ANALYSIS: Intrepid prioritises unsecured debt for growth

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US operating lessor Intrepid Aviation is concentrating on capital market issuances for the time being rather than pursuing a credit rating.

The lessor has acquired more widebody aircraft on leases during the past year while continuing to take Airbus A330 deliveries under contract with the European manufacturer.

“A credit rating is not important for us. I am not sure why we would focus on a credit rating given where our bond is trading today,” says president and chief executive Frank Pray in an interview with Flightglobal.

"We can tap the debt capital markets at attractive terms whether we have a rating or not."

He anticipates a repeat issue in the public markets, following on from the success of the lessor's previous deals.

“Tapping the unsecured market is very important for us and there will be even more liquidity in the Intrepid paper going forward. We had a record issue early this year. Our bond is trading well, and we might have a need for additional debt over the next several months,” he says.

In January Intrepid initially opted for a $250 million issuance but later upsized the transaction to a $300 million senior notes offering based on overwhelming demand. The notes bear interest at a rate of 6.875% per year and were issued at par.

Earlier this month the lessor purchased a Boeing 777-300ER from Air Lease with a lease attached to Air France. The transaction marked its fourth 777-300ER acquisition since 2013. Last year the lessor purchased an aircraft on lease to Thai Airways International from BOC Aviation. The 2012-vintage aircraft is under a 12-year operating lease with the Star Alliance carrier.

It also acquired a pair of 777-300ERs on lease to Ethiopian Airlines and Philippine Airlines from GECAS, according to Flightglobal’s Ascend Fleets database.

The latest addition to the fleet was paid in cash.

Intrepid has contracted seven A330s delivering in 2015, marking the end of Intrepid’s current A330 programme.

The following year (in 2016) will see the first 777-300ERs, which were ordered at the recent Farnborough air show. Including options, the 777 programme will stretch to 2018, Pray says. “The 777-300ER is a natural extension from our A330 programme,” he adds.

Funding for those future deliveries will come from the commercial banks, the capital markets and maybe export credit support, he adds.

Intrepid is shying away from narrowbody aircraft. “We are going to stick with where we see the most demand even though more companies are now getting into widebodies.”

He adds: “This market is still underserved. As long we see opportunities we will stay in this market, if conditions and the environment change - we will reassess.”

Intrepid’s average portfolio age is less than two years, its average lease term is more than 10 years and its first lease expiration is not until 2022.