ANALYSIS: Latam Airlines tops 2012 Ex-Im bonds table

This story is sourced from

Latin carrier Latam Airlines Group issued an estimated $1.8 billion in US Export-Import (Ex-Im) Bank bonds last year, making it the largest export credit borrower in 2012, according to data compiled by Flightglobal.

Last year, airlines turned to the Ex-Im bond market to fund 52 aircraft to the tune of $5.75 billion. This compares with $357 million worth of transactions in 2011 and $2.48 billion in 2010.

The final quarter was particularly active with 12 deals closed totalling $2.3 billion.


Latam, which had raised $954 million through three Ex-Im-backed issuances covering six Boeing 767-300ERs, two 777-300ERs, one 777F and one 787 aircraft, during the first nine months, tapped the capital market for another $850 million during the October-December period.

One issuance, priced by JP Morgan, was the first floating-rate US dollar bond with a full Ex-Im guarantee. The 12-year $212.3 million bond closed at Libor +33 basis points and refinanced the deliveries of three 767-300ERs in 2011.


European carrier Ryanair also closed a floating rate Ex-Im-backed bond issue in 2012. Last September the carrier sold $194.3 million of 1.74% notes due in October 2024..

In May, Ex-Im began a new bond guarantee programme allowing airlines to raise funds for aircraft directly from the bond market with debt backed by the bank. The notes are called "pre-funded" because airlines can sell the bonds before taking delivery of their aircraft.

Latam issued the first pre-funded bond in July, selling $299.2 million of debt in an offering managed by JPMorgan. The transaction refinanced two 767-300ERs and funded the acquisition of two additional aircraft of the type.

Middle East carriers Emirates Airline and Etihad Airways also tapped the market in 2012, covering 777-300ER deliveries. Emirates raised $1.08 billion under the Ex-Im bond programme, while Etihad issued $433 million of debt.

Both carriers have returned to the capital markets this year refinancing two more 777s each in transactions worth $600 million.

Last year the 777-300ER model was the most popular model refinanced under Ex-Im bonds with 19 transactions closed, representing 37% of the total transactions. Another 14 deals closed on the 737-800 model, or 27% of Ex-Im bond backed transactions.


Ex-Im bonds financed five 787s and a total of 12 737-900ER, 767-300ER and 747-8F aircraft with four units each.

"The majority of Ex-Im guaranteed deals are now funded in the capital markets. This is increasing the market liquidity which in turn attracts more investors and improves pricing and creates a virtuous cycle," comments Kostya Zolotusky, managing director of capital markets development and leasing at Boeing Capital (BCC).

Capital markets accounted for about $10 billion of last year's $95 billion in required commercial aircraft financing. In 2013, that number will increase to $14.5 billion out of a total of $104 billion worth of deliveries, according to Zolotusky.

"Our forecast for the year is that about 23% of all deliveries will be supported by export credit. At least on the Boeing side, most of it is going to be funded in the capital markets."

Since the beginning of the year transactions have closed with pricing slightly higher than in the second half of last year.

"The volatility in pricing is well in line with capital markets volatility and some deal variability. As far as we are concerned, we have a very efficient market for funding Ex-Im guarantees," says s Zolotusky.

BCC says Ex-Im Bank bond structures will continue to evolve, offering investors more variety, as airlines increasingly turn to the capital markets for financing. "In 2013 you will see more new structures such as the tranching of bonds," he says.

According to him, the introduction of tranches would probably come as pari-passu with different amortisations.