Export credit agency (ECA) deals remain a popular choice for customers due to bonds and fee financing despite more costly premiums under the Aircraft Sector Understanding accord, according to Aircastle's executive vice president of capital markets.
"The original rationale for the increase in price was to try and curtail the usage of ECA financing, but I think what we were starting to observe is that really hasn't taken," said Aircastle's Roy Chandran during an investor day meeting, which took place on 11 April.
He believes "part of the rationale" for this is that borrowers can actually finance the increased fees.
"Regardless of the fact that you might be paying eight or 10 points up front you can fund that. And given where our funding levels have stayed, on an amortised basis, it doesn't really translate to a substantial increase in pricing if you're holding the asset until the end."
Chandran believes the other "driver" has been the advent of the ECA-backed bond.
"Typically, the ECA market has been a bank-funded market, but the ECA bond has come into play and that in turn obviously has helped to drive financing down."
However, he notes a pricing difference between European and US export credit of "roughly about 70 basis points".
Chandran also highlights the first bond offering by French export credit agency Coface in March. The proceeds were used to support an Airbus A380 for Emirates.