JetBlue Airways has closed a $225.7 million secured enhanced equipment trust certificate (EETC) aircraft financing issue, its first in the market in seven years.
The nine-year private deal has an average weighted life of six years and a funding date of 5 March 2014, says Ursula Hurley, assistant treasurer at the New York-based low-cost carrier, today. It is the airline’s first such deal since 2006.
“The structure helps us take a portion of the interest rate risk off the table while utilising existing unencumbered collateral,” says Hurley, citing the attractiveness of the delayed draw feature and cost of funding.
The March 2014 draw aligns with the final maturity of JetBlue’s 2004-1 EETC, she says. The feature was only available in the private market, she adds.
The 2004-1 EETC totalled $431 million when it was issued March 2004 and was backed by 13 Airbus A320s.
JetBlue had $422 million in secured EETC debt due in 2014 and 2016 as of 30 June, according to company filings.
Hurley declines to comment on the pricing but says that it was favourable compared to JetBlue’s weighted average cost of debt, which was about 4.5% at the end of June.
The yield on 10-year US Treasury notes was 2.75% on 20 September, the day that the deal priced. It closed on 2 October.
The notes are backed by 14 A320s in JetBlue’s fleet with vintages ranging from 2002 to 2012.
Hurley says that the airline can still find better pricing in the private bank market for new aircraft but notes that it is always evaluating its financing options, including loans, private EETCs, public EETCs and cash.
JetBlue has four Airbus A321 deliveries and one Embraer 190 delivery scheduled through the end of the year, though its first A321 delivery has been delayed by the on-going US federal government shutdown.
The carrier has recently financed two new A320s with loans from Credit Agricole and BNP Paribas. It finances its E-190s with export credit financing from the Brazilian investment bank BNDES.
JetBlue initially launched the 2013-1 EETC at $160 million but upsized the issue following strong appetite from institutional buyers, says Gavin Sweitzer, senior analyst in corporate finance at the airline.
Citi was the sole structurer and arranger, with KfW acting as liquidity provider.