Lion Air taps Ex-Im bond market again for 737-900s

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Indonesia's Lion Air Group has secured financing for four Boeing 737-900ER aircraft through a US Export-Import bond deal despite unstable markets, which have disrupted financing plans for two other issuers.

BNP Paribas and KGS Alpha, an affiliate of Apple Bank, structured the bond deal last week, working closely with Transportation Partners, based in Singapore, sources indicate.

Lion Air's Malaysian subsidiary, Malindo Airways, and its Indonesian subsidiary, Batik Air, are the beneficiaries of the financing, say sources.

This is the second time the Indonesian group has tapped the Ex-Im bond market, following a similar deal - led by BNP Paribas - in April 2012. The $138 million, 10-year bond carried a coupon of 1.92% and also financed four new 737-900ER aircraft.

The financing follows Ex-Im's approval in March for $1.1 billion in support for Lion Air Group's outstanding orders for 230 737s ordered in November 2011.

However, the deal comes during a hefty sell-off in the bond markets, triggered by a warning from Ben Bernanke, the US Federal Reserve chairman, on 22 May that the Fed could begin tapering its emergency bond-buying, or quantitative easing programme. Quantitative easing has been instrumental in boosting demand for corporate debt as investors seek high yielding financings.

As a result, Air Canada was forced last week to scrap its $1.1 billion offer to buy back outstanding debt. Also, operating lessor Avolon has decided to postpone an asset-backed capital markets financing until markets improve "as rates remain volatile".

BNP Paribas, KGS Alpha, Transportation Partners and Lion Air were unavailable for comment at the time of press.