Lufthansa finds A380 equity in Japanese pachinko machines

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Pachinko slot machine developer Yamasa is the equity provider in an Airbus A380 refinancing for Lufthansa.

Bank of Tokyo-Mitsubishi UFJ provided the debt on the aircraft (MSN 044), which was first delivered to Lufthansa in August 2010, Flightglobal's Ascend Online database shows.

The deal marks the second A380 financing that Yamasa has backed with equity for Lufthansa, according to the carrier, which confirms the transactions.

The previous deal closed in March 2012 on MSN 048, which was delivered in October 2010.

Again, Bank of Tokyo-Mitsubishi UFJ provided the debt on the Japanese operating lease financing, according to Lufthansa.

The German carrier operates 10 A380s and has seven more on order with deliveries scheduled for 2014 and 2015, according to Ascend.

Founded in 1967, Yamasa manufactures and markets amusement-related hardware and parlour game software. The Okayama-based company also owns and invests in transportation-related assets, including vessels and aircraft.

The financing is the latest in a series of aviation investments out of Japan, which is looking to deploy capital beyond its borders in hopes of achieving better returns.

In April, Japan unleashed its bold new monetary policy that includes the increased purchase of government bonds and riskier assets in an effort to banish deflation. The move, which devalued the yen, is expected to further fuel aviation spending as investors find relief in US dollar revenue platforms, such as aircraft rental streams.

Capital sources

Since the aircraft first entered service in 2007, the A380 has attracted an eclectic mix of investors.

Wealthy German dentists and doctors, through the Kommanditgesellschaft (KG) market, have become a significant source of financing for the widebody model.

Flightglobal estimates that of the 101 A380 commercial deliveries through 25 April, the KG market financed almost a quarter, ECA-guaranteed deals absorbed a third and pure commercial bank debt backed a dozen units.

Raising financing for the A380 was initially assumed to be a difficult task due to the tall amount of capital required to purchase the aircraft, as well as questions about future transition costs and residual values.

However, the attractive credit quality of many A380 operators has helped smooth over these concerns.

Recently, the capital markets emerged as an additional source of funding for the aircraft. In the second half of 2012, Doric Aviation brought the first A380 capital markets transactions to market, covering four aircraft for Emirates Airline.

The Gulf carrier repeated the move in February this year with the refinancing of a unit. JP Morgan arranged the export credit agency bond, which was guaranteed by the Compagnie Française d'Assurance pour le Commerce Extérieur (Coface).