SriLankan agrees A330 sales and leasebacks

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SriLankan Airlines has agreed to sell and lease back its upcoming Airbus A330-300 deliveries as the state-owned carrier continues to strengthen its balance sheet.

Sri Lankan placed an order for six Airbus A330-300s along with four A350-900s at last year’s Paris air show.

Five of the new six A330s have been sold to Hong Kong-based lessor HKAC while the remaining unit is being acquired by Los Angeles-based lessor Air Lease, sources indicate. Lease terms are said to be 12 years.

Air Lease will take the first aircraft, which is scheduled to deliver in October. HKAC will acquire A330s in December 2014 and April, July, October and December 2015.

One source says HKAC will step in with pre-delivery payments covering three A330-300s, while the remaining PDPs will be funded by operating lessor ILFC.

Earlier this year, SriLankan signed an agreement with ILFC to lease three Airbus A350-900s as part of its long-haul fleet renewal. The carrier agreed to lease the aircraft on 12-year terms, with deliveries set to take place between July and September 2016.

SriLankan has embarked on a re-fleeting programme to replace the entire widebody fleet. The Sri Lankan flag carrier’s 22-aircraft fleet includes six A340-300s and seven A330-200s, Flightglobal’s Ascend Online shows.

The Colombo-based carrier posted an operational loss of SLRs28.6 billion ($219 million) in calendar year 2013, widening a loss of SLRs27 billion in 2012.

The Sri Lankan finance ministry recently bought back equity investments in SriLankan Airlines from the main three state banks – Bank of Ceylon, National Savings Bank and People’s Bank – in a move to strengthened the balance sheets of the banks.

“The investments made in SriLankan Airlines by these banks, which have not yielded any returns, will be bought back by the government relieving the banks of such long-term investments,” said the financing ministry in its latest annual report.

Ministry data indicates that SriLankan’s outstanding debt to banks stood at SLRs27.7 billion in the 2012/13 fiscal year. It was forecasted at SLRs19.6 billion for the 2013/14 fiscal year. For the 2014/15 fiscal year, the ministry predicts outstanding debt to banks will reach SLRs36.1 billion.

In addition to equity buybacks, the government injected $150 million into Sri Lankan in March, as part of a $375 million recapitalisation programme.

SriLankan also raised a $150 million syndicated loan from a consortium of banks led by Standard Chartered Bank, with a government guarantee for $50 million priced at Libor plus 400 basis points.

The loan was used for refinancing purposes. The carrier repaid a $112.5 million outstanding loan to Dubai’s Mashreq Bank.

The initial $175 million loan facility, which was guaranteed by the government, was priced at Libor plus 400 bps. The facility was agreed in June 2012 and had a four-year tenor.