Airbus anticipates the first airline export credit agency (ECA)- backed bond transaction will close this quarter.
Talking to Flightglobal Finance, EADS senior vice-president customer, project and structured finance Nigel Taylor says no capital market transactions concluded in 2012 mainly as a result of the timing of the deals.
"Transactions were ready by year-end but they were not put in the markets at the right time. The end of the year is not the best time to go to the markets. But I predict this year within the first quarter will see the first ECA-backed transactions," he says.
According to Taylor, a minimum of three transactions could close this quarter.
To date two UK's Export Credits Guarantee Department (ECGD) bonds have been issued on behalf of AerCap, both in 2010.
"It is high time we see some transactions in the market," says Taylor.
"This will encourage airlines to do more, but it obviously depends on the pricing. We have seen bank's margins falling considerably on ECA transactions. One of the reasons could be because the US Export Import Bank (Exim) is doing so many Exim backed bonds, so the banks are not getting enough traction there and therefore they move across the Atlantic to do ECA deals and reduce their pricing accordingly."
Taylor says the amount of Japanese appetite in the ECA field has also resulted in more transactions going into the Japanese banking market with lower pricing as a result.
"Today we only talk about ECGD and Compagnie Française d'Assurance pour le Commerce Extérieur (Coface) ECA-backed bonds but once it gets going, you will see these products developing into more of a commodity. It will priced accordingly, getting lower and more attractive pricing, with probably more standard documentation and therefore cheaper implementation costs."
Taylor says the French government's pricing on commercial bond papers is currently better that when the country was rated AAA. He reckons transactions will close at less than Libor + 150 basis points.
According to him, the aircraft selection is irrelevant because the market is primarily looking at government's guarantee. However the Airbus A380 model will feature in ECA-backed bond deals.
"It is highly likely we will see some A380 transactions along with a blend of Airbus products in ECA backed bonds," he says.