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SMBC Aviation Capital signals more bond issues ahead

SMBC Aviation Capital is likely to return to the bond market in the short-term, following its maiden issue last year.

"We did our first bond last year; that's the start of a programme. We're likely to be a little more active in the bond market over the next few years," chief financial officer Barry Flannery told FlightGlobal on the sidelines of the recent ISTAT Asia event in Hong Kong.

The Dublin-based lessor achieved a coupon of 2.65% on the five-year, $500 million unsecured note issue. Funds raised from that issue were earmarked for general corporate purposes, including aircraft purchases.

Flannery said the issue closed eight-times oversubscribed, illustrating the strong liquidity that remains in the bond market.

SMBC Aviation Capital receives finance from its shareholders for around 60% of its debt, with the remainder coming from bonds, revolvers and other facilities.

With US interest rates starting to rise after years at historically low levels, Flannery noted that there has been a compression in credit margins, which has partially offset the rise in rates. As such, he said that higher rates are "nothing that we're too worried about at the moment".

Last week Fitch Ratings also upgraded its rating on SMBC Aviation Capital from BBB+ to A- with a stable outlook, underlining its investment credentials.

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