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Turkish launches long-awaited EETC for three 777s

Turkish Airlines has launched $328 million in secured enhanced equipment trust certificate (EETC) notes, coming to the market after a nearly two-year wait.

The single-tranche deal has an average life of 7.6 years and an initial loan-to-value (LTV) ratio of 64.5%, says a source close to the deal. The structure is similar to Emirates’ Doric notes in 2012, with the aircraft owned by the Bosphorus Pass Through Trust and leased to Turkish for a 12-year term.

The notes are expected to price between 4% and 4.5%, or a roughly 250bp spread over seven-year US treasuries, they say.

The yield curve on seven-year US treasuries stood at 1.73% on 18 March, Treasury data shows.

Three Boeing 777-300ERs with two due this month and one in April back Turkish’s 2015-1 EETC, sources say.

The Ascend Fleets database shows four 777 deliveries that fit the collateral pool. These include TC-JJV (MSN 44119) and TC-JJY (44120) due in March, and TC-LJA (44121) and TC-JJZ (44122) due in April.

Moody’s Investors Service rates the notes A2. The rating agency cites the importance of the 777 to Turkish’s fleet and the implicit support from the government of Turkey, which owns 49.1% of the airline, in its analysis.

Investors have awaited a Turkish EETC since early 2013, when it was first reported to be looking at the market. The airline mandated Citi and Goldman Sachs for a deal in February 2014 but postponed issuing notes due to the strong commercial bank market.

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