Expect more capital-markets deals before year-end. That is the message from several Wall Street bankers to whom FlightGlobal has spoken lately.
There was a flurry of ABS activity in October's second half – Apollo Aviation launched a $640 million deal for 35 aircraft while Air Lease's fund with Napier Park, Blackbird, launched an $800 million ABS refinancing for 19 aircraft.
Regional jet lessor Elix Aviation is now rumoured to be putting together an ABS deal as well, while airlines appear hopeful of closing transactions before 2017.
In addition to ABS, bankers have also noted that the market could see the launch of more EETCs.
Capital-markets issuances have been somewhat hampered by competitive terms offered by the commercial loan market.
With low interest rates and increased competition as more lenders enter the space, airlines have been able to negotiate attractive pricing to finance their equipment purchases.
For instance, while Alaska Airlines was a perfect candidate to issue an EETC this year – investors would have jumped at their paper – the carrier instead opted to secure 19 bilateral loans with a diversified group of banks because commercial terms were so attractive. While the blended rate for the transactions is said to be about 135bps over LIBOR, FlightGlobal understands that the airline achieved rates as low as 125bps over LIBOR in some cases.
But the year is not over, and bankers are saying that more deals will come to market during the next two months. In fact, Southwest Airlines has just launched a $300 million unseucured bond deal after closing a $215 million secured term loan this week.
As Basel IV comes down the track, it is likely that the capital markets will continue to offer an attractive option for airlines and lessors alike as banks look to match alternative investors with aviation's longer-term liabilities.
Source: Cirium Dashboard
