Dubai’s Emirates airline, the largest customer of Airbus’ A380 superjumbo, plans to lease aircraft under an arrangement with a financing firm which intends to issue bond-type certificates to fund delivery of the planes.
Doric Nimrod Air Finance Alpha is eyeing a possible issue of dollar-denominated Enhanced Equipment Trust Certificates (EETCs) to finance aircraft to be leased to Emirates.
Goldman Sachs Inc. has been mandated by DNA2 to arrange investor meetings ahead of the potential issuance starting in London on June 22 before moving to the United States, according to an announcement from the bank on Tuesday.
Any subsequent transaction, which will be open to qualified institutional investors in the United States, will be subject to market conditions.
An EETC is a financial security used in aircraft finance where the airline gets ownership of the planes on maturity of the certificates. The transactions are similar to a form of secured debt financing like mortgages.
No details on size or tenor of the anticipated issue were available.
Emirates, one of the world’s biggest airlines by passenger numbers, will make lease payments to DNA2 to cover the cost of funding, and pay the coupon to certificate holders.
“Anyone who buys the bonds is essentially taking a view on Emirates making the lease payments on time in order for Doric to pay the holders,” said a regional banker, declining to be identified.
The airline ordered 90 A380 aircraft in 2010, of which 21 had been delivered by May this year.
Despite a slowdown in 2011 when the company posted a 72 per cent drop in net profit, Emirates expects to continue seeking out new routes to sustain its fast pace of growth.
Last week, Emirates, which is unrated, repaid a $550 million Islamic bond, or sukuk, in full at maturity.