Four Airbus SAS A380 passenger jets being leased to Emirates Airline are the first of their kind to be used as collateral in a U.S. corporate bond offering, according to a person familiar with the transaction.
Doric Nimrod Air Finance Alpha Ltd., a leasing company, sold $587.5 million of debt secured by four A380s to be operated by Dubai-based Emirates, according to data compiled by Bloomberg. The two-part offering was the first sale of dollar- denominated bonds backed by a non-U.S. airline’s planes, said the person, who wasn’t authorized to discuss the deal publicly.
Emirates is the biggest customer for the A380, the world’s largest passenger aircraft. With just 75 in service, investors needed reassurance that the plane will be valuable collateral in case of a default, said Mark Lapidus, managing director of Doric Asset Finance Ltd., the issuer’s London-based parent.
“There were lots of discussions to convince the investor universe that this aircraft is an important part of the landscape and will remain so going forward,” Lapidus said in a telephone interview yesterday. “We’re certainly going to look to do more of these transactions ourselves and others may well follow us.”
The sale consisted of $433.8 million of 5.125 percent, Class A notes with a final maturity of November 2024 and $153.7 million of 6.5 percent, Class B securities with a maturity of May 2021, Bloomberg data show. Goldman Sachs Group Inc. managed the offering.
With European financial markets roiled by the euro region’s debt crisis, airlines around the world may seek to emulate the Doric offering, Lapidus said.
“Non-U.S. airlines who had previously looked at the U.S. capital markets with trepidation will look much more warmly at that market after this transaction,” he said.
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