FILE PHOTO: Qantas flight QF1, an A380 aircraft, takes off from Sydney International Airport en route to Dubai, above Botany Bay, in Australia August 22, 2017. REUTERS/Jason Reed/File Photo
SINGAPORE (Reuters) – Qantas Airways is raising A$350 million ($272 million) from a loan that allows it to switch the types of aircraft used as collateral, in what bankers and analysts said is the world’s first aviation financing of this type.
The loan is the first of a series under a loan facility program set up by the Australian airline, which reported near-record profits in the year to June.
The security for each loan includes a pool of Qantas planes that have not been pledged as collateral, including Airbus SE A320 family and Boeing Co 737 narrowbodies as well as A330 and 787 widebodies, a term sheet of the deal reviewed by Reuters shows.
“It also gives us more flexibility in terms of what aircraft are encumbered, allowing us to change the aircraft depending on possible fleet changes or future plans,” a Qantas spokesman said in response to a query from Reuters.
BNP Paribas is the sole structuring bank and, with National Australia Bank, is the joint mandated lead arranger and bookrunner.
The eight-year loan will help Qantas refinance part of A$442 million in secured aircraft and other amortizing debt that matures in the financial year ended June 30, 2018, the Qantas spokesman said.
“Qantas is trying to use this rather clever structured financing tool to monetize all its assets. Whenever aircraft is added or removed from the pool, it could result in pricing adjustments beneficial to the airline,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics.
In May, Moody’s Investors Service upgraded the carrier’s credit rating by one notch to Baa2. Qantas had regained its investment-grade status from Moody’s in 2016 and from Standard & Poor’s in 2015 after slipping into junk territory in 2013.
Aviation finance is seen as attractive to banks, insurers and pension funds for providing long-term dollar-denominated returns above those of some other asset classes, on investments backed by assets that can be moved easily.
The loan facility was sold down to 10 other financial institutions and was about twice oversubscribed, according to the term sheet and sources.
“The facility appealed to both specialized aviation banks as well as traditional corporate lenders, looking to take credit exposure on longer maturity terms,” the term sheet said.
The loan has no amortization meaning that the principal is due at the end of eight years.
Analysts and bankers said this type of loan made more sense for mature airlines because typically airlines in growth mode had younger fleets that tended to be pledged as collateral already.
Both BNP and NAB confirmed their role in the loan.