First EETC issued on 787 aircraft; Qantas ditches Asian airline plans

By Victoria March 9, 2012 15:25

First EETC issued on 787 aircraft; Qantas ditches Asian airline plans

Continental Airlines restarted the capital markets for aircraft financing in 2009 and today it has made another first with the best best-ever, all-in coupon for an aircraft EETC and on a portfolio of aircraft including the new 787 to boot.

The airline is offering $892,138,000 of pass through certificates, series 2012-1, in two classes.

Continental Airlines $753.035million series 2012-1 Class A pass-through certificates with an expected maturity of April 11, 2024, have a coupon of 4.150%, and $139.103million Continental’s series 2012-1 Class B pass-through certificates with an expected maturity of April 11, 2020 carry a coupon of 6.250%.

Standard and Poor’s has assigned a preliminary A-rating to Continental Airlines the Class A certificates with a preliminary BBB- rating to the Class B notes, while Moody’s has assigned a Baa2 and Ba2 rating to the Class A and Class B certificates, respectively.

Credit Suisse and Morgan Stanley are joint structuring agents and lead bookrunners, while underwriters on the deal are Credit Suisse Securities, Morgan Stanley, Deutsche Bank Securities, Goldman Sachs, Citigroup, JP Morgan Securities and Jefferies & Company.

The funds will be used to finance the purchase of four new 787-8s and 14 new 737-900ER aircraft scheduled for delivery in 2012, and refinance three 737-900ER aircraft delivered new to Continental in 2009 and currently financed under bank mortgage loans.

The 18 new aircraft will be selected from a list of 24 aircraft scheduled for delivery in 2012, according to the prospectus.

Commenting on the deal Kostya Zolotusky, managing director of Boeing Capital Corporation, says: “We’re very pleased by the result of this EETC issuance. It delivered extraordinarily efficient financing for an important customer and represents a warm welcome for the 787 in the capital markets. It also reaffirms the merits of the 737-900ER as sound collateral. The offering saw record low pricing, tighter spread and longer average lives. It clearly supports our sentiment that the capital markets will play a very important role in aircraft financing going forward, and it provides strong evidence of investor appetite for and understanding of the quality of this asset class.”

Meanwhile, Qantas has ditched its plans to set up a new ultra-premium airline in Asia after talks with Malaysia Airlines on a joint venture broke down. In a setback to its bold gamble to expand aggressively into Asia, Qantas said the talks with Malaysia Airlines, which had warned last week that it is ”in crisis”, had faltered because they could not agree on the commercial terms for a new premium airline.
Qantas will not revisit earlier plans to set up an ultra-premium airline in Singapore because that would require a significantly larger investment of up to $500 million. The plans for a new airline – which was to be based in Kuala Lumpur – targeting Asia’s fast-growing corporate market, were part of Qantas management’s aim of turning around its international operations, which suffered more than $200 million in losses in the last financial year. The collapse of talks leaves Qantas desperate to find another partner in Asia to help it meet the ambitious target of turning a profit on its international operations within three years and making them meet their cost of capital within five.

Shares in Qantas slumped as much as 4% today before closing down 4.5¢ at $1.68. So will Cathay Pacific now come to the table with Qantas? In reality no but it would be nice.

By Victoria March 9, 2012 15:25
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