First Export Credit deal closed for a “home” airline

Victoria
By Victoria December 22, 2011 12:54

First Export Credit deal closed for a “home” airline

Air France has closed an export credit agency-backed financing for one A380 (msn 64). The ECA-deal is combined with a French tax lease.

The initial delivery took place in June 2011 when Credit Agricole-CIB arranged a French Lease financing combined with a bridge commercial loan as the ECA application was in progress. The ECA negotiations were rather long although this possibly reflects the inexperience of the airline in structuring export credit-backed financings. Germany’s Euler Hermes and the UK Export Credit Guarantee Department supported the deal.

The bridge commercial loan, 100% underwritten by CA-CIB, was fully repaid on December 21 by putting in place the ECA loan. The French Lease, also arranged by CA-CIB, remains in place.
CA-CIB acted as overall arranger, sole equity provider, facility agent, security trustee, sole bridge commercial lender, ECA Debt Arranger and ECA lender.

DekaBank and Helaba also acted jointly as ECA Debt Arrangers and ECA lenders.

CA-CIB, ECA lenders and ECAs were represented by Norton Rose Paris, while Air France was advised by Clyde & Co Paris.

The French Lease and ECA Financing is a very efficient way of financing an A380, as it combines the most competitive debt available with attractive tax benefits. If there is tax capacity available for future deals, the European ECAs would be open to structuring similar deals for other airlines.

The pricing of the components of the deal have not be disclosed although it can be assumed that after a beauty contest was held for the mandate, Air France received very attractive overall economics.
While the Export credit home country rule still remains in place (so airlines from Airbus exporting countries do not benefit from European ECA financing), after a long political battle stressing unfair treatment with other airlines, Air France managed to get an exemption for the specific aircraft. Moreover, the home country rule has always been more of an understanding rather than a legally binding agreement. And now that Air France has shown it can be done, the ECAs are likely to be inundated with calls from other home country airlines requesting similar financing. It is not yet known how Ex-Im would respond to similar request from US carriers but the relevant US authorities were aware of the Air France transaction. Watch this space.

Victoria
By Victoria December 22, 2011 12:54
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