Natixis IM International Private Debt in A350-900 Sale and Leaseback

  • January 21, 2021
Natixis Investment Managers International Private Debt has participated in the financing of a new Airbus A350-900 for a European airline.

Natixis IM International Private Debt provided $15m in a twelve-year loan for the sale and leaseback of the widebody aircraft. Aircraft deals are structured through investment vehicles (called Special Purpose Companies) that typically buy an aircraft and lease it to an airline.

The A350-900, which entered into service in 2020, carries 325 to 440 passengers and has a 14,000km range.
“The transaction shows that the aircraft debt financing business is still active despite the worldwide fall in aircraft passenger volumes,“ says Aymeric Angotti, Head of Aircraft Finance at Natixis Investment Managers International.
 
“The deal is for a major airline, whose credit quality has historically been very strong,” says Angotti. “The airline entered the current crisis with a strong balance sheet and profits, a substantial market share, and it also benefits from state support.” “Before the pandemic we were targeting margins of around 200bps-250bps on 2nd or 3rd tier airlines, but that has risen to 250bps-400bps now even on 1st tier airlines,” says Angotti. “To do a deal with this kind of airline with this level of return would have been impossible before the crisis. We think there are great opportunities for our investors.”

In the current environment, it is more important than ever to take into account the credit quality of the airline. Previously, if an airline defaults, an investor could repossess the aircraft and sell it to another airline. With air traffic so restricted, aircraft are a less fungible asset so the assessment of initial credit quality becomes even more critical.

Experience and industry knowledge are essential for asset selection, says Angotti. “There is little publicly-available information on aircraft secured debt and no secondary markets, so initial selection of assets is challenging and a key part of our job,” he says. Deals must be examined on several different levels: analysis of the corporate, including ESG considerations, the asset itself and the structure of the deal.

With shrinking liquidity in markets as banks are much more cautious in lending, private loans for aircraft are sought after by airlines and lessors, and the margins are higher than before the crisis.

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Natixis Investment Managers International
French Public Limited liability company with board of Directors (Société Anonyme).
Share capital : €51 371 060,28. RCS Paris : 329 450 738.
Regulated by the Autorité des Marchés Financiers (AMF) under no. GP 90-009. 43 avenue Pierre Mendès France 75013 Paris.
www.im.natixis.com

Natixis Investment Managers
RCS Paris 453 952 681
Share Capital: €178 251 690
43 avenue Pierre Mendès France
75013 Paris
www.im.natixis.com 

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