Turkish Airlines has successfully completed another outstanding and innovative deal with one of its major business partner, BNP Paribas and has been globally awarded for “Tax Lease Deal of the Year 2013” by Airfinance Journal that was distributed in New York on 22nd May, 2014.
Two A330 financed by Development Bank of Japan (DBJ) and arranged by BNP Paribas under Japanese Operating Lease with Call Option combined with European Export Credit Agencies’ (EECA) guaranteed bank debt (ECA JOLCO) structure is the reason of this pre eminent award.
Turkish Airlines had mandated BNP Paribas as lead arranger and lender of an ECA JOLCO financing structure for two A330 delivered in 20th November and 3rd December 2013 respectively. This transaction features a unique combination of in aggregate a 12 years and 11 months Japanese Equity and a bank debt guaranteed by EECAs fronted by Euler Hermes, the German Export Credit Agency.
After being arranged for the very first time again by Turkish Airlines and BNP in 2011 for just one single A319 aircraft; this time it has been experienced for a bigger deal size composed of 2 wide-body A330 aircraft. Together with the other JOLCOs including commercial bank debt for 3 B737-800 aircraft arranged again in 2013 by BNP Paribas, this is one of the largest JOLCO deals arranged and thus is a landmark transaction in terms of volume and ability to source a large number of Japanese equity providers and also Lenders with very attractive pricings on both sides. While not all airlines are eligible to enter to the JOLCO market, this is a 100% financing unlike any other alternative in the current aircraft financing market. As mentioned it is a very selective market for the first tier airlines and Turkish Airlines is one of the top airlines in JOLCO market in terms of attractiveness since 2007.
Another characteristic of the deal is the cash flow structure being arranged in Japanese Yen (JPY) currency. This allows Turkish Airlines to naturally hedge its currency risk by matching its excess JPY revenues by JPY lease payments without using any other derivative instrument. Since Turkish Airlines is long in JPY the mentioned financing afford another advantage to Turkish Airlines in risk management aspect as well.
This is not the first groundbreaking deal of Turkish Airlines as it has been awarded for the aircraft debt deals of the year in Europe several times in the past by Jane’s Transport Finance, Global Transport Finance and Airfinance Journal in years 2006, 2008, 2011 and 2012.
Turkish Airlines, Inc.