A US$927 million asset-backed bond flotation was launched by British Airways last Wednesday. This is the first ever bond float from a UK airline using new planes as its collateral. The move comes a year after it was forced to cancel another debt issue where landing slots was the collateral together with US routes due to tepid market response.
BA is owned by International Airlines Group and it had said that the enhanced equipment trust certificates or EETCs used 14 Boeing and Airbus planes as collateral, a year before these assets were to be delivered. These instruments are commonly used in North American airline companies. In recent years, US Airways was able to raise hundreds of millions of dollars through these instruments.
The cancelled bond last year, which had for collateral landing slots at Heathrow Airport in London as well as routes between London City Airport and JFK Airport in New York with two Airbus planes was expected to net GBP250 million or US$385 million.
According to BA, the EETC are class A bonds having an annual coupon that pays out quarterly at 4.625% while there are also class B bonds that payout at 5.625%.
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