Aircraft leasing companies are taking advantage of the capital markets with five bonds in the pipeline.

On 13 January Aviation Capital Group issued senior unsecured notes with a 1.95% coupon. The lessor opened the market with a five-year $750 million unsecured issuance that priced at a yield of 2.151%. The spread was 165 basis points (bps) over US Treasury.

The senior unsecured notes were oversubscribed six times. 

Moody's rated the fixed rated issuance at Baa2, Standard & Poor's at BBB-.

Citigroup is the structuring lead agent in the issuance. BNP Paribas, Deutsche Bank Securities, Mizuho Securities and RBC Capital Markets are the joint lead bookrunners. Barclays, Credit Agricole-CIB, Goldman Sachs and MUFG are joint bookrunners.

Just a week earlier, Aercap achieved its lowest coupon ever with a 1.75% coupon.

The lessor, and its wholly-owned subsidiaries, launched a $1 billion senior unsecured notes offering on 6 January that was more than three times oversubscribed.

Aercap opened the market with a five-year tenor that priced at a yield of 1.985% The spread was 155 bps over US Treasury. 

The issuance was rated ‘Baa3’ by Moody’s and ‘BBB-‘ by Fitch Ratings and Standard & Poor’s.

Citigroup Global Markets was the structuring agent on that transaction with Barclays Bank, JP Morgan Securities, Mizuho Securities, Morgan Stanley, SG Americas Securities, Santander Securities, TD Securities, Wells Fargo Securities and Truist Securities, are joint book-running managers.

“Lessors continue to find appetite in capital markets and investors assume that these companies stay investment grade-rated and that lessees will have cash to pay the lessors,” says one banking source.

“The demand goes to show that central banks continue to prop up the industry and investors simply have too much cash to invest,” adds another banking source. “Aercap at 1.75% coupon shows the wall of cash available for issuers with an investment-grade credit rating.”

Another banking source attributes the recent rush into aircraft leasing bonds to different factors: the Federal Reserve bond activity, the solid structure of some lessors and the positive news about the vaccine.

“Pricing has been very attractive on two leasing companies over the past few days: Aercap and Aviation Capital Group,” he says.

“The Fed is buying lots of bonds at the moment and everything that is investment grade-rated.” And for him investors will not be turned away lessors supported by large financial institutions.

This is be evidenced by the BOC Aviation deal in the marketplace that marked, late last week, the lessor’s first issuance in the capital markets this year.

The Bank of China-owned lessor issued a $400 million senior unsecured bond with a five-year tenor at 1.75% coupon. Early indications shows the deal priced at a 1.984% yield. The spread was 150-155 bps over US Treasury.

Avolon

Earlier in the week, Avolon issued a $1.5 billion unsecured bond, which was three times oversubscribed.
Orders reached $4.5 billion, sources indicate, with the book size on the five-year bond at $2.2 billion and $2.3 billion on the seven-year tranche.

The $750 million five-year tranche priced at 2.125% with a 2.377% yield. Spread was 190 bps over US treasury.

The $750 million seven-year tranche priced at 2.75%. Yield was 2.946% and Spread was 215 bps over US treasury.

Fitch Ratings and Standard & Poor’s rated both tranches at ‘BBB-‘ while Moody’s rating was ‘Baa3’.
JP Morgan Securities, BNP Paribas, MUFG Group, Mizuho Securities and Truist Bank were the banks in the transaction.

DAE
Dubai Aerospace Enterprise has returned to the capital markets with a dual tranche senior unsecured bond that will be issued by 20 January.

The lessor issued its debut $750 million 3.75% Sukuk bond in November. 

This time it is raising $1.25 billion through DAE Funding, as part of the $2.5 billion global medium-term note programme.

The first tranche, with a $500 million size, has a four-year term to 20 January 2025. Initial pricing talk is US treasury + 260 bps and the coupon was set up at 2.63%.

The second tranche, at $750 million, has a seven-year term to 20 January 2028. Initial pricing talk is US treasury + 310 bps. The coupon was set up at 3.38%.

The issuance was rated Baa3 by Moody’s and BBB- by Fitch Ratings.

Goldman Sachs International and Morgan Stanley are the active bookrunners. Credit Agricole-CIB, Emirates NBD Capital, Fifth Third Securities, Goldman Sachs International, HSBC, JP Morgan, Mizuho Securities, Morgan Stanley, Natixis and Truist Securities are joint lead managers and passive bookrunners. Deutsche Bank is co-manager.

Source say the book size reached $1.2 billion on the first tranche and $1.9 billion on the seven-year tranche.