Friday, November 30, 2012

■ ETHIOPIA: Ethiopian successfully issues bond for $363m with backing from US ExIm Bank.

Ethiopian Airlines (ET) on 28 November 2012, successfully placed its first bond issue with the backing of the US Export-Import Bank, to finance several brand new Boeing 787-8 aircraft ordered for the Ethiopian national carrier. (A bond is a certificate of debt (usually interest-bearing or discounted) that is issued by a government or corporation in order to raise money; the issuer is required to pay a fixed sum annually until maturity and then a fixed sum to repay the principal.)

The bonds, valued at USD362.59million, bear interest at a fixed rate ranging from 1.501% to 1.530%, the lowest rate ever for an Ex-Im Bank-guaranteed aircraft bond. 

J.P. Morgan, the American multinational banking corporation of securities, investments and retail, acted as sole book runner on the bond placements, as well as the sole lender for the Ex-Im Bank-guaranteed loan facility that was refinanced with the bonds. The combination of the bank loan and capital markets bond structure enables Ethiopian Airlines to achieve certainty of funding through a bank loan facility, while taking advantage of the low interest rate environment in the capital markets.

Ethiopian Airlines’ Chief Financial Officer, Kassim Geresu said:
Ethiopian AirlinesThe fact that Ethiopian Airlines was able to obtain such low interest rates in connection with our first entry into this market is a result of good understanding, dedication and effort among Ethiopian Airlines and our partners, Ex-Im Bank and J.P. Morgan. We were all closely working together over several months to close this important financing and achieve such attractive rates. On behalf of Ethiopian Airlines I want to thank all involved from the Airline, J.P. Morgan and Ex-Im Bank for such fruitful work. The bond financing is an important part of our cost leader-ship strategy and the ongoing efforts to make our airline more competitive and cost efficient that would simultaneously enable it to play a leading role in African Aviation and other areas of route network.”
He further added “This transaction is also helping to promote the Airline’s presence in the market and further develop our exposure to the US capital markets; a source of financing that has never been available to the Airline before.

This good news illustrates that the capital markets are yet another funding source available to facilitate U.S. exports and support American jobs,” said Ex-Im Bank Chairman and President Fred P. Hochberg. “We are proud that Ethiopian Airlines, one of our longstanding partners, has benefited from this new financing program, and we hope that it will be the first of many African buyers of U.S. manufactured goods and services to do so.

On May 31, 2012, Ethiopian Airlines received a final commitment from the Ex-Im Bank in support of its purchase of ten Boeing 787-8 “Dreamliners”, the first on the African continent and the first to be delivered outside of Japan. 

Ethiopian's relationship with the US Ex-Im Bank dates back to 1950, when a loan for USD1'000'000 (USD10million in 2012, adjusted for inflation) was granted by the bank to enable the then fledgling carrier to incorporate two Convair CV-240s into its fleet for use on international routes.