Hawaiian Airlines has launched a two-tranched $262 million Enhanced Equipment Trust Certificates (EETC) offering, secured by eight Airbus aircraft.
The offering comprises: $216.976 million class A notes, which have a 7.1 year tenor and weighted average life (WAL) of 4.5 years and are rated A by Fitch; and $45.010 million B notes, with a tenor of 5.1 years and a WAL of 3.0 years, rated BB+ by Fitch.
The notes are secured on a collateral pool of six A321-200neo aircraft delivered to Hawaiian between May 2018 and August 2019, and two Airbus A330-200 aircraft delivered in April and June of 2013.
The class A and B certificates each benefit from an 18-month payment-in-kind (PIK) feature. The PIK feature offers coverage of three successive semi-annual interest payments.
PIK Interest defers delinquent interest payments until the underlying aircraft are remarketed and monetized. Despite this, rating agencies views the PIK facility as “roughly equivalent to the credit protection provided by a typical liquidity facility for the senior tranche”, says Fitch. However, it adds that the PIK feature is less favourable to creditors “due to the cash flow implications during the deferred payment period”. The inclusion of the PIK feature does negatively weigh on the senior tranche rating outcome, however, and Fitch states that there is an 'A' rating cap for transactions that feature a PIK.
Fitch determines that although there are pressures on widebody values, the pool of aircraft makes up 16% of Hawaiian's owned fleet and thus makes it “unlikely that the aircraft in this pool would be rejected in the case of a bankruptcy”, further determining that if the airline needed to cut long-haul capacity in the event of a restructuring it would reject its leased A330s rather than its owned fleet.