On May 14, 2015, LATAM Airlines Group priced its inaugural 2015-1 EETC transaction with Citi acting as Sole Structuring Agent, Lead Bookrunner and Global Coordinator. The transaction was launched as a $664mm 11 aircraft deal, and upsized to a $1.021bn 17 aircraft deal.
The $845.213 million Class A notes have a 12.5 year tenor, with an 8.4 year weighted average life (WAL). The expected Ratings on this tranche from Moody’s is A2 and A- from Standard & Poor’s, while the notes have an initial and maximum loan-to-value (LTV) of 59.0%. The A notes prices at 4.20%.
The $114.265 million Class B tranche, which priced at 4.50%, has a 8.5 year tenor with a 5.4 year WAL, and expected ratings of Baa2 from Moody’s and BBB- from S&P. The initial and max LTV on these notes its 71.2%.
The notes are secured on a pool of 17 aircraft, which comprises 11 new Airbus A321-200 aircraft, two new Airbus A350-900 aircraft and four new Boeing 787-9 aircraft scheduled to be delivered from July 2015 to March 2016.
This is LATAM’s inaugural EETC and the first EETC issued by a South American airline. This is also the largest A tranche for any of the international EETCs closed to date.
The collateral in deal represents a cross-section of LATAM’s newest, most efficient and strategically core aircraft, including the first ever A350-900 financed in the EETC market.
The transaction will benefit from Chilean Law with respect to the LATAM-operated aircraft, and Cape Town as adopted in Brazil with respect to the TAM-operated aircraft.
The transaction was launched at the back of a seven-day roadshow across Santiago, London, Boston, Chicago and Los Angeles. Because the books were held open overnight in order to capture a global investor book, this was the widest-ever distribution for a EETC transaction with investors across five continents, including several first time investors.
The blended cost of 4.24% financing for 17 aircraft delivering from July 2015 through March 2016 is one of the most competitive international EETCs closed to date. Although it is difficult to compare EETC closed at different times, Turkish Airlines single A tranched EETC priced at 4.20% for 12 years and an LTV of 65.8%, while Air Canada’s recent three tranche deal closed with a blended coupon of 3.810% for 7.8 years.
The pricing on all of the EETCs closed in 2015 so far shows just how comfortable investors are becoming with the international EETC product but it is also demonstrative of the continuing dearth of airline EETC paper coming onto the market with many investors eager for the better yields of this product than other options, specifically the fixed income market.