Debt Securities Deal of the Year: Ryanair Ex-Im bond achieves lowest ever spread
The airline took advantage of low interest rate conditions and got the lowest spread to mid-swaps of any previous airline with this deal.
Ryanair's $194.3 million Ex-Im Bank guaranteed pre-funded note, has won the Debt Securities Deal of the Year. The sale of the pre-funded notes backed by the US Export-Import Bank on September 6th 2012 were sold for 1.741 per cent. The notes, due in 2024 were to fund seven Boeing 737s and was the lowest spread for a bond guaranteed by the Export-Import Bank of the United States ever. The transaction was more than three times oversubscribed. The cheap capital attained is a testament to the strength of Ryanair's reputation.
 

James Dempsey, Ryanair’s treasurer, told Finance Dublin that, 'The deal was a pre-funded US dollar denominated capital markets issuance backed by US Export Credit Agency support guarantees (commonly known as an Eximbond). The funding was used to finance new aircraft deliveries to Ryanair between September 2012 and December 2012.'

'This was the third Exim-bond we have completed however it was the first by Ryanair under a new pre-funded Exim-bond structure allowing us to drawdown the debt in advance of the aircraft deliveries. This helped Ryanair to choose the timing of the issuance to achieve very attractive funding costs. At the time of pricing we achieved the lowest spread to mid-swaps of any previous worldwide airline Exim-bond issuance resulting in an all-in cost 1.74 per cent for 12 year amortising debt. We had specifically targeted late August/early September to launch the deal to take advantage of the low interest rate conditions prevailing at the time,' he said.
(L-R) Ken O'Brien, editor, Finance Dublin; Howard Millar, Deputy CEO and CFO, Ryanair; John O'Flynn, Treasury Manager, Ryanair; and James Dempsey, Treasurer, Ryanair.
(L-R) Ken O'Brien, editor, Finance Dublin; Howard Millar, Deputy CEO and CFO, Ryanair; John O'Flynn, Treasury Manager, Ryanair; and James Dempsey, Treasurer, Ryanair.

'What was also beneficial was that we swapped the US dollar denominated Ex-Im bond into euros, taking advantage of the basis swap difference between US Dollar and Euro and at the same time removing any associated currency risk for the life of the 12 year bond for the group. This swap had the added benefit of improving the all-in coupon price we achieved on the transaction,' he added.

'Ryanair does not have any immediate debt requirements given the strong cash position and the fact that we have completed our delivery programme with Boeing. We will have some need for re-financing our existing fleet of aircraft originally delivered between '02 and '05 and will most likely use the US capital markets during 2014 to take advantage of the strong EETC market and other similar financing products,' said Dempsey.

'Since 1999, 60 per cent of our fleet of 305 aircraft have been funded with export credit support through a combination of capital markets issuance and bank debt from some of the leading international aviation financing banks including BNP Paribas and Citibank. In addition we have funded over 70 aircraft deliveries via sale and leaseback arrangements, such as the transactions we've completed with other Irish based leasing companies including Avolon, Banc of America Leasing, SMBC Aviation. We've also used Japanese operating leases with a call option (JOLCOs) for 10 per cent of our fleet,’ he said.

Hilary Marren partner at McCann FitzGerald said, 'An interesting feature of the transaction was the pre-funded nature of the bond which allowed the funding to be drawn down without having to wait for all the aircraft to be delivered and therefore avoiding the need to arrange for intermediate/bridge funding.'

BNP Paribas said, 'At the occasion of Ryanair September 2012 transaction, BNPP co arranged the first Pre funded US-Exim guaranteed Bond whereby, contrary to traditional US-Exim Bond, the pre funded bond is issued before the delivery of the aircraft and proceeds of the bond are on deposit before being used to pay Boeing on actual delivery of the aircraft. The 12Y Loan Note, maturing in October 2024, benefits from first demand guarantee from Export-Import Bank of the United States of America, which guarantee is backed by the full faith and credit of the United States of America. The USD 194 m Issuance took place in September 2012, with delivery of the aircraft occurring in the next following three months. Several other Pre Funding bonds to other airlines have been arranged since then.'


'Ryanair, despite being a EUR oriented airline, did its first USD denominated Exim financing with BNPP in 2010, considering it was cheapest to them to borrow in USD and convert the loan in EUR through the use of cross currency swap. Ryanair decided to replicate this USD borrowing in the 2012 Exim bond, and needed as well to secure net funding in EUR. BNPP played the role of swap coordinator and executing bank, offering 100 per cent underwriting cross currency facility. The cross currency swap was “pre-placed” just prior to bond pricing, then novated to third party banks at bond issuance,’ said BNP Paribas.
This article appeared in the March 2013 edition.