IAG has announced the launch by British Airways of an inaugural $927m (£601m) publicly-traded bond issue, which uses aircraft as collateral (release). The firm said that these bonds - Enhanced Equipment Trust Certificates (EETCs) - are commonly used by US airlines.
The bond will be supported by an underlying collateral pool of 14 different aircraft, which are due for delivery between June 2013 and June 2014. Two classes of certificate, A (£468m) and B (£133m) will respectively pay 4.625 per cent and 5.625 per cent quarterly.
The transaction is rated by Standard and Poor's (A/BBB), Moody's (Baa1/Ba1) and Fitch (A/BBB-).
Citi acted as Lead Structuring Agent and Global Co-ordinator on the transaction.
Enrique Dupuy, CFO of IAG said:
This transaction marks a strategic milestone as we diversify our sources of funding. It is also the first time that British Airways has used EETCs and that this form of financing has been used in the UK.