Atlas Air mulls bank debt, private placement for Amazon 767s | News | Airfinance Journal

Atlas Air mulls bank debt, private placement for Amazon 767s

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Atlas Air will use bank loans and the private placement market to finance the Boeing 767 freighters it will deliver to tech giant Amazon through 2018.

The ACMI specialist signed a deal with Amazon Fulfillment Services, an affiliate of Amazon.com, in May 2016 for the lease of 20 Boeing 767-300s. The deal followed Amazon.com’s decision to run its own airfreight delivery operation.

Lenders are keen to participate on the deal because of Amazon’s strong credit, Ed McGarvey, vice president and treasurer, told Airfinance Journal.

“Keep in mind that this is Amazon <...>, which has a lot better credit than most of us see in the aviation space. And the fact that it’s a new credit in the aviation space is causing people to be excited and want to be involved in this. We expect it to lead to two things: high LTVs and very thin margins, which is great for us,” he said.

Atlas Air is going to use bank debt to finance a number of aircraft before tapping the private placement market, he adds.

“We’ve looked at a lot of things,” he says. “I think what we’re going to see is a quick hit for a few of the early planes in the bank market, which is an easier deal to get done at very attractive spreads, and from there it looks like the private placement market is probably the best place for us to be situated for a bunch of the other aircraft,” says McGarvey.

The structure will be “typical of what a lessor would do to raise money against a lease stream”.

He adds: “We’re also looking at a structure with one of the institutions that would layer in a mezzanine slice as well that would really focus more on the metal, whereas the private placement is just purely focused on the Amazon cash flows.”

The 10-year agreement between Atlas Air and Amazon states that Atlas, will operate the aircraft on a CMI (crew, maintenance and insurance) basis and will also dry lease some aircraft.

Atlas has also granted Amazon the right to acquire up to 20% of its common shares over five years, with the right to buy an additional 10% of its common shares over seven years.

This is the second major leasing deal that Amazon closed last year. In March 2016, the company also reached a deal with Air Transport Services Group (ATSG) for the lease of 20 767 cargo jets.

Morgan Stanley is serving as financial adviser to Atlas while Cravath, Swaine & Moore is acting as legal adviser.

Pillsbury is advising Atlas Air on the financing of the 767s.

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Regional Snapshot

Related Data

Transaction Snapshot
Air Company | Bond issue | 01-24 | $1.5bn
Financial Close:
11/02/2024
SPV:
Some Aviation Trust
Value:
$1,500.00m USD
Full Details