Baker & McKenzie has advised Air China on its landmark $135 million U.S. Export-Import Bank-guaranteed bonds to finance the airline’s purchase of a new Boeing 777-300ER.
The transaction marked the first time a PRC airline had tapped into the U.S. capital market for a U.S. dollar guaranteed loan through bonds issued by a Delaware Trust entity. The U.S. dollar loan was obtained without a guarantee from a PRC lender or a sovereign undertaking from the PRC government, which is usually the case with a U.S. dollar guaranteed bond.
The international team of Bakers, which acted as the lead counsel for its long-time client Air China, was led by banking and finance partner Harvey Lau in Shanghai, Hong Kong-based U.S. Securities partner Brian Spires, and banking and finance partner Creighton Meland in Chicago.
“We are delighted to have assisted our long-standing client, Air China, on successfully concluding this strategic important transaction, which not only paves the way for Air China to further expand its air service, but also sets a strong precedent for future financing cooperation with Ex-Im Bank and opportunities for other airlines in China,” said Lau, whose firm was the airline’s lead counsel on the purchase of its first new Boeing 777-300ER earlier this year.
Representing the Ex-Im bank, Vedder Price’s team was led by global transportation finance team lawyers Jeffrey Veber and Joshua Gentner.
The sole bookrunner and structuring agent for this loan is BNP Paribas.
The bond carries a coupon rate of 2.735 percent and tenor of 11.75 years and a 6.28 year average life.
According to the Thomson Reuters publication IFR, Air China said it had achieved a relatively low funding cost because the coupon was the lowest among transactions with an equivalent average life since the product began in October 2009. The borrower plans to use the deal proceeds to finance the purchase of a new Boeing 777-300ER aircraft that will be delivered in mid-October next year.
As the first U.S. Ex-Im guaranteed bond in dollars in this year, the Air China transaction also signaled the reopening of the U.S. Exim-guaranteed bond market after the last dollar transaction in December 2010 and following S&P's downgrade of the U.S. Government rating to AA+ in August 2011. ALB
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