Ethiopian Airlines Successfully Places its First Bond Issuance

Ethiopian Airlines has successfully placed its first bond issue backed by the Export- Import Bank of the US to finance several Boeing 787-8 aircraft for Ethiopian Airlines. The US$362.59m bonds bearing interest at a fixed rate of interest ranging from 1.501% to 1.530%. In the transaction of November 28, 2012, Ethiopian Airlines achieved the lowest fixed interest rate ever for an Ex-Im Bank-guaranteed aircraft bond.

J.P. Morgan acted as sole book runner on the bond placements, as well as the sole lender for the Ex-Im Bank-guaranteed loan facility that was refinanced with the bonds. The combination of the bank loan and capital markets bond structure enables Ethiopian Airlines to achieve certainty of funding through a bank loan facility, while taking advantage of the low interest rate environment in the capital markets.

Ethiopian Airlines’ Chief Financial Officer, Kassim Geresu said, “The fact that Ethiopian Airlines was able to obtain such low interest rates in connection with our first entry into this market is a result of good understanding, dedication and effort among Ethiopian Airlines and our partners, Ex-Im Bank and J.P. Morgan. We were all closely working together over several months to close this important financing and achieve such attractive rates. On behalf of Ethiopian Airlines I want to thank all involved from the Airline, J.P. Morgan and Ex-Im Bank for such fruitful work. The bond financing is an important part of our cost leader-ship strategy and the ongoing efforts to make our airline more competitive and cost efficient that would simultaneously enable it to play a leading role in African Aviation and other areas of route network.”

He further added “This transaction is also helping to promote the Airline’s presence in the market and further develop our exposure to the US capital markets; a source of financing that has never been available to the Airline before.”

“This good news illustrates that the capital markets are yet another funding source available to facilitate U.S. exports and support American jobs,” said Ex-Im Bank Chairman and President Fred P. Hochberg. “We are proud that Ethiopian Airlines, one of our longstanding partners, has benefitted from this new financing program, and we hope that it will be the first of many African buyers of U.S. manufactured goods and services to do so.”

On May 31, 2012, Ethiopian Airlines received a final commitment from Ex-Im Bank in support of its purchase of ten Boeing 787-8 “Dreamliners”, the first on the African continent and the first to be delivered outside of Japan. This aircraft represents the future of African technology development as it uses 20% less fuel than other aircraft of similar size while offering more passenger-pleasing features such as noise reduction, larger cabin windows, increased humidity and improved cabin pressure.

The aircraft will be used for long-distance travel, with one aircraft servicing the Addis Ababa-Washington, D.C. route, catering to the largest concentration of Ethiopians outside of Ethiopia. The addition of Boeing 787-8’s to Ethiopian’s fleet is part of Ethiopian’s vision to become the leading aviation group in Africa by 2025 through a fast and profitable growth strategy, and will enable Ethiopian to renew and expand the overall fleet as well as its network reach.