An airport slot-backed ABS that falls under the rubric of a whole-business securitization appears to be approaching the runway. In a pre-sale today, Moody’s Investors Service said it had given a £250 million ($388 million) tranche of the deal a provisional rating of ‘A3,’ well above the ‘B1’ rating assigned to British Airways, which is linked to the payment obligations in the transaction.
The bond matures in 2023, and BNP Paribas is the bookrunner.
Moody’s said the deal was the first backed by airport slots that it has rated.
The transaction securitizes airport slots at Heathrow airport operated by British Airways. A slot is a permission given by an airport coordinator to take off or land. At Heathrow, Airport Coordination Limited runs the slots.
Under the terms of transaction, a set number of slot pairs, valued at roughly £454 million, will be transferred from BA to British Airways Limited, a company set up solely for this purpose.
The proceeds of the bonds, in addition to £204 million in equity loan stock, will be used by the transaction vehicle, Bealine, to fund a loan between Bealine and British Airways Limited. The loan, will in turn, pay for the slots that will back the structure.
While slots are not considered a carrier’s assets in the event of liquidation, an insolvent carrier can appeal to regulators to obtain a temporary operating license for up to 12 months, according to Moody’s. Another possible outcome in such a scenario — which also helps provide uplift from BA’s ‘B1’ — is that “BA will continue to operate the most profitable parts of its business, including operating flights using the selected slots.”
