Federal Express Corp. and Continental Airlines Inc. are said to be prepping separate enhanced equipment trust certificates (EETC) deals, which, though not technically considered securitizations, are often marketed to similar investors, as both product types are secured by aircraft and provide exposure to airline industry.
According to filings with the Securities & Exchange Commission, Federal Express can issue up to $380 million in securities, while Continental can issue up to $1.7 billion. Both are S-3 filings, which allows an issuer repeat access to a shelf.
The most notable difference between an EETC and a pooled aircraft lease securitization is that in a pooled lease deal, the leasing company is tapping the revenue streams from multiple obligors, while in an EETC deal, there tends to be only on obligor, the airline leasing the planes.
In a pooled lease deal, if an obligor defaults, or if the lease is up, the airline is then marketed and leased again, still backing the securitization. In an EETC, if the obligor defaults, the airplane is liquidated and the proceeds are paid into the trust.