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United takes off with $953.1 million EETC offering

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United Airlines is planning a $953.1 million sale of 12-year enhanced equipment trust certificates (EETCs) to finance the delivery of 16 Boeing passenger jets to its fleet, according to a regulatory filing.

United Airlines Pass Through Certificates, Series 2018-1 will include a Class AA series with a notional value of $677.2 million and a Class A series totaling $258 million, according to a prospectus filed with the Securities and Exchange Commission.

Moody’s Investors Service has assigned an Aa3 rating to the AA notes and an A2 to the Class A certificates.

Goldman Sachs, Citigroup and Credit Suisse are lead bookrunners on the transaction.

The Class AA notes are rated eight notches above Moody’s speculative-grade B2 corporate rating for the airline. The notes ratings are aided by peak loan-to-value ratios of 44% for the collateral backing the AA notes and 61% for the planes backing the A notes. Moody’s said the LTVs were “a few points higher” than other recent EETC transactions by American Airlines and Air Canada, but carry the same ratings as the AA/A notes in those two deals.

The newly manufacturered jet deliveries will be vital in replenishing United’s aging fleet that averaged 14.3 years as of July 2017. With the exception of the 32 Boeing 787 "Dreamliners" in its fleet that average 2.5 years, United's next youngest plane model is the 737 Next Gen that are on average 10.4 years old.

Ten of the new aircraft being purchased will still be younger than the average age of their respective models in United’s fleet throughout the notes’ payoff schedule maturing in March 2030, according to Moody's.

The planes’ aggregate market value is estimated at $1.54 billion by Moody’s, a slight haircut from the issuer’s $1.59 billion figure. Moody’s assigns steeper depreciation values to the jets, estimating the maintenance-adjusted base value will be $1.35 billion in 2023 and just $635 million after a dozen years in service. (United gave an end-of-term valuation of $1.03 billion, using a standard 3% per annum depreciation standard in EETC offerings.)

The offering is the first EETC offering for United since September 2016, in a $919.5 million deal with a similar capital structure and ratings.

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Airline EETC