Virgin Australia is readying its first issue of enhanced equipment notes (EEN), according to a presale report from Fitch Ratings.
The deal, series 2013-1, will refinance some existing debt and generate some additional funds for general corporate purposes. It consists of:
-- $474 million of class A notes with an expected maturity of October 2023 and a preliminary 'A' rating;
--$120.7 million of class B notes with an expected maturity of October 2020 and a preliminary 'BB+' rating;
--$137.9 million of class C notes with an expected maturity of October 2018 and a preliminary 'B+' rating;
The final legal maturities for the Class A and B notes are scheduled to be 18 months after the expected maturities.
In its presale report, Fitch noted that the deal’s structure largely follows the template for U.S. EETCs. The aircraft collateral and initial loan to value ratios are also comparable to recent EETCs. There is a pool of 24 aircraft, including 21 737-800s, two 737-700s and one 777-300ER.
However, the structure crosses three legal jurisdictions, Australia, New Zealand, and the United States, and it contains several SPVs. Moreover, it is the first EETC-type transaction relying on the Australian insolvency regime, which is different in key aspects compared to the Section 1110 and Cape Town Convention legal frameworks seen in most EETCs.
Even though Australia signed the CTC into law in late June of 2013, its implementation will not be completed prior to the issuance of the notes. The CTC rules are not expected to apply retroactively and VA 2013-1 will be governed under the current Australian insolvency law.
New Zealand is a CTC signatory and the CTC will cover the six aircraft in this transaction that are leased in New Zealand.