Stephenson Harwood has acted for Indonesia’s largest airline Lion Air on the issuance of a $138 million guaranteed by the U.S. Export-Import Bank, the first such bond in Southeast Asia, as well as the first to dip under a 2 percent interest rate.
The fixed-rate global note, arranged by BNP Paribas is the first asset-backed bond to be completed by an airline in the region and is only the second issuance by an Asian airline to be guaranteed by the U.S. Ex-Im Bank, following the Ex-Im Bank-guaranteed issuance of Air China’s bond late last year. The proceeds of the bond issuance are being used to finance four new Boeing 737-900 ER aircraft worth over U.S.D250 million at catalogue prices.
The over-subscribed bond issuance achieved one of the lowest coupon rates seen in export credit agency-backed capital markets financings to date.
Stephenson Harwood acted as lead counsel to Lion Air and the issuer. The law firm’s team was led by Paul Ng, global head of aviation, and he was assisted by Michelle Runagall, Richard Parsons, Nikhil Jalan and Jane Bay. Milbank Tweed Hadley & McCloy acted as special capital markets counsel to Lion Air. Clifford Chance acted for BNP Paribas, while Zuckert, Scoutt & Rasenberger acted as lead counsel to the U.S. Ex-Im Bank, with Vedder Price acting as special capital markets counsel to the U.S. Ex-Im Bank.
"With the increased scarcity in bank liquidity, airlines are looking more and more to the capital markets for the financing of their new orders,” said Ng in a statement. “PT Lion's oversubscribed bond issuance at the competitive coupon rate that it achieved is further evidence that investors in this sector are looking for good assets in the East where markets continue to grow and expand.”
In February, Lion Air signed $22.4 billion deal with Boeing to purchase 230 of the latter’s aircraft, the single largest contract in commercial aviation history. Lion Air ordered 201 Boeing 737 MAX and 29 next-generation 737-900ERs, with purchase rights for an additional 150 airplanes from the U.S. manufacturer. ALB
Ranajit Dam is Southeast Asia Editor at ALB. Follow him on Twitter: @RanajitDam_ALB