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CASE STUDY: Dubai Aerospace Gets Lift-Off on USD480mn Dual-Tranche Murabaha RCF

CASE STUDY: Dubai Aerospace Gets Lift-Off on USD480mn Dual-Tranche Murabaha RCF

Dubai Aerospace Enterprise (DAE) has signed a landmark unsecured four-year dual-tranche revolving credit facility with an initial commitment of USD480mn and an accordion feature that allows the facility to be increased to up to USD800mn. The deal was one of the largest conventional/Islamic transactions in the region.

Background

In spring 2018, following the acquisition of AWAS Leasing, DAE was looking to replicate a similar funding arrangement that AWAS had before, albeit in regional Gulf setting.

On 17 May it finalised a dual-tranche conventional/Islamic USD800mn facility that allowed DAE to add to the unsecured component of their liquidity profile, thus increasing overall unsecured revolving credit facilities to USD1.125 – USD1.445mn (depending on the final committed amount of this facility).

The financing, arranged through a syndicated structure with key partner banks, will support the purchase of aircraft and spare engines, including from Boeing and Airbus, as well as pre-delivery financing that DAE intends to dispose of or refinance. It also gives DAE the option to use the facility for pre-payments of existing financing arrangements

Transaction Breakdown

The medium term USD480mn revolving credit facility consisted of a conventional tranche and an Islamic (commodity Murabaha) tranche, with an accordion feature that allows for additional USD220mn to top up the facility at any time after the initial closing.

The innovative elements of the deal concern the drawing and repayment structure, as well as the in-coming accordion bank’s commitments. On a pro forma basis as of December 2017, if this facility is fully drawn and if the proceeds are used to pay down secured indebtedness, DAE’s percentage of unsecured debt would increase from 26% to a range of 31%-34%.

The 4-year tenor and maximum size of USD800mn provided the borrower with sufficient flexibility to bridge a permanent financing solution for financing their asset portfolio.

Appetite was strong on the deal and, in terms of final distribution, most of the offers came from UAE based banks, as well as banks active in the DIFC. The success of the deal, one of the largest of its kind in the region, reaffirms DAE’s good standing and solid ownership structure, as well as the company’s transparency to its debt investors.

 

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Bonds & Loans

Bonds & Loans is a trusted provider of news, analysis, and commentary that helps illuminate the most significant issues, events and trends impacting the global emerging credit markets.

 

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