Treasury Today Country Profiles in association with Citi

Etihad Aviation Group

Best Funding Solution Highly Commended: Etihad Aviation Group

Adam Boukadida, Etihad Aviation Group and Meg Coates

This transaction took place in the wake of the biggest aircraft finance story of 2016 – the unprecedented hold placed on all guarantees and export credit support of Airbus products by UK Export Finance, COFACE (the French ECA) and Euler Hermes (the German ECA) as a result of disclosure issues investigated by the UK Serious Fraud Office.

Photo of Adam Boukadida, Etihad Aviation Group and Meg Coates.

Adam Boukadida

Acting Group Treasurer

The Etihad Aviation Group comprises Etihad Airways, the Hala Group of travel and tourism management and loyalty companies as well as Etihad Airport Services and group support functions required to interface with and support its subsidiaries, joint venture companies and equity partners. Etihad Aviation Group is headquartered in Khalifa City, Abu Dhabi and is Government-owned.

Bridge financing solution for Airbus A380s in the wake of biggest aircraft finance story of 2016

The challenge

This transaction took place in the wake of the biggest aircraft finance story of 2016 – the unprecedented hold placed on all guarantees and export credit support of Airbus products by UK Export Finance, COFACE (the French ECA) and Euler Hermes (the German ECA) as a result of disclosure issues investigated by the UK Serious Fraud Office. Etihad needed to react to the consequent suspension of its long-term ECA-backed aircraft financing arrangements.

The solution

The Etihad treasury team led the design of a short-term, cost effective bridging solution of US$230m over a six-month tenor alongside Abu Dhabi Commercial Bank who in turn collaborated with MUFG to deliver funding to Etihad.

Best practice and innovation

This deal was one of the first such solutions in the market addressing the ECA funding problem and was later replicated by multiple parties. The solution offered financing for Etihad’s capital import using a mix of conventional trade finance solutions – a move rarely seen in the marketplace until this transaction.

The transaction was a short-term arrangement, with MUFG settling Etihad’s payables on the back of a supporting undertaken by ADCB to pay MUFG on the due date. This unique structure combined with rapid execution gave Etihad a solution that was both cost efficient and timely enabling the airline to meet its payment obligations to Airbus whilst facilitating a necessary interval for the arrangement of alternative long-term finance facilities.

Ricky Thirion, Interim Group Chief Financial Officer, Etihad Aviation Group said, “We are delighted to have worked with our local and international banking partners who produced an innovative, optimised and yet simple solution to address our bridge financing requirement on two of our A380 deliveries which were affected by the suspension of European ECA support for Airbus deliveries.”

Diagram 1: Transaction structure

Key benefits

  • Cost effective and timely solution which enables Etihad to meet its payment obligations to Airbus whilst facilitating a necessary interval for the arrangement of alternative long-term finance facilities.

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