Best in Class Treasury Solution in the Middle East Winner: Etihad Aviation Group

Published: Jul 2017


Photo of Roger Fleischmann, J.P. Morgan, Adam Boukadida, Etihad Aviation Group and Michael Guralnick, Citi.


Financing activities for 2016 were driven by increased funding requirements and the Etihad Aviation Group Treasury was responsible for raising funding of approximately US$6.9bn required for major capex and infrastructure developments, investment activities as well as managing the business’ liquidity requirements for the financial year. This number included the acquisition of ten new aircraft, bridge financing requirements and the refinancing of some maturing and existing debt, aligning it with the underlying project or asset life. This solution comprises a basket of innovative funding structures including the first corporate issuance in the Schuldschein market from a Middle Eastern borrower.

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.

in partnership with


Etihad excel in 2016 driven by change and innovation

The challenge

Etihad’s group treasury activities are not solely focused on the airline; it also acts in support of the broader Etihad Aviation Group. This creates multiple sourcing and management needs that must be aligned with investment and operational business requirements. Further, Group Treasury supports various equity partner airlines with a wide range of services, including bank relationship management, agency execution, systems support, in-house banking and structuring of direct capital support facilities. One deal in particular required rapid thinking to secure delivery of essential aircraft to the fleet.

The solution

Etihad group treasury has displayed a hyperactive approach to funding over the past year, especially around diversification of sources. Highlights of the financing activities include the following.

Raising US$1.5bn through a rated, senior unsecured and unlisted Sukuk Al-Wakala, this debut transaction marks the largest non-Sovereign Sukuk from the GCC since 2007. It is also the largest Sukuk ever out of Abu Dhabi. Through this transaction, Etihad has created an innovative solution, setting a new precedent for other similar issuers to access the capital markets.

A Murabaha private placement programme for a five-year, US$145m structure was the first Islamic private placement by Etihad, sourcing funds from GCC investors who otherwise may not have been able to lend into the airline.

Further funding diversification was achieved via a Schuldschein private placement programme. This was the first ever issuance for Etihad in that market and the first corporate issuance in the Schuldschein market from a Middle Eastern borrower. The transaction itself was marketed at a term-sheet volume of €150m equivalent with three, five and seven-year tranches in euro and US dollars. However, due to the high demand, the final volume was increased to €214m equivalent. An unsecured five-year US$425m Syndicated Loan Facility with a group of five local, regional and international banks was also used for refinancing.

However, group treasury surpassed itself in the wake of one of the biggest aircraft finance stories 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. In response to the consequent suspension of its long-term ECA-backed aircraft financing arrangements, Etihad’s treasury team led the design of a short term, cost effective bridging solution alongside ADCB who in turn collaborated with MUFG to deliver funding to Etihad.

Best practice and innovation

The bridging deal was one of the first such solutions in the market to address 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 undertaking 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.

This demonstrates an innovative, optimised and yet simple solution, set up to address the Group’s bridge financing requirement on A380 aircraft affected by the suspension of European ECA support for Airbus deliveries.

Key benefits

  • Diversity of funding portfolio.
  • Willingness to be first in the market.
  • Creative approach to external issues.
  • Demonstration of true partnership with third parties.

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