Wait for it: Two More to Come
August 9, 1999
The European securitization market is still hoping to get a few deals away before everyone disappears to the Mediterranean and Caribbean beaches, with confirmation that at least two deals will shortly hit the market.
The largest is a deal for Angel Train Contracts, a subsidiary of the Royal Bank of Scotland (RBS), which is currently being marketed, according to RBS officials.
The GBP480 million ($779 million) transaction, which is being lead managed by RBS and Barclays Capital, is backed by lease payments from West Coast Trains for the leasing of high-speed tilting rolling stock. West Coast Trains is jointly owned by Richard Branson's Virgin Group and transport group Stagecoach.
The bonds will have a single fixed-rate tranche and a final maturity of 2015. The transaction - which is expected to be rated at single-A by Standard & Poor's, double-A by Fitch IBCA and single-A-plus by Duff & Phelps - will be the sixth rolling stock lease securitization since Britain's railways were privatized in 1994.
Also expected later this month is Europe's first enhanced equipment trust certificate (EETC). The E195 million transaction, structured though not underwritten by Morgan Stanley Dean Witter, is for Spanish airline Iberia and is backed by six new Airbus A-320s.
"With Japanese banks withdrawing from financing aircraft, it has become more and more difficult to get bank finance to buy planes. Even if it is possible loans are always too short term compared to the life of the planes," said a rating agency official in London. "So airlines are likely to increasingly turn to the bond markets, as has become normal in the U.S."
The transaction is expected to be split into three tranches, with E177 million of senior notes rated double-A by Moody's and Duff & Phelps, E39 million of junior notes rated A1/A+ and a E39 million unrated mezzanine piece.
Securitization pros said that the relatively high ratings are thanks to a key advantage of EETC deals - ratings are based not only on the airline, but also on the high level of security provided by the aircraft themselves.