The Blakes Aviation group, representing the underwriters led by Morgan Stanley and Credit Suisse, is pleased to have assisted in the closing of the third Air Canada enhanced equipment trust certificate (EETC) transaction.

In April 2013, we assisted in the structuring and closing of Air Canada EETC 2013-1 for five new Boeing 777 300ERs, which was a historic transaction, including the following  features:

  • Canada’s first EETC
  • World’s first EETC to enjoy full Cape Town Convention benefits on an unqualified basis
  • World’s first EETC issued by non-U.S. airline to receive “pure” EETC pricing and terms
  • 4.66 per cent blended rate effectively priced better than U.S. benchmarks (significant NPV savings over next best alternative)
  • Liquidity Facility — 18 months
  • Very high effective LTVs

U.S. rating agencies gave the Air Canada transaction notching upgrades equivalent to U.S. 1110 protection without the need for additional enhancements (such as Air France/Iberia/Emirates, extended Liquidity Facility and/or Repossession Facility or pricing premium such as for British Airways or Virgin Australia).

Heavy investor demand resulted in high oversubscription on all three tranches.

This transaction received both Airfinance Journal and Airline Economics “Deal of the Year” awards in 2014.

In March 2015, representing the underwriters led by Morgan Stanley and Credit Suisse, we assisted in the closing of Air Canada EETC   2015-1b for one Boeing 787-8 (previously delivered) and eight new Boeing 787-9 aircraft, including the following  features:

  • Class A, Class B and Class C Certificates — same as 2013
  • 3.81 per cent blended  rate
  • Liquidity Facility — 18 months

Structurally, this was a much simpler transaction and it resembled more closely a typical U.S. airline EETC (2013-1 included a separate special purpose entity as issuer, which issued the Equipment Notes and entered into a conditional sale agreement with Air Canada at delivery of each aircraft, and issued mortgages to the loan trustee — required due to certain negative covenants in then existing    financing).

In 2015-1, Air Canada granted security over the aircraft through a Trust Indenture and Mortgage. Air Canada also granted security through a separate Deed of Hypothec. This was required under Quebec law as Air Canada’s domicile (registered office) is in Quebec. There was no difference in the manner that the transaction was rated.

In December 2015, representing the underwriters led by Morgan Stanley, we assisted in the closing of Air Canada EETC 2015-2 for three new Boeing 787-9 and two new Boeing 777 aircraft to be delivered in April and May 2016,  including the following  features:

  • Liquidity Facility — 18 months
  • 4.044 per cent blended  rate
  • Certificates offered: Class AA, Class A and Class B Certificates — different than 2013 and 2015-1. Only one or two U.S. airlines had issued with Class AA Certificates prior to Air Canada.

Air Canada’s structure with Class AA Certificates was the first prefunded EETC with Class AA Certificates. Introduction of Class AA Certificates required certain changes to liquidity facility and deposit arrangements, but overall, substantially the same documentation as EETC 2015-1.