Plane lessor DAE raises $1.6bn in financing amid strong investor demand

This is the largest bank loan financing raised by company yet

A DAE ATR72-600 aircraft. The Dubai-based lessor is growing its managed aircraft portfolio. Photo: Dubai Aerospace Enterprise

Dubai Aerospace Enterprise, one of the world's biggest aircraft lessors, has negotiated loan financing worth $1.6 billion from 26 banks to meet future needs.

The multi-tranche financing is structured as a combination of revolving credit and term financing, and comprises conventional and Islamic loans, DAE said on Monday.

This is the largest bank loan raised by DAE to date, and the company will use the proceeds to support financing needs and refinance a maturing credit facility.

The company said the transaction was increased to more than twice the envisaged size on strong demand from investors.

“The closing of these facilities, as well as the upsizing and oversubscription, underscores the support and confidence that banks have shown in DAE and its future growth prospects,” Firoz Tarapore, chief executive of DAE, said.

“The facilities will allow DAE to maintain its exceptional liquidity and support the financing requirements of our recently announced order book acquisition.”

HSBC and JP Morgan were the joint book-runners and lead arrangers.

DAE has been expanding its fleet amid rapid growth in the airline industry.

Last month, it signed agreement to acquire 64 Boeing 737 Max jets from a unit of China Aircraft Leasing Group Holdings.

The order book includes 737-8, 737-9 and 737-10 variants, with delivery of the narrow-body aircraft scheduled to begin in 2023 and through to 2026.

“On a pro forma basis, this transaction will increase our fleet of owned, managed, committed and mandated-to-manage aircraft to approximately 550 aircraft, valued at approximately $20 billion,” Mr Tarapore said that time.

The move came as the global aviation industry sees no signs of air travel demand abating on one hand and as plane makers struggle to deal with aircraft delivery delays and ease capacity constraints on the other.

Airlines are increasingly turning to plane lessors to supplement their capacity.

Global passenger traffic continued to improve in June, reaching 94 per cent of pre-Covid levels, as the summer travel season in the Northern Hemisphere got off to a strong start, the International Air Transport Association said in its latest report.

In August, DAE said profit for the first half of 2023 increased marginally amid robust demand from airlines for aircraft to meet demand.

Profit before exceptional items in the six months to the end of June inched up to $141.1 million, compared to $140.1 million during the same period of 2022.

The latest facility enabled DAE “to tap the Islamic banking liquidity as well as consolidate its existing banking relationships from Middle East, Asia, North America, and Europe,” it said.