Saudi aircraft firm in $60m loan deal

National Air Services wins a $60.5m loan facility with a Bahraini bank to buy six executive jets from Hawker Beechcraft in the US.

National Air Services said it would return to the debt markets soon to finance Gulfstream G-450 executive jets.

National Air Services (NAS), a Saudi holding company focusing on executive and budget air travel, has won a US$60.5 million (Dh222.1m) loan facility with a Bahraini bank to buy six executive jets from Hawker Beechcraft in the US. The deal was arranged through the assistance of the Export-Import Bank of the US (Ex-Im Bank), which provided export credit for the sale of the Hawker 750 aircraft.

The Ex-Im Bank's role includes insuring foreign purchases on behalf of financial institutions, which helps to eliminate credit risks associated with loans. The Arab Banking Corporation, based in Manama, provided the loan under a seven-year maturation period, NAS announced on Wednesday. NAS will use the aircraft on its Middle East NetJets franchise, which allows individuals to invest shares in private jets - a process called fractional ownership. Earlier this month, NAS renewed its regional management contract with NetJets, based in the US, which caters to midsized and large cabin aircraft accommodating six to 18 passengers from Hawker, Falcon and Gulfstream.

NAS first entered the fractional ownership market in 1999 to take advantage of a boom in Middle East executive jet use, particularly in the largest market, Saudi Arabia. The aviation company, based in Riyadh, said the loan enabled it to sell shares in the Hawker 750 and other aircraft under its management business "while providing relaxed payment terms that extend to seven years at attractive rates".

NAS also said it would return to the debt markets and the Ex-Im Bank soon to finance three Gulfstream G-450 executive jets from Gulfstream Aerospace, based in the US. In 2007, NAS raised $79.5m in financing for three Gulfstream G-450 aircraft. NAS also owns Nas Air, a regional budget carrier, which launched in 2007 as part of the Saudi government's attempts to make the first strides in liberalising its air transport market and breaking the monopoly of the state-owned Saudi Arabian Airlines.

Apart from making loan guarantees, Ex-Im Bank planned to nearly double its direct lending for aviation from $4.5bn last year to $8bn this year, according to John Matthews, the managing director for the Middle East and Africa at Boeing Capital, which often works with the export agency to assist with sales of Boeing commercial aircraft. "It's a reflection of the challenging market conditions," he said.

While widespread fear may have aptly described the financial community's sentiment at the close of last year, institutions were now cautiously considering making financing deals, he said. "There are still lenders in Europe and Asia that are able to lend because they didn't invest in subprime mortgages and other things," Mr Matthews said. "Because of difficulties in the marketplace, from a financier's perspective, if you have capital there are very good opportunities. Our view is that aircraft are attractive investments. They are long-lived, with a 25 to 30-year economic useful life."

Another reason aircraft were attractive financing candidates was their mobility, he said. "You can readily move it from one jurisdiction to another and from one customer to another. You have more flexibility than other asset classes." [e-mail]