Hana Financial Investment Co. Ltd. will provide a subordinated loan of 280 billion won ($250 million) on four A380 superjumbos long-term leased by Dubai-based airline Emirates, an investment expected to generate a stable return for 12 years and a currency hedging premium.
Hana, a South Korean brokerage firm, is the subordinated debt provider for a credit facility of around 1 trillion won arranged for the four passenger jets, which also include a senior tranche provided by unidentified overseas investors, according to investment banking sources on Jan. 7.
Of the 280-billion-won subordinated debt, Hana has provided half the funding for two of the four wide-body planes which were delivered to Emirates in December 2018.
Hana will inject the remaining funding within the first half of this year when the airline is expected to take delivery of the two other jets.
In return, Hana will receive a lease fee from Emirates equal to the whole principal amount over the next 12 years. A hedging premium for the euro versus the Korean won is likely to increase the expected return which the sources declined to disclose.
The leasing deal came after Emirates announced a $16 billion order for 36 additional A380 aircraft with 20 firm orders and 16 options in January 2018.
Emirates is the largest operator of the A380 and the only airline keeping the world’s largest passenger aircraft in operation.
By choosing a financial lease instead of an operational lease, Hana minimizes the risk from a failed sale of the double-decker aircraft in the secondary market, considering that airlines seek to reduce their A380 fleet.
Air carriers prefer medium-sized planes for short- and medium-haul flights in a point-to-point model rather than operating jumbo jets that connect hub airports.
The aircraft funding was handled by Hana Financial Investment’s alternative investment team headed by Hyung-joo Jin.
The in-house team had invested in the UK’s Teesside biomass power plant, Permian midstream infrastructure in the US and a waste management company in the Netherlands last year.
In comparison, the brokerage firm’s global investment finance team has focused on real estate transactions, along with Hana Alternative Asset Management Co. Ltd.
By Daehun Kim
<Edited by Yeonhee Kim>
Photo: Getty Images Bank