Investec raises $1bn for Emirates to lease Airbus A380s

The South African financier and asset manager Investec Bank has raised US$1 billion to finance aircraft leases for Emirates.

Dubai-based Emirates will lease four Airbus A380-800 aircraft – two 2013 models and two new models that will be delivered to the airline this year – Investec said.

The lease lasts for 12 years, the bank said without giving any other financial details, such as the interest level that Emirates will pay to investors.

Emirates, for its part, said it would be open to leasing more aircraft in the future.

Investec, the sole arranger for the financing of the leasing transaction, said that the $1bn was being raised from banks and institutional investors in the Middle East, Europe and Asia and that two of the deliveries, which it did not specify, would be done through Islamic financing.

The deal is being made through its aircraft-leasing subsidiary, Investec Aviation Finance. It did not name the investors.

“Emirates’ clear long-term financing strategy and our solid reputation in the financial community enables us to secure funding in the global market to grow our fleet of wide-bodied aircraft,” said Nirmal Govindadas, the senior vice president corporate treasury at Emirates.

“We are pleased to close the sale-and-leaseback agreement for four A380s with Investec Aviation Finance, and we will continue to tap into innovative funding opportunities, maintaining our well-diversified financing portfolio to support our growing fleet.”

Leasing aircraft is becoming more popular at a time when interest rates on the US dollar and other hard currencies are low, making borrowing a good way to diversify funding for planes. About 40 per cent of the world’s aircraft are leased by airlines and it is a growing trend, especially in the Middle East, where that ratio stands at about 30 per cent, according to aviation experts.

By leasing, an airline can better manage its risks because, after a 10- or 12-year lease, an aircraft loses value, especially if newer, better ones have come on the market.

There is also often a time lag between an order and delivery, meaning airlines can find themselves without planes to meet demand for new routes – and that means they must rent planes.

Investec said its aviation leasing arm has about $5bn of aircraft assets under management through its own balance sheet and managed funds.

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