Iran’s frozen assets within the EU banking systems have been used as a collateral to obtain funding for the deal to procure 118 planes from France’s Airbus.

Italy’s export credit agency (ECA) Sace is understood to have funded part of the deal, estimated to cost $27bn.

“Frozen state assets in the EU banking system have been used as a payment guarantee,” a source familiar with the deal tells MEED.

The delivery of the new Airbus fleet is set to commence within months, according to local media citing Airbus sources. The order, however, has not yet been booked with the French aircraft manufacturer’s latest orders and deliveries database viewable on its website.

Iran has said it needs up to 90 new planes annually over the next four to five years to overhaul its aviation sector.

It has been considering a number of options to address the funding constraints. In August 2015, Iran’s Aviation and Space Industries Association (AISIA) proposed founding a bank focusing on the aviation sector. As is customary in other markets, the lender, which it proposes to name Air Transport Development Bank of Iran, will secure loans for Iranian aviation companies to renovate their ageing fleet by purchasing planes from foreign companies. AISIA expects initial funding for the proposed bank to come from the National Development Fund of Iran (NDFI) as well as related financial facilities.

It is understood that the NDFI has previously provided loans for Iranian companies to buy planes, but at a very high cost and usually above the value of the company’s assets. Apparently this has been resolved, with the fund now prepared to accept planes as a guarantee for the loans.

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