US firms favourites to be lead arrangers on $290m EgyptAir loan

31 March 2010

US’ JP Morgan and Citigroup submit best bids

US banks JP Morgan and Citigroup have emerged as the favourites to act as the mandated lead arranger on a $290m loan to finance EgyptAir’s purchase of six new aircraft, according to a banker close to the deal.

“JP Morgan and Citigroup have put in the most competitive and aggressive pricing,” says the banker. JP Morgan’s offer was less than 30 basis points over the London inter-bank offered rate, the benchmark interest rate for international lending.

The state-owned airline will appoint an arranger for the loan in early April and is looking to finalise the financing by the end of June.

“They have said they will appoint the banks within a week but they have kept delaying it,” says the source. “I think it will definitely happen in the next couple of weeks.”

Other banks that are known to have submitted bids include BNP Paribas, National Bank of Egypt, Banque Misr and Credit Agricole Egypt.

The deal will cover the financing for five Boeing 737s and one Airbus aircraft.

The company is yet to decide if it wants to structure the deal as a corporate loan or as a leasing agreement, but is expected to lean towards the latter.   

“I think the leasing agreement is more appealing to them because it’s much cheaper,” says the banker. “It would be done through an export credit agency like the Export-Import Bank of the US (Ex-Im Bank), so they would create a special purpose vehicle offshore and this offers more security as there’s no country risk involved.”

JP Morgan was chosen as the sole arranger on the $200m Ex-Im Bank backed financing of five 737s as part of EgyptAir’s fleet renewal programme in 2009.

The deal marked the first time in over 25 years that Ex-Im Bank had guaranteed funding for Egypt’s national carrier, which is looking to increase its presence in the Middle East region.

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