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Overview

Bank of China provides a $154 million USD loan to Deutsche Lufthansa AG for lease financing of two Airbus A330-300 aircraft

Commitments (Constant USD, 2023)$216,900,697
Commitment Year•2008Country of Activity•GermanyDirect Recipient Country of Incorporation•GermanySector•Transport And StorageFlow Type•Loan

Status

Project lifecycle

Pipeline: Commitment

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Mar 31, 2008
Last repayment (originally scheduled)
Mar 28, 2020

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownership

Funding agencies

State-owned Commercial Banks

  • Bank of China (BOC)

Receiving agencies

Private Sector

  • Deutsche Lufthansa AG

Implementing agencies

State-owned companies

  • BOC Aviation Limited

Loan description

Bank of China provides a $154 million USD loan to Deutsche Lufthansa AG for lease financing of two Airbus A330-300 aircraft

Interest type•UnknownMaturity•12 years

Narrative

Full Description

Project narrative

On or before March 31, 2008, Bank of China issued a $154 million USD loan to Deutsche Lufthansa AG for the lease financing of two Airbus A330-300 aircraft. Loan terms included a 12-year maturity, Euro-dominated facilities, and Japanese Operating Lease (JOL) structures. Both aircraft had been delivered to Lufthansa by March 31. This transaction was the first aircraft debt facility arranged for Lufthansa by a Chinese bank. BOC Aviation -- a wholly-owned subsidiary of Bank of China -- acted as the debt arranger for the deal.

Staff comments

1. A Japanese Operating Lease (JOL) is an operating lease funded by an equity investment from a Japanese entity and non-recourse senior debt provided on-shore in Japan. This structure is used in the aviation industry to provide airlines with 100% financing of aircraft at attractive rates and over long terms. The JOL is appealing to airlines as it offers competitive lease rates and off balance sheet financing. This is achievable because the owner of the aircraft (i.e., the Japanese equity investor) is entitled to claim depreciation tax benefits in Japan. In order to receive the tax benefits associated with owning the aircraft, the Japanese equity investor must accept residual value exposure as well as demonstrate knowledge and expertise of leasing.