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Overview

BOC Aviation provides a $200 million USD loan to Icelandair Group for pre-delivery payments on 11 Boeing 737 MAX aircraft (Linked to Record ID#99210)

Commitments (Constant USD, 2023)$201,259,259
Commitment Year•2018Country of Activity•IcelandDirect Recipient Country of Incorporation•IcelandOverseas Jurisdiction•SingaporeSector•Transport And StorageFlow Type•Loan

Status

Project lifecycle

Completion

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Dec 27, 2018
Start (planned)
Jan 1, 2019
End (planned)
Mar 1, 2020
End (actual)
Dec 31, 2022

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 companies

  • BOC Aviation Limited

Receiving agencies

Private Sector

  • Icelandair Group hf.

Implementing agencies

Private Sector

  • The Boeing Company (TBC)

Loan description

BOC Aviation provides a $200 million USD loan to Icelandair Group for pre-delivery payments on 11 Boeing 737 MAX aircraft

Interest type•Unknown

Narrative

Full Description

Project narrative

On December 27, 2018, BOC Aviation entered into a $200 million USD facility agreement with Icelandic travel industry firm and airline Icelandair Group hf. for financing pre-delivery payments (PDPs) on 11 undelivered Boeing 737 MAX aircraft. In 2013, Icelandair Group signed a purchase agreement with the Boeing Company for the purchase of sixteen Boeing 737 MAX8 and MAX9 aircraft. The aircraft were to be originally scheduled to delivered between 2019 and 2020. The final aircraft was to be delivered in March 2020. The PDP payments had already been made by Icelandair Group using its own funds, so the effective of the facility was to increase the borrower's liquidity of $160 million USD. The cost of the PDP financing was capitalized with PDP payments until aircraft delivery and would become a component of the final purchase cost of the aircraft. Record ID#99209 captures the PDP financing facility. Additionally, the same day BOC Aviation entered into a sale-and-leaseback agreement for two Boeing 737 aircraft with Icelandair Group. The lease term was 12 years and included a purchase option 30 months into the lease period. Record ID#99210 captures the sale-and-leaseback agreement. In March 2019, the Boeing 737 MAX line of aircraft were grounded worldwide over safety issue, causing delays in the delivery of the aircraft to Icelandair. In August 2020, Icelandair Group reached a settlement agreement with Boeing on compensation for the 22 month long grounding, reducing the number of aircraft in the 2013 purchase agreement from 16 to 12. The PDP financing agreement with BOC Aviation was amended in accordance with this change. For the four cancelled MAX aircraft, the accrued financing cost of PDPs, $3.8 million USD, was expensed as a finance cost by the borrower. The deliveries were scheduled to complete in the fourth quarter of 2021 and first quarter of 2022. In 2021, three aircraft remained undelivered under this facility. In 2022, Icelandair took delivery of seven 737 MAX8 aircraft, including the three undelivered ones included in the PDP agreement.