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Overview

BOC Aviation enters into sale-and-leaseback agreement with Icelandair Group for two Boeing 737 MAX aircraft (Linked to Record ID#99209)

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 (actual)
Feb 22, 2019
End (actual)
Jan 1, 2021
Last repayment (originally scheduled)
Dec 24, 2030

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.

Loan description

BOC Aviation enters into sale-and-leaseback agreement with Icelandair Group for two Boeing 737 MAX aircraft

Interest type•UnknownMaturity•12 years

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 (PDP) 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 MAX aircraft with Icelandair Group. The lease term was 12 years and included a purchase option 30 months into the lease period. One aircraft was scheduled to be delivered in 2019 and the second to be delivered in 2020. Record ID#99210 captures the sale-and-leaseback agreement. BOC Aviation delivered 737-9 MAX 9 TF-ICA (MSN 44357) on February 22, 2019. The aircraft was powered by CFM LEAP-1B Engines. 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. As a result, the delivery of the second aircraft was delayed to the second quarter of 2021. Icelandair took delivery of three new Boeing 737 MAX aircraft during 2021, including the outstanding one under the sale-and-leaseback agreement.

Staff comments

1. A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. Under a capital lease (a financial arrangement where the lessee/borrower uses an asset and pays regular installments plus interest to the lender/lessor), rental payments are usually classified as interest and obligation payments, similarly to a mortgage (with the interest calculated each rental period on the outstanding obligation balance). AidData codes capital leases as loans. 2. Sale and leaseback (or sale-leaseback) agreements are generally considered to be off-balance-sheet hybrid debt products.