This landmark transaction securitises all of Korean Air Lines’ present and future airline ticket receivables sold in Japan, providing Korean Air with an effective and efficient yen-denominated funding option that is matched against its yen revenues.
The deal is noted for its key structural enhancements.
By coupling the securitisation framework with a credit facility from The Korea Development Bank in support of the payment obligations, Korean Air was able to achieve an investment grade rating on the deal.
This credit-enhanced future flow structure allows Korean Air to increase leverage beyond the limits of existing receivables and at the same time achieves much more competitive all-in rates of financing.
Korean Air was the first Korean originator to issue asset-backed securities denominated in yen and the first to test the future-flow model in Japan. The deal is also the first to securitise receiveables from the International Air Transport Association’s billing and payment unit versus previous air ticket deals that securitised credit card payments.
Nomura’s Chris Chau, who was responsible for the deal, said: “[The deal] provides airlines globally with a new viable financing option at a time when many traditional sources of funding are limited.”
