Delivery company FedEx is out with its first enhanced equipment trust certificate offering since the 1990s, as it looks to use its planes to secure additional liquidity, one lead banker confirmed.
The structure, which is typically used by airlines, secures the US$690m offering to 14 Boeing aircraft appraised at US$1.3bn, that were delivered new to FedEx between September 2015 and June 2020, according to an investor presentation.
By the time of the expected maturity in February 2034 the aircraft will have a weighted average life of 8.8 years.
FedEx's senior unsecured curve is rated Baa2/BBB, but the secured structure is pushing the EETC offering to Aa3/AA- ratings.
That higher rating allowed bookrunners Citigroup, Deutsche Bank and Morgan Stanley to set price talk at 2%-2.125%.
Comparing yields on EETC transactions is tricky because the pool of assets differ greatly between companies, investors explained. That being said, the notes offered much less yield than the last EETC offering in the market from Alaska Air in June.
Alaska Air sold a US$965m 7.1-year EETC transaction rated A/A- that priced with a yield of 4.8% and was last seen trading around 4.2%, according to MarketAxess data.
FedEx was last in the market in April with a US$3bn three-part senior unsecured offering that landed a US$750m 10-year at 379bp over Treasuries. That same 4.25% 2030 was last trading at a G-spread of 148bp, according to MarketAxess data.
The aircraft are part of FedEx's modernization strategy, which looks to improve fuel efficiency and reliability across its fleet, according to the investor presentation.
All 14 aircraft are widebody variants, which is typically a negative for bond holders in the passenger aircraft space because of the faster rate of depreciation since the start of the pandemic, according to a previous S&P report noting the trend.
However, widebody freight models have held value better, according to FedEx.
The pool of planes consists of 10 Boeing 767-300F aircraft and four Boeing 777F long-haul freighters.
FedEx has 44 additional firm orders of the 767-300F set for delivery between 2020 and 2023, with the option to purchase 50 more through 2028. Likewise the company has 14 more firm orders of the 777F to be delivered between 2020 and 2024 with the option to buy 25 more through 2027.
Use of proceeds is set for general corporate purposes and the bond is expected to price later today.