Superjet Competitive Finance Offer
“Our ultimate goal is to make Russian aerospace and financial products competitive in the global market,” Alexander Ivanov, deputy chairman at Vnesheconombank (VEB), told AIN. Ivanov called Sukhoi a “long-standing partner” for his Kremlin-controlled bank, with whom the latter “has spent two years structuring the workable aircraft sales system support.”
The first airline to benefit from the new system has been PT Sky Aviation. The Indonesian airline signed for 12 Superjet 100-95Bs at MAKS 2011. Starting up in 2010, the carrier accepted its first Superjet in December 2012, the second in the middle of 2013 and the third at the end of the year. Deliveries to PT Sky Aviation may resume in 2015, provided the airline continues to demonstrate a steady, profitable growth, Sukhoi said.
Ivanov described the mechanism under which these three aircraft were provided as “a complex credit and lease scheme.” The bank granted the airline a credit worth $80 million with a 12-year term to cover the lion’s share of the purchase. Export insurance comes from EXAR, the Russian agency for insurance of export credit and investment.
Not giving an exact interest rate charged by VEB, Ivanov insisted it was “quite competitive,” and argued that it could not have been otherwise due to the “competing environment of the fast-growing Indonesian market.” Russian bankers were able to come up with good terms “because we have a good insurance for the political and economical risks from EXAR.” The airplanes are delivered through a special branch of VEB Leasing that was specially established “in the region” as a tool of convenience.
“Should the airline not pay rentals on time and default happens, we can take airplanes back rather quickly and efficiently for subsequent placement with another carrier,” Ivanov insisted. “The credit and lease scheme we worked out is the one that minimizes risks for the leading funding institution. Aircraft are registered locally in a way that creates the best conditions in terms of country-to-country relations.”
The scheme uses elements of both finance and operating lease. “In the past we used financial lease only, but now the operating lease is trendy. In my view, modern operating lease schemes can promote placement of new Russian airplanes with airline customers.”
VEB is also a participant in the deal between Superjet International (SJI) and Interjet (ABC Aerolineas, S.A. de C.V) in which France’s Natixis acts as the lead financier. Insurance is provided by SACE of Italy and Coface of France, both in agreement with VEB on the Superjet. European banks and insurers are happy to fund the deal since the French, Italian and other EU manufacturers are on the project as vendors and suppliers (according to SJI, the Western content in the SJI-supplied Superjet is more than 60 percent).
The syndicate provided its first credit to the airline on Dec. 19, 2013. It covers one airplane only, and will be used as a basis for funding the remaining aircraft later this year. Interjet accepted two Superjets last summer and added two more by year-end. It marked the first time a Russian bank had taken part in an international syndicate on similar terms with such big players as Deutsche Bank and Natixis, albeit with a rather small share: VEB had provided about $6 million. But VEB’s involvement will grow as more airplanes are delivered–the contract covers 20 firm orders and 10 options. “Our participation means that Russia is taking the project seriously. For the Western banks this is important and comforting. In the end, we have a workable solution where every participant is happy.”
The grand total of funding that VEB has so far invested into the Superjet project has exceeded $1 billion, said Ivanov. The export sales generate cash flow with which the earlier investments pay off. “From our viewpoint as the main financier, the more Superjets [delivered], the more services its manufacturer renders to airlines, and the sooner our earlier-made investments pay off. In that case, the whole project gets clearer to us.”