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Thai Airways financing its new aircraft at 12.5 bps -- cheapest airline financing ever

So here I was in late 1990 sitting in my office (really more a desk in a trading room) when I get a call from the CFO of Thai airways.  They wanted to talk!   A few days later I was sitting down with the CFO and CEO and they indicated that they were looking to finance a large order of Boeing aircraft, and had seen the work I had done --- in producing a comprehensive information package for the potential financiers.  Since we were an investment bank they knew we had no interest in arranging the financing!  

To be honest, producing these documents is a massive pain because they have to cover all aspects of the airline -- this goes well beyond SEC documents and is somewhat different than an IPO document because the disclosure and information is far more detailed.  Today it would be a data room, but that was not convenient then, since the bidders were all over the world...that was then, this is now!

so I agreed to bring a team of bankers to Bangkok for a few weeks to undertake the work, at the peak, we were four on the ground -- my days were full not only was I advising Eximbank at night but was completing the book during the daytime.

After two months of work, the document was ready a bound book of 500 pages (with a CD-ROM -- a first at the time) that was distributed to a number of financial institutions.  I still remember the impact it had on the banks -- everyone told me that when they went to their board to get approval they brought the document with them.

A few months later it was announced that a consortium of banks had agreed to finance the purchase of US$ 1.2 billion of new Boeing aircraft at 12.5 bps interest rate margin...the tightest bank financing achieved for an airline.

Why did this happen, simply because more than 30 banks were interested in financing the airline, and a bidding war was the result, a good friend told me that he was so very happy to have lost the mandate because at 17 bps his costs were more than what he was charging. Each basis point reduction in financing cost was equal to US$ 120,000 in saving per annum.  The next cheapest financing was 20 bps achieved by a European carrier.

Of course, now the airline is in bankruptcy (these financings have expired many years ago) and liquidation of the carrier looks possible


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