Return to search

Korea’s Hana Financial acquires $50m mezzanine aircraft loan

Korean interest in aircraft financing is increasing but is expected to tilt towards small and medium-sized aircrafts.

South Korea’s brokerage company Hana Financial Investment Company will acquire the whole mezzanine tranche of $50 million loan from an aircraft fund to buy a Boeing 777-300ER from Qatar Airways.

The loan is expected to generate an average annual return between 5 and 6 percent through 2026. Hana will syndicate the loan to two or three Korean institutional investors.

The fund was set up by Korea’s JB Asset Management and the senior tranche of the fund will be underwritten by Australia and New Zealand Banking group while an unidentified domestic institution will acquire the equity interests. The size of the fund was not disclosed.

Traditionally, Korean investors prefer more reputable airlines and have much exposure to Middle-Eastern airlines such as Emirates Airlines and Etihad Airways, according to Hana Financial.

“But, Korean investors are trying to expand the aviation market from wide-body aircraft to narrow-body type like 737 or A320, some of them are trying to invest in portfolio deals,” added a spokesman for Hana Financial. “This is because there isn’t that much liquidity in the wide-body aircraft market and it is more expensive.”

The spokesman explained many Korean investors believe the market for high-rated wide-body aircraft financing is reaching its peak because availability for the debt is limited. As a result, he expects more experienced Korean investors in aircraft-financing will start participating in the narrow-body aircraft financing deals and this will signal other investors to follow the trend.

Last year, Hana Financial also underwrote a $100 million mezzanine financing for an aircraft fund launched to buy two new models of Boeing 777-300ER for lease to Emirates.