Ryanair 2012 Annual Report Download - page 92

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has essentially the same characteristics as all previous Ex-Im Bank guaranteed financings with no additional
obligations on Ryanair. On the basis of an Ex-Im Bank guarantee with regard to the financing of up to 85% of
the eligible U.S. and foreign content represented in the net purchase price of the relevant aircraft, the financial
institution investor enters into a commitment letter with the Company to provide financing for a specified
number of aircraft benefiting from such guarantee; loans are then drawn down as the aircraft are delivered and
payments to Boeing become due. Each of the loans under the facilities are on substantially similar terms, having
a maturity of 12 years from the drawdown date and being secured by a first priority mortgage in favor of a
security trustee on behalf of Ex-Im Bank. As of July 20, 2012, the Company has a commitment for all 11
aircraft due for delivery on September, October and November 2012.
Through the use of interest rate swaps or cross currency interest rate swaps, Ryanair has effectively
converted a portion of its floating-rate debt under its financing facilities into fixed-rate debt. Approximately
36% of the loans for the aircraft acquired under the above facilities are not covered by such swaps and have
therefore remained at floating rates linked to EURIBOR, with the interest rate exposure from these loans largely
hedged by placing a similar amount of cash on deposit at floating interest rates. The net result is that Ryanair has
effectively swapped or drawn down fixed-rate euro-denominated debt with maturities between 7 and 12 years in
respect of approximately 64% of its outstanding debt financing at March 31, 2012 and of this total
approximately 44% of this debt has been partially swapped, with the relevant swaps covering the first 7 years of
the 12-year amortizing period.
The table below illustrates the effect of swap transactions (each of which is with an established
international financial counterparty) on the profile of Ryanair‘s total outstanding debt at March 31, 2012. See
―Item 11. Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Exposure and Hedging‖
for additional details on the Company‘s hedging transactions.
At March 31, 2012
EUR
EUR
Fixed
Floating
(in millions of euro)
Borrowing profile before swap transactions .....................................
1,019.9
2,605.3
Interest rate swaps – Debt swapped from floating to fixed ...............
1,290.6
(1,290.6)
Borrowing profile after swap transactions ........................................
2,310.5
1,314.7
The weighted-average interest rate on the cumulative borrowings under these facilities of €3,625.2
million at March 31, 2012 was 2.9%. Ryanair‘s ability to obtain additional loans pursuant to each of the
facilities to finance the price of future Boeing 737-800 aircraft purchases is subject to the issuance of further
bank commitments and the satisfaction of various contractual conditions. These conditions include, among other
things, the execution of satisfactory documentation, the requirement that Ryanair perform all of its obligations
under the Boeing agreements and provide satisfactory security interests in the aircraft (and related assets) in
favor of the lenders and Ex-Im Bank, and that Ryanair not suffer a material adverse change in its conditions or
prospects (financial or otherwise).
Ex-Im Bank‘s policy on facilities of this type is to issue a binding final commitment approximately six
months prior to delivery of each aircraft being financed. Ex-Im Bank has already issued final binding
commitments and related guarantees with respect to the 199 (net of 26 aircraft disposals) Ex-Im Bank-financed
Boeing 737-800 aircraft delivered between 2001 and March 31, 2012. Ex-Im Bank‘s final binding commitment
is also subject to certain conditions set forth in the documentation for facilities and the Ex-Im Bank guarantee.
These conditions include, among other things, the execution of satisfactory documentation, the creation and
maintenance of the lease and related arrangements described below, that Ryanair provide satisfactory security
interests in the aircraft (and related assets) in favor of Ex-Im Bank and the lenders, and that the subject aircraft
be registered in Ireland, be covered by adequate insurance and maintained in a manner acceptable to Ex-Im
Bank. Ryanair expects that any future commitments or guarantees issued by Ex-Im Bank will contain similar
conditions. The terms of the facilities and the Ex-Im Bank guarantee require that Ryanair pay certain fees in
connection with such financings. In particular, these fees include arrangement fees paid to the facility arranger,
and a commitment fee based on the unutilized and non-cancelled portion of the guarantee commencing 60 days
from the date of issuance of the guarantee and payable semi-annually in arrears. An exposure fee for the
issuance of the guarantee on the date of delivery is also payable to Ex-Im Bank (based on the amount of the
guarantee). Ryanair‘s payment of the applicable exposure fee to Ex-Im Bank (based on the amount of the loan