Ryanair 2016 Annual Report Download - page 104

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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, 2016. 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, 2016
EUR
EUR
Fixed
Floating
(in millions of euro)
Borrowing profile before swap transactions
2,459.5
1,563.5
Interest rate swaps – Debt swapped from floating to fixed
827.0
(827.0)
Borrowing profile after swap transactions
3,286.5
736.5
The weighted-average interest rate on the cumulative borrowings under these facilities of €4,023.0 million at
March 31, 2016 was 1.97%. Ryanair’s ability to obtain additional loans pursuant to each of the facilities to finance the
price of future Boeing 737-800 and Boeing 737-MAX-200 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). In
addition, as a result of the Company obtaining a BBB+ (stable) credit rating from Standard & Poor’s and Fitch Ratings
and following Ryanair’s issuance of €850.0 million in 1.875% unsecured Eurobonds with a 7-year tenor in June 2014 and
issuance of €850.0 million in 1.125% unsecured Eurobonds with an 8-year tenor in March 2015 under its EMTN program,
the Company may decide in the future to issue additional debt from capital markets to finance future aircraft deliveries.
As part of its Ex-Im Bank guarantee-based financing of the Boeing 737-800s, Ryanair has entered into certain lease
agreements and related arrangements. Pursuant to these arrangements, legal title to the 194 aircraft delivered and remaining
in the fleet as of March 31, 2016 rests with a number of United States special purpose vehicles (the “SPVs”). The SPVs
are the borrowers of record under the loans made or to be made under the facilities, with all of their obligations under the
loans being guaranteed by Ryanair Holdings.
These Aircraft are financed using a standard Ex-Im Bank “orphan” ownership structure. The shares of the SPVs
(which are owned by an unrelated charitable association and not by Ryanair) are in turn pledged to a security trustee in
favor of Ex-Im Bank and the lenders. Ryanair operates each of the aircraft pursuant to a finance lease it has entered into
with the SPVs, the terms of which mirror those of the relevant loans under the facilities. Ryanair has the right to purchase
the aircraft upon termination of the lease for a nominal amount. Pursuant to this arrangement, Ryanair is considered to
own the aircraft for accounting purposes under IFRS. Ryanair does not use special purpose entities for off-balance sheet
financing or any other purpose which results in assets or liabilities not being reflected in Ryanair’s consolidated financial
statements. In addition to its purchase option under the finance lease, Ryanair is entitled to receive the balance of any
proceeds received in respect of the aircraft that remain after Ex-Im Bank and the lenders are paid what they are owed under
the loan guarantees.
Ryanair has a track record in securing finance for similar sized aircraft purchases. The 1998, 2002, 2003 and 2005
Boeing Contracts totaling 348 aircraft were financed with approximately 66% U.S. Ex-Im Bank loan guarantees and capital
markets (with 85% loan to value) financing, 24% through sale and operating leaseback financing, and 10% through
Japanese operating leases with call options (“JOLCOs”). See “Item 5. Operating and Financial Review and Prospects—
Liquidity and Capital Resources.”
Under the Aviation Sector Understanding which came into effect from January 1, 2013, the fees payable to Ex-
Im Bank for the provision of loan guarantees have significantly increased, thereby making it more expensive than more
traditional forms of financing. As a result, Ryanair intends to finance the New Aircraft obtained under the 2013 and 2014
Boeing Contracts through a combination of internally generated cash flows, debt financing from commercial banks, debt
financing through the capital markets in a secured and unsecured manner, JOLCOs and sale and operating leasebacks.
These forms of financing are generally accepted in the aviation industry and are currently widely available for companies
who have the credit quality of Ryanair. Ryanair may periodically use Ex-Im Bank loan guarantees when appropriate.
Ryanair intends to finance pre-delivery payments (“Aircraft Deposits”) to Boeing in respect of the New Aircraft via
internally generated cash flows similar to all previous Aircraft Deposit payments.