Lufthansa to raise debt on a 'limited basis'

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Lufthansa will go easy on debt issuances this year and instead will rely on its solid coffers to help fund the carrier’s upcoming aircraft deliveries and expenditures.

“Given our strong cash position, which exceeds our target liquidity, we have decided to limit our financing activities in order to bring both figures more in line,” says Matthias Ott, head of corporate financing and leasing at Lufthansa. “Hence in 2014 we will raise debt only on a limited basis.”

Ott says the German carrier is still uncertain about whether it will tap the capital markets, following in the footsteps of various operating lessors and airlines.

Lessors and banks are increasingly turning to the public markets for funding, whether the financing is crucial to operations or not, as the capital markets are open for the time being, offering large volumes of attractively priced capital.

Lufthansa is due to receive 17 aircraft deliveries this year including eight Airbus A320s, two A380s, one A330, four Boeing 747-8s and two 777-200LRF aircraft, according to Flightglobal’s Ascend Online database.

The carrier has pursued various avenues to fund its aircraft fleet over the years, including sourcing equity from pachinko machine developer Yamasa for two Airbus A380 refinancings last year.

Bank of Tokyo-Mitsubishi UFJ provided the debt on the aircraft (MSN 044), which was first delivered to Lufthansa in August 2010, Flightglobal's Ascend Online database shows.

Yamasa also backed (MSN 048) with equity in a deal that closed in March 2012 and was first delivered in October 2010.

Again, Bank of Tokyo-Mitsubishi UFJ provided the debt on the Japanese operating lease financing, according to Lufthansa.

The carrier has closed Japanese operating leases (JOL) on various Airbus A380 and Boeing 747-8 aircraft. It also closed a French lease deal for a 747-8 in 2012.

In addition, Lufthansa has used European export credit agency support for its Airbus A380 aircraft.

The carrier is no stranger to the bond markets. In February 2012, Lufthansa issued €50 million worth of notes with a five-year term. The group returned to market in June as part of a €245 million deal with five-year, seven-year and 10-year tranches.