Best in Class Treasury
Solution in the Middle East
Etihad Aviation Group
Abu Dhabi, UAE
Adam Boukadida, Acting Group Treasurer
Etihad excel in 2016 driven by change and innovation
The Etihad Aviation Group comprises Etihad Airways, the Hala Group of travel and tourism management and loyalty
companies as well as Etihad Airport Services and group support functions required to interface with and support its
subsidiaries, joint venture companies and equity partners. Etihad Aviation Group is headquartered in Khalifa City,
Abu Dhabi and is Government-owned.
Etihad’s group treasury activities are not solely focused on the airline;
it also acts in support of the broader Etihad Aviation Group. This
creates multiple sourcing and management needs that must be
aligned with investment and operational business requirements.
Further, Group Treasury supports various equity partner airlines with
a wide range of services, including bank relationship management,
agency execution, systems support, in-house banking and structuring
of direct capital support facilities. One deal in particular required
rapid thinking to secure delivery of essential aircraft to the fleet.
Etihad group treasury has displayed a hyperactive approach to
funding over the past year, especially around diversification of
sources. Highlights of the financing activities include the following.
Raising US$1.5bn through a rated, senior unsecured and unlisted
Sukuk Al-Wakala, this debut transaction marks the largest non-
Sovereign Sukuk from the GCC since 2007. It is also the largest
Sukuk ever out of Abu Dhabi. Through this transaction, Etihad has
created an innovative solution, setting a new precedent for other
similar issuers to access the capital markets.
A Murabaha private placement programme for a five-year, US$145m
structure was the first Islamic private placement by Etihad, sourcing
funds from GCC investors who otherwise may not have been able to
lend into the airline.
Further funding diversification was achieved via a Schuldschein
private placement programme. This was the first ever issuance for
Etihad in that market and the first corporate issuance in the
Schuldschein market from a Middle Eastern borrower. The
transaction itself was marketed at a term-sheet volume of €150m
equivalent with three, five and seven-year tranches in euro and US
dollars. However, due to the high demand, the final volume was
increased to €214m equivalent. An unsecured five-year US$425m
Syndicated Loan Facility with a group of five local, regional and
international banks was also used for refinancing.
However, group treasury surpassed itself in the wake of one of the
biggest aircraft finance stories of 2016 – the unprecedented hold
placed on all guarantees and export credit support of Airbus products
by UK Export Finance, COFACE (the French ECA) and Euler Hermes
(the German ECA), as a result of ‘disclosure issues’ investigated by
the UK Serious Fraud Office. In response to the consequent
suspension of its long-term ECA-backed aircraft financing
arrangements, Etihad’s treasury team led the design of a short term,
cost effective bridging solution alongside ADCB who in turn
collaborated with MUFG to deliver funding to Etihad.
Best practice and innovation
The bridging deal was one of the first such solutions in the market to
address the ECA funding problem and was later replicated by multiple
parties. The solution offered financing for Etihad’s capital import
using a mix of conventional trade finance solutions – a move rarely
seen in the marketplace until this transaction. The transaction was a
short-term arrangement, with MUFG settling Etihad’s payables on the
back of a supporting undertaking by ADCB to pay MUFG on the
This unique structure, combined with rapid execution, gave Etihad a
solution that was both cost efficient and timely, enabling the airline to
meet its payment obligations to Airbus whilst facilitating a necessary
interval for the arrangement of alternative long-term finance facilities.
This demonstrates an innovative, optimised and yet simple solution,
set up to address the Group’s bridge financing requirement on A380
aircraft affected by the suspension of European ECA support for
Diversity of funding portfolio.
Willingness to be first in the market.
Creative approach to external issues.
Demonstration of true partnership with third parties.
Roger Fleischmann, J.P. Morgan, Adam Boukadida, Etihad Aviation Group and
Michael Guralnick, Cititreasurytoday Adam Smith Awards © August 2017 | 17