Luxembourg-based Cargolux has closed a Japanese operating lease with call option (JOLCO) transaction for another 747-400ERF. This is the airline’s third JOLCO, having concluded the first such transaction this January.
Under the JOLCO, Cargolux has the option to purchase the aircraft during or at the end of the lease. According to Cargolux, the London Branch of DVB Bank SE provided the debt while JP Lease Products & Services Co., Ltd arranged and underwrote the equity investment. Wilmington Trust acted as agent and security trustee. Allen & Overy represented Cargolux, K&L Gates acted for JP Lease, and Norton Rose Fulbright acted for DVB and Wilmington Trust.
JOLCOs are attractive because they carry tax advantages for investors and could also result in lower lease rates for carriers. Richard Forson, CEO of Cargolux, previously told Cargo Facts that the company was using the JOLCO as a refinancing mechanism so as to better match its liabilities with its assets on the balance sheet.
Cargolux owns twenty-four of its thirty 747Fs. Forson added that, when the airline took delivery of its fourteen 747-8Fs, it used a lot of Export-Import Bank financing but a JOLCO allows Cargolux to diversify its financing portfolio, so it is looking to pursue what other opportunities there are in this market.