Apollo Global Management will fund £3.5 billion of its $7.7 billion acquisition of EasyJet Plc through aircraft-backed financing, a structural choice that sidesteps the high-yield bond market entirely.
Aircraft financing isolates the lender's claim to specific aircraft assets rather than the airline's general creditworthiness. This partition allows Apollo to access a distinct capital pool—project finance lenders and aviation-focused investors—operating under different covenant structures and pricing models than the corporate bond market.
The decision reflects a direct calculation: EasyJet's tangible asset base (its fleet) has more creditor appeal than the carrier's cash flows to unsecured bondholders. Aircraft financiers can repossess and redeploy assets in a downturn, reducing their reliance on the borrower's operational recovery. Unsecured high-yield lenders cannot. In a market where airline credit spreads remain volatile, this trade-off likely offered Apollo better pricing or more lenient terms on a substantial debt tranche.
The structure also segregates risk. A deterioration in EasyJet's operating metrics need not trigger covenant cascades across the full debt stack if aircraft-backed debt operates on a tighter collateral-to-loan ratio and independent metrics. This compartmentalization is particularly useful in cyclical industries where near-term revenue pressure does not predict asset value erosion.
