Air France has raised €435 million through the issue of loan notes by a company quoted on the Irish Stock Exchange.

The airline, which is 51 per cent owned by the French government, has closed an aircraft securitisation transaction, backed by a portfolio of 16 aircraft, to meet its refinancing needs and diversify its sources of funding.

"The transaction allows Air France to raise finance through the capital markets to complement the traditional source from commercial banks," said Mr Michael Collins, of FRANs2003, the Irish-listed company that is issuing the loan notes.

The funds from the issue of the notes will be used to finance 16 special-purpose companies, based in the Republic, which will buy aircraft from Air France although the airline will retain the title to them.

The three classes of 10-year loan notes, each with a different credit rating, have already been placed with around 30 international investors, mainly London- and Paris-based pension funds, although there was some Irish take-up of the debt.

It is the first time Air France has had recourse to a securitisation transaction and only the second time a European airline has used such a method to raise funds. The Spanish flag-carrier Iberia engaged in a similar deal in 1998.

Air France, which wholly owns Irish airline CityJet, chose Ireland for the transaction for tax and legal reasons.

"Choosing the Irish Stock Exchange for this securitisation transaction has tax benefits for the company and is a major boost for the financial services sector in Ireland," Mr Collins said.

The deal was arranged and structured by Crédit Lyonnais and placed by Crédit Lyonnais and JP Morgan.