Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird

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Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
July/August 2019
  Building
  muscle
   China Aircraft Leasing aims to be
   a top-five lessor by 2025, CEO
   Mike Poon explains

2019 Legal Guide | Paris Air show review   Airfinance Journal Awards 2018
Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
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Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
Editor’s letter

Fightback starts for 737 Max
IAG’s commitment stole the Paris air show, but concerns remain, including those
about the Boeing aircraft’s residual values, writes Olivier Bonnassies.

I n many ways the 53rd Paris air show was similar to
  previous years: it featured orders and launches of
new models, including the Airbus A321XLR and the
                                                        adding: “Willie Walsh [IAG chief executive officer]
                                                        has been a loyal Boeing partner and is not afraid
                                                        to go against the grain. And he felt for the good
ATR42-600S. A few days earlier, Mitsubishi Aircraft     of the industry and for his airlines, it was worth
had officially announced its SpaceJet family of         announcing now, when people are doubting the
aircraft, which features the M90 (previously known      Max.”
by the developmental designation of MRJ90) and a           Financiers, recently briefed by Boeing over an
new member, the M100.                                   update on the 737 Max programme, have growing
   However, two things stood out this time: fewer       concerns on two points: this year’s budget capacity
firm orders and the increasingly complicated            (short term) and residual values (long term).
and confusing terminology used by the original             One banking source says it has a pipeline of
equipment manufacturers (OEMs) and their                more than 10 aircraft, which had been mandated for
customers. Keen to demonstrate as strong a deal         2019. According to the banker, the Max deliveries
as possible, OEM PR departments are wielding the        were part of different structures. Because of the
term “commitment” very loosely.                         grounding and no deliveries since March, the bank
   This is probably because there have been fewer       is now “under budget” for the year.
firm order announcements at air shows over the             Another banking source is in the same position.
past three years. In the past it was reasonably         Both banking sources agree that the situation is
clear what was an order and what was something          serious but have confidence in the US manufacturer
else, be it a memorandum of understanding, letter       to come up with a solution.
of intent or options and purchase options – terms          Assuming the Max returns to service this year
we are used to. But this year’s announcements           or early next year, the main question is now on
have featured new constructions, such as “plan to       residual values.
extend… by adding”, “commitment to purchase”,              “Risk is an issue for bankers,” says another
“intent to acquire” and “memorandum of                  source. “Managing the risk of an aircraft whose
agreement”, leaving the community mystified as to       future is potentially uncertain could be problematic,”
what has actually been agreed.                          he says.
   The A321XLR may have recorded lots of                   “The banks have financed the 737 product line
commitments in Paris but the talk of the show was       over the years. This has led to a high degree of
the meaning of the International Airline Group (IAG)    comfort because of the market acceptance and
commitment for up to 200 Boeing Max aircraft, a         orderbook of the programme,” he says. “It also led
mix of 737 Max 8 and Max 10 aircraft delivering         to higher loan-to-values,” he adds.
between 2023 and 2027.                                     The banker has exposure through a lessor’s
   In fairness, no one saw this coming. There           portfolio, but is more concerned about residual
were rumours, before the air show, that one             values, especially if a new Boeing product comes to
announcement could feature the Max model.               market by 2035.
   Boeing’s top priority is to “fix” the Max problems      Another banker is also worried about the
and make sure it gets recertified soon. Therefore,      effect on the residual values. “We have different
an order announcement (or commitment, as it             scenarios: one, the US authorities recertify the
seems to be the fashion these days) at the air          aircraft first and only US carriers start to operate the
show, if any, had to send a strong message to           aircraft, in which case values will be impacted; two,
the marketplace: top-tier group of airlines, huge       all authorities recertify the aircraft at the same time
number of aircraft.                                     so the impact on values will be less; and three, all
   Boeing did even better to make sure it will be       authorities recertify the aircraft but then a question
the “announcement of the air show”: stealing            remains on an accelerated transition to a new
an Airbus narrowbody customer. Airfinance               narrowbody aircraft. In that scenario, values will be
Journal understands that Airbus was not aware           impacted,” he says.
of this and no request for proposal was sent to            The banker adds: “The Boeing Max family has
manufacturers. Terms on the pricing and the Boeing      sold very well and assuming that deliveries resume
commercial service agreement were no doubt              soon and Boeing delivers its orderbook, the
attractive, but one source was not surprised by the     deliveries timeframe will be not before 2030. But
announcement. “It was not a desperation move by         how about if some customers cancel, or switch part
Willie Walsh but a critical move,” says the source,     of their orderbook to a new-generation aircraft?”

                                                                                                                   www.airfinancejournal.com   3
Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
Contents

     Cover story                                               Features
      Building Muscle
      Mike Poon, chief executive officer of China
      Aircraft Leasing (CALC), tells Dominic Lalk
                                                              8          New name, new targets
                                                                                                                         41          Aircraft comparison: The 70-
                                                                                                                                     seat market, a crowded niche
                                                              Embraer is confident it will secure more
      that the group aims to be among the top                                                                             The market for 70-seat aircraft is modest in
                                                              orders in the Asia-Pacific region after
      five lessors by 2025.                                                                                               size, but there is no shortage of competitors.
                                                              rebranding as Boeing Brasil, chief executive
                                                                                                                          Geoff Hearn looks at the prospects for the
                                                              officer John Slattery tells Dominic Lalk.
                                                                                                                          various models on offer.

      34
                                                              11         Airfinance Journal Global
                                                                         Awards 2018                                     43          Data

                                                              Airfinance Journal reveals the winners of
                                                              our prestigious annual awards, recognising
                                                              the most innovative deals, individuals and
                                                                                                                         46          Pilarski

                                                              teams in aviation finance. Valued for their
                                                              independence and transparency, our awards
                                                              represent the market-leading deals rated on
                                                              innovation, timing, size, complexity, ability to
                                                                                                                          47 Guide to Aviation
                                                              overcome obstacles and setting new industry
                                                              benchmarks.
                                                                                                                                     Lawyers 2019

                                                              28
                                                                         Airfinance Journal China
                                                                         Awards 2018
                                                                                                                           48         Legal moves 2018/19

                                                                                                                           50
                                                              Airfinance Journal reveals the winners of
                                                              our China awards, recognising the most                                  Legal Survey 2019
                                                              innovative deals, individuals and teams in
                                                              aviation finance.                                            Airfinance Journal Legal Survey is the
                                                                                                                           most comprehensive survey of its type and
                                                                                                                           crucially offers real insight into the aviation

                                                              37         CSAL sets sights on mature
                                                                         aircraft
                                                                                                                           market.

                                                              As an airline-background lessor, China
     News analysis                                            Southern Air Leasing has a natural
                                                              responsibility to serve its parent, its general
                                                                                                                           61         Rising Stars

    6         Liquidation and consolidation
              are unavoidable
                                                              manager, Feng Xu, tells Elsie Guan.                          Airfinance Journal recognises seven of the
                                                                                                                           most promising legal associates for 2018.
    Hopes of a Jet Airways revival are fading after
    lenders launched bankruptcy and insolvency
    proceedings. Experts are saying flag carrier              39         Airbus focuses on safety and

    Air India could be next.
                                                                         environment

                                                              The European manufacturer is prospering,
                                                                                                                           65         An introduction to the Global
                                                                                                                                      Aircraft Trading System
                                                                                                                                      (GATS)
                                                              but challenges loom. Geoff Hearn reports

    9         Paris 2019 round-up                             on the company’s efforts to future-proof its
                                                              business.
                                                                                                                           By David Berkery, partner, A&L Goodbody

    Asia finance editor                        Managing director, The Airline Analyst   Divisional CEO                                  No part of this magazine can be reproduced
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4   Airfinance Journal July/August 2019
Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
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Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
News analysis

    Liquidation and consolidation
    are unavoidable
    Hopes of a Jet Airways revival are fading after lenders launched bankruptcy and
    insolvency proceedings. Experts are saying flag carrier Air India could be next.
    The leasing community is bracing for impact, reports Dominic Lalk.

    B    emoaning an abnormal supply of
         cheap capital and a growing reliance
    on sale and leaseback (SLB) transactions,
                                                                                                          an 85% haircut from the Rs85 billion ($1.2
                                                                                                          billion) debt. Other potential investors,
                                                                                                          including Indigo Partners and Hinduja
    CDB Aviation chief executive officer                                                                  Group, decided not to get involved.
    (CEO), Peter Chang, is convinced that                                                                    It does not stop there. Indian flag carrier
    consolidation and liquidation in the Asia-                                                            Air India could be next to go. The state-
    Pacific are unavoidable.                                                                              controlled carrier is short by Rs90 billion
       “The leasing sector is too crowded. Just                                                           to service debt maturing this fiscal year. Air
    because you like food you don’t need to                                                               India’s total debt exceeds Rs540 billion,
    own a restaurant,” says Chang. “It’s shark-                                                           although the government has already
    infested waters.                                                                                      offloaded more than half that amount to
       “We are avoiding SLBs because we                                                                   Air India Asset Holdings, a newly-formed
    can. The concept of ‘must win at any cost’                                                            special purpose vehicle, to reduce the flag
    is still very much alive but this corrupts       Nick Seah, head of commercial, CDB Aviation          carrier’s annual debt servicing.
    the rental rates for everyone else,” he                                                                  Air India keeps up to 25 aircraft on the
    says, adding that abnormally low interest                                                             ground, including Boeing 777s and 787s,
    rates of 0.5% are a “very risky situation; a                                                          because the airline lacks the funds to pay
    disaster”.                                                                                            for their scheduled maintenance.
       Other leasing experts agree, arguing                                                                  “If it’s any consolation, at least the
    that it will be “incredibly difficult” to find                                                        Jet collapse showed that assets are still
    second homes for thousands of aircraft                                                                relatively moveable at this point,” a lessor
    that will be coming off lease in the region                                                           source tells Airfinance Journal. “That was
    over the next three to five years. A primary                                                          just for Jet though. It won’t be this easy if
    concern is a lack of technical capabilities,                                                          the flag carrier collapses too, let alone one
    particularly among mainland Chinese                                                                   of the big players in South-East Asia.”
    lessors and their limited relationships with                                                             Budget carriers IndiGo and SpiceJet are
    carriers outside China.                                                                               relishing Jet’s demise. The latter has taken
       Of equal concern is a proliferation                                                                over countless Jet routes and aircraft,
    of “non-tradable assets”: aircraft with                                                               while IndiGo notes that revenues “have
    poor documentation and sub-par end of            Peter Chang, chief executive officer, CDB Aviation   been strongly affected by the Jet Airways
    lease return conditions. “These assets                                                                shutdown”.
    are very difficult to trade or bear serious                                                              Having learnt their lesson from
    impairment,” says Chang.                              The leasing sector                              bankruptcies such as Air Berlin, Wow Air
       The CDB Aviation CEO believes the                                                                  and Avianca Brasil, the leasing community
    industry will see “a couple more” airlines       is too crowded. Just                                 gave short shrift to Jet. More than 20
    collapse over the summer months. “The
    default rate is set to rise,” he says.
                                                     because you like food                                affected lessors moved in very quickly to
                                                                                                          repossess their assets when it became
       “I fully agree with my boss. We need          you don’t need to own a                              clear that Jet would go down. Their
    to get ourselves ready for repossession                                                               fastidiousness paid off, as asset values
    and remarketing. The cycle will come to          restaurant.                                          remained relatively unaffected.
    an end. The music will stop. Are we ready                                                                BOC Aviation and Castlelake quickly
    is the question,” says Nick Seah, CDB            Peter Chang, chief executive officer, CDB            placed former Jet 737s with SpiceJet, Fly
    Aviation’s head of commercial for greater        Aviation                                             Leasing put 737s with Vistara and GECAS
    China and North Asia. “We must be                                                                     found new homes for their narrowbodies
    prepared for winter to come; to be cash-                                                              in Russia, to name just a few.
    flow ready when winter comes.”                                                                           Yet, a significant portion of the former
       India is of particular concern. Jet           consortium of creditors, led by State Bank           Jet fleet remains unplaced, giving rise
    Airways is continuing to face a negative         of India, decided to seek resolution under           to those who maintain that the leasing
    streak since collapsing in April. After          local insolvency and bankruptcy laws after           community is in for a rude awakening
    the possibility of a quick sale has slowly       only a conditional bid was received for Jet.         over the next 18 months. Or, as Chang
    slipped away, it seems more unlikely than           That bid was placed by Etihad Airways,            puts it: “We will see more airlines collapse.
    ever that Jet will fly again. In late June, a    which expected Jet’s creditors to take               Default will increase.”

6   Airfinance Journal July/August 2019
Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
move with
                    the times         40% less fuel and 40% less CO2*

                                                       atr-intolife.com
© Gettyimages

                * per trip compared to regional jets

                                                                          www.airfinancejournal.com   7
Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
OEM interview

    New name, new targets
    Embraer is confident it will secure more orders in the Asia-Pacific region after
    rebranding as Boeing Brasil, chief executive officer John Slattery tells Dominic Lalk.

    I n March, John Slattery took over the
      reins of the world’s third-largest aircraft
    manufacturer, Embraer. The Irishman is
                                                                                                     countries. The aircraft’s performing well, the
                                                                                                     residual values are performing well, kind of
                                                                                                     mapping 737 residual values.
    poised to lead the original equipment                                                                “We’ve been very careful and diligent
    manufacturer (OEM), which has its                                                                around the number of lessors we have
    headquarters in São José dos Campos,                                                             in the programme so we don’t flood that
    Brazil, to new heights in the Asia-Pacific                                                       distribution channel because in the end I
    market after Boeing agreed to pay $4.2                                                           uniquely appreciate that aircraft are bonds
    billion for an 80% stake in Embraer’s                                                            with wings. They’re flying bonds. So if I
    commercial aircraft manufacturing                                                                overly impact the yield on the bond, if I push
    business, valuing the Brazilian company at                                                       it down by selling too much inventory into
    $5.25 billion.                                                                                   the market my lessor customers will feel that
       Embraer’s commercial aircraft business                                                        pain and then ultimately so will I because I’m
    was officially rebranded as Boeing Brasil       John Slattery                                    just pushing down the capital value of the
    Commercial in late May, prompting                                                                asset,” says Slattery.
    many in the industry to suggest Boeing                                                               “When we brought in AerCap, Aircastle
    forced Embraer’s hand to rename the             demanding point-to-point service. You can’t      and ICBC Leasing I said to the market place
    company. Nothing could be further from          do that profitably with an [Airbus] A320 or      that I don’t see the need for a fourth lessor
    the truth, chief executive officer Slattery     [Boeing] 737. People now for the very first      at that moment. I have no desire to bring in
    tells Airfinance Journal in this exclusive      time are saying we need the right size, not      a fourth lessor until I see a significant portion
    interview at the International Air Transport    asset-abuse the narrowbodies. The way it         of the current inventory placed. We have
    Association annual general meeting in           works in that region is that you start with      honoured that. AerCap has now placed 47
    Seoul.                                          narrowbodies, you very quickly move to           out of their 50 and those aircraft are years
       “I think the characterisation that Boeing    widebodies and then when you go through          away from being delivered,” says Slattery,
    wanted to drop the Embraer name is              that cycle then you come to the large            adding he believes the E2s of Aircastle and
    inappropriate. I’m not pleased with how         regionals. So our time will come,” says          ICBC will be placed by the second half.
    the media has characterised that. The           Slattery.                                            “I come from a leasing background.
    new name – Boeing Brasil Commercial                 Again, Boeing is expected to help            We’ve spent a lot of time when we were
    – emerged from our employees, from              Embraer sell. “It’s physically sometimes         building the business case on making sure
    their employees and from our customers.         hard to get in front of an airline in that       the E2 would be super easy to reconfigure
    Everybody was involved. It was an organic       region because they have to run their day-       from a lessor perspective. Frankly,
    process. There seems to be a desire to          to-day business, so our Boeing branding          reconfiguring an E2 will be quick and
    portray that the name was pushed on us,”        will be big leverage.                            cheap relative to the E1,” he says.
    says Slattery.                                      Key industry influencers are predicting          On AerCap’s 50 E2 options, Slattery says
       The Brazilian OEM believes the               that the E-Jet family will be next in line for   he is “hopeful but not arrogant enough to
    rebranding will result in greater brand         rebranding. Slattery cautions that this is       say” they will be converted into firm orders.
    equity and improved sales, particularly         definitely not a done deal.                      “We have invested a lot of time in each
    in Asian regional markets dominated by              “We haven’t made a decision on that.         other, into developing this relationship. In
    Airbus and Boeing.                              If they come up with a great new name            our business trust is everything. It takes
       “Boeing is the largest aircraft              and we like it then we’re going to rename        years and decades to build. When I think
    manufacturer. It’s got enormous brand           the programme and if they don’t then we          about how I interface with people like Gus
    equity around the world. We need access         won’t. All we want is a name that makes          Kelly [AerCap chief executive officer] and
    to that brand equity, particularly in regions   sense and helps sales, not hinders sales.        Phil Scruggs [AerCap president and chief
    like South-East Asia and China, to help us      We’d like it done by year end, but hopefully     commercial officer], things are done on a
    sell our aircraft. We are very well known in    much sooner,” says Slattery.                     phone call now that in the past could have
    North America – we’ve sold almost 600               The E-Jet E2 family is slated to become      taken a month or a year. Just because we
    aircraft in that market over the past five      the OEM’s bread-and-butter business. The         know and trust each other,” he says.
    years – but we need to get better in Asia,”     family comprises the E175-E2 (80 seats in            Embraer received orders for nine
    says Slattery.                                  dual configuration), the E190-E2 (96 seats)      commercial aircraft in the first quarter
       As Airfinance Journal went to press,         and the E195-E2 (120 seats). Firm orders         ended 31 March and delivered 11 aircraft,
    there were about 150 E-Jets in operation        have been placed for 170 E2-family aircraft      comprising 10 E175s and the first E190-E2.
    with Asia-Pacific carriers. Embraer’s           only, with more than 50% of that backlog         Its target is to achieve 85 to 95 commercial
    backlog lists fewer than 20 aircraft,           belonging to lessors. AerCap has 50 E2s          deliveries in 2019. At the beginning of June
    including two Embraer E190-E2s for Hainan       in its orderbook (plus 50 options), Aircastle    the OEM’s backlog stood at 359 aircraft
    Airlines and Air Kiribati, respectively.        got orders for 25 and ICBC Leasing has           and its customer base comprised 76 global
       “Our backlog in the region is not where      signed for 10 E2s.                               operators.
    it needs to be, no doubt about it. Those            “As AerCap, Aircastle and ICBC Leasing           This is not good enough, according to
    secondary and tertiary cosmopolitan             looked at the E2 they discovered an              Slattery. “I want to get to 100 operators
    areas need to be connected – they’re            aircraft with over 75 operators in over 50       around the world. Nothing short of that.”

8   Airfinance Journal July/August 2019
Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
Paris 2019 roundup

Airlines grab the headlines
Lessors place fewer firm orders at this year Paris air show, which saw the launch
of the A321XLR.

T    his year’s Paris Air Show started
     with an expected announcement:
Airbus launched the A321XLR first thing
                                                rear centre tank (RCT) for more fuel
                                                volume; a modified landing gear for an
                                                increased maximum take-off weight
                                                                                            that the E1 will be traded in, as part of
                                                                                            the commitment. Bombardier and de
                                                                                            Havilland of Canada did not record
in the morning on the first day to achieve      of 101 metric tonnes; and an optimised      any new orders at the air show. Their
maximum impact. Air Lease, which                wing trailing-edge flap configuration to    combined total for the year remains at 15
was also the launch customer for the            preserve the same take-off performance      aircraft: nine CRJ900s and six Q400s.
A321neo, was the first to commit to the         and engine thrust requirements as
new variant, signing a letter of intent (LOI)   today’s A321neo.                            ATR banks on lessors
for 27 A321XLRs.                                   In particular, the new optimised RCT     Turboprop manufacturer ATR arrived
   The European manufacturer booked             holds more fuel than several optional       in Paris with only three orders but
43 firm orders for the type at the show,        additional centre tanks did previously,     announced a total of 75 aircraft at the air
commitments for a further 79 aircraft and       while taking up less space in the cargo     show.
99 conversions from A321 to the XLR.            hold – thus freeing-up underfloor volume       The Franco-Italian airframer chief
   Airbus says the A321XLR is the next          for additional cargo and baggage on long    executive officer Stefano Bortoli disclosed
evolutionary step from the A321LR. It is        range routes.                               deals covering 23 more aircraft including
designed to become the world’s most-               Airfinance Journal has recorded a        a follow-on order for one ATR42-600
efficient and longest-range single-aisle        total of 810 aircraft announcements         from Colombian carrier EasyFly and a
aircraft, which will enable operators in        during the air show week, comprising        further 22 ATR72 commitments from
this segment to access markets requiring        140 firm orders placed by all-airline       undisclosed customers.
more range and payload.                         customers. Those included only 140 firm        These follow the letter of intent for 35
   From 2023, the A321XLR will deliver an       orders, all made by airline customers.      turboprops, spanning both ATR42-600
unprecedented narrowbody range of up            Airbus booked 114 firm orders, while        and ATR72-600 models, from lessor
to 4,700 nautical miles – 15% more than         Embraer had 24 firm orders. There were      Nordic Aviation Capital (NAC) – which
the A321LR.                                     no firm orders from Boeing.                 expects to firm the commitment shortly –
   With this added range, airlines will            On the “other commitments” side,         and the 17 commitments secured for the
be able to operate a lower-cost single-         airline customers represented 65% of the    new short take-off and landing variant of
aisle aircraft on longer and less heavily       announcements.                              the ATR42-600 variant.
travelled routes – many of which can now           Embraer announced two E1 orders             Those commitments include 10 aircraft
only be served by larger and less-efficient     (United Airlines and Fuji Dream), as        for launch customer Elix Aviation Capital,
widebody aircraft, says the manufacturer.       well as one E2 order (Binter Canarias,      two aircraft for Air Tahiti and five for
This will enable operators to open new          exercising two purchase rights).            undisclosed customers.
worldwide routes, such as India to Europe          Airfinance Journal understands that a       ATR is finalising the process for
or China to Australia, as well as further       fairly large order for the E195-E2 was to   the official launch of the ATR42-600S
extending the family’s non-stop reach           be announced in Paris but got postponed     and received authorisation to take in
on direct transatlantic flights between         at the 11th hour. That order for 25         orders for the aircraft, subject to the
continental Europe and the Americas.            E195-E2s followed a fiercely-contested      final confirmation for launch from the
   Changes on the A321XLR vis-a-vis the         battle with Airbus, which offered the       company’s board of directors, expected
A321neo(LR) include: A new permanent            A220. Airfinance Journal understands        before year-end.

                                                                                                                www.airfinancejournal.com   9
Building muscle China Aircraft Leasing aims to be a top-five lessor by 2025, CEO Mike Poon explains - Bird & Bird
Paris 2019 roundup

        The variant offers capabilities to take-off
     from and land on runways as short as 800
     metres. The ATR42-600S has a bright
     commercial outlook, says ATR, with 1,200
     in-service turboprops of between 30 and
     50 seats needing to be replaced in the
     coming years.
         Thanks to its economic performance
     and operational flexibility, the ATR42-600S
     is ideally placed to meet this requirement.
     Beyond its performance on short runways,
     the aircraft offers 50 seats at the same
     operating costs as 30-seat aircraft.
         Elix Aviation Capital commitment
     represents the first time the lessor has
     placed a strategic order directly with an
     aircraft manufacturer.
         The lessor’s chief operating officer            NAC’s chairman Martin Moller with ATR’s CEO Stefano Bortoli
     John Moore says the new aircraft fits “well
     into Elix’s long-term strategy” to offer a          aircraft deal, we are making a strategic             becomes a new LEAP customer, having
     wide range of specialised and complete              decision to ensure that airlines can lease           until now used the Pratt & Whitney
     solutions to regional turboprop operators.          and operate the most modern and eco-                 PW1100G to power its A320neos.
         The NAC commitment for up to 105                responsible regional aircraft available in the          Peach Aviation selected the CFM
     aircraft represents a very successful and           market.”                                             LEAP-1A for its 2016 A320neo order. The
     long-standing collaboration between                    CFM International stole the headlines             Japanese low-cost carrier ordered 20 LEAP
     the parties as well as a long-term vote in          at the show with a total of 1,060 LEAP               engines.
     confidence in the ATR products.                     engines ordered. The Franco-US                          Pratt & Whitney announced SMBC
         Since 2010, NAC has taken delivery of           manufacturer secured 370 orders from the             Aviation Capital and an undisclosed lessor
     in excess of 100 speculative ATR aircraft.          leasing community with ALAFCO, Avolon,               for 55 aircraft. Its airline customers included
     During that time, NAC has risen to become           Macquarie Airfinance, and CDB Aviation all           VivaAerobus for for 41 A321neo aircraft
     the number one regional aircraft lessor with        placing significant orders in Paris.                 AND JetSMART for 85 A320neo-family
     a portfolio of almost 500 regional aircraft.           AirAsia finalised a deal for 200 LEAP-            aircraft on firm order. An undisclosed airline
         “To plan for a successful future, it is vital   1A engines to power 100 A321neos. The                selected the PW1100G for 28 A320neo-
     for us to invest in the very best technology        aircraft order and intent to purchase the            family aircraft.
     so that we can offer flexible and efficient         engines were announced in July 2016.                    General Electric announced orders for
     solutions to our clients,” says NAC chairman           IndiGo ordered CFM International                  110 engines from United Airlines (40 CF34-
     Martin Møller. “Aviation is moving towards          LEAP-1A engines to power 280 A320neo                 8Es), Qatar Airways (10 GE90s), Korean Air
     a sustainable future, and with this 100+            and A321neo aircraft. The Indian carrier             and ALC (60 GEnx engines).

         GECAS boosts 737-800 conversion market
         Operating lessor GECAS strengthened              year to West Atlantic Group.                        Greener, senior vice-president and
         its relationship with Amazon’s all-cargo            The 737-800BCF features a rigid cargo            manager, GECAS Cargo. “It’s enabling
         airline Prime Air with the announcement          barrier and 12 maindeck pallet positions,           operators to replace ageing freighters
         of 15 additional Boeing 737-800BCFs              with a maximum structural payload is                and meet the rapidly growing express
         (Boeing Converted Freighters) under              23.5t (51,800lb) and a maximum range in             cargo market.”
         lease agreements. The lessor already             excess of 2,100 nautical miles – providing             Orders for the 737-800 freighter are
         has an order with the US carrier for five        capability to open new markets. It also             beginning to take off as operators and
         aircraft that will be delivered by the end       offers operators newer technology, lower            lessors look for alternatives to the 737
         of this year.                                    fuel consumption and better reliability             freighters, which are seeing feedstock
            Alex Burger, the GECAS chief executive        than other standard-body freighters. It             begin to dry up.
         officer, says the new commitment is the          primarily will be used to carry express                GECAS has delivered 13 converted
         beginning of a new relationship. The             cargo on domestic and short-haul routes.            cargo aircraft to customers since the
         15 additional aircraft will be delivered            At the show, GECAS exercised 10                  second quarter of 2018. West Atlantic and
         through 2021.                                    purchase rights to firm orders and                  Amazon Air have four units, Ethiopian
            Prime Air says it will base some of its       adding 15 more purchase rights. The                 Airlines and ASL Airlines Holdings have
         737-800BCFs in Cincinnati, a new hub             announcement marked the third time                  two, while Atran has one. Another six
         it hopes to have in operation by 2021.           GECAS had purchased Boeing’s newest                 units are scheduled for delivery in the
         By then Prime Air will have 70 aircraft,         freighter aircraft. It has commitments for          second part of this year.
         comprising 50 767 freighters and 20              55 firm orders and 10 options for the                  “Many airlines are now operating the
         737-800BCFs. GECAS was the launch                type.                                               aircraft. The performance and reliability
         customer for the 737-800 passenger-to-              “Our leasing customers are very                  of the 737-800 freighter is the key reason
         freighter conversion programme in 2016.          pleased with the versatility and reliability        why they are transitioning to this aircraft
         The first 737-800BCF was delivered last          of these freighters,” says Richard                  type,” says Greener.

10   Airfinance Journal July/August 2019
Airfinance Journal Global Awards 2018

Airfinance Journal’s
2018 deals of the year awards
Airfinace Journal reveal the winners of our prestigious annual Awards and China
Awards, recognising the most innovative deals, individuals and teams in aviation finance.

Asia Pacific Deal of the Year: Project Melville Macquarie AirFinance –
$4bn unsecured revolver and term loan
 Borrower/Issuer: Macquarie AirFinance        T   wo companies, Macquarie Aerospace
                                                  Finance and Macquarie Aerospace
                                              Holdings acted as the borrowers of this
                                                                                                      bookrunners on the term loan. Wells Fargo,
                                                                                                      Westpac, DBS, Societe Generale, ING
                                                                                                      and ABN Amro were the mandated lead
 Structure: $1bn unsecured revolving
                                              combined $4 billion financing for a total of            arrangers on the term loan.
 credit facility and $3bn term loan           135 aircraft leased to 67 airlines.                        On the revolver facility, BNP Paribas, Citi,
 Assets financed: 135 aircraft                   The transaction is believed to be the                Deutsche Bank, HSBC, National Australia
                                              largest non-recourse aircraft secured                   Bank acted as mandated lead arrangers,
 Lawyers (and role): Vedder Price
                                              portfolio term loan globally. It represented            underwriting banks and bookrunners. BNP
 acted for the borrower; Clifford Chance
                                              the refinancing of the entire business                  Paribas, J.P. Morgan, Mizuho and Natixis
 represented the lenders
                                              moving to a wholly-independent funding                  were the mandated lead arrangers of the
 Banks (RCF): Citi, Deutsche Bank,            structure. With this transaction, Macquarie             RCF.
 National Australia Bank, BNP Paribas, J.P.   AirFinance achieved significant goals,                     The $3 billion term loan has a seven-
 Morgan, Mizuho, Natixis as mandated          including the diversification of funding                year tenor with a margin of Libor + 150
 lead arrangers                               sources, allowing the company to efficiently            basis points. It successfully refinanced and
 Banks (Term loan): Citi, Deutsche Bank,      fund the expansion of its businesses.                   upsized a previous $1.8 billion 2016 Spitfire
 National Australia Bank, BNP Paribas,           The financings were widely syndicated                term loan, which was set up to complete the
 HSBC, ABN Amro, DBS, ING, Societe            among Macquarie’s core relationship                     acquisition of a portfolio from AWAS.
 Generale, Wells Fargo, Westpac as            banks, specialist aviation banks, and Asian                The term loan facility is paired with the
 mandated lead arrangers                      commercial banks.                                       $1 billion unsecured revolving credit facility
                                                 BNP Paribas, Citi, Deutsche Bank, HSBC,              that is supported by existing unencumbered
 Date closed: 30 June 2018                    National Australia Bank acted as mandated               assets and provides funds for future growth
                                              lead arrangers, underwriting banks and                  over the next five years.

Europe Deal of the Year: Nordic Aviation Capital $227m 12 Embraer 190 Jolco
                                              number of aircraft, the largest lessor Jolco.           multiple jurisdictions and short timeframe in
 Borrower/Issuer: Nordic Aviation Capital        The transaction involved an innovative               which to complete the transaction.
 Structure: Japanese operating lease          cross-collateralised structure whereby                     The Jolco structure required security to
 with call option (Jolco)                     the aircraft were divided into batches                  be granted in three separate jurisdictions.
 Assets financed: 12 Embraer 190 aircraft     and owned and leased by four Japanese                      The Jolco nature of the structure
 Lawyers (and role): White & Case acted       borrower/lessors, leased to NAC owned                   allowed NAC to raise significant additional
 for the underwriter; Clifford Chance         special purpose vehicles SPVs and                       financing against the aircraft (100%) while
 represented the sponsor’s counsel,           subleased to various airlines.                          uniquely maintaining operational flexibility
 Nishimura & Asahi represented the               The transaction involved 12 aircraft                 when combined with the portfolio features
 equity underwriter                           leased to three airlines (three to Kenya                relating to covenants and events of
                                              Airways, seven to Air Europa and two to                 defaults, which the transaction entailed.
 Banks (and role): Deutsche Bank as
                                              AeroMexico). In addition to the jurisdictions              It provided Nordic Aviation Capital a
 debt arranger, sole structuring agent and
                                              in which the aircraft were registered,                  diversification of its financing sources.
 sole underwriter
                                              English, Irish, Japanese and California law             Deutsche Bank successfully syndicated
 Lessor: Financial Products Group             were all relevant to the transaction. The               part of the debt to new lenders thereby
 Amount: $227 million                         size and complexity of the transaction was              diversifying the lessor’s international debt
 Tenor: Nine years                            significant given the number of aircraft,               investor profile.
 Date mandated: 1 April 2018
 Date closed: 21 September 2018

T   he transaction marked the first ever
    lessor Jolco financing for regional
jets and features the first ever cross-
collateralisation within a lessor Jolco
structure. It also represented the largest
                                              The Nordic Aviation Capital deal team, collecting their award from AFJ’s managing director Olivier Bonnassies
regional aircraft Jolco and, in terms of

                                                                                                                             www.airfinancejournal.com        11
Airfinance Journal Global Awards 2018

     Latin America Deal of the Year: Avianca UKEF-guaranteed
     Jolco financing for one Boeing 787 aircraft
       Borrower/Issuer: Avianca                       A    vianca mandated and successfully
                                                           closed a loan guaranteed by UK Export
                                                      Finance (UKEF) to finance one Boeing 787-8
                                                                                                             based in New York, acted as the arranger
                                                                                                             of the UKEF loan, initial lender and facility
                                                                                                             and UKEF agent. Burnham Sterling acted
       Structure: UKEF-guaranteed financing           delivery.                                              as adviser to Avianca for the Jolco equity
       structured as a Jolco                             The UKEF loan was the debt portion of a             structure.
       Assets financed: One Boeing 787-8              Japanese operating lease with call option                 The transaction marked Avianca’s first
                                                      (Jolco), and was arranged by Burnham                   UKEF-backed Jolco financing.
       Lawyers (and role): White & Case               Sterling with Sumitomo Mitsui Finance and                 It was also the first UKEF-guaranteed
       acted for Avianca; Allen & Overy               Leasing (SMFL) providing the equity on the             financing structured as part of a Jolco for a
       represented ING and UKEF, Nishimura            transaction.                                           Latin American carrier.
       & Asahi, Tokyo represented Sumitomo               The Jolco equity combined with the UKEF                This was ING’s first Jolco financing under
       Mitsui Finance and Leasing                     debt provided Avianca with 100% financing              a UKEF guarantee, and also the first time
       Banks (and role): ING as UKEF debt             for the aircraft at an attractive all-in cost.         that ING could book Jolco debt outside of
       arranger, initial lender, and ECA facility        ING’s structured export finance team,               Japan.
       agent
       Jolco arranger: Burnham Sterling
       Equity provider: Sumitomo Mitsui
       Finance and Leasing
       ECA: UK Export Finance (guarantor)
       Tenor: 11 years
       Date mandated: 1 August 2018
       Date closed: 28 September 2018
                                                      The Avianca UKEF deal team, winners of the Latin America deal of the year award

     Middle East & Africa Deal of the Year: Ethiopian Airlines
     $670m AFIC-supported financing for eight Boeing aircraft
                                                      $230 million loan facility covered by Aircraft         were structured with $137 million ANPI-
       Borrower/Issuer: Ethiopian Airlines            Non-Payment Insurance (“ANPI”) to finance              covered loan. The senior loan had a 12-
                                                      five Boeing 737 Max 8 aircraft - Ethiopian             year tenor, the junior loan was seven years.
       Structure: ANPI-insured loan facility          Airlines’ first aircraft of this type.                    The 777 facilities were negotiated and
                                                         The 737 Max 8 senior loan facility was              closed on short timetables (approximately
       Assets financed: Five Boeing 737 Max 8s        structured with ANPI cover under the AFIC              one month from start of documentation to
       and three 777 freighters                       programme and was coupled with a seven-                closing).
                                                      year $25 million junior loan facility from                Four of the six aircraft delivered over a
       Lawyers: Pillsbury, White & Case,
                                                      Investec Bank to provide Ethiopian Airlines            weekend requiring the lenders to make
       Milbank LLP and Vedder Price
                                                      with 95% financing for the aircraft at an              special arrangements to pre-position the
       Banks: ING Capital, Investec, Societe          attractive all-in cost.                                funds with Boeing to allow the delivery to
       Generale and SMBC Europe Ltd                      Each of the Boeing 777 freighter facilities         occur during non-banking hours.

       Credit Enhancer: Aircraft Finance
       Insurance Consortium (AFIC)

       Date mandated: 1 May 2018

       Date closed: 29 June 2018

     E   thiopian Airlines became the first African
         carrier to raise financing through the
     Aircraft Finance Insurance consortium
     (AFIC) structure.
        The financing also marked the first AFIC
     structure with a commercial junior debt.
                                                      The Ethiopian Airlines AFIC deal team, collecting their award
        The transaction consisted of a 12-year

12   Airfinance Journal July/August 2019
Airfinance Journal Global Awards 2018

North America Deal of the Year: Zephyrus Aviation
Partners ZCAP 2018-1 $336.6m 21 aircraft ABS
  Borrowers/Issuers: Zephyrus Capital
  Aviation Partners 2018-1 Ltd and
                                                 T    he transaction involved a newly-
                                                      launched company acquiring a
                                                 substantial portfolio of mid-life aircraft
                                                                                                      Journal. “For doing an ABS out of the
                                                                                                      box, that’s a really favourable outcome,
                                                                                                      especially when you consider the age of
  Zephyrus Capital Aviation Partners             directly into an asset-backed securitisation         the portfolio - 13.3 years is slightly higher
  2018-1 LLC                                     (ABS) structure.                                     touch.”
  Structure: Asset-backed securitisation            Zephyrus Aviation Capital was                        The $336.6 million single A-tranche
                                                 established in 2018, staffed by experienced          deal was used to finance a portfolio of 21
  Assets financed: 21 aircraft                   executives from CIT and supportive                   aircraft, comprising 18 narrowbodies and
                                                 equity backers: Virgo Investment Group               three widebodies. The aircraft – seven
  Lawyers (and role): Clifford Chance            (majority) and Seabury Capital (minority).           Airbus A320s, three A319s, eight Boeing
  acted for the lead arranger; Vedder            The transaction is a tremendous start for            737NGs and three A330s – have a
  Price represented the issuer; A&L              a new company. It also marks the first               weighted average age of 13.3 years and
  Goodbody as Irish counsel for the              time a newly-formed company launched                 are on lease to 19 airlines.
  issuer, Maples Group                           its inaugural aircraft portfolio acquisition            “The book was more than two times
                                                 directly into an ABS.                                oversubscribed which I think was also a
  Banks (and role): Deutsche Bank
                                                    The pace of the transaction saw most of           nice outcome,” he adds. “The investors
  as sole structuring agent and lead
                                                 the aircraft close into the structure within         who bought into this deal are very
  arranger
                                                 three months of the initial close of the ABS.        sophisticated players who know the space.
  Adviser: Seabury Capital                       Zephyrus Aviation Capital priced its debut           That was also a very nice endorsement.”
                                                 ABS at 98.52% of par value, according to                Under the $336 million ZCAP 2018-1, ZAL
  Rating Agency: KBRA                            Damon D’Agostino, the new lessor’s chief             Limited is the seller and Zephyrus Aviation
                                                 executive officer.                                   Capital is the servicer.
  Date mandated: 4 June 2018
                                                    “We came in at 210 over swaps, which is              The single Class A tranche of loans has
  Date closed: 9 October 2018                    within 10bps of other first time issuers,” says      a fixed coupon of 4.605%, yielding 5.153%.
                                                 D’Agostino in an interview with Airfinance           The loan-to-value (LTV) is 74.07%.

Bank Loan Deal of the Year: Limited recourse financing of four
777-300ERs leased to British Airways for Novus Aviation Capital
                                                 provided by Mitsubishi UFJ Financial Group               MUFG says the large underwriting (total
 Borrower/Issuer: Novus Aviation Capital         and BNP Paribas. Novus Aviation Capital is           deal size was $416 million) was successfully
                                                 the overall arranger.                                sold down to incoming participant banks.
 Structure: Limited recourse facility               The transaction was structured to allow               The financing from the banks allowed
                                                 for financing terms to be agreed almost two          Novus to secure end of line 777-300ERs
 Assets financed: Four Boeing 777-
                                                 years ahead of delivery in 2020 - which was          that are to be placed with British Airways
 300ERs
                                                 a requirement for Novus. Total tenor of the          Bertrand Dehouck, head of aviation for BNP
 Lawyers: Milbank LLP, Stephenson                risk is effectively 14 years from signing to         Paribas said: “There are three key elements
 Harwood                                         final loan repayment.                                that make this deal significant: One, it marks
                                                    The financing is a combination of Shariah         a substantial transformational phase for
 Banks: BNP Paribas, MUFG                        compliant and conventional lease-in lease-           Novus Aviation Capital; two, it helps Boeing
                                                 out structure. MUFG Bank and BNP Paribas             secure a new direct customer; and three,
 Date mandated: 6 September 2018                 structured the transaction into an amortising        it supports the fleet expansion of a major
                                                 tranche and balloon tranche.                         European airline.”
 Date closed: 21 December 2018

T
OEM.
    he transaction represents the first direct
    order by Novus Aviation Capital with an

   Novus Aviation Capital announced
the four 777-300ER order at the 2018
Farnborough air show. The announcement
also marked the first lessor order for the
777-300ER model since 2014 at the time of
announcement.
   The aircraft were placed under a long-
term lease agreement with British Airways.
   This transaction will be financed through
                                                 The Novus Aviation deal team, winners of the Bank Loan deal of the year award
a senior secured limited recourse facility

                                                                                                                            www.airfinancejournal.com   13
Airfinance Journal Global Awards 2018

     Export Credit Deal of the Year: Aeromar
     ECA-guaranteed loans for eight ATR aircraft
       Borrower/Issuer: Aeromar                       T   he export credit deal of the year
                                                          features takeout of manufacturer
                                                      financing with export credit agencies
                                                                                                                  BNP Paribas acted as senior agent and
                                                                                                               security trustee on five aircraft while Apple
                                                                                                               Bank for Savings was lender on those
       Structure: ECA-backed loan                     support for turboprop aircraft into Mexico.              aircraft. Export Development Canada
                                                      The manufacturer financing was made                      acted as senior agent, security trustee and
       Assets financed: Two ATR42-600s and            available to the Mexican carrier on an                   original senior lender on three ATR72-
       six ATR72-600s                                 interim conditional sale basis.                          600s.
                                                         The transaction is an export credit                      The transaction was disrupted on several
       Lawyers: Watson Farley & Williams,             agency-guaranteed debt that refinanced                   occasions by the eruption of the Fuego
       Norton Rose Fullbright, Matheson,              manufacturer supported sales of a batch of               volcano in Guatemala and a number of
       Mason Hayes Curran, Carillo &                  relatively new ATR42/72 aircraft.                        incidents relating to the aircraft.
       Asociados, Patton Moreno & Asvat,                 The collateral includes two 2016-vintage
       Ritch Mueller                                  ATR42-600s as well as six 2016/17-vintage
                                                      ATR72-600s that were ordered by Mexican
       Banks: Apple Bank for Savings, Export          carrier Aeromar in November 2016. The
       Development Canada                             order also included six options for the
                                                      ATR72-600 model.
       ECA: Bpifrance Assurance Export,                  This deal was particularly complex as it
       SACE, Export Development Canada                involved the refinancing of sales finance,
                                                      with export credit agency guaranteed
                                                      financing (Bpifrance/SACE and Export
       Date mandated: 1 December 2017
                                                      Development Canada) separately
                                                      supporting different aircraft. It also included
       Date closed: 25 July 2018                      commercial debt in respect of aircraft that
                                                                                                               The Aeromar deal team
                                                      were all in operation.

     Tax Lease Deal of the Year: Virgin Australia $120m Jolco
     financing for six used Boeing 737-800s
                                                         The debt portion was provided in                      Zealand Banking Group (ANZ).
       Structure: Japanese operating lease            Australian dollars while the equity was                     DVB Bank, IBJ Leasing and Standard
       with call option                               disbursed in US dollars.                                 Chartered Bank were the debt underwriters
       Amount: $120 million                              The transaction was executed in strict                for four aircraft in the transaction. DVB Bank
       Tenor: 57 months                               application of the Australian and Japanese               was facility agent and security trustee on
                                                      tax scheme to avoid any withholding tax                  those aircraft.
       Lawyers (and role): K&L Gates                  under the Japanese lease.                                   Standard Chartered Bank acted as debt
       (borrower), King & Wood Mallesons                 The deal’s originality also came from the             underwriter, facility agent and security
       (lenders), Herbert Smith Freehills (airline)   combination of financing complex assets in               trustee on the remaining two aircraft.
       Jolco arranger: Asset Brok’Air                 local currency (vintage aircraft) and having                King & Wood Mallesons advised the
       International                                  introduced a new name to the Jolco market.               lenders, Herbert Smith Freehills advised
       Equity underwriter: JP Lease                      It closed in a unique context following the           Virgin Australia and K&L Gates advised the
                                                      company’s recent business turnaround plan.               lessor.
       Lessee: Virgin Australia
                                                         The overall transaction was co-                          Asset Brok’Air International acted as
       Banks (and role): Australian and New           arranged by Jolco specialist Asset Brok’Air              overall arranger and JP Lease Products &
       Zealand Banking Group (debt arranger).         International and Australian and New                     Services as equity advisor.
       DVB Bank, IBJ Leasing and Standard
       Chartered Bank as debt underwriters
       Date mandated: 15 August 2018
       Date closed: 31 October 2018

     V    irgin Australia’s Japanese operating
          lease transaction with a call option
     (Jolco) for six Boeing 737-800s marked the
     carrier’s debut for this financing product.
        The transaction involved a portfolio of six
     aircraft, manufactured between 2003 and
                                                      The Virgin Australia deal team, collecting their award
     2007, for a total amount of $120 million.

14   Airfinance Journal July/August 2019
Airfinance Journal Global Awards 2018

Islamic Finance Deal of the Year: DAE Capital $800m
revolving credit facility
                                                  Al Ahli Bank of Kuwait was the mandated            The Dubai-based lessor signed a four-
 Borrower/Issuer: DAE Capital                   coordinating lead arranger and joint              year unsecured revolving credit facility
                                                bookrunner of the transaction. First Abu          worth $535 million, which can be increased
 Structure: Unsecured revolving credit          Dhabi Bank was a mandated lead arranger           up to $600 million in December, to support
 facility                                       and joint bookrunner as well as global agent      its future financing needs. The RCF
                                                and Islamic Investment Bank. Noor Bank            was arranged by Emirates NBD as sole
 Amount: $800 million
                                                acted as a mandated lead arranger.                mandated arranger and bookrunner.
 Tenor: Four years                                The transaction closed in October 2018             In November BNP Paribas and Credit
                                                and eight additional banks entered the deal       Agricole were involved in another new
 Lawyers: Clifford Chance, Clyde & Co           using the accordion feature to bring the          revolver for a total of $720 million. The
                                                facility to $800 million.                         unsecured revolving credit facility has a
 Banks: Ahli Bank of Kuwait, First Abu            The facility is atypical. It features a         maturity of five years.
 Dhabi Bank                                     conventional tranche of debt combined                The previous month DAE Funding,
                                                with an Islamic tranche, the first of its kind    the wholly-owned subsidiary of Dubai
 Date mandated: 1 May 2018                      amongst lessor financings.                        Aerospace Enterprise, priced $500 million
                                                  The facility has very limited covenants         aggregate principal amount of senior
 Date closed: 1 October 2018
                                                and does not have the standard unsecured          unsecured notes due 2021 and $500
                                                revolving credit facility covenants such          million aggregate principal amount of

D     ubai Aerospace Enterprise (DAE) signed
      an unsecured four-year revolving credit
facility with an initial commitment of $480
                                                as interest coverage, leverage ratio or
                                                unencumbered assets test, making it very
                                                unique. It provides a good execution of the
                                                                                                  senior notes due 2023. The net proceeds
                                                                                                  from those offerings was to refinance
                                                                                                  existing secured indebtedness and to pay
million in May 2018. The financing has an       deal and full flexibility to the borrower.        the related fees and expenses, and to use
accordion feature that allows the facility to     The DAE Capital treasury team had a busy        any remaining net proceeds for general
grow to up to $800 million.                     year in 2018.                                     corporate purposes.

Operating Lease Deal of the Year: airBaltic $72.4m
two A220-300 sale and leasebacks
                                                previously and remained thinly capitalised.       going forwards. The success of this
 Borrower/Issuer: airBaltic                        The deal achieved a $36.2 million per          transaction was also crucial to the future
 Structure: Sale and leaseback                  aircraft sale and leaseback price – a figure      success of the aircraft type.
                                                that was rejected by major lessors as being          The two A220-300s formed part of a
 Tenor: 12 years                                ‘unrealistically high’.                           total sale and leaseback package of six
                                                   Skyteck-AIC said the winning leasing           aircraft conducted by Skytech-AIC on
 Lawyers: Clyde & Co
                                                party, Avation plc, showed real flexibility,      behalf of airBaltic in early 2018 with the
 Adviser: Skytech-AIC                           understanding and creativity to win               finance of the balance of four aircraft
                                                the competition and build an excellent            awarded to CMB Leasing.
 Debt provider: Export Development
                                                relationship with the airline.                       Since the transaction closed, Avation
 Corporation of Canada
                                                   The Latvian airline was seeking to             has been mandated another four A220-
 Lessor: Avation plc                            diversify its sources of funding away from        300 deliveries under a similar transaction
                                                a concentration on Export Development             arranged by Skytech-AIC. The first two
 Date mandated: 16 February 2018                Corporation of Canada supported debt/             aircraft closed in March and April 2019
 Date closed: 12 June 2018                      finance leases and adding the flexibility         while the remaining two aircraft are due in
                                                of operating leases to its funding options        the third quarter of this year.

L   easing company Avation agreed
    a 12-year purchase and leaseback
transaction with airBaltic for two Airbus
A22-300s (formerly Bombardier CS300
aircraft), in a transaction arranged by
Skytech-AIC.
   The transaction represented the first
open market sale and leaseback for the
type: up to that point the asset was derided
by competitors and shunned by investors
with just 249 sales accumulated over eight
years.
   It also represented the first open market
sale and leaseback for the Latvian carrier,
                                                The airBaltic deal team, collecting their award
which had narrowly escaped bankruptcy

                                                                                                                     www.airfinancejournal.com   15
Airfinance Journal Global Awards 2018

     Structured Lease Deal of the Year: Smartwings Euro-equivalent
     $140m AFIC supported financing of three Boeing 737 Max 8s
                                                       in aviation finance, which is growing in             lessor or payments of interest by the
       Borrower/Issuer: Smartwings                     popularity but prior to this deal, no airline        borrower under the loan agreement. Ireland
                                                       had structured an AFIC deal through                  was selected as the optimum jurisdiction for
       Structure: AFIC supported finance
                                                       Ireland. The structure demonstrated that             incorporation and Irish tax residency of the
       Amount: $140 million                            airlines could avail of the AFIC support             borrower/lessor.
                                                       and maximise Ireland’s extensive double-                The transaction was completed in a very
       Lawyers: A&L Goodbody, Clifford                 taxation treaty network.                             short timeframe notwithstanding the fact that
       Chance, Norton Rose Fullbright,                    The structure also ensured that no                the structure was different to previous AFIC
       Pillsbury                                       withholding tax would apply to payments              transactions and for some of the lenders this
       Credit enhancer: Aircraft Finance               of rent by the Czech carrier to the finance          was their first AFIC-supported transaction.
       Insurance Consortium (AFIC)
       Banks: Credit Agricole-CIB
       Date mandated: 10 November 2018
       Date closed: 19 December 2018

     T   he Smartwings Aircraft Finance
         Insurance Consortium (AFIC)-supported
     multi-aircraft transaction wins the structured
     lease deal of the year.
       The financing represents the first time
     the Czech carrier had availed of the AFIC-
     supported financing product.
       It was also the first time an Irish structure
     has been used for an airline AFIC deal. The       The Smartwings deal team, collecting their award from AFJ’s managing director Olivier Bonnassies
     AFIC product has been a recent innovation

     Engine Deal of the Year: Willis Lease Finance Corp.
     WEST IV $373.4m ABS for 55 engines
                                                       of 55 engines and one Boeing 737-800                    The Series A notes priced at 99.99504%
       Borrower/Issuer: WEST IV                        airframe only on lease to Scandinavian               of par and the Series B notes priced
       Structure: Asset-backed securitisation          Airlines.                                            at 99.99853% of par. Bank of America,
                                                          The Series A notes have a fixed                   MUFG and Wells Fargo acted as active
       Amount: $373.4 million                          coupon of 4.75%, an expected maturity of             bookrunners in the transaction.
                                                       approximately eight years, an expected                  Willis Lease posted a record annual pre-
       Lawyers: Millbank LLP, Pillsbury
                                                       weighted average life of 6.3 years and a             tax profit of $56 million last year, up 56%
       Rating Agencies: KBRA, Fitch Ratings            final maturity of 25 years.                          from $36 million in 2017.
                                                          The Series B notes have a fixed coupon               The engine lessor’s 2018 pre-tax results
       Banks: Bank of America, Wells Fargo,            of 5.438%, an expected maturity of                   were driven by 27% revenue growth, to a
       MUFG
                                                       approximately eight years, an expected               record $348 million, from its core leasing
       Date mandated: 10 November 2018                 weighted average life of 6.3 years and a             business and higher spare parts and
                                                       final maturity of 25 years.                          equipment sales.
       Date closed: 19 December 2018

     E   ngine lessor Willis Lease Finance closed
         an asset-backed securitisation debt
     offering covering 55 engines in the second
     half of last year through the Willis Engine
     Structured Trust IV (WEST IV), a subsidiary
     of, Willis Lease.
        The $373.4 million 144A transaction was
     the largest engine financing of the year.
        The fixed-rate notes were issued in two
     series, with $326.8 million of Series A notes
     and $46.7 million of Series B notes.
        The notes are secured by WEST IV’s
                                                       The WEST IV ABS deal team, winners of the Engine deal of the year award
     direct and indirect interests in a portfolio

16   Airfinance Journal July/August 2019
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