AviLease, the new aircraft leasing company from the Kingdom of Saudi Arabia, has acquired a portfolio of 122 aircraft from Standard Chartered along with its aviation platform for a total consideration of $3.6bn.
AviLease has paid an initial cash consideration of $700 million and will also fund the repayment of approximately $2.9bn of net intra-group financing from the Standard Chartered Group.
“This is a great step for us,” says AviLease chief executive Ted O’Byrne. “Not only is this happening at an ideal time in our development as a global leasing company, the acquisition was particularly attractive due to its high quality portfolio of narrowbody aircraft on long leases to blue-chip credits, as well as its established platform and highly experienced team.”
AviLease Chairman, Fahad Al-Saif, said: “The Standard Chartered leasing business is an industry-leading platform combined with a team of high-calibre professionals with an outstanding reputation. This acquisition will propel AviLease and will in turn support Saudi Arabia’s aviation ecosystem, on our path to help realize the Saudi Vision 2030’s objective of diversifying the economy and adding high value employment opportunities for Saudi citizens."
Simon Cooper, chief executive of Corporate, Commercial & Institutional Banking and Europe & Americas at Standard Chartered, commented: “The sale of our Aviation Finance leasing business allows us to continue to focus our efforts on those areas where we are most differentiated and further progress our Return on Tangible Equity journey. I want to thank our Aviation Finance colleagues, whose commitment to building an outstanding franchise over more than 15 years has enabled the success of this transaction.”
Just 13 months since its launch, AviLease is already delivering on its promise to become a top tier aircraft leasing company. The acquisition of the quality portfolio and established platform accelerates AviLease’s growth ambitions and its aspiration to rapidly attain a corporate credit rating, while ensuring the development of the Kingdom’s aviation and financial sector.
With the acquisition, AviLease has acquired a portfolio of 100 owned aircraft and 22 aircraft with a joint venture partner. The all-narrowbody portfolio features new technology Boeing 737 Max and A320neo aircraft as well as classic aircraft types. O’Byrne sees the older vintage of the book as a major positive for AviLease. “We have a committed aircraft portfolio of 45 aircraft – and have delivered 30 to date – most of which are brand new aircraft,” he says. “Adding some vintage aircraft in the Standard Chartered book to our portfolio was a positive exercise since it improves yields and accelerates the maturity of the P&L as well as other benefits for the company in terms of technical skills inherent in managing older aircraft.”
Following the acquisition, AviLease’s book of 167 aircraft across 46 lessees, will have an average of approximately three and a half years of age. “The high quality portfolio and lessees and platform is such an interesting combination for AviLease,” he says. “This “bitesize” package acquisition, says O’Byrne, is the right size for the company at the right time with the right processes and the right people. The team is very experienced with relationships, know-how, processes and systems that will really help to accelerate our growth and our rating.”
Speaking to O’Byrne in December last year, he shared the company’s desire to quickly attain a corporate credit rating to enable access to capital markets financing. As a young company, AviLease would need to have three years of accounts to even begin the ratings process, acquiring an established company enhances that P&L history. One of the reasons we were attracted to this transaction is because we are also acquiring the track record, which will in turn allow us to approach the rating agencies faster.”
AviLease is financing the acquisition of Standard Chartered Aviation with $1.5bn equity and a $2.1bn bridge financing arranged by BNP Paribas, Citi, HSBC and MUFG. The terms of the bridge loan have not been disclosed but AviLease is evaluating options for replacing the loan with more efficient financing in the future. O’Byrne is confident that will not be a problem even in the rising interest rate environment and that the company “has time” to consider all avenues. Even without a rating, the private investment market is open to AviLease’s credit, which successfully closed a $1.1bn private placement earlier this year with “attractive economics”.
Ted O’Byrne’s priority now is to focus on closing the transaction towards the end of the year – maybe as early as October – depending on the antitrust process, and then integrating the new teams, onboarding systems and processes, as well as rationalising the new office spaces, which now spans Riyadh, Dublin, Limerick, London, New York, Hong Kong and Singapore. “My first priority right now is to integrate the business, and to make sure that we do it right,” says O’Byrne. “These processes can be complex and time-consuming. The human element is something that I want to pay particular attention to because there is a lot of experience in that team that I want to retain.”
Alongside integrating the two business, AviLease is continuing to write new deals and seek out new clients, with always having one eye on the next acquisition or opportunity to widen the portfolio and AviLease’s presence on the global stage.
On completion of the transaction, Standard Chartered stated that it will record an estimated gain of approximately $300 million and an increase in Common Equity Tier 1 capital ratio by around 19 basis points. Standard Chartered expects to include the net proceeds from the transaction within the overall management of the capital and liquidity position of Standard Chartered and its subsidiaries. Standard Chartered was advised by JPMorgan on the sale, with AviLease advised by Citigroup. Allen & Overy and Arthur Cox served as legal counsel for AviLease with KPMG serving as tax advisor. Clifford Chance and McCann FitzGerald served as legal counsel for Standard Chartered and PwC served as tax advisor