Dubai Aerospace Enterprise (DAE), via an affiliate, has signed a definitive agreement to acquire the rights, interests, and obligations of a portfolio of 64 Boeing 737 MAX aircraft from a wholly-owned subsidiary of China Aircraft Leasing Group (CALC). The portfolio includes 737-8, 737-9 and 737-10 variants. Delivery of the aircraft is scheduled to occur between 2023 and 2026.
The terms of the transaction were not disclosed. However, CALC announced the novation agreement for the aircraft portfolio in a stock filing on August 14, sharing that the company has agreed to novate the purchase agreement to DAE of 64 Boeing aircraft by transferring its interest in 12 special purpose vehicles for a payment determined by the pre-delivery payments already paid.
DAE’s chief executive officer, Firoz Tarapore expressed his delight at concluding the transaction with CALC and noted that on a pro forma basis, it will increase the percentage of new technology, fuel efficient aircraft in DAE’s owned fleet to approximately 66% from 50%.
“This transaction will add certainty to our growth trajectory,” said Tarapore. “On a pro forma basis, this transaction will increase our fleet of owned, managed, committed, and mandated-to-manage aircraft to approximately 550 aircraft, valued at approximately US$20 billion. This transaction will also allow us to further deepen our existing relationship with Boeing and CFM International. Since inception and including this transaction, DAE has acquired and is committed to acquire approximately 500 Boeing aircraft. We look forward to growing this relationship even further in the coming years.”
Tarapore confirmed that approximately 20% of the acquired portfolio is on lease to airline clients that are also existing clients of DAE allowing the company to expand those relationship. He added that the remainder of the acquired portfolio of assets would be “placed directly by DAE in the coming quarters”.
The transaction is expected to be completed in the third quarter of 2023 and DAE said that it will have no impact on any of the company’s capital adequacy, liquidity, and funding ratios.
CALC declared that the novation arrangement “represents a good opportunity for the Group to adjust its Boeing fleet portfolio so as to provide flexibility to the Group's existing operations and contribute to its long-term sustainable development”. CALC added that it would still “continue to consider from time to time the acquisition of further aircraft from Boeing (pursuant to any future agreements or otherwise) or other aircraft manufacturers”.
CALC stated that the novation arrangement is expected to be completed on August 30.
DAE was advised by Milbank and KPMG Ireland.