Singapore Airlines (SIA) has completed sale-leaseback transactions for 11 aircraft, comprising seven Airbus A350-900s and four Boeing 787-10s, raising approximately S$2.0 billion in total.
The transactions were arranged by four different parties, many of which introduced a number of “firsts” for aviation finance.
| Lease Arranger | Aircraft |
| Aergo Capital | 1 Airbus A350-900 1 Boeing 787-10 |
| Altavair | 4 Airbus A350-900s |
| EastMerchant / Crianza Aviation | 1 Airbus A350-900 2 Boeing 787-10s |
| Muzinich and Co. | 1 Airbus A350-900 1 Boeing 787-10 |
| Total | 11 |
EastMerchant and Crianza Aviation have purchased two 787-10s 9 (MSN 60263/60264) and one A350-900 (MSN 379). This transaction features a novel, multi-layered financing structure with the senior financing being supported by KfW IPEX-Bank / Balthazar for the Airbus A350-900 and the two Boeing 787-10 financed by AFIC / Natixis Singapore and Apple Bank, which is complemented by Korean mezzanine debt raised by Seoul based Cerritos Holdings as well as equity from Korean investors together with Crianza.
This is the first operating lease that has been supported by Balthazar for the A350 transaction, and is the first time that AFIC has supported a 787-10 aircraft and the first time it has supported a sale-leaseback deal on a limited recourse basis. This is the first time that both AFIC and Balthazar have worked with SIA.
“We started work on this project in mid-2020 in the midst of high uncertainty and it makes us very proud that EastMerchant and Crianza have been able to bring together a large group of finance parties to support Singapore Airlines during unprecedented times,” says Baldur Vander, Chief Executive Officer of Crianza. “Crianza has successfully navigated through the pandemic while shielding its investors from any impact, validating its unique investment strategy. The addition of three modern aircraft on lease to Singapore Airlines to Crianza’s portfolio shows that we are both able to raise new capital in Korea and that our investors are committed to continuing Crianza’s growth path.”
This transaction also signals the reopening of the Korean market for mezzanine and equity financings of aircraft after an 18-month hiatus and in this regard represents an important milestone for Crianza Aviation, its Korean shareholders and the Korean market in general.
Patrick Giese, Managing Director of EastMerchant, adds: “I would especially like to thank the teams of Singapore Airlines and all other transaction parties for supporting us throughout the transaction and with the logistics of getting all aircraft delivered within one single day. We are very pleased to now have eight Singapore Airlines aircraft under management.”
Legal counsel for the transaction and lessor were Jaffa & Co. (UK) and Matheson (Ireland) with corporate services being provided by APEX Group. The various financiers / insurers were represented by Milbank, Norton Rose, Yulchon, Lee & Ko. as well as HSF and Clifford Chance. Asia Practice, Rajah & Tann as well as Walkers acted as special local counsel.
Aergo Capital has purchased and leased back one A350-900 (MSN 278) and one 787-10 (MSN 60282), which are both subject to long-term leases with Singapore Airlines and are financed by way of Sharia compliant funding with Dubai Islamic Bank (DIB).
Fred Browne, Chief Executive Officer of Aergo, commented: “This transaction marks an important milestone for Aergo and demonstrates our commitment to invest and further grow our portfolio. The flexibility and broad range of skills inherent in the Aergo team enhances our ability to focus on a wide range of high quality deals that yield strong returns on equity while presenting relatively low downside risks. We found both Singapore Airlines and DIB to be proactive and highly professional partners in this transaction, resulting in a smooth closing process. We are looking forward to further developing our relationship with both parties.”
“CarVal Investors is delighted to partner with Singapore Airlines and DIB on this transaction,” said Justin Bradburn, Principal and Head of Aviation at CarVal Investors. “We see this as a compelling opportunity for growth and continued partnership.”
Marc Bourgade’s Flying Solutions company assisted Aergo in arranging its first Islamic financing.
Herbert Smith Freehills acted as lead counsel to Aergo, A&L Goodbody acted as Irish transaction counsel, Maples and Calder acted as Cayman transaction counsel, Norton Rose Fulbright (Asia) acted as lead counsel to Singapore Airlines and Allen & Overy acted as lead counsel to DIB. KPMG advised Aergo on tax matters.
Altavair, the asset manager focusing on the acquisition of new and used commercial aircraft formed in 2003 by CEO Steve Rimmer, has financed four of the A350-900s in a purchase and leaseback deal with SIA.
Muzinich & Co, the investment firm that branched out into aviation finance in 2020 with a new division led by industry veteran Alok Wadhawan, financed the final two aircraft - one A350-900 and one 787-10.
SIA has successfully raised approximately S$15.4 billion in fresh liquidity since 1 April 2020, including these sale-leaseback transactions. The amount also includes S$8.8 billion from SIA’s successful rights issue, S$2.1 billion from secured financing, S$2.0 billion via the issuance of convertible bonds and notes, as well as more than S$500 million through new committed lines of credit and a short-term unsecured loan.
SIA continues to have access to more than S$2.1 billion in committed credit lines, along with the option to raise up to S$6.2 billion in additional mandatory convertible bonds before the Annual General Meeting in July 2021.
During this period of high uncertainty, the SIA Group states that it will continue to explore additional means to raise liquidity as necessary.
“The additional liquidity from these sale-and-leaseback transactions reinforces our ability to navigate the impact of the Covid-19 pandemic from a position of strength,” said Goh Choon Phong, Singapore Airlines Chief Executive Officer. “We will continue to respond nimbly to the evolving marketing conditions, and be ready to capture all possible growth opportunities as we recover from this crisis.”
Singapore Airlines has also been named as the Airline Economics Aviation 100 Asia-Pacific Airline of the Year – for more details of all the Aviation 100 winners please see Airline Economics magazine, Issue 60, which will be published tomorrow (May 4).