Samsung Partners a Korea-based private equity firm has launched an investment Samsung Aviation Partners to focus on global aviation investment.
Samsung is in the process of setting up a leasing platform in Ireland, as well as a team within Korea, to provide innovative bespoke solutions to the aviation industry and to guide its Korean based investors.
Samsung says it aims to differentiate itself from other historical platforms in Korea by focusing on future values and what happens after a first lease.
“We will manage the process directly even if we work with other managers. Our aim is to provide our investor clients with a full risk assessment and avoid any conflicts, utilising third party managers in expensive and evergreen contracts with few rights,” the firm said in a statement.
Samsung said that the Korean investor market has been “viewed as naive and taken advantage of”, and the firm said the existing Korean investor strategy of focusing on widebody aircraft to flag carriers was both expensive and illiquid.
“Those investors who have participated in A380, 777 and A330 investments will likely pay a high price for the gains earned during the initial contracted lease. Many Korean investors will lose substantial equity having invested in illiquid assets,” said Samsung Partners.
“They have failed to understand the strategies of the airlines they have worked with; even when those airlines have been top-tier carriers. A first lease is easy to achieve and providing an estimated appraised value for lease end makes any model appear to work on paper. Appraisals are not bankable guarantees and Korean investors are learning the hard way that appraisals can be inaccurate,” it added.
Samsung said it would aim to avoid using third party services and aimed to source parts directly from suppliers.
“We will not rely on the services of third parties without oversight and ultimate decision-making authority and aim to source our own assets directly with suppliers. Korean investors have been too trusting and distanced from the management of assets, ultimately paying high fees and having little control, especially when market dynamics change,” the Korean private equity firm said.
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Samsung said it was looking to use multiple approaches in its business including; Operating and Financing Lease, Senior, Mezzanine and Equity Financing, PDP Financing, Sales and Leaseback transactions, Freighter Conversion Program and etc. on terms that will benefit both our airline customers and our investors.