BRIC is back; Aergo prices ABS and buys portfolio

Eleanor Steed
By Eleanor Steed November 1, 2017 10:05

BRIC is back; Aergo prices ABS and buys portfolio

During a keynote presentation yesterday at the Airline Economics Asia-Pacific Growth Frontiers conference, BOC Aviation chief executive, Robert Martin, confidently stated that the BRIC countries – Brazil, Russia, India and China – were turning back to growth, presenting more and more opportunities for aircraft lessors. Airlines and lessors alike are very optimistic about opportunities in China and have been for some time. The wall of liquidity in the region and indeed globally is fuelling the abundance of cheap financing for aircraft, which is driving down pricing and yields for lessors and financiers. However, Brazil is becoming more attractive for leasing companies, while India again seems ripe for investment due to the vastly underdeveloped international airline market that has lessors betting on the start-up airlines that will capitalise on the decline of the 5/20 rule, allowing more private airlines to fly abroad.

Also in Hong Kong this week, Aergo Capital has been busy pricing its debut ABS transaction and buying four aircraft.

Aergo Capital $584.839 million METAL 2017-1, secured on a portfolio of 26 aircraft, has priced. The offering consists of four tranches of notes:  $430.028 million A notes with an initial loan to value (LTV) of 62.5% and a coupon of 4.581% at par; $86.006 million of B notes with a LTV of 75% and a 6.5% coupon at 98.46% price; $55.044 million of C-1 notes (LTV of 83%) and $13.761 million of C-2 notes (LTV 85%) with coupons of 8.0% and 9.75% respectively and prices of 98.62% and 99.56% respectively. The transaction was priced on October 30th 2017 and is expected to close on November 6th 2017.

Aergo Capital will act as servicer for the aircraft portfolio. Goldman Sachs is the sole structuring agent, global coordinator, and sole bookrunner on the offering.

Aergo has also acquired two 737-800s, one A321-200, and one A330-200 aircraft from a major lessor.  All four aircraft are on long term operating leases and this acquisition brings Aergo Capital’s fleet to 41 aircraft. The acquired portfolio consists one 2015-vintage 737-800 on lease to Lucky Air, one 2001-vintage 737-800 on lease to Sun Country Airlines, one 2004-vintage A321-200 aircraft on lease to Smartlynx Estonia, and one 2007-vintage A330-200 on lease to Shaheen Air in Pakistan.

Aergo Capital’s CEO Fred Browne said, “This acquisition is a continuation of our strategy of acquiring younger aircraft on long term lease and trading out of older, classic aircraft. We look forward to working with several new lessees in addition to Smartlynx with whom we already have a strong partnership”.

A&L Goodbody acted as lead transaction counsel for Aergo Capital and KPMG acted as tax and accounting adviser. Smith Gambrell & Russell acted as NY counsel for Aergo Capital.

Meanwhile, Natixis has signed a Memorandum of Understanding (MoU) with Minsheng Financial Leasing (MSFL), a majority-owned subsidiary of China Minsheng Bank, for the financing of a fleet of Boeing aircrafts to be acquired by MSFL.

Under the agreement, Natixis will provide MSFL with financial support for pre-delivery payments and the long-term funding of their 30 Boeing 737 Max8 aircraft, arrange a warehouse facility to facilitate the fleet management of MSFL. The bank will also support MSFL in arranging approximately US$2.2 billion of funding to support the growth of its commercial aircraft leasing platform, set up a Euro medium-term note (EMTN) programme for MSFL, and offer its expertise including ratings advisory, capital structuring, documentation and marketing and distribution outside of China of the instruments issued under the programme.

MSFL will also draw upon Natixis’ expertise in green financing to establish a Green Bond framework for MSFL and identify investment opportunities in Europe and in the US across various asset classes that fit MSFL’s risk-return profile.

Bruno Le Saint, Head of Global Finance, Asia Pacific, sees this transaction as another significant development for the aviation finance franchise of Natixis in China and in Asia, as the bank continues to expand in the Chinese aviation financing market.

The lack of talent in the leasing industry is a constant issue and is consistently referred to as a top three challenge by lessors. Skilled individuals are in high demand across the spectrum of aviation companies from airlines, to lessors and financial institutions. Airline Economics Research is again conducting a survey into the main themes in aviation recruitment for the past 12 months. The results will be revealed at the Growth Frontiers Dublin 2018 event held at The Shelbourne in Dublin on January 20-22, 2018. Cast your vote here https://www.research.net/r/TalentCheck2018

Eleanor Steed
By Eleanor Steed November 1, 2017 10:05