Acasta to sell Stellwagen and amend Its $150 million credit facility

Eleanor Steed
By Eleanor Steed February 7, 2018 14:44

Acasta to sell Stellwagen and amend Its $150 million credit facility

Acasta Enterprises has entered into a non-binding term sheet with Martello Finance Company for the sale of its Stellwagen business unit. Acasta has also entered into an amending agreement with the company’s senior lenders under its US$150 million credit facility.

Acasta will sell Stellwagen to an affiliate of Martello, in exchange for the cancellation of 26 million common shares of Acasta beneficially owned by Martello and others, which represents approximately 27% of the issued and outstanding common shares, in return for US$35 million (of which $5 million will be paid ninety days following closing of the transaction). Acasta will retain the Stelloan loan portfolio, which has a book value of approximately $47.4 million.

The term sheet states that if definitive agreements have been signed and the transaction has not yet closed by March 1, an affiliate of Martello will make a $25 million down payment to Acasta in consideration for first-ranking security over the Stellwagen C295 aircraft assets and related deposits.

Acasta plans to use the proceeds from the sale to reduce its indebtedness, including using at least $25 million to satisfy its obligations under the credit facility. Acasta has already paid down $5 million of the $120 million currently outstanding under the credit facility.

Goodmans is acting as legal advisor to Acasta. Osler, Hoskin & Harcourt is acting as legal advisor to the Independent Committee. Stikeman Elliott is acting as legal advisor to Martello.

Acasta bought Stellwagen for US$270 million in late 2016 but the acquisition has not been entirely successful. Douglas Brennan, CEO of Stellwagen Group, who is also a partner in Martello Finance Company, has described the purchase as “fantastic news” and a positive end to the relationship. Taking back his company into private ownership with a large capital partner will allow Stellwagen to become “much more flexible and much more aggressive as we were before the acquisition,” says Brennan.

Stellwagen has a full schedule planned for 2018. First up is the large aircraft asset backed securitisation (ABS) it is planning to execute in the second quarter since it has been slightly delayed due to the sale by Acasta. The company is also executing long term leases of its C295s, which it ordered from Airbus last year, and has delivered two to DAC Aviation in Nairobi this month.

Later this year, Stellwagen Technology will debut its financial software that has been in development for four years at a cost of $12 million. “When I first entered this industry, I noted that everyone was still using excel and had no real capability for large-scale, quantitative, predictable mathematics, which is common in mortgage backed securities markets for example – probability of outcomes, stochastic analysis, Monte Carlo analysis for pricing – the basics in terms of sophisticated financial management doesn’t exist in aviation.”

Brennan also described the appointment of Aengus Whelan as chief commercial officer as a very positive development for the company adding that a new board would be announced in the coming weeks.

Eleanor Steed
By Eleanor Steed February 7, 2018 14:44