IAG to buy Niki; CALC launches first ABS and new funding vehicle

By victoria@aviationnews-online.com January 2, 2018 15:24

IAG to buy Niki; CALC launches first ABS and new funding vehicle

At the close of 2017, International Airlines Group (IAG) confirmed plans to purchase Austrian airline NIKI, which was formerly part of the Air Berlin group, for €20 million and provide liquidity to NIKI of up to €16.5 million. NIKI will be acquired by a newly formed subsidiary of Vueling which will be incorporated as an Austrian company and run initially as a separate operation, said IAG in a statement on December 29. The deal remains subject to EC competition approval.

NIKI’s assets include up to 15 A320 family aircraft and a slot portfolio at various airports including Vienna, Dusseldorf, Munich, Palma and Zurich. The new company plans to employ approximately 740 former NIKI employees to run the operation.

Willie Walsh, IAG chief executive, said: “NIKI was the most financially viable part of Air Berlin and its focus on leisure travel means it’s a great fit with Vueling. This deal will enable Vueling to increase its presence in Austria, Germany and Switzerland and provide the region’s consumers with more choice of low cost air travel”.

Also during the last days of 2017, Chinese lessor, CALC, launched China’s first asset-backed security (ABS) which is denominated and settled in US dollars – a foreign currency – and is also the first ABS in aircraft leasing in the public placement market.

China Asset Leasing Company, a company registered in Tianjin by the Group, is the issuer of the ABS, which will have aircraft leasing assets as its underlying assets, and Huatai Securities (Shanghai) Asset Management Co. (Huatai Securities Asset Management), is the manager. The ABS denominated in US dollars was listed on the Shanghai Stock Exchange.

CHEN Shuang, JP, Chairman of CALC, said, “CALC is dedicated to developing innovative finance products with aircraft leasing as the underlying asset. We have set another precedent by introducing foreign currency denominated asset securitized products and providing the aviation industry and the leasing industry with a new financial product category.”

CALC has been exploring new financing options for the group for some time, says Winnie LIU, Deputy Chief Executive Officer and Chief Commercial Officer of CALC, who adds: “The successful debut of this product category provides another safe, stable and innovative option for USD-denominated fixed income products which is still rare in China. We are deeply grateful for the support and recognition from the departments of the State Administration of Foreign Exchange, China Securities Regulatory Commission, Shanghai Stock Exchange and China Securities Depository and Clearing Company Limited. We would also like to thank the participating institutional investors who have put their trust in CALC and our products.”

The lessor also took the opportunity at the close of the year to order 50 more A320neos, which will be delivered in stages in 2023.

Following this incremental order, CALC’s total order book with Airbus will increase to 202 aircraft. The Group shall purchase 15 additional Airbus A320neo aircraft in January 2018 subject to the fulfilment of certain conditions.

Mike Poon, Chief Executive Officer of CALC, said, “We are proud to augment our fleet by adding 50 in-demand A320neo jetliners that have outstanding fuel efficiency, and are reliable and comfortable. Since CALC’s inception, we have maintained a close and dynamic relationship with Airbus, and the commitment marks yet another endorsement of our mutual trust. This bulk purchase will significantly expand CALC’s fleet portfolio and further solidify our position as a full value-chain aircraft solutions provider. Currently majority of our fleet comes from direct purchase from manufacturers and that will remain the major source of our new aircraft.”

To finance its aircraft deliveries, CALC intends to establish an aircraft investment vehicle with the mezzanine tranche financiers, held at a ratio of 20% to 80% (based on respective aggregate capital commitments, and same for the shareholding), for investing in a portfolio of lease-attached aircraft.

Poon explains: “The new platform will serve as an additional financing channel to support CALC’s global expansion. It will also enable the Group to progressively adopt an asset-light business model by efficiently turning over its capital, so as to scale up the aircraft asset under the Group’s management. With lessened balance sheet pressure that allows greater flexibility, CALC will be able to focus on its core competitiveness in aircraft servicing and management, ultimately generating better returns for its shareholders.”

The vehicle will be seeded with an initial portfolio of narrow-body aircraft assets with a market appraised value of approximately US$826 million (equivalent to approximately HK$6.44 billion). The asset size of the aircraft portfolio is targeted to grow to approximately US$1.4 billion (equivalent to approximately HK$10.92 billion) in two years’ time from the execution date of debt financing documentation (the funding period).

To facilitate the establishment and to initiate its operations, CALC will inject into the vehicle a total of 18 aircraft from its fleet. During the funding period, the vehicle may acquire additional aircraft from CALC or from other aircraft vendors, to no more than 25 aircraft. In addition, CALC will also act as the vehicle’s servicer providing aircraft and lease management service by which CALC will have exclusive right to originate any aircraft acquisition opportunities for the vehicle as long as it serves as the servicer, including any disposal of aircraft to the vehicle by the Company or any acquisition of aircraft by the vehicle from third party vendors.

The establishment of the vehicle is subject to shareholders’ approval at an EGM to be held on 18 January 2018.

By victoria@aviationnews-online.com January 2, 2018 15:24