Airbus and Bombardier to close C Series partnership on July 1; GECAS launches START

Eleanor Steed
By Eleanor Steed June 8, 2018 15:11

Airbus and Bombardier to close C Series partnership on July 1; GECAS launches START

Having received all required regulatory approvals, Airbus, Bombardier and Investissement Québec (IQ) have agreed to close the C Series transaction effective on July 1, 2018. The regulatory approval process has been completed ahead of schedule – Airbus declared its intention to acquire a majority stake in the C Series Aircraft Limited Partnership (CSALP) in October 2017 – which has allowed Bombardier to update its guidance for 2018 to expect revenues in a range of $16.5 billion to $17 billion. Full year consolidated EBIT for Bombardier is expected to increase to a range of $900 million to $1.0 billion as the C Series program results will no longer be fully recognised after closing.

CSALP, based in Mirabel, was originally established between Bombardier and IQ, and will now will benefit from Airbus’ global reach, scale, procurement organisation and expertise in selling, marketing and producing the C Series aircraft.

As previously announced, Bombardier will continue with its current funding plan of CSALP. Bombardier will fund the cash shortfalls of CSALP, if required, during the second half of 2018, up to a maximum of US$225 million; during 2019, up to a maximum of US$350 million; and up to a maximum aggregate amount of US$350 million over the following two years, in consideration for non-voting participating shares of CSALP with cumulative annual dividends of 2%. Any excess shortfall during such periods will be shared proportionately amongst CSALP’s Class A shareholders. Airbus will consolidate CSALP effective from July 1, 2018 onwards. Further financial information on the transaction will be provided later this year.

Airbus Chief Executive Officer Tom Enders said that the “strength of the entire Airbus organization will be behind the C Series” that will enable it to “fulfill its market potential” and bring “significant value to Airbus, our customers and shareholders.”

Bombardier delivered 17 C Series in 2017, and is on track to deliver double that amount this year, the company statement says.

“The C Series team in Québec is proud to participate in this opportunity to drive the success of this amazing aircraft,” said Philippe Balducchi, CEO of the C Series partnership. “Our teams have worked tirelessly to merge cultures and bring operations together well ahead of schedule and are confident in our ability to make this win-win partnership a thriving commercial success. The composition of the C Series leadership team reflects our principles of bringing together the best talent that both sides have to offer. We are ready to turn outward and help our customers get their hands on the hottest aircraft in its segment.”

Also this week, GE Capital Aviation Services (GECAS) is in the market with its eleventh aviation asset backed securitisation (ABS) dubbed START 2018-1. GECAS will act as the servicer for the 24-aircraft portfolio as well as retain a small minority percentage of the equity.

The portfolio consists of 23 narrowbody aircraft (87.7% by value) – 11 A320-200s, 11 737-800s and one 737-900ER – and one A330-300 widebody aircraft (12.3% by value), with an initial value of $695.6 million, an initial weighted average aircraft age of 7.7 years and a weighted average remaining lease term of 4.5 years. The three largest lessees by value are Jet Airways, Travel Service and Volaris, which represent 15.8%, 10.6% and 8.9%, respectively (35.3% in total).

The $586.9 million ABS is offered in three tranches of notes: $430 million A notes, rated A by Kroll Bond Rating Agency (KBRA), with an initial loan-to-value (LTV) of 61.8%; $120 million of B notes, rated BBB with an LTV of 79.1%; and $36.9 million of C notes, rated BB with an LTV of 84.4%.

The A and B notes amortise on a 14-year straight-line schedule, which the C notes amortise on a seven-year straight-line schedule.

Deutsche Bank is the lead structuring agent and lead bookrunner on the deal, with Natixis providing the nine-month senior and junior liquidity facilities. Wells Fargo is the security trustee, operating bank and trustee, with Phoenix American Financial Services acting as managing agent.

Eleanor Steed
By Eleanor Steed June 8, 2018 15:11