Udvar-Hazy's Air Lease Raises $802.5 Million in Jet Industry's Biggest IPO

Air Lease Corp., the jet-leasing company led by Steven Udvar-Hazy, raised $802.5 million in the industry’s largest U.S. initial public offering after increasing the number of shares 21 percent.

The Los Angeles-based company sold 30.3 million shares at $26.50 each yesterday, according to data compiled by Bloomberg. It had offered 25 million shares at $25 to $28, according to a filing with the U.S. Securities and Exchange Commission.

The underwriters may exercise an overallotment option to buy as many as 4.54 million additional shares, Bloomberg data show, compared with the 3.75 million listed in the prospectus.

Udvar-Hazy, 65, is drawing on four decades of relationships with airlines, planemakers and bankers to recreate some of what he walked away from in 2010 when he left American International Group Inc. (AIG) As chairman and chief executive officer of Air Lease, he has built a fleet of 49 aircraft, with orders for more than 150 additional planes since founding the company 14 months ago.

Air Lease’s fleet doesn’t have the “legacy challenges” that saddle competitors, Udvar-Hazy said in a presentation broadcast online by RetailRoadshow. The company’s jets have a weighted average age of 3.5 years, compared with 5.4 years for competitor AerCap Holding NV’s 350 planes, 8.1 years for Fly Leasing Ltd. (FLY)’s 59 and 11 years for Aircastle Ltd. (AYR)’s 136 aircraft, according to company filings.

Air Lease doesn’t plan to pay a dividend, according to its prospectus, while Aircastle and Fly do.

Industry Growth

Aircraft leasing is growing in popularity as airlines seek flexibility within the cyclical air-travel industry as well as a way to avoid burdening their balance sheets with the billions of dollars required to fund plane purchases. In 1990, about 10 percent of the world’s commercial planes were leased, and by 2015 that proportion will reach 35 percent, according to estimates by industry-data providers Ascend and Avitas cited by Air Lease.

Still, the three aircraft lessors that went public in the two years before the recession hit -- AerCap, Aircastle and Fly -- all were trading at least 37 percent below their $23 initial share price as of April 15.

The shares, trading on the New York Stock Exchange under the symbol AL, climbed $1.03, or 3.9 percent, to $27.53, at 10:03 a.m. in New York Stock Exchange composite trading.

JPMorgan Chase & Co., Credit Suisse AG, Barclays Plc, FBR Capital Markets, RBC Capital Markets and Wells Fargo & Co. led the offering.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.

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