Jet Lessor AWAS Seeks Increase in Debt Before Terra Firma Exit

AWAS Aviation Capital Ltd., an Irish aircraft lessor with more than 260 jets, may turn to capital markets or bank lending to increase its pool of money available for plane purchases before its private-equity owner exits.

“We have more work to do on the debt side” as the company tries to boost returns, Ray Sisson, president and chief executive officer of the Dublin-based leasing company, said in an interview. The business is under-leveraged compared to rivals and has too much cash on its balance sheet, he said.

Owner Terra Firma Capital Partners Ltd., which acquired AWAS in 2006, will seek to exit by March 2016 through a strategic sale or initial public offering, Sisson said. The IPO process could kick off next year if that’s the chosen route.

Avolon, a three-year-old lessor owned by Oak Hill Capital Partners, Cinven Ltd., CVC Capital Partners Ltd. and Singapore, said last month it would seek a buyer or pursue an IPO. The company was encouraged by Sumitomo Mitsui Financial Group Inc.’s $7.3 billion purchase of Royal Bank of Scotland Group Plc’s aviation division, CEO Domhnal Slattery said at the time.

Sisson has changed AWAS’s focus since taking over the leasing company in 2010 to focus on higher-yield transactions by providing used aircraft to financially weaker carriers.

The company has also shifted its purchasing strategy away from buying new aircraft from planemakers such as Airbus SAS and Boeing Co. to acquiring jets from other lessors. “We are very aggressively buying from our competitors well ahead of our target,” Sisson said.

The company may increasingly buy planes such as Boeing 777-300ERs as the user base expands beyond carriers with high credit ratings to those with lower ratings that can generate higher lease rates, he said. Newer Airbus A321s also are of interest, along with Boeing 737-800s and Airbus A330s the leasing company has been collecting.

Sisson said the company’s debt to equity ratio is 1.7 to 1, compared with competitors with levels of 2.5 to 1 or higher.

AWAS still has some orders placed with manufacturers that will run out in late 2015 and not be refreshed, he said.

Before it's here, it's on the Bloomberg Terminal.