Awas Aircraft Lessor Nears Sale as Owner Terra Firma Seeks ExitAndrea Rothman
Awas Aviation Capital Ltd., an aircraft lessor focused on buying used jets mainly from other leasing companies, is studying options for a sale or initial public offering as its private-equity owners consider an exit.
The Dublin-based lessor, with more than 280 aircraft, has already hired banks as advisers and is working through possible scenarios that would let Terra Firma Capital Partners Ltd. and minority owners exit, Chief Executive Officer Ray Sisson said in an interview. He declined to name the financial advisers.
A sale would come after a series of lessors have changed hands in the last two years. Aercap Holdings NV is set to close its purchase of International Lease Finance Corp. Other sales include Sumitomo Mitsui Financial Group Inc.’s $7.3 billion purchase of Royal Bank of Scotland Group Plc’s aviation unit and the sale of Oaktree Capital Group LLC’s Jackson Square Aviation to Mitsubishi UFJ Lease & Finance Co. for about $1.1 billion.
“There may be a move to exit by our shareholder in one form or another, it’s in the analysis phase now,” Sisson said in a telephone interview. “You could sell the company, or you could IPO it. Or you could make two leasing companies out of it.”
With assets valued at about $11 billion today and expected to grow to as much as $17 billion in 2016, Sisson said the company may be too large to be swallowed by any one buyer, requiring a division into two if the path chosen is for private sales.
Terra Firma bought Awas from Morgan Stanley in 2006 for $2.5 billion and a year later added Pegasus for $5.2 billion, merging the two.
Goldman Sachs Group Inc. and Deutsche Bank AG are the banks chosen by Awas to study a sale, Airfinance Journal reported in March. Sisson declined to confirm the names. AWAS’s market value may be $3 billion to $4 billion, given its peers’ forward price to earnings and multiples and the three-year growth rate, according to a Bloomberg Industries analysis.
Awas is increasing its asset base and return on equity, and is “up on every key financial metric,” with growth set to continue through 2017, the executive said.
By buying mainly used jets, which are far less expensive than new-build planes coming directly from manufacturers Airbus Group NV or Boeing Co., Awas has been able to achieve higher yield, or lease revenues, relative to what it spends, Sisson said.
“We are determined to transform Awas into a clearinghouse for other lessors,” Sisson said, meaning companies that want to move older planes out of the portfolio can turn to Awas as a partner to buy them, find new airline customers to rent the jets, or even have the aircraft scrapped for parts.
While Awas lacks any cost-of-funds advantage over other lessors, he said, “our advantage is that we know the second-and third-tier airline credits.”
Broad experience with carriers in regions including Africa, Latin America and Asia means Awas can judge risks better and benefits from renting planes to carriers that may struggle getting models elsewhere, the CEO said. Awas manages risk by limiting the number of planes it leases to any single carrier, he said.
“We’re very comfortable dealing with Bolivia, rural Indonesia, the vast majority of Africa,” Sisson said.