SMBC Aviation Capital’s 18 July launch of a new closed-end fund that will acquire up to 10 aircraft from the lessor is the first of what it hopes will be several similar transactions going forward.
Seventeen Japanese institutional investors joined one debt investor to fund the newly established Global Aviation Equipment Leasing (GAEL), while the lessor will ontinue to manage the aircraft.
“We hope this is going be the first of many going forward,” Michael Weiss SMBC Aviation Capital’s head of aircraft trading tells FlightGlobal.
Trading has always been a part SMBC Aviation Capital’s strategy. In a typical year, the company looks to sell about 10% to 12% of its portfolio – or about 25-30 aircraft.
Weiss says the deal – which incorporates a closed-end fund – is akin to a private placement. It’s also different from the usual Japanese funding that airlines and lessor seek from the Japanese market.
The buyers are differed from the usual JOL or JOLCO investors, looking for looking for a tax deferral benefit through the depreciation of aircraft. “They’re getting a yield on their investment,” says Weiss.
”[They’re ]looking at a money over money return.” While Weiss declines to disclose the exact return the fund is targeting, he says it will be in the single digits.
Working with its distribution partners at Sumitomo Mitsubishi Banking Corporation – one of the lessor’s shareholder – SMBC Aviation Capital was able to identify a group of investors who were looking for this type of return.
What differentiates this particular trade from the kinds of sidecars that competitors like Avolon and Air Lease have launched in recent years, is that It’s not an open-ended fund. Rather, GAEL is a discrete portfolio of aircraft that SMBC Aviation Capital has sold to the fund, which has raised debt and equity.
“We’ve been working on the trade for quite a while,” says Weiss, adding that it has spent around a year putting it together..
“Now that this is launched, we do hope to leverage all the investment we’ve put into this for future trades moving forward,” he says. “We will go back to the market in the coming months and years.”
While Weiss is reluctant to reveal the composition of the portfolio, he says that it is a cross-section of SMBC Aviation Capital’s portfolio, comprising all narrowbody aircraft with an average age of about five-years.
Novations of the aircraft are expected finish in the next six months, upon which more details about the transaction like the debt provider and value of the portfolio will be identified.
Source: Cirium Dashboard
