Global AFJ deals of year winners 2017: Miami | Analysis | Airfinance Journal

Global AFJ deals of year winners 2017: Miami

Airfinance Journal's 2017 deals of year winners were selected by a judging panel of senior aviation finance executives, comprising Bertrand Grabowski (former board member and head of aircraft finance at DVB Bank), Scott Scherer (former vice president of aircraft financial services and general manager at Boeing Capital Corp.) and Hugh Robertson (former aviation finance partner at Milbank).

The winners of Airfinance Journal's global finance awards at the Rusty Pelican in Miami, Florida include: 

Bank loan deal of the year: DAE Capital 15xA320s – PDP financing

Dubai-based DAE Capital scooped the bank loan deal of the year with a pre-delivery payment financing structure covering 12 Airbus A320s.

The deal covered aircraft being delivered from October 2017 to December 2018 under AWAS’ orderbook, and it provided strategic liquidity for DAE, which had previously financed predelivery payments largely from cash.

The transaction was significant because of the volume of aircraft and the fact the assets were last-of-the line units. The long commitment period of the pre-delivery payments (estimated at 15 months) was also a deciding factor.

DVB Bank acted as joint lead arranger, underwriter, lender and security trustee in the transaction.

Crédit Agricole Corporate and Investment Bank was the joint lead arranger, underwriter, lender and facility agent. Vedder Price (New York) represented the lenders while Clifford Chance (New York) was counsel for the lessor.

 

Bank loan deal team 

Export Credit Deal of the Year LOT Polish Airlines 2x787s 

The UK Export Finance-supported financing of two Boeing 787s for LOT Polish Airlines stood out from last year’s shortlist given the lack of financing available from the US Export-Import Bank (Ex-Im). The UK Export Finance (UKEF) could provide support because the 787s’ engines were manufactured by Rolls-Royce. This enabled the transaction to be categorised as a UK export.

It was a complex deal: the documents were governed by the English law; the mortgage was based on New York law; there was also a Polish law pledge agreement; and the manufacturer’s documents were governed by Washington state law.

Crédit Agricole Corporate Investment Bank acted as a lender in the transaction. Norton Rose Fulbright in the London and Warsaw practices advised LOT Polish Airlines. Allen & Overy advised UK Export Finance.

Export Credit Deal Team 

Tax lease deal of the year: THY 777 Freighters - AFIC/French Lease financing

Turkish Airlines’ Aircraft Finance Insurance Consortium (AFIC) financing combined with a 10-year French tax lease supporting two Boeing 777-200 freighter deliveries in the final quarter of 2017 won the tax lease deal of the year.

The Istanbul-based carrier approached the banking market for the financing of the two aircraft in February 2017 as part of a 13-aircraft request for proposals (RFP).

It was the first French tax leverage lease to be combined with AFIC-guaranteed debt. The transaction was also the first AFIC-supported transaction involving a tax lease and the first for freighter aircraft.

Crédit Agricole Corporate and Investment Bank was the overall arranger of the French structured lease. Crédit Agricole Corporate and Investment Bank and ING Bank were the debt arrangers. Norton Rose Fulbright acted for the lenders in the transaction while Allen & Overy acted for AFIC and Pillsbury Winthrop Shaw Pittman for Turkish Airlines.

Tax Lease Deal Team

Operating Lease Deal: DAE-Gulf Air 5x787s - PDP/purchase-and-leaseback financing

Despite being the first transaction between the lessor and the airline, the deal size is significant ($1.4 billion at Boeing’s list price) and includes a unique pre-delivery payments structure, financing 100% of the payments in advance.

The Boeing 787-9 aircraft are the first 787-9s to enter Gulf Air’s fleet and are also the first 787-9s in DAE Capital’s portfolio. The 787-9s are under 15-year lease terms.

Lawyers (and role): Allen & Overy acted for the lessor; Stephenson Hardwood represented the airline. Advisor: DVB Bank acted for the lessor

 

DAE and Gulf Air operating lease deal winner 

Equity deal of the year: Azul’s R$2bn ($644 million) enlarged IPO

Azul’s R$2bn ($644 million) initial public offering wins 2017’s Equity Deal of the Year.

David Neeleman’s Brazilian airline raised $571.2 million through the offering, which listed in Brazil and New York in April 2017.

The deal achieved several milestones: it was the first dual-listed Brazilian IPO since 2009; the largest Brazilian IPO since BB Seguridade in April 2013; the first airline IPO in Brazil since 2006; and the first US-listed aviation IPO since Virgin America in 2014.

Despite concerns the deal would not proceed, Sao Paulo-based Azul overcame the regulatory challenges and finally launched IPO on its third attempt. Two previous attempts had failed due to structural and market reasons. Azul priced the equivalent of 85.4 million preferred shares at R$21 each ($6.70) and its American depositary shares at $20.06, the midpoint of the suggested price range.

The underwriters – Citi, Deutsche Bank and Itau BBA – had put the target price between R$19 and R$23 per share. The other bookrunners included Banco do Brasil, Bradesco, JPMorgan, Raymond James and Santander.

Azul IPO deal team 

M&A deal of the year: GECAS sidecar vehicle

GECAS’ $2 billion sidecar vehicle, Einn Volant Aircraft Leasing (EVAL), a joint venture with Canada’s second largest pension fund manager, Caisse de dépôt et placement du Québec (CDPQ), wins Airfinance Journal’s 2017 M&A award.

The EVAL platform is an innovative venture that provides GECAS with the flexibility to finance future growth while serving as an entry point for CDPQ into the aircraft leasing and financing industry.

Goldman Sachs and Bank of America Merrill Lynch advised GECAS on the transaction. Clifford Chance, Milbank, Tweed, Hadley & McCloy, Torys, Walkers and Lavery provided legal advice. E&Y provided tax advice.

EVAL deal team 

Capital markets deal of the year: Goshawk $566.5m - Unsecured private placement

The Capital markets deal of the year has been awarded to Goshawk Aviation, for its $566.5 million senior unsecured private placement, which closed in July 2017.

This transaction was a follow-on offering from the 2016’s $231 million due 2021 and 2023. Net proceeds from the issuance were used to repay existing secured indebtedness, thereby adding additional aircraft to Goshawk’s balance sheet and repaying the unsecured revolving credit facility to free up the lessor’s liquidity.

The base deal of $100 million was over 6x oversubscribed, allowing Goshawk to upsize the deal to $566.5 million, making the deal the largest for an aircraft lessor in the private placement market in the past 10 years. This was an incredible achievement considering that Goshawk was only established in November 2013.

Citibank, Credit Agricole CIB, Natixis and HSBC were joint lead agents. BNP Paribas was a co-lead agent. O’Melveny & Myers acted as Goshawk’s legal counsel while Greenberg Traurig Maher acted as the investors’ legal counsel.

 

Goshawk deal team

Innovative deal of the year: Atlas/Titan Aviation/Amazon - $145.8m 

This year’s Innovative deal of the year came at the end of 2017, when Atlas Air Worldwide closed a $146.5 million hybrid financing facility that combined a private placement and a bank loan for the acquisition and conversion of six Boeing 767-300BCF/SFs for Amazon.

This transaction, which adopted a structure never used before in aviation finance, comprised $127.8 million of privately-placed A1 equipment notes that flowed through pass-through certificates and $18.7 million of institutionally-held A2 loans, with Citibank acting as initial lender.

Citibank was the sole structuring and placement agent. SkyWorks acted as advisor to Atlas during the transaction.

Milbank acted as legal counsel for Citi on the transaction. Pillsbury acted for Atlas/Titan.

 

Innovative deal team 

Used deal of the year:  Altavair 2x777-200LRs -Secured refinancing

There were a number of interesting used deals last year, showing an active market for secondhand aircraft and an investor demand for older assets. One deal that stood out was Altavair’s $100 million senior secured term financing for two 2008 and 2009 vintage Boeing 777-200LRs operating with UAE flag carrier Emirates Airline.

Although Emirates has financed many new Airbus A380s and 777-300ERs, this transaction involved a financing of two mid-life 777-200LRs, an aircraft type with superior range but with far fewer aircraft in service when compared to the -300ER model..

DVB, together with the support of its in-house asset management team, arranged and structured a senior secured term loan financing that matured with a bullet when the leases matured.

Vedder Price acted for the lenders and Stephenson Harwood acted for the borrower.

Used aircraft deal team

Editor's deal of the year: Aero Capital Solutions - $350m Stub leases

Last year saw many innovations in used aircraft financing. In a low-fuel-price environment, older aircraft are more economically attractive and in demand, making banks more willing to finance them. Aero Capital Solutions’ (ACS) $350 million stub lease facility was one of the most interesting used aircraft deals of 2017: it provided the Texas-based asset manager and parts trader with unmatched flexibility to suit its unique business model.

The deal allowed a diverse range of in and out-of-production assets to be financed, including mid-life aircraft on stub leases. The aim was to manage aircraft through redelivery and divestment of airframes and engines, which might include green-time leasing of serviceable engines.

The facility, which was structured by Deutsche Bank, had a day one commitment of $150 million and a $350 million accordion feature. The facility maturity is six years.

 

AFJ Editor and Aero Capital deal team 

Asia Editor’s deal of the year Asia: Cathay Pacific used aircraft - $350m revolving credit facility

Cathay Pacific’s revolving credit facility with two international banks, BNP Paribas and Bank of China, is the AFJ editor’s deal of the year for Asia.

The standby facility provides Cathay Pacific with competitive contingent liquidity, available to draw at any time. It is backed by Cathay’s currently unencumbered vintage aircraft.

The transaction was an impressive $350 million but also stood out due to the age of the aircraft collateral and the flexibility in Cathay’s pool of vintage aircraft. The average age of the targeted aircraft was approximately 22 years, making it one of the oldest average vintages of any pool of aircraft collateral.

The transaction was the first secured revolving credit facility closed by an Asia- Pacific carrier. It also highlights Cathay Pacific’s innovative approach to generating competitive contingent liquidity.

The syndication effort led by BNP Paribas raised close to $500 million in commitments from more than 10 financial institutions, predominantly Asian banks. The French bank’s industry expertise, distribution capacity and customisation effort for this transaction were all noted in the market.

Lawyers (and role): Allen & Overy acted for the airline; Clifford Chance represented the banks.

Banks (and role): BNP Paribas (Singapore), Bank of China (Hong Kong) and Bank of China (Sydney) as mandated lead arranger and underwriters. 10 undisclosed financial institutions.

 

Cathay Pacific deal team and AFJ Asia editor

Overall deal of the year: Korean Air 2x787+1x747-8I - First AFIC transactions

In the last two years, both the US Export-Import Bank and European export credit agencies (ECAs) have been quiet. Despite previously playing a significant role in financing new aircraft deliveries, political considerations have constrained their activities

Spotting a gap in the market, US insurance company Marsh seized upon the opportunity to provide an attractive financing alternative for airlines. The insurance company formed a new financing structure, the Aviation Finance Insurance Consortium (AFIC), in which four insurance companies – Allianz, AXIS Capital, Fidelis and Sompo International (formerly Endurance) – guarantee aircraft finance transactions.

Marsh’s first AFIC deal wins this year’s Overall Deal of the Year for its innovation as well as its timing: during a period of plentiful liquidity. The deal guaranteed the financing of two Boeing 787s and one Boeing 747-8I for Korean Air. The lenders on the transaction were SMBC and DBJ. SMBC Europe was the security trustee.

The insurers on the Korean deal were advised by Clifford Chance and Korean Air was advised by Milbank. Norton Rose Fulbright advised the security trustee, the agent and the lenders.

Lawyers (and role): White & Case (for ING Capital); Norton Rose Fulbright (for SMBC, DBJ and SMBC Europe); Milbank (for Korean Air); Clifford Chance (for insurers).

Banks (and role): ING Capital (sole lead arranger, lender and agent for the 747-8I);SMBC and DBJ (lenders for the 787s); SMBC  Europe (security trustee for 787s).

 

Korean AFIC deal team 

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