Stell­we­gan tar­gets €1bn of deals in bid to shake up air fi­nance

Irish Independent - Business Week - - BUSINESSWEEK - John Mul­li­gan

DUBLIN-BASED air­craft fi­nanc­ing firm Stell­wa­gen Cap­i­tal in­tends to com­plete “at least” $1bn (€867m) a year of deals and will raise an ad­di­tional $250m (€217m) in cap­i­tal later this year as it “dis­rupts” the air­craft fi­nanc­ing mar­ket for com­mer­cial jets.

Its CEO, for­mer Ryanair fi­nance boss Howard Mil­lar told the Ir­ish In­de­pen­dent Stell­wa­gen Cap­i­tal, a unit of Stell­wa­gen Group, will also likely raise at least $250m each year for the next few years.

It has pre­vi­ously raised $200m and Mr Mil­lar said he’ll likely tar­get in­vestors such as pen­sion funds and in­surance com­pa­nies to se­cure fresh cap­i­tal.

Stell­wa­gen Cap­i­tal re­vealed yes­ter­day that it has fi­nalised a loan to China Air­craft Leas­ing Com­pany (CALC) us­ing a new se­nior loan in­vest­ment ve­hi­cle, with a 10-year fi­nanc­ing so­lu­tion.

Mr Mil­lar said that the loan struc­ture – un­like leas­ing – en­ables an air­craft op­er­a­tor to own the jet. Loan re­pay­ments on the prod­uct re­main rel­a­tively low over the course of the loan, re­duc­ing cash out­flows to ser­vice it.

A bal­loon pay­ment is due at the end of the loan pe­riod, at which time the bor­rower can re­fi­nance or sell the as­set and clear the loan.

Mr Mil­lar said CALC has fi­nanced a new Air­bus A321 with Stell­wa­gen Cap­i­tal, as well as an­other air­craft. He said that Stell­wa­gen will com­plete two other air­craft fi­nanc­ing deals with an­other client in com­ing weeks. “We are now go­ing to be com­pet­ing with the big avi­a­tion banks, so I would see this as a big dis­rup­tor,” he said. “They won’t like this. It’s a new form of com­pe­ti­tion and is fill­ing a gap that has arisen in the mar­ket.”

Mr Mil­lar said he will be “dis­ap­pointed” if Stell­wa­gen Cap­i­tal doesn’t have at least $2.5bn of as­sets un­der man­age­ment by the end of this year. It cur­rently has $1.6bn.

Mr Mil­lar, who is also the chief op­er­at­ing of­fi­cer of Stell­wa­gen Group, added that some big avi­a­tion banks are ex­it­ing the air­craft fi­nanc­ing sec­tor, in some cases in re­sponse to new ac­count­ing rules.

“What they’ve op­er­ated was a high-cost, in­ef­fi­cient and in­flex­i­ble so­lu­tion,” he said.

“So if you’re a mid-tier air­line or mid-tier op­er­at­ing lease com­pany, you’ll find it very hard to source fi­nanc­ing from those guys.

“If you take a $50m air­craft, I’ ll ad­vance $40m on that as­set, but give a bal­loon of $10m which is paid at the end of the loan, so there’s only $30m in cap­i­tal be­ing paid off (un­til the end of the loan).

“If you’re a chief fi­nan­cial of­fi­cer, that’s pretty good be­cause your cash out­flows are go­ing to be lower. We’re cre­at­ing a dis­rup­tive force in avi­a­tion fi­nanc­ing.”

Stell­wa­gen Cap­i­tal will tar­get fi­nanc­ing of new and used sin­gle-aisle air­craft such as Air­bus A321s and Boe­ing 737s. How­ever, Mr Mil­lar, who’s still a Ryanair non-ex­ec­u­tive di­rec­tor, said he will also con­sider fi­nanc­ing of new-tech­nol­ogy jets such as the Boe­ing 787 Dream­liner and the Air­bus A350.

“I’m go­ing for air­craft that have a big, liq­uid mar­ket,” he said.

Stell­wa­gen Group was ac­quired last year by Canada’s Acasta En­ter­prises for $270m. As part of that deal, Acasta also com­mit­ted $100m to Stell­wa­gen Cap­i­tal’s se­nior loan in­vest­ment ve­hi­cle.

About 55pc of the world’s com­mer­cial air­craft fleet is fi­nanced via debt and eq­uity, and 45pc by leas­ing com­pa­nies.

Ra­dio pre­sen­ter Mairead Ro­nan, pic­tured at The Re­dis­cov­ery Cen­tre in Dublin’s Bal­ly­mun, at the launch of Bord na Móna’s search for the na­tion’s #Sus­tain­abil­i­tyHeroes.

The cam­paign in­vites peo­ple and com­mu­ni­ties to share sto­ries and tips on how they are mak­ing big ef­forts to live more sus­tain­ably in a va­ri­ety of ways – from the or­di­nary ef­forts to the quirky and the in­spi­ra­tional; from how they make the most of the nat­u­ral world around them to how they con­serve en­ergy and re­cy­cle or even find new pur­poses for their waste. To in­spire po­ten­tial #Sus­tain­abil­i­tyHeroes, mem­bers of the public are in­vited to share their sto­ries on www.face­book.com/Bord­naMon­aIre­land. Photo: Marc O’Sullivan

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