Air Lease Corporation (Los Angeles) has announced that a wholly-owned subsidiary of the Company entered into a joint venture with a co-investment vehicle (the “JV Partner”) arranged by Napier Park Global Capital (US) LP (“Napier Park”) for the purpose of investing in commercial aircraft and leasing them to airlines around the globe. The newly formed entity with committed equity and debt capital is named Blackbird Capital I LLC (“Blackbird Capital I”) and 90.5% of the equity is owned, through the JV Partner, by a pooled investment vehicle of long-term institutional investors managed by Napier Park. The Company owns 9.5% of the joint venture and will not consolidate the entity.
The joint venture is expected to acquire total aircraft assets of approximately $2.0 billion by year-end 2016, with up to $500 million in equity and the remainder financed by a committed $750 million warehouse credit facility (which includes an accordion feature that could make the total facility up to $1.5 billion) and other forms of debt financing. ALC will provide management services over a 12 year period to the joint venture for a servicing fee based upon aircraft assets under management. In addition, the Company expects to sell aircraft from its portfolio to the joint venture with an aggregate value of approximately $500 million by year-end 2016. Through the joint venture, ALC will manage up to $2.0 billion of additional aircraft lease transactions to better serve the airline industry.
“We are excited to partner with Napier Park and its group of institutional investors because they share ALC’s vision of creating long-term value through leased aircraft assets,” said Steven F. Udvar-Hazy, Chairman and Chief Executive Officer of Air Lease Corporation. “Blackbird Capital I is an important partnership for ALC’s strategy to grow our management business and serves as a model that can be replicated in the future.”
“Blackbird Capital I benefits all of the parties involved, including Air Lease Corporation, its global aircraft leasing customers, Napier Park and our investors. We look forward to a successful, long-term partnership with ALC and its management team,” said James O’Brien, Napier Park’s co-Managing Partner. “This joint venture continues Napier Park’s focus on partnering with leading industry operators to support their core businesses.”
“ALC’s core aircraft leasing business has generated strong profitability and stable returns for our shareholders. Now, with Blackbird Capital I, we will be able to supplement our existing leasing platform and serve our airline customers even better by providing additional lease opportunities beyond our current orderbook and customer credit and risk parameters,” said John L. Plueger, President and Chief Operating Officer of Air Lease Corporation.
Macquarie Capital acted as financial advisor in the formation of the joint venture.
The revolving warehouse facility was arranged by BNP Paribas, as Structuring Agent, Syndication Agent and Joint Lead Arranger, Credit Suisse A.G. as Joint Lead Arranger, and includes Bank of America, N.A., The Royal Bank of Scotland plc, Citibank, N.A., and MUFG Union Bank, N.A.
Hughes Hubbard & Reed LLP advised the joint venture, Munger Tolles & Olson LLP advised the Company, and Sidley Austin LLP advised Napier Park, in each case in connection with the formation of the joint venture. Milbank, Tweed, Hadley & McCloy LLP advised the lead arrangers and the lenders in connection with the warehouse facility.
The following section provides transaction details and additional clarification in a “Question and Answer” format:
1) How does ALC benefit from the formation of Blackbird Capital I?
• Blackbird Capital I allows ALC to manage and, through its minority interest, participate in profitable lease deals that were previously passed on for various reasons, including customer concentration limits
• While purchase decisions are authorized by the joint venture board, the vehicle can serve as a sales outlet for ALC’s current fleet, while ALC continues to manage the aircraft and remains as the primary interface with the customer pursuant to the contractual servicing and management agreements
• The joint venture is managed by ALC and therefore creates a source of stable, long term management fee income for ALC based upon assets under management
• Blackbird Capital I is expected to expand ALC’s leasing footprint
2) What are the anticipated sources of aircraft to be purchased by the joint venture?
• It is expected that in building a portfolio of aircraft of up to $2.0 billion, the joint venture will acquire aircraft both externally and from ALC’s fleet
• The aircraft targeted for acquisition by the joint venture will include incremental aircraft opportunities to ALC’s current commitments
• The aircraft targeted are expected to be similar to the aircraft types and customer profiles that currently comprise ALC’s fleet
3) How will ALC account for the joint venture on its financial statements?
• ALC will recognize management fee income as earned and account for its share of ownership in Blackbird using the equity method of accounting
• ALC’s investment in the entity will be reflected in Other Assets on ALC’s balance sheet
• Blackbird Capital I will not be consolidated into ALC