ANALYSIS: More Japanese money enters the leasing market

London
Source: Flightglobal.com
This story is sourced from Flightglobal.com

Japanese banking capital has made another move in the operating lease market in today’s purchase of San Francisco-based Jackson Square Aviation by Mitsubishi UFJ Lease & Finance.

In January RBS Aviation Capital was sold to Sumitomo Mitsui for $7.3 billion after a fierce bidding process with Wells Fargo and China Development Bank.

Mitsubishi UFJ will acquire JSA for about 100 billion yen ($1.27 billion) and fund the purchase using cash on hand and bank loan facilities. The deal is scheduled to close in December.

Sources indicate the purchase of JSA could be linked to growth plans the Japanese financier has for its Dublin-based MUL Aviation subsidiary, which was established in January with the aim of growing a portfolio of narrowbody aircraft.

JSA’s has a fleet of 65 aircraft in service, according to Flightglobal’s Ascend Online database. The fleet, which has a value in excess of $4 billion, originated through sale and leaseback transactions, according to JSA's website.

Mitsubishi UFJ has a four-aircraft portfolio, according to Ascend's database. Two 2006-built Boeing 737-800s are on lease to Air China; Hainan Airlines leases another 737-800 (2006) and a 2010-built Boeing 777-300 is on lease to Air New Zealand.

JSA’s primary shareholder Oaktree Capital Management, a Los Angeles-based private equity fund, mandated Deutsche Bank to manage the sale of its major shareholding in the lessor earlier this year. The sale is compatible with the Oaktree Capital’s business strategy of selling rather than maintaining its investments in aircraft lessors.

In 2007 Oaktree Capital sold its interest in operating lessor Pegasus Aviation to Terra Firma for $5.2 billion.

Mitsubishi UFJ is Japan's largest financial group and the world's second largest bank holding company with around $1.7 trillion in deposits as of March 2011.

Investor migration

Mitsubishi UFJ’s investment in JSA falls in line with recent changes in the operating lessor investor base that has seen more long-term money enter the space.

“Investors are realising the 15-20% return is no longer possible, so private equity funds are looking at other assets more closely,” says a financier. “This has lead to the migration of investors into leasing which are willing to settle for an 8-10% return and match long-term liabilities with long-term investments.”

In August, private equity firm Fortress Investment Group ended its investment in Aircastle through the lessor’s 9.25 million common shares offering. The Ontario Teachers' Pension Plan purchased 6.2 million common shares of Aircastle, while undisclosed investors assumed the remaining amount.
Aircastle repurchased 2.5 million common shares from Fortress Investment in a separate transaction at a cost of $28.5 million.

In the same month, AerCap repurchased an additional $120 million common shares from Cerberus Capital Management, reducing the private equity firm’s holding to 10% of outstanding ordinary shares.

AerCap, which is backed by private equity heavy weights Waha Capital, Cerberus Capital Management, Wellington Management and Oppenheimer Funds, is rumoured to be frustrated with its stock price.  The lessor disclosed in May that its board of directors decided to “explore a range of strategic alternatives to enhance shareholder value, including continued execution of operating strategies, further share repurchases, aircraft portfolio sales or a sale or merger of the company."

Operating lessor AWAS has also seen a change in its investor base. Last year, Canada Pension Plan Investment Board provided $266 million to help bankroll expansion at the lessor, increasing its stake in AWAS to 25% from 16%. Private equity firm Terra Firma owns 60% of AWAS and co-investors own the remaining 15%.

When JSA was formed in March 2010 private equity money was making a play for the lessor community.  JSA secured a $500 million equity commitment exclusively from investment funds managed by Oaktree Capital. Last year, the private equity fund agreed to increase this backing to $800 million.

In the same year, Avolon launched with $1.4 billion in equity and debt backing from the private equity firms of Cinven, CVC Capital Partners, Oak Hill Capital Partners as well as bank partners DVB and UBS.

Air Lease Corporation, which came to market in July 2010, secured $1.3 billion in equity capital and approximately $2 billion of committed debt financing.


Jackson Square Aviation Fleet

 

Aircraft Manufacturer

Aircraft Type

Build Year

Operator

Owner

Airbus A320-200 2011 Air France JSA Aircraft 4747 LLC
Airbus A320-200 2011 Air France MSN 4800 LLC
Airbus A320-200 2011 Air France MSN 4908 LLC
Boeing 777-300 2011 Air France MSN 39973 LLC
Airbus A319-100 2008 airberlin Jackson Square Aviation
Boeing 737-800 2011 airberlin Jackson Square Aviation
Boeing 737-800 2011 airberlin Jackson Square Aviation
Boeing 737-800 2009 American Airlines JSA Aircraft 29568 LLC
Boeing 737-800 2010 American Airlines JSA Aircraft 29575 LLC
Boeing 737-800 2009 American Airlines JSA Aircraft 33203 Inc
Boeing 737-800 2009 American Airlines JSA Aircraft 33205 Inc
Airbus A320-200 2010 Avianca JSA Aircraft 4175 Inc
Airbus A319-100 2010 Avianca (Brazil) Jackson Square Aviation
Airbus A319-100 2010 easyJet Jackson Square Aviation
Airbus A319-100 2010 easyJet Jackson Square Aviation
Boeing 777-300 2011 Emirates Airline Jackson Square Aviation
Boeing 777-300 2011 Emirates Airline Jackson Square Aviation
Boeing 777-300 2011 Emirates Airline Jackson Square Aviation
Boeing 737-800 2009 GOL Linhas Aereas   
Inteligentes
Jackson Square Aviation
Boeing 737-800 2010 JAL Express JJ Phoenix 1 Co Ltd
Boeing 737-800 2011 JAL Express JJ Phoenix 2 Co Ltd
Boeing 737-800 2011 JAL Express JJ Phoenix 3 Co Ltd
Boeing 737-800 2011 JAL Express JJ Phoenix 5 Co Ltd
Boeing 737-800 2011 JAL Express JJ Phoenix 4 Co Ltd
Airbus A320-200 2012 Jetstar Japan JJJ1
Boeing 737-900 2011 Lion Air MSN 37285 LLC
Boeing 737-900 2012 Lion Air Jackson Square Aviation
Boeing 737-900 2011 Lion Air JSA Aircraft 38305 LLC
Boeing 737-900 2012 Lion Air Jackson Square Aviation
Airbus A330-300 2011 Malaysia Airlines Jackson Square Aviation
Airbus A330-300 2011 Malaysia Airlines Jackson Square Aviation
Boeing 737-800 2012 Malaysia Airlines Jackson Square Aviation
Airbus A321-200 2008 Monarch Airlines Jackson Square Aviation
Airbus A321-200 2008 Monarch Airlines Jackson Square Aviation
Boeing 737-800 2011 Norwegian JSA International Aircraft 36879 Ltd
Boeing 737-800 2011 Norwegian JSA International Aircraft 39045 Ltd
Boeing 737-800 2011 Norwegian JSA International Aircraft 39046 Ltd
Boeing 737-800 2010 Shanghai Airlines SJK Aircraft Leasing (Cayman) Ltd
Boeing 737-800 2000 Shenzhen Airlines JSA International Aircraft 30062 Limited
Boeing 737-800 2000 Shenzhen Airlines JSA International Aircraft 30063 Ltd
Boeing 737-800 2000 Shenzhen Airlines JSA International Aircraft 30500 Ltd
Boeing 737-800 2012 Thomson Airways Jackson Square Aviation
Boeing 737-800 2011 Transaero Airlines SJK Aircraft Ireland 36119 Limited
Boeing 737-800 2011 Transaero Airlines SJK Aircraft Ireland 36883 Limited
Boeing 737-800 2012 TUIFly Nordic AB MSN International Aircraft 37246 Ltd
Airbus A321-200 2011 US Airways MSN 4960 LLC
Airbus A321-200 2011 US Airways MSN 4966 LC
Airbus A319-100 2008 Virgin America JSA Aircraft 3684 LLC
Airbus A319-100 2008 Virgin America JSA Aircraft 3686 LLC
Airbus A320-200 2011 Virgin America JSA Aircraft 4814 LLC
Airbus A320-200 2011 Virgin America JSA Aircraft 4867 LLC
Airbus A320-200 2011 Virgin America MSN 4894 LLC
Airbus A320-200 2011 Virgin America MSN 4959 LLC
Boeing 737-800 2012 Virgin Australia MSN 41001 LLC
Boeing 737-800 2012 Virgin Australia JSA Aircraft 41002 LLC
Airbus A320-200 2011 Volaris SJK Aircraft Leasing LLC
Airbus A320-200 2011 Volaris JSA Aircraft 4828 LLC
Airbus A320-200 2011 Volaris JSA Aircraft 4832 LLC
Airbus A320-200 2011 Volaris MSN 4950 LLC
Airbus A320-200 2012 Volaris JSA Aircraft 5062 LLC
Airbus A320-200 2012 Volaris JSA Aircraft Ireland 5207 Ltd
Airbus A320-200 2012 Volaris JSA Aircraft Ireland 5212 Ltd
Airbus A320-200 2011 Wizz Air Jackson Square Aviation
Airbus A320-200 2011 Wizz Air Jackson Square Aviation
Airbus A320-200 2011 Wizz Air Jackson Square Aviation
Source: Ascend as of 27 September