ANALYSIS: Novus targets more partnerships

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Dubai-based Novus Aviation Capital is anticipating more partnership platforms as part of its unique business model.

The family-based business, which celebrates 20 years of trading, has evolved throughout the years with the launch of funds to acquire aircraft but has lately concentrated on widebody aircraft through partnerships with financiers.

Last month Novus further developed its partnership platform through an aircraft leasing investment agreement with KDB Daewoo Securities (Hong Kong), one of South Korea’s leading security companies.

The exclusive partnership, supported by the Novus platform, allows the Korean institution to invest in aircraft assets with operating leases attached.

An 2009-vintage Airbus A330-300 aircraft purchased from Finnair Aircraft Finance, is KDB Daewoo Securities’ first transaction through the partnership. The aircraft is on lease to Finnair for 12-years.

The particularity of Novus partnerships is the company’s ability to co-invest.

“On a typical transaction Novus acts as overall arranger, structuring agent but also underwrite the junior or equity tranche,” explains Mounir Kuzbari, executive vice president of Novus Aviation Capital in an interview with Flightglobal.

Last September Novus established Tamweel Aviation Finance (TAF), a fund in partnership with Airbus and Development Bank of Japan (DBJ). The new fund was set up to facilitate the funding of aircraft acquisitions, providing secured junior and mezzanine loans with a focus on Airbus twin-aisle segment, including the Airbus A380.

Another partnership is in the pipeline and will involve the acquisition of another A330. Flightglobal understands that a Japanese institution is the leasing entity, the senior loan is provided by a European bank while the equity provider is a Middle East-based financing institution.

“We do not have a parent company or a single shareholder. Novus is a unique business model with a variety of pool of investors,” says Kuzbari.

The company initially originated in the Gulf Co-operation Council countries. In 2012 Novus opened an office in Dubai and today the company continues to add more investors from the Middle East region.

However it has accelerated its growth over the past years through the establishment of an Asian base in Hong Kong.

“We branched out in Asia last year to tap the Asian capital and investor markets,” says Kuzbari.

Novus closed initial transactions tapping the Japanese and Korean markets but is looking at growing its footprint in Asian markets.

“Our objective is to grow our Hong Kong platform and develop partnerships in Asia. We are confident to tap different type of investors with different risk profiles and asset types appetites.”

Novus is also looking at widening the pool of investors to pension funds as well as European and US institutional markets.

INVESTING IN WIDEBODIES

Novus has been targeting widebody assets over the past three years as fleets typically stay on longer terms with operators.

“We have experience in this market through previous funds. The widebody market drives better airline credits but also offers better returns on investment,” says Kuzbari.

The company has worked on a certain number of transactions with Gulf carrier Emirates Airline.

Referring to the business model, Kuzbari says funds have no concentration limits.

In addition to A380s, Novus has also arranged multiple 777-300ER sale and leasebacks for investors with the Emirates. On the equity side, two aircraft were placed in the GCC market while the third aircraft was placed with Asian investors.

“For Emirates A380 it is a turnkey solution facility which provides high loans to value on a finance lease deal,” he explains.

The lessor has also been a seller with leases attached. In 2013 it closed four transactions while letters of intent have been signed for further aircraft this year. “This demonstrates a certain level of liquidity in the business and our ability to exit at the right time for our investors,” he observes.

Novus is expected to exceed the $2 billion owned and managed portfolio level by the end of this year.