First Star Aviation, a new lessor formed by New York-based Fifth Street Finance, is looking to fill a gap in the funding market for mid-life and older aircraft that are being passed up by existing financiers.
“With larger banks and financial institutions scaling back on lending activities to older aircraft, we see an opportunity to fill a void in the underserved segments of the markets,” Pradeep Hathiramani, managing director of First Star Aviation, tells Flightglobal Pro.
The lessor plans to grow the portfolio during the next few years through a “disciplined and value-oriented investment approach”.
“The rate of our growth will depend on market conditions and available transactions,” he says.
First Star will not target a specific aircraft size or type. Instead, each transaction will be evaluated for its returns on a risk-adjusted basis with “appropriate” diversification goals for the overall fleet portfolio, says Hathiramani.
“We think of the sector as an attractive place to deploy patient capital and capitalise on dislocation,” he says. “The rapid growth of the leasing industry is poised to continue given the growing preference of leasing versus owning equipment by capital constrained carriers.”
Last week, the lessor completed the purchase of three Boeing 757 aircraft on lease to United Airlines.
The three 1991-build aircraft (MSNs 24994, 25019, and 25130) will be managed by Kahala Aviation Leasing.
Fifth Street provided First Star with debt and equity capital to finance the purchases.
The parent company will be the dedicated sponsor for debt and equity on "all transactions that meet First Star's investment objectives and strategy", says Hathiramani.