PARIS: Terra Firma tipped for possible 2016 exit from AWAS: Sisson

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Operating lessor AWAS anticipates private equity firm Terra Firma, its main shareholder, could exit the business around 2016.

"But well before then, we will begin conducting non-deal roadshows within the year, to educate potential investors on the AWAS story, and to ascertain what is the best exit option for our shareholder: an initial public offering, a strategic sale or other options," says AWAS' chief executive officer Ray Sisson in an interview with Flightglobal at the Paris air show. "We will have a direction by mid-2014," he says.

Sisson does not rule out a potential sale to Japanese investors, who have been busy piling money into the sector during the past year. However, he notes, so far, the Japanese have preferred a different business model.

"To-date Japanese buyers have been looking for steady, built-in growth, not necessarily yield, which is AWAS' strategy and our key differentiator," he says. "If you are very risk-adverse, and sometimes we might have repossessions as we are agnostic to age and credits, we might not be the most obvious fitbut we get a significantly higher risk-adjusted yield with this approach. That is not the model that the Japanese have bought into so farbut things could change."

In 2011, Terra Firma was rumoured to be interested in the purchase of RBS Aviation Capital with plans to merge the lessor with AWAS, which the private equity firm acquired from Morgan Stanley in 2006 for $2.5 billion.

Terra Firma's interest in the RBS portfolio was speculated to be about achieving economies of scale, which would bring a number of opportunities, including greater access to the commercial paper market through a larger platform.

Even without a new acquisition, Sisson says AWAS has been able to achieve "significant organic growth" during the past two years with total revenue up 28% in that time, and the AWAS fleet now at 255 aircraft compared 203 units before.

AWAS expanded its leasing platform in June 2007 through the purchase of Pegasus Aircraft Finance for $5.2 billion from Oaktree Capital and the company's management team.

"Terra Firma and the Canada Pension Plan Investment Board has been very supportive of our strategy, and we look forward to taking our platform to the next level of growth and success," says Sisson.

The Dublin-based lessor has 60 forward orders that will take it to more than $12 billion worth of assets by 2015, he says.

AWAS completed $481.1 million in financings for aircraft purchased in the first quarter 2013. The lessor's first quarter total cash balance fell to $600 million from $677.2 million at year-end 2012, reflecting the funding of aircraft from equity.