Paul Lewis/SAN ANTONIO
Fairchild Aerospace plans to underwrite development of the new 728JET family of regional aircraft by raising up to $800 million through a combination of bank loans and a bond offer, with an equity sale under consideration in the longer term.
The US/German manufacturer has budgeted for $1.2 billion in development and working capital funding for the 55/105-seat 728JET family by 2005, plus a further $150 million for the 42/44-seat 428JET. Development costs for the current financial year, ending on 30 September, are expected to total $164 million.
Chairman and chief executive Carl Albert says expenditure so far has been funded from Fairchild's own working capital, but adds that a bond offering is planned next month, with the aim of raising around $300 million. Fairchild is also negotiating a $370-$500 million credit line with a consortium of German banks with the German Government and the Bavarian state - where the 728JET family will be assembled - likely guarantors for some of that amount.
Risk-sharing partners on the 728JET are contributing another $270 million, while Albert says that an equity sale is also likely by 2002. "I have investment bankers calling me all the time asking when we would be willing to accept either a private placement or an initial public offering [IPO]," he says. "It's really not a question of if, but of when. There is really no need for us to stay private for ever."
Fairchild claims the combination of internal funds, loans, bond sales and partner money will pay for development of the new family, with the placement or IPO providing further working capital and allowing for acquisitions or debt repayment.
Albert acquired Fairchild in 1990 and took an 80% interest in Germany's Dornier in 1996. He controls 56% of the San Antonio-based company, with remaining stock owned by a limited partnership of small investors, of which he is the sole general partner.
Fairchild is in the final stages of completing its last two Metro 23 turboprops at its San Antonio base, which will shortly take over 328JET wing production from Dornier's former parent, Daimler-Chrysler. Production will run at four sets a month, with an increase to 10 possible, if required.
The Texas factory will also build the 428JET wing and has responsibility for customising the Envoy 3 and Envoy 7 business jet versions of the 328JET and 728JET, respectively. The baseline 70/85-seat 728JET is due to enter service in May 2002.
Source: Flight International