Asia Aviation Capital, a wholly-owned subsidiary of AirAsia Berhad, has entered into agreements to sell its aircraft leasing operations to BBAM-managed entities for a total disposal consideration of US$1.18 billion, valuing the business at an enterprise valuation of US$2.85 billion.
Under the terms of the agreements, FLY Leasing Limited (FLY), Incline B Aviation Limited Partnership (Incline) and Nomura Babcock and Brown (NBB) will acquire a portfolio of 84 aircraft and 14 engines of which 79 aircraft and 14 engines will be leased back to AirAsia and its affiliates.
FLY and Incline have also entered into agreements to acquire 48 aircraft to be delivered to AirAsia Berhad and an option to acquire a further 50 aircraft to be delivered.
As part of the disposal consideration, AirAsia Berhad will also receive non-cash considerations comprising of US$50 million in FLY American Depositary Shares (ADSs), resulting in AirAsia Berhad owning approximately 10.2% of FLY.
AirAsia Berhad will also commit US$50 million into Incline Parallel Funds, which will invest alongside the Incline Aviation Master Fund in global aviation investments.
As a result of the disposal, AirAsia Berhad is expected to recognise a gain on sale of approximately RM967.1 million.
AirAsia Group CEO Tony Fernandes said, This sale is much in line with our stated strategy of disposing non-core assets and businesses, an undertaking which we have successfully executed over the last six months starting with our training centre, ground handling unit and now our leasing unit and unveiling the true value of AirAsia. When we bought these planes, our gearing was high and some people could not see why we wanted to own these assets. This deal shows it was the right strategy as we have something of value to dispose in return for cash and an equity relationship in two great companies, while removing residual risks. This is a perfect outcome to a strategy we started in 2004 and Im thrilled at the execution of our long-term vision. We have now disposed of most of our physical non-core assets and we are thrilled to be embarking on our new digital strategy which will build a very valuable group of assets.
BBAM CEO Steve Zissis said, Tony and his team have built an incredible business at AirAsia and we feel fortunate in having this opportunity to build a long-term partnership with an organization of this caliber.
Credit Suisse, BNP Paribas and RHB are acting as joint financial advisors, and Milbank and ZICO are acting as counsels to AirAsia Berhad.