Avation in talks with single buyer over ATR 72 sale
Aircraft investment firm Avation confirmed on Thursday that it was in discussion with a single prospective buyer over the sale of a number of its regional turboprop assets.
Avation
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16:55 25/04/24
Industrial Transportation
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17:09 25/04/24
The AIM-traded company had announced on 26 October 2016 that it received an expression of interest to purchase a portfolio of 22 ATR 72 aircraft.
With the assistance of a financial adviser, the company ran a global process to consider the proposal and benchmark alternative bids associated with the potential sale of such a portfolio.
The board said it carefully considered the process for the sale of the portfolio, and was pleased to receive eight offers for all or parts of the portfolio.
In reviewing the offers, the company considered the consequential impact on revenues of the business, the impact to the firm's credit ratings, lessee diversification and concentration, the potential for redeployment of the sale proceeds and other factors.
After what it said was due and careful consideration, the board said it decided that the optimal commercial outcome is a sale of a smaller portfolio of aircraft.
The board was now in discussion with a single commercial lessor for a proposed sale of six existing leased ATR 72 aircraft.
It executed a conditional letter of intent with the proposed purchaser which had made a $3m cash deposit, refundable in the event of non-completion.
The transaction was expected to close prior to the end of June, with an economic closing date of 7 April.
Avation said the transaction remained subject to entering into definitive sale documentation and the usual conditions of transactions of that type, including the purchaser novating debt finance and technical inspections.
Assuming the transaction completes, the outcome is at a price above the company book value for the aircraft and would release approximately $31m in net proceeds after transaction costs and debt repayment.
The directors said they would carefully consider the redeployment of proceeds through the acquisition of a diversified portfolio of leased aircraft.
Avation said it may pay a dividend in the ordinary course of business associated with the company's year-end, and there was no special dividend under consideration in relation to this transaction.
“This was an extremely positive process for the company, eight existing and new lessors were interested in part or all of the ATR portfolio,” said executive chairman Jeff Chatfield.
“Many of these bidders offered to pay cash above book value.
“But, in our view selling such a large proportion of our fleet would reduce revenues too dramatically.”
Chatfield said aircraft valuations remained high, with a rush of new liquidity into the aircraft lessor market.
“The efficient redeployment of the proceeds from the sale of 22 aircraft would therefore be challenging in the current aircraft pricing environment.
“In our view the exercise did validate the company aircraft valuations and verified our business model.”
In electing to sell six aircraft, Chatfield said the board was confident the proceeds could be redeployed in a sensible manner in the near term.
“The company remains extremely confident in the ATR aircraft which is the leading turboprop in the world with about 85% global market share.
“The company has three ATR-72s to place in 2017 and a further six in future years with 27 additional options over new aircraft.”
Avation planned to continue to invest in ATR-72s in addition to jet aircraft, Chatfield said.
“Avation is in net growth mode in 2017 and is actively seeking airline sale and lease backs along with secondary trade transactions with other lessors.”