Wednesday, September 20, 2017, 6:44 pm

Floreat Group aims to raise up to $1b in 2017 for aviation sector

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Following on from the financing of two Boeing 737-800s leased to Norwegian Air Shuttle, Floreat Group are embarking on a securitisation programme focused on the aviation sector to provide long term fixed income investments to their institutional and high net worth clients.

The first issuance will issue in December 2016 for up to $175m of notes (with denominations of $200,000 each) and is linked to a portfolio of four Airbus A330s on leases to geographically diversified airlines. The notes will have a 10-year term in line with the maturity of the underlying leases, will pay a fixed coupon of 7% per annum, will be issued by a Luxembourg securitisation vehicle and will be listed on the Euro MTF market of the Luxembourg Stock Exchange. Part of the notes will be structured as being Sharia compliant for Floreat’s Middle Eastern investors.

The first Airbus A330-200 is leased to Virgin Australia and was purchased for the portfolio on 30 November. The remaining aircrafts will likely be acquired over the course of December. The total value of the portfolio will be around $400m and will be funded with the proceeds of the notes and senior debt provided by Nord LB.

“We have previously funded individual transactions in the aviation space to satisfy the demand from our core clients for long term income producing transactions secured by real assets. The issuance of listed notes was a natural next step for our asset based lending programme, which, to date, has only been open to the group’s core clients,” said Ben Churchill a partner at Floreat Capital Markets Ltd. who originated and structured the transaction.

“Given the prevailing low interest rate environment, there is a distinct lack of fixed income investments that offer high income together with strong risk/reward characteristics. The dynamics of the aviation sector allow us to securitise leases and offer secure fixed income investments which fill this void left in portfolios, with the added benefit of being uncorrelated to traditional equity and bond markets.”

Due to the strong demand Floreat plan to follow this initial issuance with a second similar issuance in short order with a view to issuing up to $1b in 2017.

Doric has negotiated the acquisitions and leases and will be responsible for the asset management of the portfolio and eventual remarketing of the aircraft.

The Floreat Group will seed the notes and are responsible for their distribution via their placement team within Floreat Merchant Banking Ltd., which is authorised and regulated by the FCA.

Deutsche Bank AG London are acting as the Primary Settlement Agent and Paying Agent, and Allen & Overy advised on the transaction.

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