Meritz Securities Co. Ltd. has recently closed the acquisition of 24 aircraft for $686 million from Aviation Capital Group Corp. (ACG), in its third investment in aircraft portfolios.
The South Korean brokerage firm invested $205.4 million, or 30% of the acquisition price, in the transaction, while issuing secured notes in the US for the remainder, a Meritz source said on Oct. 17.
Of the $205.4 million investment, it sold down $180 million in the form of preferred shares to domestic institutional investors, mostly insurance companies, through a vehicle with a term of seven and a half years.
Mertiz will hold the remaining $25.4 million for a principal investment.
The institutional investors in South Korea will receive a fixed rate of 7.5% per annum in US dollar terms. After the fund matures, they will share 70% of the proceeds from the aircraft sale on top of the principal repayment.
The secured notes carry coupon rates of 3.474%-4.335% per annum, the lowest levels for aircraft-backed notes since 2012, according to South Korea’s Yonhap News.
The airplanes in the portfolio are on lease to 19 airlines and include bestselling models such as Boeing B737 and Airbus A320.
The aircraft investment came after Meritz bought 20 aircraft from GE Capital Aviation Services for $900 million in 2016 via a joint aviation fund with Mizuho Securities Co. Ltd. and acquired 18 planes from Dubai Aerospace Enterprise Capital for $540 million in December 2018.
California-based ACG owns and manages approximately 500 commercial jet aircraft leased to about 90 airlines.
On Oct. 3, ACG announced the issuance of $477 million of fixed-rate secured notes by its two units. They comprise of $403 million of series A notes rated A with an initial LTV of 66.9%; and $74 million of series B notes rated BBB with an initial LTV of 79.2%, according to the Airline Economics.
Proceeds from the issuance will be used by ACG to acquire a portfolio of 24 aircraft on lease to 19 lessees located in 15 countries, the report added.
The growth of global travel and budget carriers raises optimism for aircraft investment.
Compared to real estate assets, aviation funds have advantages of ownership transparency and strong liquidity because of standardized aircraft prices, Yonhap said.
By Hyun-il Lee
<Edited by Yeonhee Kim>
(Photo: Getty Images Bank)