Monday 16 January 2017

Slattery plans to double the size of Avolon before float

Singapore's sovereign wealth fund investment may boost credibility

Published 27/11/2011 | 05:00

Aviation entrepreneur Domhnal Slattery and his executive team plan to double the size of aircraft leasing firm Avolon with a view to a possible Asian flotation in 2015. Last month Avolon -- which has raised more money than any other Irish start-up company in history -- tapped up Singapore's sovereign wealth fund GIC for almost €225m in return for a minority per cent stake in the business.

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The presence of Singapore's sovereign wealth fund on Avolon's share register may give it increased credibility among Asian investors ahead of any public offering.

Avolon raised about €561m from private equity groups CVC Capital Partners, Cinven and Oakhill just over a year ago. It is thought that Avolon is worth close to €1.3bn just two years after coming into existence.

Private equity firms such as Avolon's backers typically see a return of two times their investment within a defined period. This means Slattery and his team must create a staggering €1.3bn in upside for their backers.

The fast-growing Dublin company is armed with a major chunk of bank financing, which has enabled it to build up a portfolio of 89 jets which are leased to 26 airlines around the world including Ryanair, American Airlines, Air Asia and China Eastern.

Avolon has access to €1.95bn in bank debt provided by the likes of Wells Fargo, Goldman Sachs and Deutsche Bank.

Ireland is one of the main global hubs for aircraft leasing, due to the favourable corporate tax regime as well as extensive double taxation agreements with other countries. Major players operating from Ireland include China Development Bank, GE capital aviation services, Awas and CIT.

Around 40 per cent of all jets flying around the globe are now leased from specialist finance companies such as Avolon. Ireland's increasing importance in this fast-growing sector is emphasised by the fact that about half of all these leased jets -- 7,000 planes -- are managed from here.

The sector is forecast to grow spectacularly fast over coming years as the poor in emerging economies become wealthier and start to fly. Close to €750bn will be required to finance all new commercial aircraft deliveries all the way up to 2020, with around €375bn need to refinance existing aircraft.

Clareman Slattery, who started out at Tony Ryan's famed GPA operation in Shannon, made a fortune when selling aviation leasing business IAMG to RBS for €25m in 2001. He also fronted private investment group Claret Capital, which raised money from the likes of Riverdeep's Barry O'Callaghan, former Anglo chairman Sean FitzPatrick and Superquinn's Feargal Quinn. Claret invested money in some of the largest private equity deals ever completed, including the $33bn buy-out of US hospital operator HCA. It also helped finance a deal involving a massive casino in Macau.

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