Friday 28 July 2017

SMBC debut bond eight times over subscribed - lessor boss

Peter Barrett, chief executive of SMBC Aviation
Peter Barrett, chief executive of SMBC Aviation
Gavin McLoughlin

Gavin McLoughlin

Aircraft lessor SMBC Aviation Capital's debut bond issue was eight times oversubscribed, according to chief executive Peter Barrett.

The company raised $500m, to be used for general corporate purposes, via the issue of guaranteed bonds with an interest rate of 2.65pc due for repayment in 2021.

"We don't need the money, we've very strong shareholders who provide a lot of funding to the business, but we wanted to diversify our funding channels," Mr Barrett said, adding that it wants to continue issuing bonds in future as market conditions dictate.

SMBC's revenue topped $1bn for the first time last year, with operating profit rising 22pc to $530m.

Mr Barrett said the company has a strong order book and wants to continue to grow.

He said he didn't want to make a judgment on whether the activities of aircraft lessors should be included in Ireland's economic growth figures, with activity in the industry one of the factors behind the recent CSO figures that said the Irish GDP grew 26pc last year.

Investments in aircraft made by Irish-based lessors are included in the figures even though the aircraft in question may be based on the other side of the world.

"I'm not a statistician...I think GDP is just one measure of economic growth and there's an ongoing debate as to whether it's the most appropriate one," he said.

"I think the aircraft leasing sector is an important part of the economic story in Ireland, there's probably some unusual aspects at the moment in that I think one or two of our large competitors are moving their businesses to Ireland and it's probably elevated the element of aircraft leasing at this particular time.

"Ultimately whether aircraft leasing is appropriate to include or not is a judgment for the CSO to make, but I think you've got to look at all of these statistics and the context in which they're made, and the debate over the last couple of weeks has probably helped that.

Mr Barrett said that aircraft leasing has made a significant contribution to the Irish economy.

"It provides a significant number of high quality jobs in Ireland, it's one area where I think Ireland really does have a significant dominant position, there's a lot of taxes paid by people who work in the industry, there's a lot of ancillary activity around accountants, lawyers and other professional services.

"And there's a lot of technical services, when we are transitioning aircraft we would often use technical companies here like Dublin Aerospace or Shannon Aerospace.

Mr Barrett said Brexit would probably have an impact on his industry but it would depend on the final outcome of negotiations.

"In an industry like ours there's always broader geopolitical and economic issues, to put in context there was always going to be something on the horizon, be it the attempted coup in Turkey, or the sharp rise in oil prices and the collapse in oil prices.

"Frankly, people try to prematurely analyse these things and come to an immediate answer - Brexit is a good case in point.

"Will it have an impact? Yes. Exactly what it's going to be - I think it's just too early to tell."

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