Business Irish

Monday 17 December 2018

Dublin jet lessor SMBC to land $1bn balance-sheet boost

CEO says group will have the ability to pursue further opportunities in the sector, as first-half pre-tax profits rise

SMBC is owned by firms in Japan’s Sumitomo Mitsui banking group. Stock image
SMBC is owned by firms in Japan’s Sumitomo Mitsui banking group. Stock image
John Mulligan

John Mulligan

SMBC Aviation Capital is set to receive a $1bn (€876m) capital boost from its Japanese owners within the next couple of weeks and will continue to eye raising debt from external sources, according to CEO Peter Barrett.

The Dublin-based aircraft leasing giant signalled recently that it was set for the $1bn injection before March next year.

But speaking to the Irish Independent, Mr Barrett said the capital should be received shortly and while there's no "specific intent" for it, it would leave the group in a position to pursue opportunities.

SMBC is owned by firms in Japan's Sumitomo Mitsui banking group.

"We're in a good position at the moment," said Mr Barrett.

"Our shareholders have been very supportive of us. They like what we deliver to them. We thought it was timely to strengthen the balance sheet and position ourselves for opportunities that might come along."

He said that "potentially", future opportunities could include asset acquisitions from some of the relatively fledgling entrants to the leasing sector, especially in China.

"We're very focused on executing on the plan we have in front of us, but if opportunities come along we will certainly look at them," said Mr Barrett.

"There have been a lot of new entrants, not just in China, but generally around the market in our space.

"That's a good thing. It provides liquidity. It clearly increases competition, but generally it's a bigger market," he said.

"But they're not all going to stay. I think that's inevitable. There will be opportunities as the cycle progresses and some of these players decide that this sector is not for them.

"It will open opportunities for well-capitalised, long-term players like ourselves," he added.

He said that those opportunities could also include sale and leaseback-type transactions, and pointed out that SMBC also has a large order book.

SMBC raised $500m via a bond issue in July and now has three tranches of outstanding bonds, each of $500m, issued in 2016, 2017 and 2018. "We'll continue to tap into the bond market as appropriate," said Mr Barrett.

He said SMBC will also look to broaden its geographic spread for debt raises.

SMBC Aviation Capital is the world's fourth-biggest aircraft lessor, with an owned, managed, and on-order fleet of 663 jets. Its portfolio consists primarily of single-aisle jets.

Yesterday it reported first-half results, with pre-tax profit for the period rising 7.5pc to $168m (€147.3m). Core lease revenue was 3.5pc higher at $490m (€429.6m).

Mr Barrett said the environment for airlines is more challenging, but that aircraft demand remains resilient.

Irish Independent

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