Tuesday 21 November 2017

Japanese backers to pump $1bn into SMBC

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

Gretchen Friemann

SMBC Aviation Capital, the Dublin-headquartered aircraft leasing firm, is poised for a $1bn cash injection from its Japanese backers as it gears up to buy more airplanes amid intensifying competition in the sector.

The fresh equity will be provided by the end of March next year and comes as part of a wider corporate restructuring by SMBC's shareholders, Sumitomo Mitsui Financial Group (SMFG) and Sumitomo Corporation.

CEO Peter Barrett said the cash infusion demonstrated the "strategic importance" of SMBC to its owners.

The airplane-leasing firm, one of the biggest in the world with 261 aircraft valued at close to $10bn at the end of March, has commitments for about 200 aircraft from Boeing and Airbus, according to its annual report.

The money is expected to help fund this expansion as well as offer its customers finance to acquire aircraft.

But the additional capital also ties in with a wider corporate restructure of the leasing firm jointly owned by SMBC Aviation Capital's backers.

Yesterday the Japanese financial heavyweights unveiled a restructure that will transform Sumitomo Mitsui Finance and Leasing Company (SMFL) into a 50:50 joint venture.

Currently SMFG controls 60pc of the leasing platform while Sumitomo Corporation controls 40pc.

The ownership structure still leaves SMFG as the biggest owner of the aviation financing company.

This is because SMBC, one of Japan's largest banks, and 100pc controlled by SMFG, owns 32pc of the Dublin-based firm.

That leaves the Japanese group with a 66pc stake in SMBC Aviation Capital.

The restructure, aimed at streamlining the partners' leasing operations, comes as Chinese players vie for a larger slice of the aircraft leasing sector.

Companies backed by Chinese capital are expected to account for a third of the $261bn aircraft-leasing market by 2022.

Demand for jets, particularly in Asia, helped lift SMBC Aviation's annual profits by 48pc to $346m for the financial year 2016.

Irish Independent

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