Terra Firma ups aircraft investment to $1.2bn

A consortium of investors led by Terra Firma and CPPIB will invest up to $729mn of additional capital in AWAS, an aircraft leasing company Terra Firma originally purchased in 2006.

Guy Hands-led buyout firm Terra Firma will inject $246 million of follow-on equity capital into Dublin-based aircraft lessor AWAS. The transaction brings Terra Firma’s total investment in the portfolio company to $1.2 billion, according to a source with knowledge of the matter.

Aircraft leasing: now
boarding more capital

Terra Firma declined comment.

Joining the buyout group is the Canada Pension Plan Investment Board (CPPIB), which will invest $266 million; and a group of co-investors who collectively will contribute $17 million.

The new capital will “drive [AWAS’] expansion programme” according to a statement by the investors, which also said an additional $200 million of equity capital is on tap for further expansion opportunities.

Under the new capital structure Terra Firma will own a majority 60 percent share of AWAS. CPPIB will hold a 25 percent stake with co-investors making up the balance.

“AWAS had an excellent 2010 ending substantially above budget and putting in place a major refinancing totalling over $1.1 billion through a highly successful bond issue and new term loan,” said Terra Firma chairman Guy Hands.

AWAS has in its pipeline roughly $5 billion in orders, a figure which would double its current portfolio value to $10 billion, said Hands. AWAS’s portfolio holds around 200 aircraft vehicles, with another 100 next generation planes on order from Airbus and Boeing, according to the statement.

Terra Firma won an auction for AWAS in 2006 for around $2.5 billion. One year later the buyout shop merged AWAS with rival US-based airplane leasing business Pegasus, creating the world’s third largest airplane leasing company at the time with an enterprise value of approximately $7.5 billion.

Private equity firms have shown strong appetite for the aviation industry so far this year. Last month TPG Credit Management closed its “Airline Credit Opportunities II” fund on just over $604 million after roughly one year of marketing.

In January Cinven, CVC Capital Partners and Oak Hill Capital Partners invested a further $250 million into aircraft leasing company Avolon. It brought the trio’s total equity investment to $1 billion, having previously invested $750 million when the company was founded in May 2010.

For an exclusive look into Guy Hand’s investment strategy post-EMI, see the March edition of Private Equity International.