Terra Firma's AWAS sells $4bn aircraft portfolio

The Guy Hands-led firm will continue to hold a 75% stake in the business

AWAS, a Dublin-based aircraft lessor which is owned by Terra Firma Capital Partners and Canada Pension Plan Investment Board (CPPIB) has signed an agreement to sell a portfolio of 90 aircrafts to Macquarie Group for $4 billion.

Both owners haven't reduced their stake in the company. Terra Firma retains a 75 percent stake in AWAS while CPPIB still owns the remaining 25 percent.

The portfolio being sold comprises a fleet of 90 young, predominantly narrow-body aircrafts. AWAS will continue to own and maintain the core of its remaining portfolio of more than 200 aircraft and plans to continue to grow its fleet through sale-leaseback transactions with airlines and secondary market aircraft purchases.

“AWAS has gone from having 156 aircraft with an average age of 12.1 years in 2006 to 314 aircraft with an average age of 4.9 years in 2014; the book value of aircraft has risen from $2.3 billion to $10.7 billion. Meanwhile, EBITDA has risen from $256m in 2006 to $1,081m in 2014,” Guy Hands, chairman and chief investment officer of Terra Firma, said in a statement.

Terra Firma saw “a good opportunity to generate value” for its investors through the sale of these aircrafts, the firm said. “We will continue to grow AWAS in anticipation of our plans to explore appropriate exit opportunities for the remaining business in the coming years,” Hands added. Terra Firma declined to comment on the return it yielded.  

Terra Firma and CPPIB have owned AWAS since 2006. In 2007, Terra Firma – through AWAS – acquired Pegasus, an airplane leasing business, from Oaktree Capital Management for $5.2 billion. The transaction was made from Terra Firma’s second fund, a €2.1 billion, 2002-vintage and Terra Firma Capital Partners III, a €5.4 billion vehicle raised in 2007.

LPs in that fund granted Terra Firma a two-year fund extension in July 2013. The lifespan of the vehicle has been extended to April 2016. It is understood 98 percent of LPs agreed to the extension, PEI reported at the time.

Terra Firma will not charge its 1.5 percent management fee during Fund II's extension period. There are four investments left in Terra Firm’s Fund II; motorway services Tank & Rast; cinema group Odeon & UCI; energy generator Infinis; and aircraft leasing company AWAS. “It would be best to increase value rather than selling them now,” a source familiar with the matter told PEI at the time.

Last month, Hands said that Terra Firma had committed capital of €1 billion for future deals. The firm will invest the capital on a deal-by-deal basis. Some of the capital could potentially also be committed to a future fund, PEI reported at the time.