TIDMAVAP
RNS Number : 4354O
Avation PLC
09 February 2021
The following replaces the RNS Number 4347O released this 9(th)
of Feb 2021. The changes are headings to tables. A full replacement
follows:
Important Notice
This announcement contains an overview of the matters to which
it relates. It does not purport to provide an exhaustive summary of
all the issues that may be relevant to the Transaction (as defined
below), or that may be required by the recipient to evaluate the
performance of the Company (as defined below).
This announcement has been prepared by the Company's advisers
and management in the context of the Transaction. The information
contained in this announcement has not been prepared in accordance
with International Financial Reporting Standards or any other
comprehensive body of accounting principles, and the Company's
independent auditors have not audited, reviewed, compiled, examined
or performed any procedures with respect to the financial
information included herein.
This announcement includes "forward-looking statements",
including certain estimates that the Company has provided to the
Committee (as defined below) in the context of discussions
concerning the Transaction, that are based on the Company's
management's current expectations regarding future events or the
future financial performance of the Company. In the course of
preparing such forward-looking statements, certain assumptions
about the future have been made that the Company's management have
deemed to be reasonable and represent the Company's management own
judgments and expectations. Such forward-looking statements speak
only as of the date on which they are made and are based on the
knowledge, information available and views taken on the date on
which they are made; such knowledge, information and views may
change at any time. By their very nature, forward-looking
statements are not statements of historical or current facts; they
relate to events that may or may not occur in the future and so
cannot be objectively verified, are speculative, and involve
inherent risks and uncertainties.
As such forward-looking statements (and the assumptions
underlying them) are subject to change at any time, a number of
important factors could cause the Company's actual results of
operations, financial condition, liquidity, prospects, growth,
strategies and the development of the industry in which the Company
operates to differ materially from those expressed or implied by
the forward-looking statements contained herein. As such
forward-looking statements speak only as of the date of this
announcement, and, save as required by the Listing Rules, the
Prospectus Regulation Rules, MAR and the Disclosure Guidance and
Transparency Rules, the Company expressly disclaims to the fullest
extent permitted by law any obligation or undertaking to
disseminate any updates, corrections or revisions to any
information included in this announcement to reflect any change in
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are
based.
For the avoidance of doubt, any forward-looking statements
included in this announcement relate to the Company's business
operations only; no confirmation, admission or statement should be
read into or inferred from such forward-looking statements in
respect of the Company's debt service capabilities or its ability
to repay, refinance or revisit the terms of any of its
indebtedness. No reliance should be placed on any such
forward-looking statements when making decisions with respect to
the Company and/or its securities.
Information and opinions contained in this announcement are
provided for reference only. All estimates and opinions contained
herein are subject to change without notice. Any reference to past
performance should not be taken as an indication of future
performance. Accordingly, while this announcement has been prepared
in good faith and based on reasonable assumptions at the time of
its preparation, no representation or warranty or undertaking,
express or implied, is given by the Company as to the accuracy,
completeness or fairness of the information or opinions contained
this announcement. The Company does not accept any liability
whatsoever for any direct, indirect or consequential damages or
loss howsoever arising from any use of or reliance on this
announcement or its contents.
The Company undertakes no obligation, among other things, to
provide the recipient with access to any additional information or
to update this announcement with additional information or to
correct any inaccuracies which may become apparent, and reserves
the right, at any time and from time to time and without advance
notice, to deviate from the information, intentions, plans,
strategies, forecasts etc. contained in this announcement without
giving reasons. The provision of this announcement shall not be
taken as any form of commitment on the part of the Company to
proceed with or implement any transaction or to adhere to any
intentions, plans, strategies or forecasts, including any such
intentions, plans, strategies or forecasts that are implied by any
forward-looking statements contained herein.
This announcement has been prepared for information purposes
only (and solely in connection with the Transaction) and is not
intended to and does not constitute financial, investment, tax,
accounting or legal advice. It should not be regarded as a
substitute for independent verification or for proper due diligence
by interested recipients. Any such recipient must conduct their own
due diligence in relation to the Company and the information
herein, having regard to their own objectives, financial situation
and needs, and seek financial, legal, accounting and tax advice
appropriate to their particular circumstances. Nothing contained
herein shall be deemed to constitute an agreement by the Company to
permit the recipient to have unrestricted or any other type of
access to the Company or its subsidiaries' information, books,
records, employees or otherwise.
This announcement does not constitute or form any part of and
should not be constructed as an offer or commitment to sell or
issue, a solicitation, recommendation, commitment or invitation to
subscribe for, underwrite or otherwise acquire, and should not be
construed as an advertisement for, any securities of the Company or
any of its subsidiaries in any jurisdiction or an inducement to
enter into investment activity in any jurisdiction.
Via RNS and SGXNET
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 AS IN
FORCE IN THE UNITED KINGDOM PURSUANT TO THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018 (AS AMED).
AVATION PLC
("Avation" or "the Company")
AGREEMENT WITH BONDHOLDER GROUP
ON SENIOR NOTES MATURITY EXTENSION
Avation PLC (LSE: AVAP), the commercial passenger aircraft
leasing company, advises that it has reached an agreement with a
group of bondholders on the terms of a maturity extension in
relation to the Avation Capital S.A. 6.5% senior notes due May 2021
issued under Avation's global medium term note programme (the
"Notes").
The Company has entered into a lock-up agreement with
bondholders representing 76% of the Notes (the "Committee") to vote
in favour of the transaction outlined below (the "Transaction"),
subject to agreement on definitive documentation. This support from
the Committee is sufficient, subject to senior lender consents
where applicable, to implement the Transaction through a consent
solicitation exercise that the Company will be launching as soon as
possible, but no later than 19 February 2021.
In the Company's opinion, this agreement constitutes an
important capital structure stabilisation measure. The Directors
believe that the Transaction will assist the Company to continue
successfully navigating the COVID-19 pandemic, while providing a
more than 5-year maturity extension of the Notes to 31 October
2026, and will provide sufficient financial flexibility to support
the continued development of the business through and post the
COVID-19 pandemic.
The purpose of this announcement is to outline the Transaction
and information on the credit analysis that was provided to the
Committee for the purpose of facilitating discussions to negotiate
and agree the terms of the Transaction.
Transaction Highlights
The key terms of the Transaction include:
-- Maturity extension of the Notes from 15 May 2021 to 31 October 2026;
-- Cash coupon of 6.5% with, at the Company's option, an
additional 2.5% payment in kind ("PIK") coupon or an additional
1.75% cash coupon;
-- Early bird consent fee of up to 75bps; late consent fee of 25bps
-- Bondholders to receive 6,000,000 warrants to subscribe for
ordinary shares exercisable to 31 October 2026 at a price of 114.5p
per share (including cashless exercise option);
-- The Notes are to be callable at any time during their 5.5
year remaining duration, with the call premium decreasing to par
during year 5; and
-- A general strengthening of the Notes' covenants and the
granting of additional guarantees and security
The Board of Avation has an opinion that following the
Transaction, the Company will be in a position to use this stable
capital structure to take advantage of the recovery in the airline
industry after the impacts of the COVID-19 pandemic start to
recede.
Executive Chairman Jeff Chatfield said: "Avation's team has been
managing airlines, bankers and financiers on a daily basis in the
duration of COVID-19. We have an opinion that air travel passenger
movements will exceed previous levels when a treatment or vaccine
is deployed, and passengers perceive air travel to be safe. We
believe that this more than 5-year bond maturity extension
stabilises an important part of the capital structure. The Company
retains the option to refinance the Notes at any time. We thank the
Committee and the advisers for their efforts and diligent
analysis."
Fleet Update
At the date of this announcement, Avation's fleet totals 46
aircraft. Customers include 19 commercial airlines in 15
countries.
Since the last fleet update provided by the Company on 14
October 2020 and as updated on 23 December 2020, there have not
been any further aircraft transactions other than as described
below.
Avation is currently expecting its customer Philippine Airlines
("PAL") to implement a downward adjustment to the lease rate of the
Boeing 777-300ER aircraft on lease, which may result in an
impairment in the value of this aircraft in the financial results
for the year ending 30 June 2021. For illustrative purposes, a
reduction of the PAL lease rate of 20-40% would have a negative
impact of approximately 3-5% on total current monthly lease
revenues.
Aircraft leased to three airlines (together representing
approximately 10% of monthly run-rate lease revenue) were extended
between March and September 2020. The average lease term extension
was 3.6 years and the revised lease rates are between approximately
5-19% lower than the prior contracts.
On 20 April 2020, Virgin Australia Holdings Limited ("Virgin
Australia") entered into voluntary administration. Avation had two
Fokker 100 aircraft on finance lease and 11 ATR 72 aircraft on
operating lease to Virgin Australia two of which were subleased to,
and operated by, another airline. At the date of its entry into
administration, Virgin Australia represented around 19% of the
group's total monthly run-rate lease revenue. The two Fokker 100
aircraft were sold off the end of their leases (completed in
September 2020). Of the 11 ATRs, three have been re-leased at
market rates, one is subject to a non-binding letter of intent in
respect to a new lease at market rates, three are being actively
marketed for sale or lease, and the remaining four are being
marketed for sale or lease but have not yet been through
maintenance. Avation is intending to re-lease at market rates or
sell all remaining ex-Virgin Australia ATRs in due course. In
relation to the administration, Avation's claim against Virgin
Australia has now been mitigated by the transactions noted above
and is now expected to be approximately US$56 million. The
administrators have advised an expected payout of 9-13 cents on the
dollar on this claim. Whilst it is the Company's current plan and
expectation that it will be able to lease and/or sell aircraft,
and/or recover from Virgin Australia the recovery rates as set out
in this paragraph, there can be no assurance that it will be able
to do so
Avation has also signed a new lease on a new delivery ATR72-600.
The rate is in line with the market, and following the commencement
of this lease, the aircraft will be either marketed for sale or
Avation may raise secured financing on the asset.
Financial Performance Information
The Company is scheduled to release its financial results for
the six months ended 31 December 2020 by the end of February 2021.
However, it is providing the update below in the context of the
Transaction.
As of 31 December 2021, the weighted average age of the aircraft
fleet was 4.6 years, the weighted average remaining lease term was
6.5 years and the total future minimum lease payments receivable
under non-cancellable leases amounted to approximately US$722
million excluding any leases currently being renegotiated.
The Company has a diversified client base, with the largest
customer representing 28% of revenue and the three largest
customers (airBaltic, VietJet and Eva Air) represent 66% of total
contracted revenues. The leases with each of Avation's top three
customers each have more than 5 years' remaining duration.
At the outset of the COVID-19 pandemic, Avation instituted a
programme of support for its airline customers, offering interest
bearing loan deferrals of portions of their rent over the
short-term. The cashflow impact of this support programme has been
mitigated by adjusting the amortisation profiles of related
financings with the agreement of lenders.
At the current date, Avation has provided support to 14 airline
customers with agreements to defer a total of US$25.9 million. The
Company has mitigated this impact on cashflow with secured lenders
agreeing to reschedule US31.0 million of loan amortisation. At
today's date, 7 airline customers have returned to normal monthly
rental levels (including 3 of Avation's top 5 customers).
Debtor collection has been challenging due to the severe
disruption to airline cashflows and Avation has had to monitor and
work closely with airlines to ensure operational cashflow is
maintained. For the six months ended 31 December 2020, the Company
achieved an overall cash collection rate of approximately 65%
across all its leases. While the above rescheduling of loan
amortisation mitigated the impact, cash collection during this
period was approximately 80% of total secured debt service
obligations. The effect of this on corporate cash flow was
partially offset in the period by the provision of new financing on
a previously-unencumbered aircraft, the aforementioned sale of the
two Fokker 100 aircraft previously leased to Virgin Australia and
certain cost reduction initiatives. At the current date, an
aggregate of US$18.7 million of lease collections are more than 120
days overdue.
The Company continues to manage its liquidity position carefully
and continuously aims to match the tenor and cash flow profile of
its financing arrangements with the tenor and cash flow profile of
their respective leases. As of 31 December 2020, the Company had
total cash and bank balances (including restricted cash) of
US$117.5 million, compared to US$114.6 million as of 30 June 2020.
As of 31 December 2020, the Company had a total unrestricted cash
balance of US$25.2 million, compared to US$35.3 million as of 30
June 2020. As at the date of this announcement total cash
(including restricted cash) has increased to US$144.1 million
(unaudited) which is in line with Avation's expectations. Over the
coming 6 months, the Company is expecting the distribution from
Virgin claims (as described above) and a release of certain
restricted cash balances to offset against rent owed to Avation by
one airline and is pursuing certain short-term initiatives to
maintain liquidity including raising new financing against an
unencumbered aircraft. The combined effect of these inflows would
be approximately US$25 million, if in line with Avation's
expectations.
Avation is also actively marketing a number of aircraft for
sale, including two Airbus A321 aircraft. The Company expects the
sale of these two aircraft to conclude by July 2021 and assumes
approximately US $ 30 million of net proceeds released after senior
debt repayments. Beyond the next 6 months, Avation expects to
manage its liquidity as it has done historically through a
combination of aircraft sales, raising new secured debt and/or
raising equity. Avation may also seek deferrals, amortisation
re-profiles or refinance where revenues for any aircraft are not
sufficient to cover existing debt service.
As of 31 December 2020, there were US$342.6 million of Notes and
US$731.3 million of senior secured borrowings outstanding. The
weighted average cost of secured debt was 3.7%, and the weighted
average cost of total debt was 4.6%. Maturities on secured
borrowings range from 2021 to 2031.
At issuance, a large majority of the proceeds of the Notes were
on-lent to Avation Group (S) Pte Ltd ("AGS"), a private
wholly-owned intermediate holding company of the Group. The capital
contribution by Avation to each of its, and AGS', aircraft owning
subsidiaries were provided by shareholder loans from one or both of
Avation or AGS. The terms of Avation's existing loans and other
secured lending arrangements provide for cross-collateralisation
within certain pools of facilities, but not across the entire
Group.
The Company's secured borrowings are subject to certain
covenants that give lenders the right to demand repayment if
breached. As of 31 December 2020, the Company was either in
compliance with, or had waivers in place for, any covenant test on
all senior bank loan covenants through to at least June 2021.
Avation expects that breaches for certain covenant levels as of
June 2020 will remain outstanding during the period described in
the credit analysis set out below. Avation maintains a good
relationship with its senior lenders and expects to receive waivers
for any covenant breach, as it did when covenants were tested in
relation to its financial year ending June 2020, and expects to
reset the levels in due course.
Credit Analysis Provided to the Committee
The impact of COVID-19 continues to dominate the airline
industry and Avation expects there will be some continuing work to
do to support airlines as the challenges facing the sector will
remain for an extended period even with the successful roll out of
vaccines for COVID-19 commencing around the world. Avation is
optimistic about the medium-term opportunity for air travel,
particularly in the turboprop and narrow-body aircraft sectors. The
Company will position itself for a return to growth through
opportunistic purchases and delivery of its orderbook in a
post-pandemic environment.
In order to frame terms for the Transaction, the Company has
shared with the Committee relevant credit analysis as outlined
below.
US$ million FY20 Actuals Analysis Comments
Total Revenue 135.3 Expected to decrease by approx. 25%
for FY21, then return to grow at a
7% CAGR over the FY21-FY25 period.
------------- -------------------------------------------
Operating (4.2) Expected to remain marginally negative
Cash Flow for FY21 and FY22, then return to over
After Secured US$20 million per annum thereafter
Debt Service*
------------- -------------------------------------------
Unrestricted 35.3 Expected to decrease through the remainder
Cash Balance of FY21 and then remain fairly stable
over the FY22-FY25 period, but expected
to remain above US$20 million
------------- -------------------------------------------
* It should be noted that "Operating Cash Flow After Secured
Debt Service" is not an accounting metric on which the Company has
previously reported, and it does not plan to report on this metric
going forward.
The key assumptions underlying this analysis are as follows:
- Future revenues are predominantly from three sources:
1. Current leases, assumed to be paid on time as contractually agreed going forward
-- These will represent approximately 56% of total revenue by
FY25.
2. Expiring leases / leases for off-lease airframes, assumed to
be renewed at expected market lease rates at the time of the
renewal:
-- These will represent approximately 19% of total revenue by
FY25;
-- All remaining ex-Virgin Australia ATRs assumed to be sold or
re-leased by end of Q1 FY22 at market lease.
3. Leases from new aircraft (see "Purchase of Aircraft" below):
-- These will represent approximately 25% of total revenue by
FY25.
- Majority of outstanding lease arrears to be recovered and rent
and deferrals paid to schedule going forward.
- Assuming the business performs in line with this credit
analysis, management may consider reinstating a dividend in due
course.
- Purchase of Aircraft:
o No purchase of aircraft anticipated in FY21;
o Delivery of existing ATR orderbook over the FY22-FY24
period;
o Assumed total of US$300 million of opportunistic purchases
over the FY22-FY25 period;
o Acquisitions will be part funded by new secured lending at
historical leverage levels (c. 75-80%). Funding costs are expected
to be above the current weighted average cost of the Group's
secured debt, but below the weighted average cost of the Group's
total debt;
o New aircraft are expected to be leased at the prevailing
market rates on delivery, with most rates forecast throughout the
FY22-FY25 period expected to return to typical levels; and
o Avation expects to raise its capital contribution to the
purchase of such aircraft through a combination of opportunistic
asset sales, new issuances of equity capital, and cash flows from
existing assets.
Avation has the following debt maturity profile as of December
30, 2020:
Time Period Secured Debt (US$ million) Notes
Payments (US $million)
Amortisation Balloon
$342.6m
(being extended to
2H21 $34.5m - Oct 26)
-------------- -------------- --------------------
FY22 $91.7m $158.5m -
-------------- -------------- --------------------
FY23 $58.3m - -
-------------- -------------- --------------------
FY24+ $282.1m $104.9m -
-------------- -------------- --------------------
The Company expects to refinance or extend the balloon payments
prior to the maturity date and has commenced discussions with
financing providers who have been supportive in providing
accommodation and relief thus far.
In order to raise additional cash, if needed, the Company has
the option to, amongst other things, sell aircraft or raise equity.
The Company has a proven track record of doing so, having sold 27
aircraft since 2011 and having issued new shares on 28 occasions
since 2010. The ability to sell aircraft and raise equity are
intrinsic to the Company's business model, and the Company expects
to continue to use these options in the future for both liquidity
and capital expenditure purposes as required.
In the period referred to in this analysis, the Company expects
to modestly de-leverage and seeks to improve its credit metrics
over time.
For the duration of the period referred to in this analysis, the
Company expects to either be in compliance with, or receive waivers
for any technical breach on any senior bank loan covenants (as
achieved for covenant testing in FY20).
As noted elsewhere in this announcement, the above analysis has
been prepared by the Company specifically for the Committee in
connection with the Transaction and should not be used or relied on
for any other purposes. In addition, such analysis (including data
used to support such analysis) has not been reviewed or audited by
the Company's independent auditors or advisors, is based on certain
assumptions which are subject to change (potentially significantly)
and cannot be objectively verified, are speculative, and involve
inherent risks and uncertainties. Given the context in which such
analysis was prepared, the Company does not intend to update,
provide additional information or to correct any inaccuracies which
may become apparent, and reserves the right, at any time and from
time to time and without advance notice, to deviate without giving
any reasons from the information, intentions or plans implied by
such analysis.
Transaction Overview
As part of the Transaction, the Committee representing 76% of
the bondholders have agreed to extend the maturity of the Notes.
The key terms of the amended Notes are as follows:
Amount US$ 342.6 million
Maturity Maturity extension of the
Notes from 15 May 2021 to
31 October 2026
---------------------------------------------------------------------
Coupon
* 6.5% plus at the option of the company either 2.5%
payable in kind ("PIK") interest or 1.75% cash
interest
---------------------------------------------------------------------
Consent Fee
* Early bird fee for acceptances received
electronically within the first 7 days:
* 50bps upfront; plus
* Subsequent 25bps payable upon cumulative aggregate
net proceeds from asset disposals exceeding $10
million
* Late consent fee of 25bps
---------------------------------------------------------------------
Warrants American style warrants with
the following key terms:
* Quantity 6,000,000, to be granted pro rata to all
bondholders
* Exercise price 114.5p per share
* Exercise period to 31 October 2026
* Exercisable at any time by the holder
* Exercisable on a cash or cashless basis
* Separate from (not stapled to) the Notes
* Warrants to be tradeable/listed on a stock exchange
within 12 months of issue
* Each warrant gives the right to subscribe for one
ordinary share in the capital of Avation PLC,
following which the Company will make application for
admission of such new shares to trading on the main
market of the London Stock Exchange
---------------------------------------------------------------------
Redemption schedule Redemption schedule:
* Callable at 103% until 18 months from completion;
then
* Callable at 106% until 31 October 2024;
* Callable at 104.5% until 31 October 2025; then
* Callable at par thereafter
---------------------------------------------------------------------
Other Terms General strengthening of the
Notes' covenants, including
the provision of additional
guarantees, fixed and floating
debentures and security over
shares by Avation PLC and
Avation Group (S) Pte. Ltd.
---------------------------------------------------------------------
Next Steps
The Company is pleased to announce the Transaction today. The
Company intends on commencing a consent solicitation exercise as
soon as possible, but no later than 19 February 2021, to formally
implement the Transaction. Bondholders will be asked to consent
electronically. Receipt of electronic consent by more than 75% of
the bondholders is sufficient to approve the Transaction. The
Company has received lock-up agreements from 76% of the bondholders
to consent electronically.
Should sufficient electronic consent not be received,
bondholders will be asked to consent at a meeting of bondholders.
Such meeting will be cancelled if the voting threshold is achieved
electronically.
The Company would like to thank the Committee for their
assistance and recommends that other bondholders vote in favour of
the Transaction.
The Company is publishing a circular containing a notice of
general meeting to be held on or about 5 March 2021 at which
Shareholders will be asked to pass a resolution to disapply
pre-emption rights in connection with the issue of the warrants to
the Bondholders.
Advisor to the Company: PJT Partners
Advisor to the Committee: Perella Weinberg UK Limited
-ENDS-
Enquiries:
Avation PLC - Jeff Chatfield, Executive Chairman +65 6252
2077
PJT Partners - Martin Gudgeon: gudgeon@pjtpartners.com +44 20 3650 1100
Edouard Kulik: kulik@pjtpartners.com
For additional information, bondholders are encouraged to get in
touch with the Committee
via their financial advisor Perella Weinberg:
Perella Weinberg - Guy Morgan: gmorgan@pwpartners.com +44 20 7268 2898
Marcus Johnson: mjohnson@pwpartners.com +44 20 7268 2947
Avation welcomes shareholder questions and comments and advises
the email address is: investor@avation.net
Notes to Editors:
Avation PLC is an aircraft leasing company, headquartered in
Singapore, owning and managing a fleet of commercial passenger
aircraft which it leases to airlines around the world.
More information on Avation is available at www.avation.net
.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
CNTSSMSWUEFSEIE
(END) Dow Jones Newswires
February 09, 2021 03:03 ET (08:03 GMT)
Avation (LSE:AVAP)
Historical Stock Chart
From Apr 2024 to May 2024
Avation (LSE:AVAP)
Historical Stock Chart
From May 2023 to May 2024