| Wed 26 Jun 2002, 0:00 | | Imperial Holdings Limited - Giant Aviation Lease F |
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Imperial Holdings Limited - Giant Aviation Lease Finance Company Takes To
Air
Johannesburg - Wednesday June 26, 2002
A new aviation financing company with an initial funding capacity of at
least R5-billion has been formed through a partnership between Imperial
Holdings, the country`s leading mobility group, and the financial services
group, Sanlam and its investment banking arm, Genbel Securities (Gensec).
The new company has not wasted time and already has committed assets
totalling R1,5-billion for its business. The new company has recently
signed a US$50-million agreement with KLM Royal Dutch Airlines to finance
existing aircraft in their fleet and in addition Imperial is injecting into
the new company the 80-million Euro DHL International contract it signed
earlier this year. The company is currently negotiating a further lease
transaction with a value in excess of R2-billion and expects to be able to
announce this within a month.
Safair Lease Finance (Pty) Limited is a 50/50 joint venture between the
Imperial and Sanlam/Gensec groups which have each agreed to provide a
minimum of R400-million to make up the R800-million in equity capital that
will form the initial capital of the company. The lease finance company is
targeting to gear itself up to five times which will create the capacity to
finance at least R5-billion in aviation assets. The balance of the funding
will be raised in the capital markets, either locally or internationally.
Commenting on the transaction, Imperial Holdings chief executive Bill Lynch
said that the major benefit for Imperial is that the group`s aviation
division can now "really fly". "Our aviation business has shown
considerable growth in recent years and it has been our determination to
expand the business further to take advantage of what we believe is an
exciting opportunity. We are in a unique position to develop the aviation
business here in South Africa as our costs are Rand-based and lease
contracts tend to be dollar or Euro-based.
"However to enable Safair to develop to its full potential without putting
strain on the Imperial balance sheet, we needed a partner with considerable
financial muscle. We are delighted that Sanlam and its wholly-owned
investment bank, Gensec, have partnered with us in this venture. The five
aircraft deal, which Imperial signed with DHL International earlier this
year, has been injected into the new company which will release R887-million
back to the group, freeing up our balance sheet.
"Apart from the Sanlam group providing the required financial resources for
the new company, Gensec`s wholly-owned subsidiary Fieldstone, which is a
leading international infrastructure finance and advisory practice with
considerable aviation financing experience, will be particularly helpful.
Our arrangement with Sanlam and Gensec is consistent with the international
trend for aviation leasing businesses to partner with institutions with
significant financial liquidity and access to large pools of capital."
Sanlam`s chief executive Leon Vermaak added that the Sanlam group was
delighted with the new arrangement. "When you look at the quality of our
partner, Imperial, one of the leading companies in this country, and the
business that Safair Lease Finance has already secured with lease agreements
with KLM and DHL, you can see why we are excited about this project.
"In spite of the events of September 11, which had an impact on airline
profitability, we believe that prospects for the long term development of
the aviation industry remain good. Over the next decade, the underlying
demand for air travel is forecast to maintain a broad 4% annual average
growth rate while air cargo demand is expected to run a little higher, at
6%.
"The Gensec group`s solid experience in the aviation leasing industry as
well as its access to, and experience in the capital markets were key
competitive advantages in structuring this partnership for the Sanlam
group."
The chairman of Imperial`s logistics, transport and aviation divisions,
Ralph Boettger, who will also be the chief executive of the new business,
said that aviation leasing is a large industry globally, with profits being
generated by both rentals paid by the lessees and via the residual values of
the aircraft on termination of the lease. "This is particularly true in the
South African environment where we have a weak currency and the assets tend
to be valued in hard currencies."
The day-to-day administration of the joint venture is being handled by
Safair, which has considerable experience in the aviation industry, and
currently manages a fleet of 80 aircraft with an asset value of R2,3-
billion. The board, which will be chaired by Imperial`s Bill Lynch and
which has equal representation from both companies, will set the strategic
and investment direction for Safair Lease Finance.
Mr Boettger went on to say that the joint venture`s first transaction is the
funding of a US$50-million agreement with KLM Royal Dutch Airlines for three
existing Boeing 737-400s, which will commence in July this year. "These
lease agreements run for between seven and eight years."
Imperial has also injected into the new joint venture the 80-million Euro
lease agreement that it signed with DHL International in January this year.
That transaction covered the acquisition of five Airbus A300-B4 cargo
aircraft which will now be owned by Safair Lease Finance and leased to DHL
International, for a six-year period, for operation within DHL`s European
network.
"We anticipate being in a position to announce another major deal for around
R2-billion for the financing and acquisition of a fleet of new narrow bodied
aircraft in a few weeks," he said.
Mr Boettger added that one area that will receive great attention in the new
business, is aircraft selection. "It will be our strategy to concentrate on
narrow body aircraft which tend to be more marketable and have relatively
higher residual values than wide bodied aircraft. We believe that this will
mitigate the risk inherent in the business."
Marius Ferreira, the chief executive of Gensec said that aviation lease
financing was an attractive asset class for the group. "We expect the joint
venture to achieve an average return on equity in line with our group
objectives. The business has the added appeal for investors of foreign
currency exposure as the costs of the operating leases are largely rand-
based and the leases generate a dollar or Euro income stream."
In addition, the nature of lease financing is also consistent with Gensec`s
drive to enhance its annuity income and reduce the volatility of its
earnings.
The joint venture came into effect in June 2002.
ends
Please note:
IMPERIAL HOLDINGS activities include a wide range of services relating to
motoring, car rental and tourism, transport, trucking, aviation leasing,
logistics and fleet management outsourcing, forklifts, and a comprehensive
related financial services arm supplying banking, short-term insurance and
life assurance. While these services combine to facilitate maximum synergy
between business entities, a decentralised management structure engenders
industry best practice. Management is empowered to develop each business
with entrepreneurship into unique business units within the strength and
support structures of the Imperial group.
Imperial employs 25 000 people at locations in 26 countries and had total
assets of R20-billion at December 25, 2001 and its revenues for the six
months to December 25 totalled R13,7-billion.
Visit our websites - www.imperial .co.za and www.imperialtoday.co.za
GENSEC BANK is a leading South African investment bank, specialising as a
wholesale provider of derivative-based risk management products to the
savings industry. It is also a prominent arranger of debt and equity
finance for corporates and is a manager of private equity funds. Corporate
action advice and transaction support is provided to listed and unlisted
companies by the corporate finance advisory unit. Through its proprietary
trading desk the bank acts as a market maker in most South African financial
instruments.
Gensec Bank is a subsidiary of Sanlam and is fully guaranteed by Gensec
which has a capital base of around R5-billion.
Gensec Bank strives to be a leading international financial engineering and
capital markets group. Its growth has been driven through innovations such
as:
- Being the leaders in the structured products industry in South Africa
- Pioneering credit derivatives in the local market
- Pioneering the launch of the Satrix index-linked products
- Introducing new insurance products
- Developing the market for index-linked warrants in South Africa.
Visit our website - www.gensec.com
ISSUED BY: PENELOPE GRACIE INVESTOR RELATIONS
ON BEHALF OF: IMPERIAL HOLDINGS LIMITED
FURTHER INFORMATION: PENELOPE GRACIE
CONTACT: OFFICE +27 (11) 447-3301
MOBILE 082-55-77-444
FACT SHEET
SAFAIR LEASE FINANCE (PTY) LIMITED, a Sanlam-Imperial company
- The new aviation lease business will grow its assets to at least R5-
billion
- 50:50 joint venture - Sanlam/Gensec and Imperial Holdings
- Sanlam group and Imperial group each contributing a minimum of R400-
million in equity
- Equity investment by end financial year 2003
- Targeting up to 5 times gearing
- Balance of funding to come from capital markets, both local and
international
- Funding largely secured
- Both Sanlam and Imperial will proportionately consolidate the profits from
the joint venture
* Board of directors :
Bill Lynch Chairman
Marius Ferreira Deputy chairman
Ralph Boettger Chief executive
Dave Andrew
Steven de Bruyn
Brian Frankel
Div Geeringh
Johan Latsky
Assets in business
DHL INTERNATIONAL CONTRACT
- 80-million Euro lease agreement with DHL International for 5 x Airbus A300-
B4 cargo aircraft
- Aircraft delivered in March 2002
- Leases extend for a six year period
KLM ROYAL DUTCH AIRLINES CONTRACT
- US$50-million lease agreement with KLM for
- 3 x Boeing 737-400s during July
- Leases for between seven and eight years
SAFAIR
- Started in 1960s
- 1980s refocused as aircraft lease and charter company
- Imperial Holdings acquired from Safren in 1999 for R230-million
- Fleet profile - 57 owned aircraft and more than 80 under management
- Aviation asset value = R2,3-billion
- R205-million operating profit - June 2001
- 1 028 employees
- 18 locations internationally
Global aviation industry estimated average annual growth rate over next
decade
- Air travel - 4%
- Air cargo - 6%
- Market asset value of aviation lease market + $75-billion (Jan 2002)
- Leased fleet size + 5 750 (April 2002)
- Currently operating lease market = 25% of world`s fleet
2012 estimated at 35%
Date: 26/06/2002 10:00:00 AM Produced by the SENS Department
