TIDMDPA
RNS Number : 4204Q
DP Aircraft I Limited
29 August 2014
DP Aircraft I Limited (the "Company")
Please see below the Unaudited Interim Report for the period
from 1 January 2014 to 30 June 2014. This Interim Report also
includes figures for the period since incorporation on 5 July 2013
to 30 June 2014.
COMPANY OVERVIEW
DP Aircraft I Limited was incorporated with limited liability
in Guernsey under The Companies (Guernsey) Law, 2008
as amended, on 5 July 2013 with registered number 56941.
The Company was established to invest in aircraft. The
Company is a holding company, and makes its investment
in aircraft through two wholly owned subsidiary entities,
DP Aircraft Guernsey I Limited and DP Aircraft Guernsey
II Limited (collectively and hereinafter, the 'Borrowers'),
each being a Guernsey Incorporated company limited by
shares and an intermediate lessor (the 'Lessor'), an
Irish incorporated private limited company. The Company
and its subsidiaries (the Borrowers and the Lessor) comprise
the Group.
Pursuant to the Company's Prospectus dated 27 September
2013, the Company offered 113,000,000
Ordinary Preference Shares (the 'Shares') of no par value
in the capital of the Company at an issue price of US$1.00
per Share by means of a Placing. The Company's Shares
were admitted to trading on the Official List of the
Channel Islands Stock Exchange and to trading on the
Specialist Fund Market of the London Stock Exchange on
4 October 2013.
INVESTMENT OBJECTIVE & POLICY
The Company's investment objective is to obtain income
and capital returns for its Shareholders by acquiring,
leasing and then, when the Board considers it appropriate,
selling aircraft (the 'Asset' or 'Assets').
To pursue its investment objective, the Company intends
to use the net proceeds of placings and other equity
capital raisings, together with loans and borrowings
facilities, to acquire aircraft which will be leased
to one or more international airlines.
THE BOARD
The Board comprises three independent non-executive directors.
The Directors of the Board are responsible for managing
the business affairs of the Company in accordance with
the Articles of Incorporation and have overall responsibility
for the Company's activities, including portfolio and
risk management while the asset management of the Group
is undertaken by DS Aviation GmBH & Co. KG (the 'Asset
Manager').
THE ASSET MANAGER
The Asset Manager has undertaken to provide the asset
management services to the Company under the terms of
an asset management agreement but does not undertake
any regulated activities for the purpose of the UK Financial
Services and Markets Act 2000.
DISTRIBUTION POLICY
The Company aims to provide Shareholders with an attractive
total return comprising income, from distributions through
the period of the Company's ownership of the Assets,
and capital, upon any sale of the Assets. The Company
targets a quarterly distribution in February, May, August
and November of each year. The target distribution is
2.25 cents per Share per quarter. Three quarterly distributions
have been made at the date of this report, each meeting
the 2.25 cents per Share target. The target dividends
are targets only and should not be treated as an assurance
or guarantee of performance or a profit forecast.
Fact Sheet - DP aircraft I Limited
Ticker DPA
Company Number 56941
ISIN Number GG00BBP6HP33
SEDOL Number BBP6HP3
Traded SFM
SFM Admission Date 4 October 2013
Share Price 106 pence as at 14 August 2014
Listed CISE
CISE Listing Date 4 October 2013
Country of Incorporation Guernsey
Current Shares in Issue 113,000,000
Administrator and Company Secretary Dexion Capital (Guernsey) Limited
Asset Manager DS Aviation GmbH & Co. KG
Auditor and Reporting Accountant KPMG, Chartered Accountants
Corporate Broker Canaccord Genuity Limited
Aircraft Registration EI-LNA
EI-LNB
Aircraft Serial Number 35304
35305
Aircraft Type and Model B787-8
Lessee Norwegian Air Shuttle ASA
Website www.dpaircraft.com
HIGHLIGHTS
PROFIT BEFORE TAX
Profit Before Tax of 4.367 cents per Share for the interim
accounting period from 1 January 2014 to 30 June 2014,
driven by the leasing of two Boeing 787-8 aircraft. No
tax arises on the profit of the Company as it is Guernsey
resident where the standard rate of income tax for companies
is nil. Therefore the Profit Before and After tax is
the same.
NET ASSET VALUE
A Net Asset Value ('NAV') per Share (post the interim
dividends) of 95.262 cents per Share as at 30 June 2014.
INTERIM DIVIDENDS
Two interim dividends each of 2.25 cents per Share.
CHAIRMAN'S STATEMENT
I am pleased to present Shareholders with the second
interim report of the Company for the six month period
to 30 June 2014, as well as for the full period from
incorporation on 5 July 2013 to 30 June 2014. A separate
report for the period from incorporation to 31 December
2013 ("the first interim report") will be released shortly.
I and my fellow Directors, Didier Benaroya and Jeremy
Thompson, were delighted with the success of the initial
public offering (the 'IPO') and subsequent Listing and
Trading as described in the Company Overview introduction
in this report.
Two incidents in early 2013, prior to the launch of the
IPO, saw all Boeing 787-8 aircraft delivered prior to
that date grounded for approximately two months. Following
a redesign of the battery system providing for additional
layers of safety, the Federal Aviation Authority lifted
the flight ban on 19 April 2013, which allowed the IPO
preparation to continue.
On 9 October 2013, we completed the acquisition of our
first two aircraft, each a Boeing 787-8 or 'Dreamliner'.
A Dreamliner is a twin-engine long range aircraft, distinguished
by its entirely new aircraft design, composite materials
and variety of technical innovations. Each aircraft was
acquired by one of the Company's wholly owned subsidiaries,
DP Aircraft Guernsey I Limited and DP Aircraft Guernsey
II Limited. The Lessor and Trustee for each aircraft
is DP Aircraft Ireland Limited. Each aircraft was purchased
with the benefit of pre-negotiated leases with Norwegian
Air Shuttle ASA ('Norwegian' or the 'Lessee') each with
a term of twelve years from their respective commencement
dates, and these are successfully producing income for
our investors. I am pleased to report there are no issues
to bring to the attention of Shareholders concerning
the performance of the Lessee.
I recently flew on a Norwegian 787-8 to and from the
U.S.A. and from the U.K. and was impressed with the innovations
and superior environment.
The total shareholder return for this second accounting
period of 4.367 cents per Share is as expected. Full
performance by Norwegian of its lease obligations allowed
the Company to meet its target dividends of 2.25 cents
per Share for the quarters ending December, March and
June 2014. The net asset value per share as at 30 June
2014 was 95.262 cents per Share.
The outlook for the period to 31 December 2014, our first
full accounting period end, is described fully in the
Asset Manager's Report that follows. The Asset Manager
will advise the Directors of any further acquisition
opportunities as they arise.
The Company's annual general meeting ('AGM') is scheduled
for 2 January 2015. As our first full set of audited
financial statements will not be available for Shareholders
at that time we anticipate adjourning the AGM until a
later date in early 2015. It is expected that the normal
laying of audited financial statements at each future
AGM will take place.
I would like to thank our Investors for their support
in the IPO. I and my fellow Directors are available via
our Company Secretary whose details can be found at the
end of this report.
Jon Bridel
Chairman
ASSET MANAGER'S REPORT
Overview and Development - The Aviation Market
Growth in demand for air travel has continued steadily,
with passenger traffic in May 2014 up 6.2 per cent on
the previous year according to the International Air
Transport Association (IATA). On average it is estimated
that passenger traffic will grow by 5.9 per cent in 2014.
Moreover, airlines' financial performance during the
first quarter of 2014 has particularly improved on the
operating level. According to IATA's latest published
expectations, net profits for 2014 will be USD 18.0 billion,
which would be an increase of around 40 per cent on 2013.
Furthermore, it is estimated that 3.3 billion passenger
and goods worth USD 6.8 trillion will be transported
by air this year.
Taking a closer look at the European aviation market,
economic growth within the Eurozone came in below expectations
in the first quarter of 2014 but is expected to accelerate
in the second quarter. In May, the 6.4 per cent increase
in Revenue Passenger Kilometres (RPK) for European airlines
compared to the same month the previous year was above
the global average. In addition, it is anticipated that
net post-tax profits for European carriers may more than
quadruple in 2014.
Crude oil prices remain high, amongst other reasons due
to the conflict in Ukraine, Iraq, Syria and Israel. Given
that fuel represents the largest percentage of operating
costs for an airline, technological improvements and
the availability of a fleet of aircraft bene-fitting
from the latest technology, such as the Dreamliner Boeing
B787, are significant factors for an air carrier as it
seeks to optimise its cost level. Another way to ameliorate
the cost structure is through an increase in labour productivi-ty;
the latter is expected to increase globally by 2.5 per
cent. Despite this, total employment is also expected
to rise, by 2.6 per cent, due to overall global growth
in air traffic. There is also a more structural change
within the industry, with the air transport product becoming
ever more integrated with legacy carriers. As yields
have been under pressure in recent years, airlines have
concentrated on generating ancillary revenues e.g. by
charging for the reservation of seats with additional
legroom. This offers airlines the possibility to sig-nificantly
improve their operating results while still offering
competitive air fares.
The long term outlook for the aviation market and the
demand for new aircraft remain positive. Air travel and
air freight are products for which there are very few
substitutes. According to their current market outlooks,
Boeing (Current Market Out-look 2014-2033) and Airbus
(Global Market Forecast 2013-2032) are of the opinion
that passenger fleets will double by 2033 and 2032 respectively.
Boeing estimates annual growth rates of airline passengers
at 4.2 per cent and of airline traffic (RPK) at 5.0 per
cent on average; while global GDP will grow annually
by only 3.2 per cent on average. This year, IATA ex-pects
the global fleet to increase both in number (by around
600 aircraft) and also slightly by average size of aircraft.
According to the latest Airline Business Confidence Index
(April 2014 survey), 76 per cent of participating CFOs
and Heads of Cargo believe that there will be an increase
in de-mand for air travel over the next 12 months; this
is 4 per cent higher than the comparable figure from
the last survey in January 2014. On top of that, nearly
73 per cent of res-pondents believe that passenger yields
will remain stable or increase over the next 12 months.
Furthermore, the results of the survey in regard to cargo
are positive reflecting significant developments in the
demand environment; and the expectations of the last
survey that cargo volume will increase at rates not seen
since the middle of 2010 remain unchanged.
The Boeing B787 Dreamliner still ranks alongside the
Airbus A350 (which is expected to enter into service
in the fourth quarter this year) as the latest technological,
mid-size wide-body aircraft available in the market.
As at July 1 2014, 162 Boeing B787 had been delivered
to 21 different airlines and more than 20 million passengers
had been commercially transported. With a backlog of
over 860 aircraft in June 2014, and production fully
sold out until 2019, it is clear that the aircraft remains
in high demand. On top of that, Boeing's Current Market
Outlook highlights the fact that the B787-8 offers airlines
the opportunity to open up new markets and new non-stop
routes like London - Austin and Stockholm - Fort Lauderdale.
Since DP Aircraft I Limited took title of its two aircraft
last year (registration numbers EI-LNA and EI-LNB), Norwegian
has met all of its lease obligations in full. The airline
received its seventh B787-8 in June this year and one
more is due at the end of this year. Hence the minimum
target fleet size of five aircraft has been reached,
enabling the carrier to operate a long-haul network on
a fully economically efficient basis. The carrier operates
the aircraft in a two-class configuration seating 32
premium economy plus 259 economy passengers. The airline
reports that it and its customers are highly satisfied
with the aircraft.
Both of the aircraft were physically inspected at Stockholm's
Arlanda Airport in April this year. The inspection was
documented by photographs of the aircraft interior and
exterior. Norwegian's Maintenance Operation Manager,
as well as a Boeing Maintenance control engineer, were
present in case of the need for assistance. (At least
one Boeing representative is always on site during Norwegian's
B787 aircraft downtime at all destinations of the carrier's
long-haul network as part of the Gold Care Agreement
with Boeing.) No areas of concern could be found and
both aircraft appear to be maintained to a very high
standard.
The table overleaf below gives an overview about the
utilisation of airframe and engines. One of LNB's engines,
Engine Serial Number (ESN) 10130, and one of LNA`s engines,
ESN 10118, have undergone an upgrade at Rolls Royce's
Derby facilities. The upgrade extends the maintenance
intervals of the engines and therefore decreases maintenance
costs. LNA's second engine, ESN 10119, and LNB's second
engine, ESN 10135, are currently undergoing this upgrade
as well.
In May, DS Aviation GmbH & Co. KG, the Asset Manager
of DP Aircraft I Limited, and UK-based aircraft lessor,
marketing and management organisation Skytech-AIC formed
a new joint venture. This new company is named DS Skytech
Limited and will provide technical asset management in
regard to the combined owned and managed aircraft portfolio
of the two organisations. DS Skytech will also provide
technical asset management services to the Company from
May 2015 onwards.
DS Skytech is a UK-registered company located near Farnborough
in Hampshire and equally owned by DS Aviation, the aircraft
leasing unit of Dr. Peters Group, and Skytech-AIC. The
objective of this Joint Venture is to provide a new industry
benchmark in management service quality. In this way,
it is envisaged that DP Aircraft I Limited will profit
from the provision of enhanced in-house technical asset
management services.
The Assets- two Boeing DreamlinerB787-8
Airframe LNA LNB
Status
(30 June
2014)
Total June 2014 Total June 2014
Flight hours 4,217:08 250:51 4,034:57 384:57
Cycles 603 26 533 73
Block hours 11.46 8.35 12.93 12.82
Flight hours/
Cycles Ratio 6.99 : 1 9.64 : 1 7.57 : 1 5.27 : 1
Engine Data
(30 June 2014)
Engine Serial
Number 10118 10119 10130 10135
Engine Rolls-Royce Rolls-Royce Rolls-Royce Rolls-Royce
Manufacturer
Engine Type and Trent 1000 Trent 1000 Trent 1000 Trent 1000
Model
Total Time
[flight hours] 3,109:17 4,127:10 1,197:57 3,503:32
Total Cycles 497 594 115 423
LLP Various HPT Various HPT Various HPT Various HPT
Components Components Components Components
Cycles to LLP
Replacement 3,003 2,906 3,385 3,007
Location LNA In Shop LNA In Shop
Norwegian Air Shuttle - Scandinavia's second largest
airline - has been operating since 1993 and transported
more than 20 million passengers in 2013. Since May 2013
the airline has offered long-haul services; currently
operating to six destinations in Thailand and USA from
Scandinavia and London Gatwick. The next route to be
opened will be Copenhagen-Bangkok by end of October this
year. Norwegian attracts both passengers originating
in Scandinavia as well as in the United States and Asia.
As is well known, Asia in particular represents one of
the fastest growing tourism markets for outbound traffic,
offering Norwegian an attractive source for new business.
The 2013 financial year was the seventh consecutive year
in which the airline has made a profit despite some events
which have significantly impacted their results. A drop
in bookings due to the extraordinarily good summer weather
in Scandinavia 2013, higher expenses due to the necessary
wet-lease of Airbus A340 as a result of the late delivery
of the Dreamliner, as well as start-up investments to
establish long-haul operations and its new base in London
Gatwick, put Norwegian's yields and net profit under
pressure, seeing them decrease by 10 per cent and 30
per cent respectively. The carrier estimates the costs
associated with the start-up of the long-haul business
to be around NOK 216 million (around US$ 35.6 million).
Moreover, the consolidated financial statements for 2013
show a net profit of NOK 321,564 million (around US$
53 million), a decrease of 30 per cent on 2012. However,
the load factor only decreased by 1 per cent and EBITDAR
and EBIT (operating profit) increased by 53 per cent
and 140 per cent correspondingly. EBIT in 2013 amounted
to NOK 969,658 million (around US$ 160 million).
Norwegian's revenues in 2013 were around 15.6 NOK billion
(around US$ 2.6 billion) and up by 21 per cent against
2012. Ancillary revenues, which are important in Norwegian's
business strategy, increased by 6 per cent, whereas unit
costs decreased by 6 per cent in the same period. In
the first quarter of 2014, compared to the same period
of the preceding year, the carrier increased its ancillary
revenues by 25 per cent. The 2013 income statement showed
an increase in equity of 13 per cent and in cash of 25
per cent based on an YTD comparison between 2013 and
2012. The equity ratio stood at 18.6 per cent at the
end of 2013.
Norwegian Air Shuttle ASA continues to grow. The carrier
increased its number of passengers in June 2014 by 21
per cent compared to the same month in 2013. Furthermore
available seat kilometres (ASK) and RPK increased by
39 per cent and 45 per cent respectively over the same
period. On top of this, first quarter results for 2014
emphasised growing market shares in all markets of Norwegian
Air Shuttle ASA compared to the same period in 2013.
At Oslo Airport the carrier holds a market share of 39
per cent.
The airline is also optimising its cost structure and
cost levels, and is further developing its automated
booking system as well as introducing self-check-in and
self-baggage drop-off stations. Furthermore, the company
has been restructured to reflect its move towards further
international growth, establishing two fully owned subsidiaries,
each of them operating with their own air operator's
certificate (AOC). Long-haul destinations will be operated
by Norwegian Air International (NAI) with an Irish AOC,
which was granted by Ireland in February of this year.
It is planned that all of Norwegian's B787 aircraft will
eventually be operated by this subsidiary under a sublease
from Norwegian Air Shuttle ASA. The process of obtaining
a licence to operate transatlantic flights from the US
Department of Transportation is ongoing, but the airline
is being supported in this by the European Commission,
which is meeting with its US counterpart this month to
accelerate the process. The European Commission is of
the opinion that the interpretation of Article 17 of
the EU-US Open-Skies Agreement can only lead to the grant
of the licence to NAI. In any event, Norwegian's current
schedule is not dependent upon or affected by this approval
procedure, and the carrier continues to expand its long-haul
network, adding more aircraft with a view to operating
a fleet of ten Dreamliners by 2016. The ideal fleet size
of the carrier would be 20 to 25 aircraft with a growth
rate of 4-5 yearly, but due to ongoing high market demand
for Boeing's Dreamliner B787, Norwegian's requirements
cannot be met.
DS Aviation GmbH & Co. KG
Member of Dr. Peters Group
Stockholmer Allee 53
44269 Dortmund, Germany
DIRECTORS
The current Directors of the Company were appointed on
9 July 2013 and are as follows:
Jonathan (Jon) Bridel, Non- Executive Chairman (49)
Jon is a non-executive chairman or director of various
listed and unlisted investment funds and is resident
in Guernsey. These funds include listings on the premium
segment of the London Stock Exchange and the Official
List of the CISX. He was until 2011 managing director
of Royal Bank of Canada's investment businesses in Guernsey
and Jersey. This role had a strong focus on corporate
governance, oversight, regulatory and technical matters
and risk management. Jon previously worked with Price
Waterhouse Corporate Finance in London and subsequently
served in a number of senior management positions in
London, Australia and Guernsey in corporate and offshore
banking and specialised in credit. He was also chief
financial officer of two private multi-national businesses,
one of which raised private equity. He holds qualifications
from the Institute of Chartered Accountants in England
and Wales where he is a Fellow, the Chartered Institute
of Marketing, the Australian Institute of Company Directors
and an MBA from Durham University. Jon is a Chartered
Marketer and a member of the Chartered Institute of Marketing,
the Institute of Directors and is a Chartered Fellow
of the Chartered Institute for Securities and Investment.
Didier Benaroya, Non- Executive Director (64)
Having previously worked as the founder and senior partner
of the Transportation Group and the managing director
of Paine Webber, Didier has extensive experience in the
transportation industry. He is currently resident in
the UK and is the founder and a director of Numera Limited
and Numera Services Limited, which has advised investors,
lessors, banks, operating lease companies and airlines
on aircraft and airline related transactions (including
leasing, financing and restructuring) since 1995. Didier
holds a BS in Economics, an MS in Mathematics and Applied
Computer Science from the University of Paris, and an
MBA from Northwestern University's Kellog School of Management.
Jeremy Thompson, Non- Executive Director (59)
Jeremy is a Guernsey resident with sector experience
in finance, telecoms, aerospace & defence and oil & gas.
Since 2009 Jeremy has been a consultant to a number of
businesses which includes non-executive directorships
of investment vehicles relating to the BT pension scheme.
He is also a non-executive director of two private equity
funds and of a London listed oil and gas technology fund.
Between 2005 and 2009 he was a director of multiple businesses
within a private equity group. This entailed an active
participation in private, listed and SPV companies. Prior
to that he was chief executive officer of four autonomous
businesses within Cable & Wireless PLC (operating in
both regulated and unregulated markets), and earlier
held MD roles within the Dowty Group. Jeremy currently
serves as chairman of the States of Guernsey Renewable
Energy Team and is a commissioner within the Alderney
Gambling Control Commission and is also a member of the
Guernsey Tax Tribunal panel. Jeremy attended Brunel University
and was awarded an MBA from Cranfield University. He
was an invited member to the UK's senior defence course
(RCDS). Jeremy has been awarded the Institute of Directors'
Certificate and Diploma in Company Direction.
Carol Kilby was appointed as the sole director on formation
of the Company on 5 July 2013 and resigned this appointment
at the Company's launch meeting on 9 July 2013.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
Asset risk
The Company's Assets comprise two Boeing 787-8 aircraft.
The Boeing 787-8 is a newly developed generation of aircraft;
there is currently insufficient experience and data available
to be able to give a complete assessment of the long-term
use and operation of the aircraft; the Company is exposed
to the used aircraft market of the 787-8, which is untested.
Market risk
The airline industry is particularly sensitive to changes
in economic conditions and is highly competitive; risks
affecting the airline industry generally could affect
the ability of Norwegian (or any other lessee) to comply
with its obligations under the Leases (or any subsequent
lease).
There is no guarantee that, upon expiry of the Leases,
the Assets could be sold for an amount that will enable
Shareholders to realise a capital profit on their investment
or to avoid a loss. Costs regarding any future re-leasing
of the assets would depend upon various economic factors
and would be determinable only upon an individual re-leasing
event.
Key personnel risk
The ability of the Company to achieve its investment
objective is significantly dependent upon the expertise
of certain key personnel at DS Aviation; there is no
guarantee that such personnel will be available to provide
services to the Company for the scheduled term of the
Leases or following the termination of one or both Leases.
However, Key Man clauses within the Asset Management
agreement do provide a base line level of protection
against this risk.
Credit risk
Norwegian's stated strategy of providing low-cost long
haul flights is untested and may not be successful; failure
of this strategy, or of any other material part of Norwegian's
business, may adversely affect Norwegian's ability to
comply with its obligations under the Leases.
Any failure by Norwegian to pay any amounts when due
would have an adverse effect on the Group's ability to
comply with its obligations under loan agreements, could
ultimately have an impact on the Company's ability to
pay dividends and could result in the Lenders enforcing
their security and selling the relevant Asset or Assets
on the market potentially negatively impacting the returns
to investors. In mitigation, Norwegian is the second
largest airline in Scandinavia and the third largest
low-cost airline in Europe.
Liquidity risk
In order to finance the purchase of the Assets, the Group
has entered into two separate Loan Agreements pursuant
to which the Group has borrowed an amount of US$159,600,000
in total. Pursuant to the Loan Agreements, the Lenders
are given first ranking security over the Assets. Under
the provisions of each of the Loan Agreements, the Borrowers
are required to comply with loan covenants and undertakings.
A failure to comply with such covenants or undertakings
may result in the relevant Lenders recalling the relevant
Loan. In such circumstances, the Group may be required
to sell the relevant Asset to repay the outstanding relevant
Loan.
More detailed explanations of the above risks can be
found within the Notes to the Unaudited Consolidated
Financial Statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
-- the unaudited Interim Report has been prepared in
accordance with IAS 34 Interim Financial Reporting;
-- the unaudited Interim Report (comprising the Chairman's
Statement, the Asset Manager's Report and the Statement
of Principal Risks and Uncertainties), meets the
requirements of an interim management report, and
includes a fair review of the information required
by:
(a) DTR 4.2.7R of the Disclosure and Transparency
Rules, being an indication of important events that
have occurred during the interim accounting period
from 1 January 2014 to 30 June 2014 and their impact
on the condensed set of financial statements; and
a description of the principal risks and uncertainties
for the remaining six months of the full financial
reporting period; and
(b) DTR 4.2.8R of the Disclosure and Transparency
Rules, being related party transactions that have
taken place during the interim accounting period
from 1 January 2014 to 30 June 2014 and that have
materially affected the financial position or performance
of the entity during that period.
GOING CONCERN
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to
continue in operational existence for the foreseeable
future. The Directors believe the Group is well placed
to manage its business risks successfully with the cooperation
of the Asset Manager. The Group's loan repayments are
hedged into a fixed payment which is more than covered
by the Group's lease rental income. Accordingly, and
in the absence of any material uncertainty that may cast
significant doubt upon the Group's ability to continue
as a going concern, the Directors have adopted the going
concern basis in the preparation of the condensed consolidated
unaudited financial statements.
By order of the Board
Jon Bridel
Chairman
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period 1 January 2014 to 30 June 2014
1 January 5 July 2013
to to
30 June 30 June 2014
2014
Notes US$ US$
Revenue
Lease rental income 4 14,959,499 21,214,901
Expenses
Asset management, general and administrative
expenses 5 (559,081) (1,562,041)
Depreciation of Aircraft 6 (5,425,170) (8,137,755)
----------------------------------- ---------------------------- -------------- ------------------ ------------------
(5,984,251) (9,699,796)
Operating profit 8,975,248 11,515,105
Finance costs 9 (4,041,196) (5,867,026)
Finance income 9 870 3,075
----------------------------------- ---------------------------- -------------- ------------------ ------------------
Net Finance Costs (4,040,326) (5,863,951)
Unrealised foreign exchange gain (2) 9
Profit for the period 4,934,920 5,651,163
----------------------------------------------------------------- -------------- ------------------ ------------------
Other Comprehensive Income
Items that are or may be reclassified
to profit or loss
----------------------------------------------------------------- -------------- ------------------ ------------------
Cash flow hedges - changes in fair
value (3,124,486) (3,774,973)
----------------------------------------------------------------- -------------- ------------------ ------------------
Total Comprehensive Income for the
period 1,810,434 1,876,190
----------------------------------------------------------------- -------------- ------------------ ------------------
US$ US$
Earnings per Share for the period
- Basic and diluted 0.04367 0.05001
----------------------------------------------------------------- -------------- ------------------ ------------------
In arriving at the Total Comprehensive Income for the period,
all amounts above relate to continuing operations.
There is no comparative information.
The notes form part of these financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2014
30 June 2014
Notes US$
NON-CURRENT ASSETS
Aircraft 6 259,463,545
Total Non-Current Assets 259,463,545
CURRENT ASSETS
Cash and cash equivalents 8 4,815,822
Restricted cash 7 7,212,545
Trade and other receivables 10 724
----------------------------------------------------------------------- -------- ------------------ ------------------
Total Current Assets 12,029,091
TOTAL ASSETS 271,492,636
----------------------------------------------------------------------- -------- ------------------ ------------------
EQUITY
Share Capital 11 110,855,221
Hedging Reserve 15 (3,774,973)
Retained Earnings 566,163
----------------------------------------------------------------------- -------- ------------------ ------------------
Total Equity 107,646,411
NON-CURRENT LIABILITIES
Loans and Borrowings 12 140,822,955
Maintenance reserves 12 812,545
Security deposits 12 6,400,000
Derivative instrument liability 15 3,774,973
Total Non-Current Liabilities 151,810,473
CURRENT LIABILITIES
Loans and borrowings 13 10,414,982
Rent received in advance 13 1,160,189
Trade and other payables 13 460,582
----------------------------------------------------------------------- -------- ------------------ ------------------
Total Current Liabilities 12,035,753
TOTAL LIABILITIES 163,846,226
----------------------------------------------------------------------- -------- ------------------ ------------------
TOTAL EQUITY AND LIABILITIES 271,492,636
----------------------------------------------------------------------- -------- ------------------ ------------------
There is no comparative information.
These Financial Statements were approved by the Board of Directors
on 29 August 2014 and signed on its behalf by:
Jon Bridel Jeremy Thompson
Chairman Director
CONSOLIDATED STATEMENT OF CASH FLOWS
for the period 1 January 2014
to 30 June 2014
5 July 2013
to 30 June
2014
US$
OPERATING ACTIVITIES
Profit for the period 5,651,163
Adjusted for:
Depreciation of Aircraft 8,137,755
Amortisation of deferred loans
and borrowings
Finance costs 5,867,026
Facility fee 114,960
Changes in:
Increase/(decrease) in maintenance
reserves 812,545
Increase/(decrease) in security
deposits 6,400,000
Increase/(decrease) in rent
received in advance 1,160,189
Increase/(decrease) in trade
and other payables 460,582
Decrease/(increase) in receivables (724)
NET CASH FLOW FROM OPERATING
ACTIVITIES 28,603,496
-------------------------------------------------------- ----------------------- ------------------ ------------------
INVESTING ACTIVITIES
Purchase of Aircraft (265,041,612)
NET CASH FLOW FROM INVESTING
ACTIVITIES (265,041,612)
-------------------------------------------------------- ----------------------- ------------------ ------------------
FINANCING ACTIVITIES
Dividend paid (5,085,000)
Share issue proceeds 113,000,000
Share issue costs (5,994,469)
New loans and borrowings raised 159,600,000
Loan principal repaid (6,637,631)
Financing costs (5,867,026)
Deferred loans and borrowings
facility costs (1,839,391)
-------------------------------------------------------- ----------------------- ------------------ ------------------
NET CASH FLOW FROM FINANCING
ACTIVITIES 248,466,483
-------------------------------------------------------- ----------------------- ------------------ ------------------
CASH AND CASH EQUIVALENTS -
AT BEGINNING OF PERIOD
Increase in cash and cash equivalents 12,028,367
Restricted cash (7,212,545)
CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,815,822
--------------------------------------------------------------------------------- ------------------ ------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period 1 January 2014 to
30 June 2014
Ordinary Retained Hedging Total
Shares Earnings Reserve
Share Capital
US$ US$ US$ US$
Total Comprehensive Income
for the period
Profit for the period - 5,651,163 - 5,651,163
Other comprehensive income - - (3,774,973) (3,774,973)
---------------------------------------- ------------------- ------------------ ------------------ ------------------
Total comprehensive income - 5,651,163 (3,774,973) 1,876,190
---------------------------------------- ------------------- ------------------ ------------------ ------------------
Issue of ordinary shares 113,000,001 - - 113,000,001
Share issue costs (2,114,781) - - (2,114,781)
Dividends - (5,085,000) - (5,085,000)
---------------------------------------- ------------------- ------------------ ------------------ ------------------
Balance as at 30 June
2014 110,855,220 566,163 (3,774,973) 107,646,410
---------------------------------------- ------------------- ------------------ ------------------ ------------------
There is no comparative information.
The notes form part of these financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the period 1 January 2014 to 30 June 2014
1. GENERAL INFORMATION
The condensed consolidated unaudited financial statements
('financial statements') incorporate the results of the Company
and that of wholly owned subsidiary entities, DP Aircraft
Guernsey I Limited and DP Aircraft Guernsey II Limited (collectively
and hereinafter, the 'Borrowers'), each being a Guernsey
Incorporated company limited by shares and an intermediate
lessor (the 'Lessor'), an Irish incorporated private limited
company.
DP Aircraft I Limited (the 'Company') was incorporated on
5 July 2013 with registered number 56941. The Company is
listed on the Channel Islands Stock Exchange and admitted
to trading on the Specialist Fund Market of the London Stock
Exchange.
The Share Capital of the Company comprises 113,000,000 Ordinary
Preference Shares of no par value and one Subordinated Administrative
Share of no par value.
The Company's investment objective is to obtain income and
capital returns for its Shareholders by acquiring, leasing
and then, when the Board considers it appropriate, selling
aircraft.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Preparation
The financial statements for the period 1 January 2014 to
30 June 2014 have been prepared in order to comply with the
listing rules of the Specialist Fund Market of the London
Stock Exchange and the Channel Islands Stock Exchange whereby
the Company must produce annual and half yearly reports.
These financial statements have been prepared in accordance
with International Accounting Standard 34 (Interim Financial
Reporting) ('IAS 34') issued by the International Accounting
Standards Board ('IASB'), the Disclosure and Transparency
Rules ('DTR's) of the UK's Financial Conduct Authority ('FCA')
and applicable Channel Islands Stock Exchange and Guernsey
law.
The financial statements do not include all of the information
required for full financial statements. As the Company was
only incorporated on 5 July 2013 and these financial statements
cover the second interim accounting period from 1 January
2014 to 30 June 2014, there is no comparative financial information
at the time of the approval of the financial statements.
The Directors are of the opinion that the affairs of the
Group are suitably structured to enable the Going Concern
basis to be adopted in the preparation of these financial
statements. A number of new standards, amendments to standards
and interpretations are effective for annual periods beginning
after 1 January 2014, and have not been applied in preparing
these financial statements. Those which may be relevant to
the Group are set out below. The Group does not plan to adopt
these standards early.
IFRS 9 Financial Instruments (2010), IFRS 9 Financial Instruments
(2009) (continued)
The International Accounting Standards Board (IASB) recently
completed the final element of its comprehensive response
to the financial crisis by issuing IFRS 9 Financial Instruments.
The package of improvements introduced by IFRS 9 includes
a logical model for classification and measurement, a single,
forward-looking 'expected loss' impairment model and a substantially-reformed
approach to hedge accounting. The new Standard will come
into effect on 1 January 2018 with early application permitted.
The key elements of the new Standard are:
Classification and Measurement - IFRS 9 introduces a logical
approach for the classification of financial assets, which
is driven by cash flow characteristics and the business model
in which an asset is held. The new model also results in
a single impairment model being applied to all financial
instruments.
Impairment - As part of IFRS 9, the IASB has introduced a
new, expected-loss impairment model that will require more
timely recognition of expected credit losses. The new Standard
requires entities to account for expected credit losses from
when financial instruments are first recognised and to recognise
full lifetime expected losses on a more timely basis.
Hedge accounting - IFRS 9 introduces a substantially-reformed
model for hedge accounting, with enhanced disclosures about
risk management activity. The new model represents a significant
overhaul of hedge accounting that aligns the accounting treatment
with risk management activities, enabling entities to better
reflect these activities in their financial statements.
Own credit - the Standard also removes the volatility in
profit or loss that was caused by changes in the credit risk
of liabilities elected to be measured at fair value. This
change in accounting means that gains caused by the deterioration
of an entity's own credit risk on such liabilities are no
longer recognised in profit or loss.
The adoption of these standards is expected to have an impact
on the Group's financial assets, but no impact on the Group's
financial liabilities.
b) Basis of measurement
The financial statements have been prepared on the historical
cost basis except for certain financial instruments that
are measured at fair value through profit or loss.
The financial statements are prepared in United States Dollars
(US$), rounded to the nearest Dollar, which is the functional
currency of the Company and its subsidiaries and presentation
currency of the Group.
In preparing these financial statements, the significant
judgements made by the Directors in applying the Company's
accounting policies and the key sources of estimation uncertainty
are disclosed in note 3.
c) Basis of consolidation
The financial statements include the results of the Company
and that of its wholly owned subsidiaries, DP Aircraft Guernsey
I Limited, DP Aircraft Guernsey II Limited and DP Aircraft
Ireland Limited (the 'Group'). Subsidiaries are entities
controlled by the Group. The Group controls an entity when
it is exposed to, or has a right to, variable returns from
its involvement with the entity and has the ability to affect
those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences
until the date on which control ceases.
Intra-group balances and transactions, and any unrealised
income and expenses arising from intra-group transactions,
have been eliminated in preparing the financial statements.
d) Taxation
The Company, DP Aircraft Guernsey I Limited and DP Aircraft
Guernsey II Limited are subject to income tax at the company
standard rate in Guernsey, which is currently zero per cent.
However, tax at rates greater than zero per cent will be
payable on any income received by the Guernsey Companies
from the ownership of lands and buildings in Guernsey or
from certain regulated activities. It is not intended that
the Guernsey Companies make any such investments or engage
in any of the regulated activities in question.
Shareholders of the Company, whether corporates or individuals,
who are not resident in Guernsey for tax purposes, will not
be subject to Guernsey income tax and will receive dividends
without deduction for Guernsey income tax. Individual shareholders
who are resident in Guernsey for tax purposes will be subject
to tax at the individual standard rate of 20 per cent upon
dividends.
DP Aircraft Ireland Limited is subject to resident taxes
in Ireland.
e) Property, plant and equipment - Aircraft (the 'Assets')
Upon delivery, aircraft are initially recognised at cost
plus initial direct costs which may be capitalised under
IAS 16. In accounting for property, plant and equipment,
the Group makes estimates about the expected useful lives,
the fair value of attached leases and the estimated residual
value of aircraft. In estimating useful lives, fair value
of leases and residual value of aircraft, the Group relies
upon actual industry experience, supported by estimates received
from independent appraisers, with the same or similar aircraft
types and considering our anticipated utilisation of the
aircraft.
The Company's policy is to depreciate the Assets over their
remaining lease life (given the intention to sell the Assets
at the end of the lease) to an appraised residual value at
the end of the lease. For the interim report, the directors
determined a residual valuation at the end of the lease based
on 50 per cent of the purchase cost in the absence of any
recent official appraisal. An official appraisal will be
carried out for the valuation to be presented within the
31 December 2014 audited accounts.
In accordance with IAS 16 - Property, Plant and Equipment,
the Group's aircraft that are to be held and used are reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying value of the aircraft may not
be recoverable. An impairment review involves consideration
as to whether the carrying value of an aircraft is not recoverable
and is in excess of its fair value. In such circumstances
a loss is recognised as a write down of the carrying value
of the aircraft to the higher of value in use and fair value
less cost to sell. The review for recoverability has a level
of subjectivity and requires the use of judgement in the
assessment of estimated future cash flows associated with
the use of an item of property, plant and equipment and its
eventual disposition. Future cash flows are assumed to occur
under the prevailing market conditions and assume adequate
time for a sale between a willing buyer and a willing seller.
Expected future lease rates are based upon all relevant information
available, including the existing lease, current contracted
rates for similar aircraft, appraisal data and industry trends.
The future cash in-flows for the assets have been fixed at
a set rate as agreed between the Group, NordLB, as loan provider,
and the Lessee.
f) Financial instruments
A financial instrument is recognised when the Group becomes
a party to the contractual provisions of the instrument.
Regular way purchases and sales of financial assets are accounted
for at trade date, i.e., the date that the Group commits
itself to purchase or sell the asset. Financial liabilities
are derecognised if the Group's obligations, specified in
the contract, expire or are discharged or cancelled. Financial
assets are derecognised if the Group's contractual rights
to the cash flows from the financial assets expire, are extinguished,
or if the Group transfers the financial assets to a third
party and transfers all the risks and rewards of ownership
of the asset, or if the Group does not retain control of
the asset and transfers substantially all the risk and rewards
of ownership of the asset.
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, restricted cash,
loans and borrowings, and trade and other payables. Non-derivative
financial instruments are recognised initially at fair value
plus, for instruments not at fair value through profit and
loss, any directly attributable transaction costs. Subsequent
to initial recognition, non-derivative financial instruments
are measured at amortised cost using the effective interest
rate method, less any impairment losses in the case of financial
assets.
Fair values of non-derivative financial instruments, which
are determined for disclosure purposes, are calculated based
on the present value of future principal and interest cash
flows, discounted at the market rate of interest at the reporting
date.
Derivative financial instruments
The Company invests in interest rate swaps in order to provide
for fixed-rate interest to be payable in respect of the Loans
and borrowings, matching the timing of the scheduled fixed
rental payments under the Leases, interest rate swaps have
been entered into to provide for surety of cash flow and
elimination of volatility.
On initial designation of the derivative as hedging instrument
the Company formally documents the relationship between the
hedging instrument and the hedged item, including the risk
management objective and strategy in undertaking the hedge
transaction and the hedged risk, together with the methods
that will be used to assess the effectiveness of the hedging
relationship. The Company makes an assessment, both at the
inception of the hedge relationship as well as on an ongoing
basis, of whether the hedging instruments are expected to
be highly effective in offsetting the changes in the fair
value of the respective hedged items attributable to the
hedged risk, and whether the actual results of each hedge
are within a range of 80% - 125%.
Fair value movements on the derivative instruments are recorded
as Other comprehensive income in the Statement of Comprehensive
Income; the fair value of the derivative instruments are
recorded as "derivative liability" or "derivative asset"
in the Statement of Financial Position.
Hedging Reserve
The hedging reserve comprises the cumulative net change in
the value of hedging instruments used in cash flow hedges
pending subsequent recognition in profit or loss as the hedged
cash flows affect profit or loss.
Cash and cash equivalents (Loans and Receivables under IAS
39.9)
Cash and cash equivalents comprise cash balances held for
the purpose of meeting short term cash commitments and investments
which are readily convertible to a known amount of cash and
are subject to an insignificant risk of changes in value.
Where investments are categorised as cash equivalents, the
related balance has a maturity of three months or less from
the date of acquisition. Cash and cash equivalents are carried
at amortised cost.
Restricted cash (Loans and Receivables under IAS 39.9)
Restricted cash comprises cash held by the Group but which
is ring-fenced or used as security for specific financing
arrangements, and to which the Group does not have unfettered
access. Restricted cash is measured at amortised cost.
Maintenance Reserve
Maintenance reserves are Lessee contributions to a retention
account held by the Lessor which are calculated by reference
to the budgeted cost of maintenance and overhaul events (the
'supplemental rentals'). They are intended to ensure that
at all times the Lessor holds sufficient funds to cover the
proportionate cost of maintenance and overhaul of the Assets
relating to the life used on the airframe, engines and parts
since new or since the last overhaul. During the term of
the Leases, all maintenance is required to be carried out
at the cost of Norwegian, and maintenance reserves are required
to be released only upon receipt of satisfactory evidence
that the relevant qualifying maintenance or overhaul has
been completed.
Maintenance reserves are recorded on the statement of financial
position during the term of each lease. Reimbursements will
be charged against this liability as qualifying maintenance
work is performed. Maintenance reserves are restricted and
not distributable until, at the end of a lease, the Group
is released from the obligation to make any further reimbursements
in relation to the aircraft, and the remaining balance of
maintenance reserves, if any, is released through profit
or loss.
Security Deposit
Lease contracts require the lessee to pay a security deposit,
either in cash or in the form of a letter of credit. These
deposits are refundable to the lessee upon expiration of
the lease and, where such deposits are received in cash,
they are recorded in the statement of financial position
as a liability. The cash received related to security deposits
is presented as restricted cash in the Statement of Financial
Position.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value and are thereafter measured at amortised cost using
the effective interest rate less any provision for impairment.
Trade and other receivables are discounted when the time
value of money is considered material. A provision for impairment
of trade receivables is recognised when there is objective
evidence the Group will not be able to collect all amounts
due according to the original terms of the receivables. Significant
financial difficulties of the loans and borrowings or, probability
that the loans and borrowings or will enter bankruptcy or
financial reorganisation, and default or delinquency in payments
are considered indicators that the trade receivable is impaired.
Loans and borrowings
Loans and Borrowings are recognised initially at fair value,
net of transaction costs incurred. Loans and Borrowings are
subsequently stated at amortised cost; any difference between
the proceeds (net of transaction costs) and the redemption
value is recognised through profit or loss in the consolidated
statement of comprehensive income over the period of borrowings
using the effective interest rate method. Loans and Borrowings
are classified as current liabilities unless the Group has
an unconditional right to defer settlement of the liability
for at least one year after the reporting date.
Trade and other payables
Trade and other payables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method.
g) Share capital
Shares are classified as equity. Incremental costs directly
attributable to the issue of shares are recognised as a deduction
from equity.
h) Share based payments
For cash settled share-based payment arrangements with the
Asset Manager, which is classified as a non--employee, the
Company re-measures the goods or services from the non--employee
at each measurement date at their fair value. The cost of
the share--based payment exchanged for the goods or services
is recorded in equal amount over the period the services
are provided. (See note 19 Asset Management Agreement).
i) Lease rental income
Leases relating to the Aircraft are classified as operating
leases where the terms of the lease do not transfer substantially
all the risks and rewards of ownership to the lessee. Rental
income from operating leases is recognised on a straight-line
basis over the term of the lease.
The first Asset (for the purpose of this Note the 'First
Lease') is a Boeing 787-8. The manufacturer's serial number
is 35304. The First Lease consists of monthly lease rentals
of US$1,240,501 per month for the lease term. Lease rentals
are due in advance on the 15(th) day of each calendar month.
The second Asset (for the purpose of this Note the 'Second
Lease') is a Boeing 787-8. The manufacturer's serial number
is 35305. The Second Lease consists of monthly lease rentals
of US$1,245,620 per month for the lease term. Lease rentals
are due in advance on the 15(th) day of each calendar month.
j) Expenses
Expenses are accounted for on an accruals basis.
k) Finance costs - Interest payable - Loans
Interest on each Loan is payable in arrears on the last day
of each interest period, which will be one month long (the
'Interest Period'). Interest on each Loan generally accrues
at a floating rate of interest which is calculated using
US LIBOR for the length of the Interest Period and a margin
of 2.6 per cent per annum. If any amount is not paid by the
Group when due, interest will accrue on such amount at the
then current rate applicable to the Loan plus 2.0 per cent
per annum. Interest is calculated on an effective interest
basis.
l) Finance income
Interest income on cash and cash equivalents is accounted for on an
effective interest rate basis.
m) Foreign currency translation
Transactions denominated in foreign currencies are translated
into US$ at the rate of exchange ruling at the date of the
transaction.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated into US$ at the rate
of exchange ruling at the reporting date. Foreign exchange
gains or losses arising on translation are recognised through
profit or loss in the Consolidated Statement of Comprehensive
Income.
n) Initial direct costs
Aircraft:
Initial direct costs incurred during the purchase of an aircraft
which meet the capitalisation criteria of IAS16 are capitalised
to the cost of the aircraft and depreciated in line with
the depreciation policy.
Borrowings:
Initial direct costs related to loans and borrowings are
capitalised, presented net against the loans and borrowings
accrual and amortised to the Statement of Comprehensive Income
over the period of the related loan.
Lease Costs:
Initial direct costs incurred when settling up a lease are
capitalised to Property, Plant and Equipment and amortised
over the lease term.
o) Segmental reporting
The Directors are of the opinion that the Group is engaged
in a single segment of business, being acquiring, leasing
and subsequent selling of Aircraft.
p) Distribution policy
Dividends will be accrued for when declared by the Board
of Directors.
3. SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with
IFRS requires that the Directors make estimates and assumptions
that affect the application of policies and reported amounts
of assets and liabilities, income and expenses. Such estimates
and associated assumptions are generally based on historical
experience and various other factors that are believed to
be reasonable under the circumstances, and form the basis
of making the judgements about attributing values of assets
and liabilities that are not readily apparent from other
sources.
As described in Note 2, the Company will depreciate the Assets
(which are significant) on a straight line basis over the
remaining lease life and taking into consideration the estimated
residual value. In making a judgement regarding these estimates
the Directors will consider previous sales of similar aircraft
and other available aviation information. The Company will
engage three Independent Expert Valuers each year, commencing
December 2014 to provide a valuation of the Assets and will
take into account the average of the three valuations provided.
The Company expects that, in performing their valuations,
the Independent Expert Valuers will have regard to factors
such as the condition of the Assets, the prevailing market
conditions (which may impact on the resale value of the Assets),
the Leases (including the scheduled rental payments and remaining
scheduled term of the Leases) and the creditworthiness of
the Lessee. Accordingly, any early termination of the Leases
may impact on the valuation of the Assets'. The Assets residual
value is based on appraised residual values.
4. LEASE RENTAL INCOME
1 January to 5 July 2013
30 June 2014 to
30 June 2014
US$ US$
Lease rental income from First
Asset ('LNA'):
Earned and received 7,464,349 10,585,610
7,464,349 10,585,610
-------------------------------------------------------- -------------------------------- -------------------
Lease rental income from Second
Asset ('LNB'):
Earned and received 7,495,150 10,629,291
7,495,150 10,629,291
-------------------------------------------------------- -------------------------------- -------------------
Total lease rental income 14,959,499 21,214,901
-------------------------------------------------------- -------------------------------- -------------------
All lease rental income is derived from a single customer in Norway.
OPERATING LEASES
As at 30 June 2014 the contracted cash lease rentals to
be received under non-cancellable operating leases comprised:
Next 12 2 to 5 years After 5 Total
months years
30 June 2014 US$ US$ US$ US$
Boeing 787-8 Serial
No: 35304 14,307,111 59,544,048 88,836,865 162,688,024
Boeing 787-8 Serial
No: 35305 14,366,151 59,789,760 91,496,761 165,652,672
--------------------- ----------- ------------- ------------ ------------
28,673,262 119,333,808 180,333,626 328,340,696
--------------------- ----------- ------------- ------------ ------------
5. ASSET MANAGEMENT, GENERAL AND ADMINISTRATIVE
EXPENSES
1 January to 5 July 2013
30 June 2014 to
30 June 2014
US$ US$
Asset management
fees 249,996 362,897
General 152,511 710,291
Administrative 156,574 488,853
Total operating
expenses 559,081 1,562,041
------------------------- ---------------------------------------------------- -------------------------
6. PROPERTY, PLANT AND EQUIPMENT - AIRCRAFT
Boeing 787-8 Boeing 787-8 Total
Serial No: Serial No:
35304 35305
COST US$ US$ US$
As at 5 July 2013 - - -
Additions-October 2013 133,446,738 134,154,562 267,601,300
As at 31 December 2013 133,446,738 134,154,562 267,601,300
---------------------------------------------------- --------------- ---------------- ---------------
As at 30 June 2014 133,446,738 134,154,562 267,601,300
---------------------------------------------------- --------------- ---------------- ---------------
ACCUMULATED DEPRECIATION
As at 5 July 2013 - - -
---------------------------------------------- --------------- ---------------- ---------------
Charge for the period 1,348,919 1,363,666 2,712,585
---------------------------------------------------- --------------- ---------------- ---------------
As at 31 December 2013 1,348,919 1,363,666 2,712,585
---------------------------------------------------- --------------- ---------------- ---------------
Charge for the period 2,697,839 2,727,331 5,425,170
---------------------------------------------------- --------------- ---------------- ---------------
As at 30 June 2014 4,046,758 4,090,997 8,137,755
CARRYING AMOUNT
---------------------------------------------- --------------- ---------------- ---------------
As at 31 December 2013 132,097,819 132,790,896 264,888,715
---------------------------------------------------- --------------- ---------------- ---------------
As at 30 June 2014 129,399,980 130,063,565 259,463,545
---------------------------------------------------- --------------- ---------------- ---------------
The Boeing 787-8 is a newly developed generation of aircraft
and the Company is exposed to the used aircraft market of
the 787-8 which is untested. Due to the new type of design,
in particular in respect of innovative materials and technology,
there is currently insufficient experience and data available
to be able to give a complete assessment of the long-term
use and operation of the aircraft. There is a risk that the
newly developed materials may be found to be less efficient
or durable than expected and thereby may lead to higher maintenance
and repair costs. Under the terms of the Leases, the cost
of repair and maintenance of the Assets will be borne by Norwegian.
However, upon expiry or termination of the Leases, the cost
of repair and maintenance will fall upon the Group. Therefore
upon expiry of the Leases, the Group may bear higher costs
and the terms of any subsequent leasing arrangement (including
terms for repair, maintenance and insurance costs relative
to those agreed under the Leases) may be adversely affected,
which could reduce the overall distributions paid to the Shareholders.
The estimated residual value of the Boeing 787-8 Assets as
at the end of their respective leases in 2025 will be re-evaluated
by independent experts for the first full financial accounting
period ending on 31 December 2014. The residual value will
depend upon a variety of factors including actual or anticipated
fluctuations in the results of the airline industry, market
perception of the airline industry, general economic and social
and political development, changes in industry conditions,
fuel prices or rates of inflation. For the interim report,
the directors determined a residual valuation at the end of
the lease based on 50 per cent of the purchase cost in absence
of any official appraisal. An official appraisal will be carried
out for the valuation to be presented within the 31 December
2014 audited accounts. The Loans entered into by the Company
to complete the purchase of the aircrafts are cross collateralised.
Each of the First Loan and the Second Loan are secured by
way of security taken over each of the first aircraft and
the second aircraft.
Both aircraft are being operated by a single customer in Norway.
7. RESTRICTED CASH As at 30 June
2014
US$
Security Deposit 6,400,000
NordLB - Maintenance reserve 507,258
NordLB - Maintenance reserve 305,287
7,212,545
---------------------------------------------------------------- --------------- ---------------------
Refer to Note 2 (f) for information
on restriction
8. CASH AND CASH EQUIVALENTS As at 30 June
2014
US$
NordLB 755,152
NordLB 755,152
Royal Bank of Scotland International
- Call 3,305,518
---------------------------------------------------------------- --------------- ---------------------
Total cash and cash equivalents 4,815,822
---------------------------------------------------------------- --------------- ---------------------
9. FINANCE INCOME AND EXPENSE 1 January 5 July 2013
to to
30 June 30 June 2014
2014
US$ US$
Finance income 870 3,075
---------------------------------------------------------------- --------------- ---------------------
870 3,075
Loan interest paid & payable (2,154,700) (3,165,114)
Deferred loan and borrowings facility
costs (76,640) (114,960)
---------------------------------------------------------------- --------------- ---------------------
Total interest at effective interest
rate (2,231,340) (3,280,074)
Swap interest paid & payable (1,809,856) (2,586,952)
---------------------------------------------------------------- --------------- ---------------------
Total finance income and expense (4,040,326) (5,863,951)
---------------------------------------------------------------- --------------- ---------------------
10. TRADE AND OTHER RECEIVABLES As at 30 June
2014
US$
Directors' and officers' insurance prepaid 724
Total receivables & pre-payments 724
--------------------------------------------------------------------------------- ---------------------
11. SHARE CAPITAL As at 30
June 2014
Subordinated Ordinary Total
Administrative Preference
Share Shares
US$ US$ US$
Administrative share issued
on incorporation July 2013 1 - 1
Shares issued pursuant to
the Placing
October 2013 - 113,000,000 113,000,000
Share issue costs - (2,114,781) (2,114,781)
Total share capital as at
30 June 2014 1 110,855,219 110,855,220
--------------------------------------------- ---------------------- ---------------- ------------
Subject to the applicable company law and the Company's
Articles of Incorporation, the Company may issue an unlimited
number of shares of par value and/or no par value or a combination
of both. Notwithstanding this, a maximum number of 113,000,000
Shares were issued pursuant to the Placing Agreement, dated
27 September 2013, between the Company, DS Aviation, JS
Holding (DS Aviation and JS Holding together the 'Asset
Manager Parties') and Canaccord Genuity (the Company's Corporate
Broker) whereby Canaccord Genuity acted as agent for the
Company, to procure subscribers for Shares under the initial
Placing of shares at the Issue Price (the 'Placing').
The Subordinated Administrative Share is held by DS Aviation
GmbH & Co. KG, (the Asset Manager).
Holders of Subordinated Administrative Shares are not entitled
to participate in any dividends and other distributions
of the Company. On a winding up of the Company the holders
of the Subordinated Administrative Shares are entitled to
an amount out of the surplus assets available for distribution
equal to the amount paid up, or credited as paid up, on
such shares after payment of an amount equal to the amount
paid up, or credited as paid up, on the Ordinary Shares
to the Shareholders. Holders of Subordinated Administrative
Shares shall not have the right to receive notice of and
have no right to attend, speak and vote at general meetings
of the Company except if there are no Ordinary Shares in
existence.
Without prejudice to the provisions of the applicable company
law and without prejudice to any rights attached to any
existing shares or class of shares, or the provisions of
the Articles of Incorporation, any share may be issued with
such preferred, deferred or other rights or restrictions,
as the Company may be ordinary resolution direct or, subject
to or in default of any such direction, as the Directors
may determine.
Although not utilised in the reporting accounting period,
the Directors were entitled to issue and allot Ordinary
Shares as well as C Shares immediately following the Placing
for cash or otherwise on a non pre-emptive basis.
The share issue costs include fees payable under the Placing
Agreement, registration, listing and admission fees, settlement
and escrow arrangements, printing, advertising and distribution
costs, legal fees, reporting accountant fees and a commission
of 1.5 per cent of the Placing Proceeds due to Canaccord
Genuity, as Placing Agent.
Refer to Note 15, Liquidity Proposal.
12. NON-CURRENT LIABILITIES As at 30
June 2014
US$
NordLB loan - Borrowings 71,188,631
NordLB loan - Borrowings 71,358,755
Deferred loans and borrowings facility fees (1,724,431)
--------------------------------------------------------------------------------------- ------------
140,822,955
Security deposit refundable to Norwegian (refer
Note 8) 6,400,000
Maintenance reserves 812,545
--------------------------------------------------------------------------------------- ------------
Total non-current liabilities 148,035,550
--------------------------------------------------------------------------------------- ------------
Loans
The Company utilised the Placing Proceeds and the proceeds
of two separate Loans, each of US$79,800,000, to fund the
purchase of the two Boeing 787-8 aircraft.
The loans, each of US$79,800,000 will be fully amortised
with monthly repayments in arrears over approximately twelve
years (until the scheduled expiry of the Lease, as drawdown
of the loans happened after the commencement of the First
Lease). There are no defaults or breaches under the loan
agreements.
Structure and term
The committed term of each Loan is from the drawdown date
until the date falling twelve years from the Delivery Date
of the relevant Asset. Each Loan will be amortised with repayments
every month in arrears over the term in amounts as set out
in a schedule agreed by the Company and the Lenders. Amortisation
will be on an annuity-style (i.e. mortgage-style) basis.
Interest
Interest on each Loan is payable in arrears on the last
day of each interest period, which is one month long (the
"Interest Period"). Interest on each Loan accrues at a floating
rate of interest which is calculated using LIBOR for the
length of the Interest Period and a margin of 2.6 per cent
per annum (the "Loan Margin") ("Loan Floating Rate"). For
the purposes of calculating the Loan Floating Rate, if on
the date when LIBOR is set prior to the beginning of an
Interest Period it is not possible for LIBOR to be determined
by reference to a screen rate at the time that LIBOR is
to be set for that Interest Period (a "Market Disruption
Event"), the amount of interest payable to each affected
Loan Lender during the Interest Period will be the aggregate
of each Lender's cost of funds during that monthly period
and the Loan Margin. If any amount is not paid by the Borrower
when due under the Loan Transaction Documents, interest
will accrue on such amount at the then current rate applicable
to the Loan plus 2.0 per cent per annum. The Group has entered
into ISDA-standard hedging arrangement with Norddeutsche
Landesbank Girozentrale as hedging provider in connection
with the Loans, in order to provide for a fixed interest
rate of 5.06% and 5.08% to be payable in respect of the
Loans throughout the whole term.
Cross Collateralisation
The Loans entered into by the Company to complete the purchase
of the Assets are cross collateralised. Each of the First
Loan and the Second Loan is secured by way of security taken
over each of the First Asset and the Second Asset. In the
event of a default on either the First Loan or the Second
Loan, the lenders may enforce security over both Assets.
This means that a default on one Loan places both of the
Assets at risk. Following the enforcement of security and
sale of the aircraft, the remaining proceeds, if any, may
be substantially lower than investors' initial investment
in the Company.
13. AMOUNTS PAYABLE WITHIN ONE YEAR As at 30
June 2014
US$
NordLB loan payable 5,259,218
NordLB loan payable 5,155,764
--------------------------------------------------------------------------------------- ------------
Total loans and borrowings 10,414,982
Rent received in advance 1,160,189
Total lease rental received in advance 1,160,189
Interest payable 291,538
Accruals and other payables 169,044
Total trade and other payables 460,582
Total amounts payable within one year 12,035,753
--------------------------------------------------------------------------------------- ------------
14. FINANCIAL INSTRUMENTS & RISK MANAGEMENT
The primary risks arising from the Company's financial instruments
are Capital management, Credit risk, Market risk and Liquidity
risk. The principal nature of such risks is summarised below.
The Group's main financial instruments comprise two separate
loan agreements and interest rate swaps.
Capital Management - Going Concern
The capital managed by the Company comprises the ordinary
and subordinated administrative shares issued on the initial
Placing of the Company. The Company is not subject to externally
imposed capital requirements.
The lease rental income and supplemental rental income have
been set by the Group at an aggregate absolute income stream
in excess of the Group's expenses, distributions and financing
costs. The Directors are of the opinion that the affairs
of the Group are suitably structured to enable the Going
Concern basis to be adopted in the preparation of these financial
statements.
Income distributions are made quarterly, subject to compliance
with Applicable Law and regulations, in February, May, August
and November of each year. The Company aims to make a distribution
to investors of 2.25 cents per Share per quarter (amounting
to a yearly distribution of 9.0 per cent. based on the initial
placing price of US$1.00 per Share). There can be no guarantee
that dividends will be paid to Shareholders and, if dividends
are paid, as to the timing and amount of any such dividend.
Any distribution of dividend to Shareholders will be subject
always to compliance with the Companies Laws.
Before recommending any dividend, the Board will consider
the financial position of the Company and the impact on such
position of paying the proposed dividend. Dividends are declared
and paid in US Dollars.
Credit Risk
Credit risk is the risk that a significant counterparty will
default on its contractual obligations.
The Group's most significant counterparties are Norwegian
as lessee and provider of income and NordLB as provider of
loans and borrowings, cash and restricted cash (all held
at NordLB). The Lessee does not maintain a credit rating.
The credit rating of NordLB is Aa1.
During the term of the Leases, the returns on an investment
in the Shares will depend in large part on the lease rentals
received from Norwegian under the Leases. A failure by Norwegian
to comply with its payment obligations under the Leases may
lead to a reduction in distributions paid on the Shares and/or
in the value of the Shares and have an adverse effect on
the Company. In advance of the commencement of the Lease
terms under the Leases,
Norwegian have paid to the Group a security deposit in respect
of each Asset. However, the security deposits do not cover
the full value of the Group's obligations pursuant to the
loan agreements in the event of termination of the Leases
or default by Norwegian.
The semi-annual Shareholder Report issued during July 2014
highlighted the key financial data from Norwegian's 2013
financial statements. Revenues of Norwegian Air Shuttle ASA
in 2013 were around 15.6 NOK billion (around US$ 2.6 billion)
and up by 21 per cent against 2012. Ancillary revenues, which
are important in Norwegian's business strategy, increased
by 6 per cent, whereas unit costs decreased by 6 per cent
in the same period. In the first quarter of 2014, compared
to the same period of the precedent year, the carrier increased
its ancillary revenues by 25 per cent. Norwegian remains
Scandinavia's second largest airline.
The amounts due to be received under the operating leases
are analysed in Note 4.
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at the
reporting date was:
Financial assets As at 30 June
2014
Restricted cash 7,212,545
Trade and other receivables 724
Cash and cash equivalents 4,815,822
-------------------------------------------------------------------------------------- ------------------
Total cash and cash equivalents 12,029,091
-------------------------------------------------------------------------------------- ------------------
Financial liabilities
The Directors have in place a cash flow hedge in respect
of the loans from NordLB. The Group has entered into ISDA-standard
hedging arrangements with NordLB as hedging provider in connection
with each loan, in order to provide for fixed-rate interest
for 12 years to be payable in respect of each loan, funded
by the fixed rental payments under the corresponding lease.
As at 30 June 2014, the present value movement of the interest
rate swaps was a loss of US$3,774,973 as calculated and presented
by NordLB.
Market Risk
Interest Rate Risk
Interest rate risk arises on the Group's various interest
bearing assets and liabilities from changes in the general
economic conditions of the market from time to time. The
Directors have sought to mitigate this risk by swapping the
interest on each loan from a floating rate of interest which
is calculated using LIBOR for the length of the Interest
Period and a margin of 2.6 per cent per annum to a fixed
rate of 5.06 and 5.08 per cent for the duration of each loan.
The Group has entered into ISDA-standard hedging arrangements
with NordLB as hedging provider in connection with each loan,
in order to provide for fixed-rate interest for 12 years
to be payable in respect of each loan, funded by the fixed
rental payments under the corresponding lease.
Fixed rate Variable Non-interest Total
instruments rate instruments bearing
instruments
US$ US$ US$ US$
Restricted cash - - 7,212,545 7,212,545
Trade and other
receivables - - 724 724
Cash & cash
equivalent - 4,815,822 - 4,815,822
- 4,815,822 7,213,269 12,029,091
----------------- ------------------ ----------------------- ----------------------- -----------------
Accrued expenses - - (460,582) (460,582)
Effect of
interest
rate swap - (3,774,973) - (3,774,973)
Notional
interest
rate swap (152,962,368) - - (152,962,368
NordLB loans - (151,237,937) - (151,237,937)
(152,962,368) (155,012,910) (460,582) (308,435,860)
----------------- ------------------ ----------------------- ----------------------- -----------------
Total interest
rate
sensitivity gap (152,962,368) (150,197,088)
----------------- ------------------ -----------------------
Foreign Currency Risk
The foreign currency risk to the Group is not significant as its
cash flows are predominantly in US$ which is the functional reporting
currency of each entity within the Group and the presentation
currency of the Group. However there are expenses paid in Sterling
and Euro's.
Liquidity Risk Management
In the event that the Leases are terminated as a result of a default
by Norwegian, there is a risk that the Company will not be able
to remarket the Asset successfully within the remarketing period
specified in the Loan Agreements and that (after using the security
deposits and the Liquidity Reserve) the Company will not have
sufficient liquidity to comply with its obligations under the
Loan Agreements. This may lead to a suspension in distributions
paid on the Shares and/or a reduction in the value of the Shares
and have an adverse effect on the Company and could ultimately
result in the Lenders enforcing their security and selling the
relevant Asset or Assets on the market. There can be no guarantee
that the Company will be able to re-lease the Asset on terms as
favourable as the Leases, which may have an adverse effect on
the Company and its ability to meet its investment objective and
its dividend target. The price paid by the Company for the Assets
partly reflects the terms of the Leases to which the Assets are
subject. Accordingly, were either or both of the Assets to be
re-leased on less favourable terms, this may have an adverse effect
on the value of the Assets and therefore the Share price.
Liquidity Reserve
In accordance with the Company's financial model, in addition
to paying the proposed dividends to Shareholders, the Company
intends to establish and to build up a liquidity reserve (the
"Liquidity Reserve"). The Liquidity Reserve will be accumulated
from surplus cash flow from the Leases after payment of the Group's
costs and after allowing for proposed dividends. The Liquidity
Reserve is intended to fund contingencies and to be available
to the Company, in addition to the security deposits paid by Norwegian
under the Leases, to aid the Company to meet its Loan Repayments
in the event of a default by Norwegian and/or to meet costs incurred
in connection with a subsequent remarketing of the Assets. In
the event of a Loan Event of Default the accumulation of surplus
Lease Rental by the Company in the Liquidity Reserve will be suspended.
In the event of a re-lease of the Assets, the Company may maintain
and/or accumulate a Liquidity Reserve in an amount which is considered
appropriate by the Directors, having regard to the available security
deposits and the other circumstances applicable at such time.
Any unused Liquidity Reserve ultimately will be available for
distribution to Shareholders following the disposal of the Assets
and after all Loan obligations have been satisfied.
Liquidity Proposal
Although the Company does not have a fixed life, the Articles
require that the Directors convene a Liquidity Proposal Meeting
to be held no later than 31 March 2025 at which a Liquidity Proposal
in the form of an ordinary resolution will be put forward proposing
that the Company should proceed to an orderly wind-up at the end
of the term of the Leases. In the event the Liquidity Proposal
is not passed, the Directors will consider alternatives for the
Company and shall propose such alternatives at a general meeting
of the Shareholders, including re-leasing the Assets, or selling
the Assets and reinvesting the capital received from the sale
of the Assets in other aircraft.
Next 12 2 to 5 After 5 Total
months years years
US$ US$ US$ US$
Operating lease income
(refer note 4) 28,673,262 119,333,808 180,333,626 328,340,696
NordLB loan Borrowings
& interest (14,564,962) (60,839,061) (103,117,944) (178,521,967)
Interest rate swaps (3,470,559) (11,303,022) (7,339,299) (22,112,880)
Maintenance Reserves - - (812,545) (812,545)
Security Deposits - - (6,400,000) (6,400,000)
Trade and other payables (460,582) - - (460,582)
-------------------------------- ---------------- -------------------- ------------------- -----------------
Excess liquidity
prior to ongoing
expenses and distributions 10,177,159 47,191,725 62,663,838 120,032,722
-------------------------------- ---------------- -------------------- ------------------- -----------------
Other
In addition to the loans, the Company may from time to time use borrowings.
To this end the Company may arrange an overdraft facility for efficient
cash management. The Directors intend to restrict borrowings other
than the Loans to an amount not exceeding 15 per cent. of the NAV
of the Company at the time of drawdown. Borrowing facilities will
only be drawn down with the approval of Directors on a case by case
basis. The Directors may also draw down on the overdraft facility
for extraordinary expenses determined by them, on the advice of DS
Aviation, to be necessary to safeguard the overall investment objective.
With the exception of the loans, the Directors have no intention,
as at the date of this report, to use such borrowings for structural
investment purposes.
15. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The fair value measurements for the loans and borrowings have been
categorised as level 3 fair values based on the inputs to the valuation
technique used (i.e. the inputs are not based on observable market
data). The Directors have determined that the fair value of all of
the financial assets and liabilities not measured at fair value approximate
their carrying value at the balance sheet date due to their short
term nature and with the exception of loans and borrowings as stated
above, the remaining assets and liabilities are considered to be
within level 2 of the fair value hierarchy.
A number of the Group's accounting policies and disclosures require
the determination of fair value, for financial and non-financial
assets and liabilities. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair values
have been determined for measurement and / or disclosure purposes
based on the following methods. Where applicable, further information
about the assumptions made in determining fair values is disclosed
in note 2.
The Company's derivative, the interest rate swap with NordLB, is
valued by NordLB as calculation agent. Loans from NordLB are at variable
interest rates based on a repayment schedule as agreed between the
Group and NordLB. The Directors confirm that the Lessee is meeting
payment of lease rentals without impairment, enabling the Company
to meet its loan repayment obligations and dividend distributions.
The Directors believe it is appropriate to fair value the Loans at
par.
Cash Flow Hedging
A floating rate of interest applies to the loans as set out in each
respective Loan Agreement. However, the Group has entered into ISDA-standard
hedging arrangements with Nord LB as hedging provider in connection
with the Loans, in order to provide for fixed-rate interest to be
payable in respect of the Loans throughout the whole term. The rate
of the interest rate swap was set at the time of the draw-down of
the loans. The following table indicates the periods in which the
cash flows associated with the cash flow hedges are expected to occur
and impact profit or loss along with the carrying amounts of the
related hedging instruments.
Next 12 months 2 to 5 years After 5 years Total
US$ US$ US$ US$
Interest rate
swaps (3,470,559) (11,303,022) (7,339,299) (22,112,880)
--------------- --------------- ------------- -------------- -------------
16. INVESTMENT IN SUBSIDIARIES
The Company is the ultimate controlling party of the following companies,
whose results are consolidated in these financial statements:
Company Company Country of Date of %
registration incorporation incorporation Ownership
number
DP Aircraft
Guernsey I
Limited 56958 Guernsey 10 July 2013 100
DP Aircraft
Guernsey II
Limited 56959 Guernsey 10 July 2013 100
DP Aircraft
Ireland Limited 529455 Ireland 27 June 2013 100
17. OPERATING SEGMENT
The Company is engaged in one operating segment, being acquiring,
leasing and subsequent selling of Aircraft.
The geographical location of the Assets of the Group is Ireland,
where the Assets are registered.
The income arising from the lease of the Assets originates wholly
from one lessee in Norway.
18. RELATED PARTY TRANSACTIONS
The key management personnel (deemed to be the non-executive Directors,
Jon Bridel, Didier Benaroya and Jeremy Thompson), are remunerated
for their services at a fee for each Director of GBP20,000 per annum
(GBP25,000 for the Chairman) in relation to the Company plus GBP5,000
per annum for acting as director in relation to each of the Borrowers.
In addition the two directors of the Lessor who are based in Ireland
will receive a fee of EUR6,000 in aggregate per annum and the Director
who sits on the board of the Lessor will receive a fee of GBP10,000
per annum. For the period from inception to 30 June 2014 the Directors'
remuneration totalled US$166,715. For the period 1 January 2014 to
30 June 2014 the Directors' remuneration totalled US$134,357 with
US$45,587 outstanding to be paid. Expenses were refunded in the amount
of US$5,451. As at the date of this report Mr Bridel, jointly with
his wife, held 7,500 Ordinary Shares and Mr J Thompson held 15,000
Ordinary Shares.
19. MATERIAL CONTRACTS
Asset Management Agreement
The Asset Management Agreement, dated 19 September 2013,
between the Company and DS Aviation, whereby DS Aviation
has agreed to:
(a) maintain ongoing communication with the lessee, the
financing parties, the airframe and engine manufacturers
and provide the Company with reports in relation thereto,
(b) undertake regular inspections of the Assets,
(c) monitor the lessee's performance of all the obligations
specified in the relevant lease agreement (in particular,
obligations as regards the insurance of the Assets) and
provide information and advice in the event of default,
(d) support the Company in any sale or releasing activity
in respect of the Assets and
(e)provide input into the Company's reports, announcements
and shareholder communications.
The Asset Management Agreement shall continue until 31 October
2027, subject to earlier termination (i) by either party
on immediate notice in certain circumstances including a
material un-remedied breach by, or the insolvency of, the
other party; (ii) by the Company in relation to any Asset
on one month's prior written notice if a sale of the Asset
has been completed or a Total Loss has occurred in relation
to the Asset; and (iii) by the Company if DS Aviation is
unable to comply with certain 'key person' provisions.
The Asset Management Agreement contains a 'key person' provision
with the aim of ensuring the Company retains the benefit
of the expertise of Christian Mailly or a suitable replacement
for the duration of the agreement.
The Company will pay DS Aviation a management fee of US$250,000
per annum per Asset (inflating annually from 2014 onwards,
at 2.5 per cent. per annum), payable monthly in arrears
commencing from the acquisition of each relevant Asset.
Upon the sale or Total Loss of an Asset, the Company will
pay DS Aviation a percentage of the total return per Share
attributable to that Asset prior to the date of sale or
Total Loss. The percentage payable to DS Aviation will vary
depending on the level of the total return per Share attributable
to that Asset expressed as a percentage of the Issue Price
and will range from nil (if the total return per Share attributable
to the Asset is less than 200 per cent.) to 3 per cent if
the total return per Share attributable to the Asset equals
or exceeds 300 per cent.
The Disposal Fee will be adjusted in the event that an Asset
is disposed of before the end of the scheduled term of the
relevant Lease, in accordance with an agreed mechanism.
Administration Agreement - Dexion Capital (Guernsey) Limited
(the 'Administrator')
The Administration Agreement, dated 19 September 2013, between
the Company and the Administrator pursuant to which the
Company has appointed the Administrator to act as
administrator and secretary of the Company and its Guernsey
incorporated subsidiaries. The Administration Agreement
is for a minimum period of one year from Admission (unless
terminated on notice on the occurrence of certain events)
and thereafter may be terminated by either party on not
less than 90 days' notice. The Administrator is entitled
to fees as set out below. The Administrator is entitled
to an establishment fee of GBP12,500 for the Company; a
secretarial fee of GBP25,000 per annum assuming quarterly
Board meetings, plus any committee meetings as described
in the prospectus and an annual general meeting each year,
plus an additional GBP1,640 for each ad hoc Board meeting
held and a further GBP1,640 for each board meeting of each
wholly-owned subsidiary that the Company incorporates (other
than the Lessor); and a financial reporting fee for the
Company on a group consolidated basis in respect of the
preparation and approval of audited annual reports, half
year reports and interim management statements, in the amount
of GBP16,000 per annum and an initial set up fee of GBP1,000
in respect of the first set of accounts.
In addition to the above remuneration the Administrator
is also entitled to an administration fee in the minimum
amount of GBP1,250 per month and such other remuneration
as shall be agreed between the Administrator and the Board
from time to time, (including activity fees as previously
agreed with the Company or time cost charges which shall
be levied by the Administrator for any other matter not
already included under the Administration Agreement). The
Company has covenanted in the Administration Agreement to
indemnify and keep indemnified the Administrator from and
against all actions, proceedings, claims, demands, (including
reasonable and properly incurred costs and expenses incidental
thereto) whatsoever made against or incurred by the Administrator
arising out of or in connection with the proper performance
by the Administrator of its duties under the Administration
Agreement save where any action, proceeding, claim, demand,
cost or expense results from or arises out of a breach of
the Administration Agreement (save where due to a force
majeure event) or breach of applicable laws or the fraud,
negligence, wilful default or bad faith of the Administrator.
Technical Services Agreement - GerMic Aviation Safety and
Regulatory Consultants Ltd (the 'Technical Services Consultant)
The Technical Services Agreement dated 25 July 2013, between
the Group and the Technical Services Consultant pursuant
to which the Lessor has appointed the Technical Services
Consultant to provide certain technical services in respect
of the Assets, including:
(i) assistance with registration and certification of the
Assets with the Irish Aviation Authority;
ii) attendance at the Irish Aviation Authority's inspection
of the Assets; and
(iii) assistance with ongoing compliance responsibilities
in respect of the Assets.
The Technical Services Agreement may be terminated by either
the Group or the Technical Services Consultant giving to
the other at any time 30 days' written notice. The Technical
Services Consultant will be entitled to a fee of EUR600
per day in respect of services (i) and (ii) (as
above) requested by the Group and separately a fee of EUR2,000
per month in respect of service (iii) as above, performed
on the ongoing basis. Additional vehicle costs and fees
payable to the Irish Aviation Authority will also be the
responsibility of the Group.
Irish Corporate Services Agreement
The Irish Corporate Services Agreement dated 23 September
2013, between the Group and Alter Domus (Ireland) Limited
("Alter Domus") pursuant to which the Lessor has appointed
Alter Domus to provide certain corporate and administrative
services to the Lessor in Ireland. Alter Domus is entitled
to a fee of EUR4,000 per annum in respect of services save
for the first year of services for which it will receive
a fee of EUR5,500. The agreement is terminable on 30 days'
notice by either party or on immediate notice in certain
circumstances, including insolvency or breach of agreement.
By a separate deed of indemnity, the Company has agreed
to indemnify Alter Domus to the extent permitted by law
in respect of losses suffered by Alter Domus in the performance
of its services. Such indemnity will not apply where Alter
Domus has acted dishonestly or been guilty of fraud, gross
negligence or wilful misconduct in the matter or issue in
respect of which it seeks indemnity.
Directors' Service Agreement - DP Aircraft Ireland Limited
The Directors' Service Agreement in respect of DP Aircraft
Ireland Limited, dated 23 September 2013, between Marching
Star Limited (the "Agent") and the Group pursuant to which
the Agent nominated Justin Walsh and Aileen McElroy (the
"Irish Directors") to be appointed and provide their services
as directors of the Lessor with effect from 8 July 2013.
The Irish Directors are responsible for the management of
the Lessor with all other directors of the Lessor, and the
Agent is responsible for the permanent activity of the Irish
Directors. In the event the Irish Directors are incapable
of performing their duties for a period of 15 days, the
Agent has the obligation to propose a new Irish Director
to the Lessor and failure to propose such director will
give the Lessor a right to terminate the agreement. The
Agent will be entitled to a fee of EUR6,000 payable annually
plus VAT and the Lessor will reimburse the reasonable travelling
expenses and all other reasonable expenses incurred by the
Irish Directors in the performance of their duties. For
any time spent by the Irish Directors in excess of four
standard board meetings per annum, the Lessor will be invoiced
separately on a time-spent basis at an hourly rate of EUR200
per hour plus VAT and disbursements (which may vary from
time to time) depending upon the level of qualification
of the staff involved.
The Directors' Service Agreement may be terminated (a) by
either party in the event of (i) un-remedied breach of the
agreement or (ii) with immediate effect by written notification;
or (b) automatically in the specific circumstances set out
in the agreement, including (but not limited to) the resignation
of the Irish Directors. By a separate deed of indemnity,
the Company has agreed to indemnify the Irish Directors
to the extent permitted by law in respect of losses suffered
by them in the performance of their duties. Such indemnity
will not apply where the relevant Irish Director has acted
dishonestly or been guilty of fraud, gross negligence or
wilful misconduct in the matter or issue in respect of which
he seeks indemnity.
Placing Agreement
The Placing Agreement, dated 27 September 2013, between
the Company, DS Aviation, JS Holding (DS Aviation and JS
Holding together the "Asset Manager Parties") and Canaccord
Genuity whereby Canaccord Genuity agreed, as agent for the
Company, to use its reasonable endeavours to procure subscribers
for Shares under the Placing at the Issue Price. Canaccord
Genuity was not under an obligation to purchase Shares in
the event that it was unable to procure subscribers for
Shares. For its services in connection with the Placing,
Canaccord Genuity was entitled to fees and a placing commission
as described below. The Company reimbursed Canaccord Genuity
for all costs and expenses incurred by it in connection
with the Placing and paid Canaccord Genuity's reasonable
legal fees. In consideration for Canaccord Genuity acting
as placing agent in the Placing the Company agreed and paid
Canaccord Genuity, as at Admission, a placing commission
equal to 1.5 per cent. of the Placing Proceeds. All fees,
expenses and commissions payable to Canaccord Genuity by
the Company were paid to Canaccord Genuity together with
any VAT payable in respect of such fees, expenses or commissions.
Canaccord Genuity was also entitled to its share of the
Arrangement Fee which, in the case of Canaccord Genuity,
amounted to 0.3 per cent. of the Gross Proceeds.
20. SUBSEQUENT EVENTS
On 21 July 2014, the Company declared an interim dividend,
in respect of the period starting 1 April 2014 and ended
30 June 2014, of 2.25 cents per Share, to holders of Shares
on the register at 1 August 2014.
The ex-dividend date was 30 July 2014, with payment on 15
August 2014.
21. APPROVAL OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS ('Financial Statements')
The Financial Statements were approved by the Board and
authorised for release on 29 August 2014.
COMPANY INFORMATION
Registered Office 1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Channel Islands
Asset Manager DS Aviation GmbH & Co. KG
Stockholmer Allee 53
44269 Dortmund
Germany
Solicitors to the Company Norton Rose Fulbright LLP
(as to English law) 3 More London Riverside
London
SE1 2AQ
United Kingdom
Advocates to the Company Ogier
(as to Guernsey law) Ogier House
St Julian's Avenue St Peter Port
Guernsey
GY1 1WA
Channel Islands
Auditor KPMG, Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
Administrator and Company Secretary Dexion Capital (Guernsey) Limited
1 Le Truchot
St Peter Port
Guernsey
GY1 1WD
Channel Islands
Corporate Broker Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UKSVRSSAWUAR
Dp Aircraft I (LSE:DPA)
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