TIDMDPA
RNS Number : 9040L
DP Aircraft I Limited
30 April 2015
DP Aircraft I Limited
Proposed Placing and publication of Shareholder Circular
30 April 2015
Introduction
The Board of Directors of DP Aircraft I Limited (the "Company")
is pleased to announce that the Company has today published a
shareholder circular setting out the key terms of a proposed
US$106.8m placing of Ordinary Shares (the "Placing") to finance the
acquisition of additional aircraft and convening an extraordinary
general meeting (the "Extraordinary General Meeting") at which
approval will be sought from Shareholders for, inter alia, that
acquisition.
A prospectus will be published by the Company in due course
setting out the proposals in full, and detailing how to make an
application to subscribe for New Shares in the Placing.
The Acquisition
The Acquisition will involve the purchase of two Boeing 787-8
aircraft from AerCap Ireland Capital Limited, a company within the
AerCap Group, one of the largest aircraft leasing entities in the
world. The aircraft, one of which was delivered in October of last
year and the other in December of last year, are currently leased
to Thai Airways International Public Company Limited and as part of
the proposed purchase, the benefit of those leases would be novated
to a new wholly-owned subsidiary of the Company (the "New
Lessor").
The key features of the Acquisition are as follows:
(a) The New Assets - Boeing 787-8s
The New Assets will consist of two Boeing 787-8s, which are to
be purchased by the Company following Admission pursuant to the New
Sale Agreements.
The Boeing 787-8 is a long-range, mid-size widebody, twin engine
jet airliner with an innovative design, offering lower fuel
consumption than comparable aircraft. The customer list of the
Boeing 787-8 amounts to 42 operators (total customer number for the
787-family: 58). It includes a wide range of different airline
business models such as full service network carriers (e.g. Air
France-KLM, American Airlines, British Airways, Etihad Airways,
Qantas, Singapore Airlines, China Southern and ANA), charter and
low cost carriers (e.g. Air Europa, Lion Air, Scoot, Tui Travel)
and smaller airlines (e.g. Air Niugini, Royal Air Maroc, Royal
Jordanian). In addition to this, leading leasing companies such as
AerCap and CIT have also ordered the 787-8.
(b) The Counterparty - Thai Airways
Thai Airways is the lessee of the New Assets pursuant to the
terms of the New Leases. Thai is the national carrier of the
Kingdom of Thailand. It operates full service domestic, regional
and intercontinental flights radiating from its home base in
Bangkok to key destinations around the world and within Thailand.
The company's paid up capital amounts to Baht 21.82 billion
(equivalent to approximately US$664.1 million based on the Baht/US$
exchange rate as at 29 April 2015) and is 53.16 per cent. owned by
the Ministry of Finance, the Thai Government. The credit rating of
the Thai Government is Baa1 (Moody's).
Thai is listed on the stock exchange of Thailand.
Thai's revenue for the 2013 fiscal year was Baht 207.71 billion
(equivalent to approximately US$6.32
billion based on the Baht/US$ exchange rate as at 29 April
2015), a slight decrease on the previous year. In 2014, Thai's
revenues amounted to Baht 203.88 billion (equivalent to
approximately US$6.20 billion based on the Baht/US$ exchange rate
as at 29 April 2015), the decrease being mainly caused by political
unrest in the first half of 2014.
(c) The New Leases
Thai and ILFC UK Limited (the "Current Lessor") have entered
into the New Leases in respect of the New Assets and prior to
Admission the New Leases will be novated to the New Lessor. The
Current
Lessor can assign the benefit of the New Leases without the
consent of Thai, subject to the satisfaction of certain standard
conditions.
Each novated Thai Lease will be on substantially similar terms
to the Company's existing leases with
Norwegian Air and will provide for monthly Lease Rentals
(composed of US Dollar Lease Rentals). It is expected that the US
Dollar Lease Rentals will be for an amount that will exceed the
anticipated principal and interest payments under the relevant New
Loan, as well as allowing for the payment of
all other running costs and the target dividend return. The
novated Thai Leases will contain various other provisions,
including provisions as to insurance of the New Assets and their
maintenance. The
security interests created over the New Assets are given as
security for both of the New Loans on a
cross-collateralised basis, increasing the risk of a reduction
in, or a suspension of, dividends in the event of a default under
either New Loan Agreement.
(d) Debt and equity funding
The Acquisition and its associated costs will be funded through
a combination of debt (US$156.4 million) and equity (US$106.8
million). The debt, which will comprise two loans to be advanced to
two new wholly-owned subsidiaries of the Company (being the Third
Borrower and the Fourth Borrower) (the "New Loans"), will be
amortised on an annuity-style basis with repayments every month,
with a view to repaying the New Loans in full by the time that the
New Leases expire in 2026.
(i) Debt funding
Debt funding for the full required sum has been agreed in
principle with two reputable banks experienced in aviation finance
(together, the "Lenders"), and it is intended that two new loan
agreements will be signed up with the Lenders prior to Admission
(the "New Loan Agreements"). The New Loan Agreements will contain
standard market terms and conditions and will be comparable to the
existing loan agreements entered into in October 2013 in connection
with the acquisition of the Existing Assets which are leased to
Norwegian (the "Existing Loan Agreements"). Accordingly,
-- Interest on each New Loan will be payable in arrears on a monthly basis;
-- Prepayment of the New Loans in part or in full will be
permitted (subject to the provision of
prior written notice and may be subject to breakage costs);
and
-- Events of default (which will allow the Lenders to demand immediate repayment of the New
Loans) will include failure to pay principal, interest or other
amounts due; insolvency of the
borrower; any representation made by the borrower and/or the
lessor in a loan transaction
document being untrue in any material respect and having a
material adverse effect upon
the Lenders' position.
The New Loan Agreements will contain cross-default clauses, so
that an event of default under one New Loan Agreement will
automatically trigger an event of default under the other. There
will, however, be no cross default provisions as between the two
New Loan Agreements and the two Existing Loan Agreements. Interest
on each of the New Loans will be fixed under the New Loan
Agreements.
(ii) Equity funding
The Company will seek to raise equity monies of US$106.8 million
through an issue of New Shares pursuant to the Placing, with the
basis of allocation of New Shares under the Placing to be
determined by the Company's broker, Canaccord Genuity. If
commitments under the Placing exceed the maximum number of New
Shares available, Canaccord Genuity will scale back subscriptions
at its discretion.
It is intended that the New Shares to be issued under the
Placing will be issued at a price of or around 105.8 cents per New
Share, with a view to enabling the Company to maintain its target
dividend yield of 9.0 per cent. for those initial investors in the
Company who choose not to participate in the Placing, while still
offering an attractive target yield for subscribers of New Shares
under the Placing.
The Placing will be conditional upon, inter alia, the execution
of the New Loan Agreements and the New Sale Agreements and the
novation of the New Leases to the New Lessor. The Placing will also
be conditional on Admission of the New Shares.
Effect of the Acquisition upon Shareholder returns
(a) Target Yield
The Company currently targets an income distribution to
Shareholders of 2.25 cents per Ordinary Share per quarter,
equivalent to 9.0 cents per year. This represents a yield of 9.0
per cent. based on
the IPO issue price of US$1.00 per Ordinary Share. This target
figure is based upon the income which
the Company receives under the Existing Leases; the principal
and interest payment obligations which the Company and its
subsidiaries have under the Existing Loan Agreements; and the
projected annual running costs of the Company.
In the IPO Prospectus, it was stated that the Company will have
the ability to acquire additional aircraft if, in the view of the
Board, the acquisition of such additional aircraft would not have a
material adverse effect on the Company's target income
distributions.
The Company intends to raise the US$106.8 million of equity
monies required to finance the Acquisition through the issue of New
Shares under the Placing at an issue price of or around 105.8 cents
per New Share and in any event at not less than 104.5 cents per New
Share.
For illustrative purposes only, if the New Shares were to be
issued under the Placing at 105.8 cents per New Share, this would
result in the issue of 100,945,180 New Shares. Taking this number
of New
Shares into account, and on the basis of the income which the
Company would receive under the New Leases, the principal and
interest payment obligations expected to be payable under the
New
Loan Agreements, and the projected additional running costs of
the Company as a result of the Acquisition, it is expected that the
Company would continue to be in a position to pay a quarterly
distribution of 2.25 cents per Ordinary Share.
This would mean that:
-- An investor in the Company at IPO who chooses not to
participate in the Placing should maintain a target dividend yield
of 9.0 per cent. (9.0 cents per annum on an issue price of US$1.00
per Ordinary Share);
-- A new investor in the Company who participates in the Placing
should receive Ordinary Shares with a target dividend yield of 8.5
per cent. (9.0 cents per annum on an issue price of US$1.058 per
New Share); and
-- An existing investor in the Company (whether at IPO or
thereafter) who participates in the Placing will hold Ordinary
Shares with a blended target dividend yield, with the precise yield
depending upon how many Ordinary Shares they have purchased and at
what price.
In accordance with the IPO Prospectus, the Directors do not
intend to proceed with the Placing unless it is possible to issue
the New Shares at a price which, in the view of the Board, would
not have a material adverse effect on the Company's target income
distributions.
Shareholders should note that while the Company will aim to
generate the target gross distributions
referred to above, these returns are targets only and are based
over the term of the Company's life on the performance projections
of the investment strategy net of expenses and market conditions at
the time of modelling and are therefore subject to change. There
can be no assurance that these targets can or will be met and they
should not be seen as an indication of the Company's expected or
actual results.
(b) Return of capital
The amount that a sale of the prospective New Assets at the end
of the term of the New Leases would generate is unknown; the actual
price achieved on sale, and therefore the level of return to
Shareholders, will depend upon market conditions at the time of
sale. However, the Board, as advised by DS Aviation, believes that
the New Assets represent an opportunity for capital growth for
Shareholders.
Liquidity Proposal
Although the Company does not have a fixed life, the Existing
Articles require the Board to convene a Liquidity Proposal Meeting
to be held no later than 31 March 2025 at which a resolution will
be proposed that the Company should proceed to an orderly
winding-up at the end of the term of the Existing Leases. Given
that the New Leases will not expire until October 2026 in respect
of the Third Asset and December 2026 in respect of the Fourth
Asset, the Directors believe that it would be appropriate to amend
the Existing Articles so as to postpone the back-stop date for the
Liquidity Proposal Meeting to 30 June 2026. Accordingly, the
business of the Extraordinary General Meeting includes a special
resolution proposing that such an amendment be made to the Existing
Articles, subject to the Placing Approval Resolution being passed
and the Acquisition completing.
Given the proposed postponement of the back-stop date for the
Liquidity Proposal Meeting, the Board will consider other
mechanisms to return the net proceeds of any sale of the Existing
Assets prior to the Liquidity Proposal Meeting.
Cancellation of CISEA listing
On 4 October 2013, the Company's Ordinary Shares were admitted
to trading on the Specialist Fund Market of the London Stock
Exchange and were also listed and admitted to the Official List of
the Channel Islands Stock Exchange (now The Channel Islands
Securities Exchange Authority Limited) (CISEA).
At the time of the IPO, the Specialist Fund Market was not a
recognised exchange for the purposes of the ISA Regulations; as a
result, an SFM-traded product could not be held within an ISA
without obtaining an appropriate listing elsewhere. Accordingly, in
order to make the Company's shares accessible to a wider potential
investor base in the secondary market, the Company sought a listing
on the CISEA, which was at that time (and remains) a recognised
exchange for the purposes of the ISA Regulations.
In March 2014, the ISA Regulations were amended so that shares
traded on the Specialist Fund Market are now eligible in their own
right for inclusion in an ISA.
In view of the above, the Board intends to cancel the Company's
listing on the CISEA as this would reduce operating costs and the
regulatory burden on the Company. The Directors expect to make a
further announcement concerning the Company's proposed delisting
from CISEA and that the delisting will become effective prior to
publication of the Prospectus.
Disposal Fee
Under the terms of the Asset Management Agreement between the
Company and DS Aviation, a disposal fee (the "Disposal Fee") may be
payable by the Company to DS Aviation upon the sale of an asset,
such fee being calculated as a percentage of the price at which the
relevant asset is sold. The Asset Management Agreement currently
provides that that percentage will vary depending upon the total
return per Share attributable to the relevant asset expressed as a
percentage of the US$1.00 price at which Shares were issued at the
Company's launch.
The proposed issue of New Shares pursuant to the Placing at a
different price to that at which Ordinary Shares were issued at IPO
means that the provisions relating to the Disposal Fee will no
longer operate correctly as currently drafted. Accordingly it is
proposed that, subject to the Acquisition proceeding, the Asset
Management Agreement be amended so as to take account of the fact
that the Company will have issued Ordinary Shares at differing
prices and that it is likely to be disposing of the Existing Assets
at a different time to the New Assets. In making these amendments,
it is the intention of the Board to ensure that the new fee
arrangements provide substantially the same level of remuneration
to DS Aviation as is currently payable.
Under the new fee arrangements, the total shareholder return
calculation will continue to be made by reference to an initial
investor in the Company, but will be postponed until disposal of
the New Assets; and the total shareholder return thresholds by
reference to which a Disposal Fee may become payable will be
increased to take into account the additional dividends expected to
be paid to shareholders after the disposal of the Existing
Assets.
As with the current Disposal Fee arrangements, 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.
Extraordinary General Meeting
The Proposals are conditional on the approval of Shareholders of
the Resolutions to be put to the Extraordinary General Meeting,
which has been convened for 10.00 a.m. on Monday 18 May 2015.
The Resolutions that will be put to Shareholders at the
Extraordinary General Meeting are:
-- the Placing Approval Resolution to permit the Company to
proceed with the Placing for the purpose of raising the equity
monies required to fund the Acquisition; and
-- the Amendment Resolution to postpone the back-stop date for
the Liquidity Proposal Meeting to 30 June 2026.
The Placing Approval Resolution will be proposed as an ordinary
resolution requiring the approval of a simple majority of the votes
recorded. If the Placing Approval Resolution is not passed the
Acquisition will not proceed. The Placing Approval Resolution,
however, is not conditional on the passing of the Amendment
Resolution.
The Amendment Resolution will be proposed as a special
resolution requiring the approval of 75 per cent. or more of the
votes recorded. The Amendment Resolution is conditional on the
passing of the Placing Approval Resolution and in addition the
amendments to the Existing Articles will only become effective if
the Acquisition completes. If the Amendment Resolution is not
passed or the Acquisition does not complete, the back-stop date for
the Liquidity Proposal Meeting will remain 31 March 2025.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCURRSRVKASOAR
Dp Aircraft I (LSE:DPA)
Historical Stock Chart
From Jun 2024 to Jul 2024
Dp Aircraft I (LSE:DPA)
Historical Stock Chart
From Jul 2023 to Jul 2024