AeroCentury, an independent aircraft leasing company, reported a Q2/20 net loss of $13.5 million compared with a net loss of $0.1 million for Q2/19. In the first six months of 2020, AeroCentury reported a net loss of $23.7 million compared with a net loss of $1.4 million in the first six months of 2019.
Results for the quarter included impairment losses totaling $9.7 million. The losses arose from appraised values for three regional jet aircraft that are held for sale, estimated sales proceeds for an older turboprop aircraft that is held for sale and which AeroCentury expects to sell during Q4/20 and estimated fair value of two regional jet aircraft that are held for lease. Results for Q2/20 also included $2 million of charges arising from the conversion of AeroCentury’s revolving credit facility to a term loan in May of 2020, including a $1.5 million write-off of a portion of the company’s unamortized debt issuance costs included in interest expense and $0.5 million of costs that is included in professional fees and other.
On May 20, 2020, JetFleet Management, a subsidiary of AeroCentury, was granted a Paycheck Protection Program loan from American Express National Bank in the aggregate amount of $276,353.
“During our second quarter, the COVID pandemic’s impact continued to play out more fully,” Michael Magnusson, president of AeroCentury, said. “Airlines around the world drastically reduced their operations or ceased operating entirely. Many defaulted on lease payments or demanded rent concessions. As a result, aircraft lessors have experienced increasing difficulties meeting financial obligations to their lenders. AeroCentury is no exception. A number of our customers were unable to make rental payments during the second quarter, which dramatically reduced the company’s free cash flow. The pandemic also delayed sales of surplus assets anticipated to close in the second quarter. Finally, the worldwide decrease in demand put significant downward pressure on our aircraft valuations, which required the company during the last quarter to re-appraise our aircraft and take significant asset value write-offs, which further eroded our performance. All of these factors continued to negatively affect the company’s ability to comply with its debt obligations.
“To meet the unprecedented impact that the pandemic has had on the company, we have enacted cost-cutting measures, including reductions in overhead and office space, and we continue to work closely and cooperatively with our defaulting lessees and our lenders to negotiate a workout of our customers’ lease defaults and to restructure our debt obligations accordingly. Many great challenges lie ahead, but we remain hopeful as we are beginning to see signs of adaptation by airlines and passengers to the post-pandemic world and of a slow but steady recovery of the airline industry.”
Q2/20 Highlights and Comparative Data
Aircraft and Engine Portfolio
AeroCentury’s portfolio currently consists of 13 aircraft, spread over six different aircraft types. Eleven of the aircraft, comprising nine regional jets and two turboprops, are held for lease. Two additional turboprops are held under sales-type leases. AeroCentury also has three turboprop aircraft, two of which are being sold in parts, and three regional jet aircraft that are held for sale. The current customer base comprises seven customers operating in five countries.
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