Avolon, an international aircraft leasing company, issued an update on its performance in Q4/20 and the entirety of 2020.
In Q4/20, Avolon closed a private offering of $1 billion of senior unsecured notes maturing in 2026 and tendered for $723 million of notes maturing in 2022 and 2023. The company also raised $675 million of new secured term loan debt maturing in 2027, the proceeds of which were used to repay existing revolving secured debt. In addition, Avolon executed a total of 31 lease transactions in the quarter consisting of new aircraft leases, follow-on leases and lease extensions, and delivered a total of 21 new aircraft in the quarter to seven customers and transitioned three aircraft to follow-on lessees.
At the end of 2020, Avolon had an owned and managed fleet of 572 aircraft, with total orders and commitments for 270 aircraft and a total of 142 airline customers operating in 61 countries. During 2020, Avolon delivered 57 new aircraft and transitioned 10 aircraft to a total of 26 customers. The company also further reduced its aircraft purchase commitments in the 2020 to 2023 timeframe by a net 100 aircraft through a combination of cancellations and deferrals. In addition, during the year, Avolon entered into sale and leaseback commitments for 44 aircraft; sold 29 aircraft in 2020, three of which were managed; and executed 28 sale agreements and a total of 141 lease transactions consisting of new aircraft leases, follow-on leases and lease extensions.
In terms of financial highlights, Avolon had its investment grade credit rating affirmed by Fitch, KBRA, Moody’s and S&P Global, and raised $4.4 billion of debt, including $3.4 billion of senior unsecured notes and $675 million of secured term loan debt. Avolon also reduced near-term debt maturities by $1.4 billion through the tender offer for $723 million of notes maturing in 2022 and 2023, as well as the execution of the opportunistic buyback of $651 million of Avolon senior unsecured notes maturing between 2021 to 2026 at a discount to par.
Avolon ended 2020 with $4.7 billion of revolving debt capacity, with maturities from 2024 onward and an undrawn balance of $4.2 billion. It also closed the sale of 19 aircraft to the Sapphire 2020-1 vehicle, which were acquired from the Avolon fleet following the issuance of $620 million of senior secured notes and a majority equity investment from a third-party investor.
Lastly, Avolon declared a dividend to shareholders in Q1/20 of $193 million, $65 million of which was withheld due to the holdback provisions in Avolon’s shareholder agreement, bringing the total withheld amount to $167 million.
“2020 was the most challenging year the commercial aviation industry has ever faced. The level of airline distress truly tested the resilience of the leasing sector business model. Through Avolon’s decisive actions to reduce our capital commitments, strengthen our liquidity and reduce our future obligations, the business is now well positioned to benefit from the recovery. We steadfastly supported our airline partners through temporary deferrals during the year and have seen cash flows improve in the second half of the year from a low in the second quarter,” Dómhnal Slattery, CEO of Avolon, said. “It will take time for the aviation industry to recover. The pace and scale of recovery will not just be determined by the roll-out of vaccines, but also by rapid testing programs and the depth of coordination between governments.
“Air travel will drive economic recovery. It is clear there is a strong desire to travel and latent demand in markets across the world. It is incumbent on governments to provide appropriate policies to facilitate that demand and drive recovery. We are well positioned and looking forward to building on continued positive momentum as the recovery takes hold through 2021.”
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