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Doric Aircraft Fund - Fully Syndicated
Asset
A modern A340-600 widebody aircraft from the proven A340 family, manufactured by Airbus S.A.S and equipped with four Rolls-Royce engines. At 75.30 m, the -600 type is the longest commercial passenger aircraft currently in production. It was acquired directly from Airbus having already been delivered to the lessee, Virgin Atlantic Airways Ltd. (“Virgin Atlantic”), in July 2006.
Market
World air traffic is being pushed forward by globalisation and the liberalisation of international airspace and is expected to double in volume over the next 20 years. The growing economic importance of the emerging markets, especially in Asia, is increasing the need for faster transportation of goods and people between continents. The wealth of the middle-classes in many emerging nations is growing and creating new markets for the whole aviation industry. Accordingly, an investment in a modern widebody aircraft like the A340-600 offers a great opportunity for attractive profits in both the short and long-term.
Employment
The aircraft is under a long-term lease to Virgin Atlantic with an initial lease term of 10 years and three months (from October 2006) and an option to extend for another 1 1/2 years. If the lessee does not exercise its option to extend the lease it will have to pay a high walk-away penalty. All operating costs, including insurance and maintenance costs, are to be borne by the lessee, Virgin Atlantic.
After expiry of the existing lease agreement it is planned to release the asset for another eight years and three months. At the end of the 20 year base case, a sale of the aircraft for a scrap value of 7% of the purchase price has been assumed.
Lessee
Virgin Atlantic is the second largest UK airline operating one of the most modern fleets of aircraft in the world today. From its hubs at Heathrow, Gatwick and Manchester the airline offers flights to destinations in America, Africa, Asia and Australia. The airline was founded by Sir Richard Branson in 1984 and is part of Branson’s Virgin group. 49% of the airline’s shares are owned by Singapore Airlines who acquired this interest for more than GBP 600 million in 1999.
Debt Financing
Debt financing accounts for approx. 42% of the transaction volume and is USD denominated. The debt financing will be fully amortised over 11 years, i.e. over the tenor of the lease with Virgin Atlantic.
Economics
Projected total distributions of 217% with attractive tax treatment.
