Investec Bank’s aviation arm made its first foray into financing the Airbus Group SE A380 superjumbo with a deal to purchase four jets operated by Emirates before leasing them back to the Dubai-based carrier.
Investec will pay a total of $1 billion for the double-deckers, of which two are new and owned by Emirates, with the other two, first delivered in 2013, being bought from Aviation Finance Co.’s Stellwagen Finance, it said on Monday.
London-based Investec, which already finances single-aisle and smaller twin-aisle aircraft built by Airbus and Boeing Co., plans to own the A380s for 12 years before selling them in the secondary market, Alok Wadhawan, co-head of Investec Aviation Finance, said in a telephone interview.
Interest in aircraft purchases has increased as yields from more traditional assets struggle to recover to the levels seen before the 2008 credit crunch and global recession.
The price of oil has also buoyed airline earnings, while making the four-engine A380 a more viable prospect, Wadhawan said.
“Aircraft are dollar assets, and investors want dollar exposure,” he said. “And you get steady returns, the assets are mobile, and the security collateral is strong. It also helps that most airlines these days are profitable.”
Investec, whose portfolio of 60 planes includes narrow-body 737s and A320s, as well as twin-aisle 777s, 787s and A330s, put its own money into the superjumbo deal, as well as into signing up the backers including insurance companies, pension funds and wealthy Middle Eastern
“It’s the structure of the deal and the residual risk at the back end that made this attractive,” Wadhawan said, declining to speculate about future A380 sales. Of second-hand demand, in 12 years, “at the right price, and with more units flying, I think there would be a market,” he said. There are about 184 A380s operating worldwide today.
Investec, which also owns a 20 percent stake in Dublin-based Goshawk, with an owned or committed portfolio of 75 smaller planes, used Islamic financing for the two planes built in 2013.
Investec is an international specialist banking and asset management group.
It provides a range of financial products and services to a client base in three principal markets; the UK, South Africa and Australia. It is dual listed on the London Stock Exchange and the Johannesburg Stock Exchange and it is a FTSE 250 company.
Investec employs approximately 8,200 people worldwide and operates primarily in South Africa, UK, Australia and Ireland. It also has banking operations in Switzerland, Mauritius, Guernsey, Hong Kong, Jersey, Namibia, Botswana, Canada, Taiwan and the US.
It is organised as a network comprising six business divisions, asset management, wealth and investment, property, private banking, investment banking and capital markets.