PIF's AviLease to buy Standard Chartered's aviation finance business for $3.6bn

The transaction is expected to close in the fourth quarter of this year

Riyadh-headquartered AviLease is part of the PIF’s efforts to further boost the kingdom’s aviation sector. EPA
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AviLease, a plane lessor and financier fully owned by Saudi Arabia's Public Investment Fund, has signed an agreement with Standard Chartered to buy its aviation finance business for $3.6 billion.

As part of the agreement, AviLease will acquire a portfolio of 100 narrow body aircraft and become servicer for another 22, the company said in a statement on Monday.

The combined platform will own and manage 167 of the fuel efficient aircraft. It will consist of 145 owned aircraft valued at nearly $6 billion and 22 managed aircraft valued at about $800 million leased to 46 airlines globally, Avilease said.

The transaction is expected to close in the fourth quarter of this year.

“This acquisition will propel AviLease and will in turn support Saudi Arabia’s aviation ecosystem, on our path to help realise the Saudi Vision 2030’s objective of diversifying the economy and adding high value employment opportunities for Saudi citizens,” AviLease chairman Fahad Al-Saif said.

Saudi Arabia aims to attract more tourists and develop its aviation sector, increasing its contribution to non-oil gross domestic product as part of its Vision 2030 economic diversification agenda.

The Saudi Aviation Strategy calls for measures to triple annual passenger traffic to 330 million by 2030 and boost the number of destinations to 250, from 99 at present.

This strategy is backed by $100 billion in government and private sector investment.

AviLease, which was founded in June 2022 and has its headquarters in Riyadh, is part of the PIF’s efforts to boost the kingdom’s aviation sector.

The company, which focuses on leasing, trading and asset management services, intends to source deals in both domestic and international markets.

In June, it secured a $1.1 billion five-year loan from a banking syndicate to fund the expansion of its fleet.

It plans to expand its fleet to about 300 aircraft by 2030 as it aims to become one of the world's top aircraft leasing companies.

“We are purchasing a very high-quality portfolio of narrow body aircraft on lease to top-tier airlines globally,” AviLease chief executive Edward O'Byrne said.

“The transaction accelerates the scale-up and lessee diversification of our fleet, demonstrating our ability to execute on our investment strategy."

As part of the transaction, AviLease arranged $2.1 billion of bridge financing commitments from four banks including BNP Paribas, Citibank, HSBC Bank Middle East and MUFG Bank.

Standard Chartered’s aviation finance business owns and manages a fleet of more than 120 aircraft on lease to more than 30 airlines. Last year, the aviation leasing business recorded a profit after tax of $15.6 million and its gross assets stood at $3.8 billion, the bank said in a separate statement.

“The sale of our aviation finance leasing allows us to continue to focus our efforts on those areas where we are most differentiated and to further progress our return on tangible equity journey,” Simon Cooper, chief executive of corporate, commercial and institutional banking and Europe and Americas at Standard Chartered, said.

The transaction includes the sale of 100 per cent shareholding in each of Pembroke Group (Isle of Man), Pembroke Aircraft Leasing Holdings (Ireland) and Pembroke Aircraft Leasing (Tianjin).

Upon completion of the sale, these companies will no longer be subsidiaries of Standard Chartered, the bank said.

Updated: August 28, 2023, 4:28 PM