NBAD and DVB in plan for fund

DUBAI // The National Bank of Abu Dhabi (NBAD) and Germany's DVB Bank plan to launch an aviation investment fund that will acquire assets valued at more than US$1 billion (Dh3.67bn) within two years. The fund will invest principally in aircraft and engines on lease to international airlines. NBAD and DVB will act as 50-50 joint venture partners in establishing and managing the fund and both will also invest, NBAD said yesterday. It will target investors from the UAE and GCC region.

"Both banks recognise the opportunity to provide much needed capital to the industry and bring new investment opportunities in aviation to the market. We believe this is an opportune time to be investing in aviation assets," said Bertrand Grabowski, a DVB director. The fund represents the first major co-operation between NBAD and a DVB, a global specialist in transport financing. Gulf fund managers have started to raise capital again after retreating from regional markets in the wake of the global financial crisis.

Several GCC financial institutions have set up special-purpose vehicles to target investment such as distressed properties and agriculture. The aviation industry has turned towards renting rather than owning new aircraft amid a global credit squeeze. But many lenders have withdrawn from aircraft financing in recent months and analysts expect funding constraints to continue next year. NBAD, the second largest bank in the country, has been actively funding the transport sector in the UAE in the past two years.

The bank's outstanding loans to the transport sector increased to Dh6.36bn by the end of last year from Dh5.16bn the previous year. [e-mail]