Avolon’s $1.6bn NYSE launch lures new institutional investors

Aircraft leasing group Avolon’s €1.3 billion launch on the New York Stock Exchange lured a number of new US institutional backers to the Irish company’s share register.

Avolon’s launch price valued the company’s 80 million-plus shares at more than $1.6 billion (€1.3 billion), below the $1.8 to $2 billion range originally expected.

Speaking after it began trading, founder and chief executive Dómhnal Slattery said that a number of new institutional investors from the US, Europe and Asia, had bought Avolon's shares.

“In the US the mix is known as ‘long-termers’,” he said. “We are very pleased to have those type of shareholders.”

Original backers, private equity firms Cinven, CVC Capital Partners, Oak Hill Capital Partners and Singapore’s sovereign wealth fund, all sold a portion of their stakes.

They offered a total of 13.6 million shares, valued at a total of $27.2 million, between them. Neither Mr Slattery nor any of his boardroom colleagues parted with any of their holdings.

The flotation was the largest ever by an Irish-founded company on the New York Stock Exchange. The launch price combined with its €4.3 billion debt left it with an enterprise value of almost $6 billion.

Announced flotation

Its $20 launch price was below the $21 to $23 range it pitched when it announced flotation plans earlier this year. Mr Slattery explained that market conditions prompted the change.

“During our roadshow in the last few weeks, equity markets have been very volatile,” he said.

“At the same time, our competitors, that is other lessors that are public, they all traded 6 per cent to 8 per cent off. But we are very pleased with where we priced.”

The shares began trading on the New York Stock Exchange under the symbol “AVOL”. They were selling for around the $19 mark 90 minutes after the launch.

Avolon has an order book valued at $6 billion, which includes Airbus A330-neo craft, for which it is the launch customer, and Boeing's Dreamliner.

It has further undrawn debt facilities of $1.3 billion which will be used to pay for the initial deliveries from this pipeline.

Mr Slattery said it will focus on cutting the cost of borrowing over coming months. The current figure is 4 per cent, but it raised $700 million over the past two quarters at 3.2 per cent.

“The banks are putting more capital into aircraft leasing and that is leading to more reductions in the cost of borrowing,” he said.

Organic growth

Avolon works with a syndicate of 30 banks and Mr Slattery said that it will be able to continue to rely on borrowing to fund organic growth.

He added that it has no plans to use the stock market to raise money and would only do so if a takeover opportunity came its way at some point in the longer term.

Founded by Mr Slattery just over four years ago, Avolon has grown to become the third largest independent aircraft leasing company in the world.