Terra Firma to look at exit options on aircraft lessor Awas-sources

LONDON/FRANKFURT, April 1 Tue Apr 1, 2014 12:42pm EDT

LONDON/FRANKFURT, April 1 (Reuters) - British private equity firm Terra Firma has appointed Goldman Sachs and Deutsche Bank to advise it on what to do with aircraft leasing firm Awas, with possible options including a stock market listing or complete sale, three people familiar with the matter said.

Terra Firma bought Awas from Morgan Stanley in 2006 for $2.5 billion and a year later acquired rival Pegasus for $5.2 billion, merging the groups to create the world's third-largest plane lessor, making it a much larger force in the market, which has boomed in the last year or so as airlines look to build up fleets quickly to meet resurgent travel demand.

Any potential IPO is expected to take place in the second half of the year, one of the sources said.

"The strategic review will take some months. Options include IPO, outright sale, partial sale or do nothing," a second source familiar with the matter said.

Terra Firma, CPPIB, Goldman Sachs and Deutsche Bank declined to comment.

Aviation assets have begun attracting the interest of longer-term investors such as insurers and pension funds hungry for better returns while interest rates remain low.

Dublin-based aircraft lessor Avolon is also preparing for an initial public offering this year two people familiar with the matter told Reuters in March.

Awas owned 263 aircraft with a book value of $8.6 billion as of May 2013, leasing them to airlines in 46 countries, with Awas making a net profit of $162 million on revenue of $1 billion in its 2012 fiscal year.

Aircraft leasing firms dwarf airlines in terms of fleet size and are the biggest and most important customers for planemakers like Boeing and Airbus.

For Terra Firma, which is run by British financier Guy Hands, Awas is one of its largest investments. CPPIB, the Canada Pension Plan Investment Board, also owns a significant minority stake.

Recently sources familiar with the matter said Terra Firma was planning to launch a new 2 billion-euro fund concentrating on smaller buyouts. (Reporting by Anjuli Davies and Arno Schuetze; Editing by Greg Mahlich)