Macquarie, Orix among suitors for $5 bln Awas aircraft portfolio: sources

SINGAPORE/NEW YORK Thu Sep 4, 2014 8:52am EDT

SINGAPORE/NEW YORK (Reuters) - Australia's Macquarie Group Ltd (MQG.AX) and Japan's Orix Corp (8591.T) are among a handful of companies exploring binding offers for the $5 billion aircraft portfolio being sold by Dublin-based lessor Awas, people familiar with the matter said.

Macquarie's aircraft leasing subsidiary Macquarie AirFinance, and Orix Aviation, part of the Japanese financial group, are set to compete against other Asian parties bidding for the asset, including Cheung Kong Holdings Ltd (0001.HK), which has previously confirmed its interest.

Other bidders include Hong Kong Aviation Capital, which is owned by China's HNA Group and Bohai Leasing Co. Ltd 000415.SZ, and SMBC Aviation Capital - part of Sumitomo Mitsui Financial Group Inc (8316.T), according to the people familiar with the matter.

Awas [AWASA.UL], one of the world's biggest aircraft lessors and owned by British private equity firm Terra Firma, plans to seek second-round bids in late September with the hope of finalizing a deal by next month, the people said, asking not to be named because the matter is not public.

The companies' interest underscores strong demand for aircraft assets from Asian buyers, at a time when the region has become the world's fastest-growing market as Asian airlines tap into the spending power of travelers.

Representatives for Macquarie, Hong Kong Aviation Capital, Orix, SMBC Aviation Capital and Terra Firma all declined comment.

Cheung Kong, controlled by Asian tycoon Li Ka-shing, said last month it had submitted a preliminary bid for the aircraft portfolio.

Terra Firma has hired Goldman Sachs Group (GS.N) and Deutsche Bank (DBKGn.DE) to explore exit options for Awas, which has about 300 planes on lease to more than 100 airlines, including Singapore Airlines Ltd (SIAL.SI) and LATAM Airlines LAN.SN.

The company is looking to sell newer aircraft for around $5 billion, while exploring an initial public offering for the remaining portfolio of older planes that could be worth about $8 billion, Reuters reported in July.

Bidders are drawn to the sector's strong returns and that the investment is secured against an underlying mobile asset, people familiar with the process said. Access to cheap funding and the potential for huge industry growth in Asia has driven expansion plans of Asian companies.

New airlines coming up to meet growth in emerging markets are increasingly looking to rent planes from the leasing industry, which is currently estimated to have aircraft portfolios worth $200 billion.

Asian players have muscled into the aircraft leasing industry in recent years. Leasing arms of Industrial and Commercial Bank of China (601398.SS), Bank of China (601988.SS), and China Development Bank [CHDB.UL] have already emerged as significant global players.

Acquisitions by SMFG and Mitsubishi UFJ Financial Group Inc (8306.T) have helped these groups also gain a global footprint.

In the process, they have taken on the world's two biggest lessors, GECAS, a unit of General Electric Co (GE.N), and International Lease Finance Corp, now part of AerCap (AER.N).

Another Dublin-based aircraft leasing firm that has been exploring a sale, Avolon, has also attracted Asian interest. China's sovereign wealth fund China Investment Corp, teamed up with state-owned aerospace and defense company, Aviation Industry Corporation of China, are in talks to buy Avolon, Reuters previously reported.

Terra Firma bought Awas from Morgan Stanley (MS.N) 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.

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.

(Additional reporting by Emi Emoto in Toyko; Editing by Meredith Mazzilli)

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