South Africa market guide 2011

Transcription

1 South Africa market guide 2011

2 Executive summary It is relatively simple to find business jet or helicopter finance in South Africa. There is healthy competition amongst local banks to finance both smaller jets and helicopters. Whilst some smaller clients have struggled in the last two years financiers are keen to lend. In the larger cabin markets South African banks are active on both domestic and cross-border deals across Africa and comfortable with structured deals. About this report Corporate Jet Investor is a website and event organiser focusing on helicopter and business jet finance. This report is based on face-to-face meetings, telephone interviews, third-party publications and websites and the from a roundtable meeting of banks, traders, lawyers and brokers in Johannesburg in April The report was published in June Over 5000 people use every month and our paying subscribers include banks, leasing companies, manufacturers, lawyers, consultants and

3 Contents Executive summary... 2 Introduction... 4 Aircraft Finance... 5 Smaller aircraft and helicopters... 5 Brokers... 6 Mid-cabin and large aircraft finance... 7 International lenders... 9 Lawyers Aircraft and helicopter sales Technical advisers Aircraft managers and operators... 14

4 Introduction South Africa dominates the sub-saharan business jet and helicopter market. Most African business jets are maintained in world-class facilities in Johannesburg and Cape Town and a number of aircraft based in foreign jurisdictions are listed on the South African register. Some private jets are owned by high net worth individuals but the size of South Africa means that business jet and helicopters are largely used as a business tool rather than as a luxury product and the market tracks key industries like mining, natural resources and tourism. Although several operators such as King Air Services and National Airways Corporation - are also active supporting aid organisations including the United Nations in other African countries this is a smaller part of the market. Although there is a perception that Africa is a convenient dumping ground for older jets this is becoming less true. There are opportunities for older pre-owned jets but traders say that they buyers are increasingly focusing on aircraft that are less than eight years old. The main airports are Lanseria, about an hour away from central Johannesburg, and Cape Town International Airport. However business jets are seen at all major airports. Although Lanseria can be a hot and high take-off (limiting some older jets) and foreign object damage can be an issue at some airfields, maintenance specialists say it is an easy country in which to operate an aircraft not least because of the number of high quality maintenance organisations. Maintenance companies are also experienced in dealing with import restrictions on spares and replacement engine. The country has a sophisticated and competitive finance market. Investec and Rand Merchant Bank are committed to larger aircraft finance across the continent with Nedbank more reluctant lender to borrowers that are not existing customers. Wesbank, a division of FirstRand Rand, is the leading financier of small aircraft and helicopters. The finance and legal community is concentrated in Sandton, which is between Lanseria and central Johannesburg.

5 Aircraft Finance The aircraft finance market is split into two groups determined by transaction size. Banks in the smaller aircraft market typically offer aircraft finance alongside vehicle and general asset finance, and focus on domestic deals worth up to $5 million. The South African institutions that provide finance for larger jets typically do so alongside commercial aircraft finance and are comfortable with international transactions. First Rand demonstrates this split well with Rand Merchant Bank financing larger jets and its sister company Wesbank focusing on smaller deals. Lenders estimate that between 60% and 70% of all corporate aircraft and helicopters are financed in both markets. South African banks fared better than most during the credit crunch but did tighten up aircraft and helicopter lending. Aircraft loan-to-values have tightened considerably in the last two years and lenders requiring more information for deals and take monitoring seriously. Although the market is competitive, a number of banks have exited from business jet and helicopter finance in the last few years. This is both because of problems with portfolios and due to bank mergers First Rand also owns First National Bank, which was a small aircraft lender, and Nedbank acquired Imperial Bank. Smaller aircraft and helicopters As with international markets, the smaller aircraft finance has been hit particularly hard. The commoditised nature of the market meant that many banks did not spend much time monitoring assets or hold maintenance reserves. This has changed. Wesbank, for example, now insists on aircraft having satellite tracking so they can monitor location and usage. Charter operators fared the worst in the last three years and banks which traditionally took an asset finance view are now also looking at credit or repayment risk more thoroughly. One major issue during the last five years has been the willingness of some South African buyers to effectively bet on foreign exchange by using South African rand funding for US dollar assets and cash flows. Some of these borrowers were unable to pay when the rand strengthened. It also lowered the value of aircraft on bank s book.

6 Wesbank Wesbank (the division of FirstRand Bank specialising in asset finance) is the largest asset finance company in South Africa. The aviation teams focuses on general aviation and smaller business jets and is the most active bank in this market. Colin Squair Head: Aviation and Yellow Metal Ryan Harrison Sales Manager - Aviation Finance rharrison@wesbank.co.za Standard Bank Nicolette Farquhar Nicolette.farquhar@standardbank.co.za Brokers Aircraft Finance Corporation Launched by Ryan Forrester, the son of one of the founders of National Airways Corporation, Aircraft Finance Corporation is the leading aircraft finance broker in South Africa. Jaco Pietersen jaco@airfincorp.co.za Ryan Forrester ryan@airfincorp.co.za Airbourne Insurance Aircraft Finance Corp s sister company is one of the largest business jet insurance brokers. Scott Smith Managing director Scott@airborneinsurance.co.za

7 Mid-cabin and large aircraft finance South Africa market guide 2011 Investec, Rand and Nedbank all have specialist aircraft finance teams that work in both the commercial and business aircraft markets. Many of these have a background in tax leasing so are comfortable with complex international deals and can also lend from banks or branches outside South Africa including the UK, Mauritius and the Isle of Man. These branches help avoid issues with South Africa s Exchange Control regulations which makes international deals complicated for domestic banks. Unlike European banks that specialise in different markets, South African banks aretypically willing to finance individuals, corporates, governments and operators. The major banks also offer aircraft finance through their private banking groups. The larger banks tend to have close relationships with distributors like NAC (which represented Hawker Beechcraft in 2010), ExecuJet (which was distributor for Bombardier until 2009) and Comair (Cessna) which makes it hard for international lenders and smaller banks to compete. Investec and Rand Merchant Bank are the most active business jet lenders in sub-saharan Africa. However, a number of international financiers are keen to grow their portfolios in the region. Investec Melanie Humphries Head of Aviation Africa and Middle East mhumphries@investec.co.za Now a major international bank and asset manager, Investec was originally a South African leasing company and it continues to be a specialist asset financier with aviation teams in Johannesburg, Sydney and London. Investec Private Bank also provides finance to high net worth individuals. Investec s Johannesburg aviation team consists of four full time specialists covering commercial and corporate aircraft finance. It prefers deals worth over $10 million and is keen to increase its business jet lending. It has close relationships with manufacturers and operators and has done deals across Africa. Rand Merchant Bank Wouter Du Preez Wouter.DuPreez@rmb.co.za Rand Merchant Bank is the investment arm of First Rand Group (which also owns Wesbank and others). The aviation team focuses on commercial aviation and larger, mainly cross-border, transactions and whilst most of its experience is in commercial deals it is keen to grow its business jet portfolio.

8 Nedbank Capital James Geldenhuys Head: Aircraft Finance, Investment Banking +27 (0) South Africa market guide 2011 The focus of Nedbank s aircraft finance team is firmly on commercial aircraft financing for airlines. It will consider very selective deals for corporates and individuals that are existing clients and may finance two or three in 2011 but the bank does not want to actively market itself in this area. Nedbank is only interested in larger value transactions. It does have a legacy portfolio of smaller aircraft after acquiring the remaining shares in Imperial Bank in Nedbank s aircraft finance team has been active across Africa and in the Middle East. It is also evaluating opportunities in India. Via Capital Andrew Millard CEO andrew@viacapital.co.za When Nedbank acquired the remaining 49% of Imperial Bank it did not own, the specialist finance team and its empowerment partners had the opportunity to buy out part of the business to form Via Capital. Until 2005 Imperial was active in business jet and commercial aircraft finance. One of the most exciting assets was Imperial Bank s Eagle Bonds Programme an innovative Ex-Im finance platform. The first Eagle Bond issuance in 2003 was used to finance three s owned by local lessor Safair which then leased them to South African Airways. It was a breakthrough deal in many ways it took seven years before anyone else in the world issued ExIm bonds and the deal was unique in South Africa as the country s only triple-a rated bond (it was also the first time that Moody s had ever rated a Rand bond. Via Capital focuses on structured transportation and trade deals and most of aviation efforts are centred on commercial aircraft. However, it is re-evaluating business jets and Eagle Bonds could easily be adapted to finance business jets or helicopters both in South Africa and other countries.

9 International lenders South Africa s domestic finance market is competitive and sophisticated making it hard for international banks and lenders to compete particularly for Rand based financing. However, its strong legal system makes it an attractive market for foreign institutions. Bank of America Merrill Lynch Rod Derbyshire rob.derbyshire@baml.com Bank of America has been a very active international business jet lender for over 20 years but has increased its international exposure significantly since merging with Merrill Lynch. CIT Robert Schaeberle robert.schaeberle@cit.com Problems with the parent company means the last three years has been quiet for CIT s business jet finance team. Now a bank rather than a finance company, CIT is keen to grow its portfolio quickly. Cessna Finance Corporation Andrew Woolfson awoolfson@cfc.textron.com Cessna Finance Corporation is active in Southern Africa providing finance for Bell Helicopters and Cessna Aircraft through its EXIM and EDC programs as well as other funding sources. It will no longer finance other manufacturer s aircraft. Guggenheim Aero Capital James Crowley jim.crowley@guggenheimpartners.com Guggenheim takes an asset finance view first and is growing fast. It has closed several deals in the Middle East and Africa and is keen to work with African borrowers.

10 Lawyers South Africa has a strong legal market with highly regarded firms including Webber Wentzel, Bowman Gillfillan, Deneys Ritz (which become part of Norton Rose in June 2011) and others. ENS Sean Lederman Director slederman@ens.co.za Sean Lederman at Edward Nathan Sonnenbergs (ENS) in Johannesburg, is highly recommended by local lenders. There are lots of good lawyers but he is the one we regard as the best for aircraft finance, says one Johannesburg aircraft finance head. Clyde & Co Paul Jebely Head of Aviation Africa and Asia paul.jebely@clydeco.com Based in Hong Kong and a regular visitor to Johannesburg, Paul Jebely at Clyde & Co is recognised as a specialist in African aircraft finance and represents a number of the major South African lenders on English and US law transactions. Gates and Partners Aoife O Sullivan Partner aosullivan@gatesandpartners.com The specialist aviation law firm has a growing business jet practice and regularly advises ExecuJet on sales and international lenders.

11 Aircraft and helicopter sales Absolute Aviation Neil Howard, Launched by Neil Howard, former maintenance and executive director at ExecuJet, Absolute Aviation gained prominence in early 2011 when it was named as distributor for Beechcraft. Comair Founded in 1946 Comair has been a representative for Cessna for over 40 years the manufacturer s longest relationship with any representative. It also provides maintenance and spares support. ExecuJet Robbie Irons Regional sales manager, Africa & Indian Ocean Islands Robert.irons@execujet.co.za ExecuJet dominates much of South Africa s business jet market running maintenance and facilities. Its aircraft sales business is focused on larger aircraft particularly Bombardier but it also sells corporate airliners and it is active across Africa. Hawker Beechcraft Christopher Hancock Regional sales director chris_hancock@hawkerbeechcraft.com Hawker is the only manufacturer with a full time salesperson in South Africa.

12 National Airways Corporation JP Fourie Executive director aircraft sales Gary Phillips Executive director Helicopter sales As well as running the largest pilot training school and maintenance facilities, NAC is one of the leading sales companies. It is representative for Pilatus aircraft and Robinson Helicopters. Until 2011 NAC was also Hawker Beechcraft s representative for Africa for 40 years until December NAC is also active across aircraft and has sold a number of aircraft to Nigerian customers.

13 Technical advisers IBA Group Owen Geach Commercial director IBA advises most of the country s larger banks on technical matters and appraisals for business jets and commercial aircraft. Jet Support Services Haydee Ramirez Garcia Business development director Africa HRamirez@jetsupport.com Jonathan Sawyer Technical representative JSawyer@jetsupport.com The largest independent provider of engine and aircraft maintenance plans, JSSI has a full time technical representative in Johannesburg with new sales handled from the Chicago head office.

14 Aircraft managers and operators Many owners chose to operate and manage aircraft on their own although the number of aircraft under management is also rising. Execujet and NAC are the largest and best known managers. The following list is not exhaustive but covers some of the largest companies. Absolute Aviation Neil Howard Launched by Neil Howard, former maintenance and executive director at ExecuJet, Absolute Aviation gained prominence in early 2011 when it was named as distributor for Beechcraft. AdoAir A relatively new entrant created by DanieJoubert, the former managing director of ExecuJet Africa, with Nigerian businessmen Adegboyega A Olulade chairman and GT Alli-Balogun a director. Active in South Africa, Nigeria and Namibia. Airquarius Founded in 1997 operates Fokker, Boeing and BAE Aircraft as well as four helicopters. ExecuJet With a fleet of 50 business jets and turboprops in South Africa it claims to be the country s largest operator. In %of Execujet Africa was sold to Simang Group, a Black Empowerment Enterprise. National Airways Corporation (NAC) Established in 1946 as a charter company it claims to be the largest general aviation company in Africa. The company is 62% owned by Johannesburg Stock Exchange listed Imperial. NAC is an independent representative for Bell Helicopter, a dealer for Robinson Helicopters, distributor for Piper, Diamond and Daher-Socata. Stargate Aviation Chris Perry chris@stargate-aviation.com +27 (0) Working with UK operator Hanger8. SwiftFlite Specialises in business jets operating three Falcons, a Challenger 300, a Gulfstream G2, alearjet 45, several Citation Sovereigns and turboprops.