Lessors raised just $1.3bn in funds last year due to ‘brutal’ fundraising environment
Aircraft leasing platforms raised just $1.3 billion through new publicly announced equity funds and joint ventures (JV) in 2023, according to Ishka research. This is down from $3.77 billion in 2022 and $2.9 billion in 2021 respectively.
Leasing sources describe 2023 as a particularly ‘brutal‘ fundraising environment as rapidly rising interest rates altered return expectations thanks to rising debt costs, while esoteric asset classes such as aviation faced stiff competition from other, more liquid, asset classes. Nonetheless, Ishka notes several recent green shoots. Perhaps the most significant was a large JV between CDPQ and lessor SMBC Aviation Capital.
Key recent fund raises and JVs
- SMBC Aviation Capital and CDPQ launched Maple Aircraft Company Holding in January 2024. The target equity deployment of this new partnership is $1.5 billion, with $500 million invested over the course of three years, in modern fuel efficient NextGen aircraft. CDPQ net assets totalled CAD 24 billion ($315 billion) as of June 2023.
- Spanish Arcano Partners launched the Arcano Aviation Fund in October 2023. The target for the portfolio is $110 million, with at least 70% of assets being commercial aircraft and cargo. The fund is currently open to new investors.
- In April 2023, LCI and a US Public Pension launched a Joint Venture which aims to build a portfolio of aircraft and helicopters worth $300 million. The joint venture is the first of its kind in the rotary market.
- Investec Aviation Finance established an aviation debt platform in partnership with a Japanese institutional investor on 12th March 2023. Investec will originate lending opportunities and co-invest in every deal on the platform, which will initially target a $500 million portfolio of loan assets. The platform has already agreed a transaction providing senior loans for a $70 million six-aircraft portfolio.
- HALO AirFinance, a joint venture by GA Telesis and Tokyo Century Corporation launched on 4th March 2023. HALO will serve as the debt origination channel for GA Telesis and Tokyo Century, with a focus on secured lending to airlines, lessors, and investors, covering new to mid-life aircraft. In partnership with InterVest Capital Partners (formerly known as Wafra Capital Partners), HALO established its first fund HALO One. Funds are undisclosed.
SKY has launched SKY Fund VI, following the closing of its oversubscribed SKY Fund V. Although no additional information has been made public, according to the SEC filing, the minimum contribution to participate in the fund is $5 million.
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Please note: All these equity funds are established with existing asset managers or platforms. Ishka notes this list does not include funds launched prior to 2021 that continue to invest in commercial aviation assets. For funds that have an undisclosed amount Ishka has assumed a proxy figure of $300 million or used 30% of the targeted portfolio size if stated to create an annual tally. There may also be new funds missing from the list indicating the total amount could be higher than $1.3 billion. If your fund is missing, please contact Dickon Harris at dickon@ishkaglobal.com or Justine El Amrani at justine@ishkaglobal.com.
The Ishka View
Aircraft lessors tell Ishka equity fundraising has been especially difficult in the last 12 months, across multiple industries, and aviation as an esoteric asset class has been no exception. A few lessors state that investors are demanding higher returns to compensate for increased debt costs (Ishka will be running more analysis on this in an upcoming Insight). This has been one reason why there have been relatively few new leasing start-ups announced last year. Rising debt costs however, have helped attract more interest from investors in aviation alt lenders.
One bright spot is that aircraft trading has now resumed after being largely dormant for the last two years (see Insight: Trading heats up for aircraft buyers). This has helped some of the capital committed to the sector actually acquire aircraft. Ishka understands some funds have struggled to deploy all of their capital in the last two years. One of the biggest challenges for investors has been investing in scale. Ishka believes that a more active secondary market should help leasing firms demonstrate a profit, and potentially attract more interest from investors.
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