standard unit
9th Jun 2010, 06:45
David Coe back and looking for airline lease vulture fund
John Durie From: The Australian June 04, 2010 12:00AM
THE receivers are still sorting out his last mess -- the $1.1 billion collapse of Allco -- but David Coe is back in town and investing around $2.4 million in the equivalent of an airline lease vulture fund.
Coe is part of a $US46m ($54m) buyout of the $US100m investment that two US hedge funds -- Stark and Oasis -- made in Global Aviation Asset Management (GAAM) three years ago.
The US funds have dropped $US54m on their excursion into the aviation lease business, but the new buyers are hoping their timing is better.
The venture, masterminded by Greg Woolley, is a further sign that the global financial crisis may be lingering but the financial engineers and leverage kings are back in the game.
They may be more modest in their goals, but it's game on.
The team behind the failed management buyout of Qantas in 2007 are back together to snap up cheap aviation lease assets.
The only missing link is David Bonderman at TPG, but he'll get a call as the new GAAM team hunts for more money.
The new owners include Coe, former Qantas boss Geoff Dixon, Leighton and former Qantas CFO Peter Gregg, investment banker Mark Carnegie and advertising guru John Singleton who will invest a combined $12m in the venture for a 10 per cent stake.
Woolley, a longtime Lieberman family adviser, will invest another $6m. Combined with existing assets that gives him a 20 per cent stake. Another $36m will come from cash sitting in the business.
The Liebermans, who invested in excess of $120m in GAAM at its inception in 2005, will stay in the game and control 70 per cent of the money.
The decision on the new money was finalised over a lunch in Sydney's The Ottoman restaurant in late April.
Now it is in the open, the game is to raise around $US500m more in equity and around $US1bn in mezzanine debt as the base to buy another $US4bn in assets.
This is on top of the 50 commercial aircraft it already owns with a market value of around $2bn and a client list which includes the best in the game from Qantas to Ryanair to Air France and Virgin Atlantic.
The rationale, as always in highly leveraged vehicles, is based on supply and demand.
Right now the big companies who dived like lemmings into the aviation lease business in the bull market want to get out, so there is a surfeit of sellers and not many buyers.
The likes of AIG and RBS are forced sellers, for a variety of reasons.
The GAAM team figure there are at least six identifiable pockets of $10bn worth of plane leases up for grabs.
The next leg is to buy at the bottom of the market and leverage the increased demand for passenger seats.
The first step is to be one of the few buyers in a market full of sellers; the second is to be a seller into a market of many buyers.
In theory it's simple, but it's a question of timing -- and having just bought out a couple of masters of the universe at 46c in the dollar, this team of undoubted experts must know the risks.
Right now it is just their money at risk, but they are looking for pension and superannuation funds, which are patient, long-term investors.
The airline business is risky, with the safest entry at the airport level, then planes and then the whole company.
The Qantas management buyout was at the risky end of the scale. But it was effectively a management buyout, and the guys running the show -- Dixon and Gregg -- knew they had de-risked the airline as much as possible through its multi-brand strategy of Qantas and Jetstar.
There were several easy paybacks: the frequent flyer program and other assets could be sold to cut down debt.
That was the plan until two fund managers -- Andrew Sisson and Paul Fiani -- argued that at $5.45 a share, the buyout bid was outright theft.
Last night's close was $2.56, so with the benefit of hindsight it is fair to say this was not their best call.
At least they saved TPG et al some money by stopping the bid.
The re-emergence of Coe in this deal was a risk, given his last mess is still being cleaned up, and those who hung around longer than he did are the ones in the legal line of sight.
Reports suggesting Coe was a broken man can now be forgotten. He's obviously ready to play again.
Then again, the Australian market is slow to forget, in stark contrast to the US, where a fallen idol like Donald Trump is lauded for fighting back.
In that respect, Coe's re-emergence is welcome.
On paper, if you want to take a crack at the aircraft leasing game, than a combination of Coe, Dixon, Carnegie and Gregg is a powerful one.
Dixon now has a full plate. He sits on the board of two James Packer companies -- Crown and Consolidated Media -- as well as Tourism Australia, does not-for-profit work and is on the advisory board of the US-based aviation advisory house Seabury.
His old colleague Gregg will shortly be reappointed to the Leighton board as an executive director, and now sits on the GAAM board.
The Qantas buyout dream failed, but now the same faces are back in LBO game, using their Qantas retirement cheques.
John Durie From: The Australian June 04, 2010 12:00AM
THE receivers are still sorting out his last mess -- the $1.1 billion collapse of Allco -- but David Coe is back in town and investing around $2.4 million in the equivalent of an airline lease vulture fund.
Coe is part of a $US46m ($54m) buyout of the $US100m investment that two US hedge funds -- Stark and Oasis -- made in Global Aviation Asset Management (GAAM) three years ago.
The US funds have dropped $US54m on their excursion into the aviation lease business, but the new buyers are hoping their timing is better.
The venture, masterminded by Greg Woolley, is a further sign that the global financial crisis may be lingering but the financial engineers and leverage kings are back in the game.
They may be more modest in their goals, but it's game on.
The team behind the failed management buyout of Qantas in 2007 are back together to snap up cheap aviation lease assets.
The only missing link is David Bonderman at TPG, but he'll get a call as the new GAAM team hunts for more money.
The new owners include Coe, former Qantas boss Geoff Dixon, Leighton and former Qantas CFO Peter Gregg, investment banker Mark Carnegie and advertising guru John Singleton who will invest a combined $12m in the venture for a 10 per cent stake.
Woolley, a longtime Lieberman family adviser, will invest another $6m. Combined with existing assets that gives him a 20 per cent stake. Another $36m will come from cash sitting in the business.
The Liebermans, who invested in excess of $120m in GAAM at its inception in 2005, will stay in the game and control 70 per cent of the money.
The decision on the new money was finalised over a lunch in Sydney's The Ottoman restaurant in late April.
Now it is in the open, the game is to raise around $US500m more in equity and around $US1bn in mezzanine debt as the base to buy another $US4bn in assets.
This is on top of the 50 commercial aircraft it already owns with a market value of around $2bn and a client list which includes the best in the game from Qantas to Ryanair to Air France and Virgin Atlantic.
The rationale, as always in highly leveraged vehicles, is based on supply and demand.
Right now the big companies who dived like lemmings into the aviation lease business in the bull market want to get out, so there is a surfeit of sellers and not many buyers.
The likes of AIG and RBS are forced sellers, for a variety of reasons.
The GAAM team figure there are at least six identifiable pockets of $10bn worth of plane leases up for grabs.
The next leg is to buy at the bottom of the market and leverage the increased demand for passenger seats.
The first step is to be one of the few buyers in a market full of sellers; the second is to be a seller into a market of many buyers.
In theory it's simple, but it's a question of timing -- and having just bought out a couple of masters of the universe at 46c in the dollar, this team of undoubted experts must know the risks.
Right now it is just their money at risk, but they are looking for pension and superannuation funds, which are patient, long-term investors.
The airline business is risky, with the safest entry at the airport level, then planes and then the whole company.
The Qantas management buyout was at the risky end of the scale. But it was effectively a management buyout, and the guys running the show -- Dixon and Gregg -- knew they had de-risked the airline as much as possible through its multi-brand strategy of Qantas and Jetstar.
There were several easy paybacks: the frequent flyer program and other assets could be sold to cut down debt.
That was the plan until two fund managers -- Andrew Sisson and Paul Fiani -- argued that at $5.45 a share, the buyout bid was outright theft.
Last night's close was $2.56, so with the benefit of hindsight it is fair to say this was not their best call.
At least they saved TPG et al some money by stopping the bid.
The re-emergence of Coe in this deal was a risk, given his last mess is still being cleaned up, and those who hung around longer than he did are the ones in the legal line of sight.
Reports suggesting Coe was a broken man can now be forgotten. He's obviously ready to play again.
Then again, the Australian market is slow to forget, in stark contrast to the US, where a fallen idol like Donald Trump is lauded for fighting back.
In that respect, Coe's re-emergence is welcome.
On paper, if you want to take a crack at the aircraft leasing game, than a combination of Coe, Dixon, Carnegie and Gregg is a powerful one.
Dixon now has a full plate. He sits on the board of two James Packer companies -- Crown and Consolidated Media -- as well as Tourism Australia, does not-for-profit work and is on the advisory board of the US-based aviation advisory house Seabury.
His old colleague Gregg will shortly be reappointed to the Leighton board as an executive director, and now sits on the GAAM board.
The Qantas buyout dream failed, but now the same faces are back in LBO game, using their Qantas retirement cheques.