SINGAPORE (THE BUSINESS TIMES) - Total Engine Asset Management (TEAM), an engine leasing joint venture of ST Engineering's aerospace arm, has inked agreements to sell 30 aircraft engines using a securitisation structure.
This sale will enable the group to free up capital for future investments, including aircraft engines, and to reduce TEAM's capital employed, ST Engineering said on Friday morning (Feb 21).
The diversified portfolio of 30 engines power primarily narrowbody aircraft leased to 13 airlines across 11 countries with a weighted average remaining lease term of about six years.
The securitisation structure includes about US$257 million of fixed-rate notes offered in three tranches, and the placement of equity notes.
The secured notes to be issued by TEAM are being offered only to qualified institutional buyers.
TEAM is expected to retain 10 per cent of the equity notes, while an affiliate of Marubeni Corporation as well as one or more other investors will purchase the balance.
Lim Serh Ghee, president of ST Engineering's aerospace sector, said the sale will be a "major milestone" for its engine leasing business.
"It will allow us to lower our capital requirements for continued engine investments, while retaining TEAM's asset manager role to create value for lessors through our innovative asset management solutions."
This is ST Engineering's first securitisation transaction. The group will continue to scale up its engine leasing business, one of the growth areas for its aerospace arm.
TEAM was set up in 2011 as a 50:50 JV with Marubeni Corporation.
Shares of ST Engineering ended trading at $4.27 on Thursday, down $0.04 or 0.9 per cent.