Dp Aircraft I Share Discussion Threads

[pimsim] 20/3/2020 08:39

Good News and makes DPA look tempting at the current price.

[valhamos] 07/11/2019 19:14

Also in the last couple of days Norwegian has again raised more equity with a private placement.

[rambutan2] 07/11/2019 18:48

And noted in today's interim update:

Besides, Norwegian is aware that it is exposed to a liquidity risk, amongst others regarding commitments for future aircraft deliveries, lease commitments and constraints from credit card institutions. The carrier identified various potential sources of financing, including amongst others the divestment or postponement of aircraft, the shareholding in Bank Norwegian (as previously mentioned), improved operational performance and the extension of two bonds with maturity in December 2019. The latter had been approved by the bondholders mid-September and the maturity of two unsecured bonds had been pushed back to November 2021 and February 2022 respectively; secured by a pledge over Norwegian's slots at London Gatwick Airport. According to Norwegian the value of these slots is above the bond's nominal value of USD 380 million. Transaction costs amounted to NOK 70 million. Norwegian Air Shuttle follows, as mentioned above, a strategic change from growth to profitability, including postponements of aircraft deliveries, divesting aircraft, network optimisation and the implementation of #Focus2019. Norwegian's priority remains to return to sustainable profitability.

[rambutan2] 07/11/2019 18:46

Re those troublesome engines:

[apollocreed1] 30/10/2019 17:53

I'm thinking that it might be possible to partially hedge a long position in DPA by shorting the Norwegian Air Shuttle stock.

I can short without any financing costs via Spreadco or Ayondo Markets. I would take a short position in Norwegian of about 30% of my long rather than a 1:1 ratio because DPA has limited negative exposure to Norwegian rather than being fully exposed to any negative performance of the company.

I don't think the same could be done with Thai airways as not sure if it's shares are available on normal markets.

[rambutan2] 17/10/2019 18:22

Yes, a rate occurrence to be right so quick! I'm not sure the rest have gone yet, as would've expected at least a little bounce once cleared. Perhaps a broker or arb has taken them and is trying to find a taker?

[pimsim] 17/10/2019 15:26

rambutan2.

Well you were right about CCLA wanting out. 25.7m shares sold, 14m picked up by Smith and Williamson, wonder where the rest went?

[pimsim] 15/10/2019 07:16

rambutan2,

I stand corrected. post 27 amended.

[rambutan2] 14/10/2019 18:43

Just a thought. In the current climate I wonder whether the CCLA (and perhaps others) be could thinking that it doesn't want to be involved in the sector?

[rambutan2] 14/10/2019 18:36

So Smith & Williamson were the buyer last week and now have 14m (6.66%), awaiting for the seller to reveal themselves.

[rambutan2] 14/10/2019 18:34

Pimsim,

Boeing has delivered 859 Boeing 787 Dreamliner aircraft, of which 361 aircraft are B787-8s, 467 aircraft are B787-9s and 31 are B787-10s(as of 30th June 2019). These deliveries had been made to 54 customers consisting of airlines and lessors.

As of 30th June 2019, the (NAS) fleet comprised 162 aircraft, including 36 B787 aircraft. In the second quarter 2019, the carrier received two B787-9 Dreamliner aircraft. In 2018, the airline transported more than 37 million passengers, an increase of 13 per cent over the previous year and took delivery of 11 Dreamliners.

[pimsim] 14/10/2019 08:41

Rambutan2,

I agree the situation with NAS and the Trent Engine is clearly why the price share has dived as much as it has. The present uncertainty is keeping buyers away from DPA but to me this is definitely one to keep on the radar. The Trent engine issue 'should' be resolved for the two NAS planes by Summer 2020 at the latest. The bigger issue is NAS survival.

NAS has 36 boeing 787s compared to a total world 787 fleet around 900. The 787 is very much in demand at the moment, Boeing currently have orders for a further 550. Even if NAS does go belly up, it should be pretty easy to re-lease the 2 NAS planes providing the Trent engine issue has been addressed. The question-mark would be the terms of any new lease agreement.

One additional point that might be worth considering. The 2 NAS planes are currently grounded which means they are not clocking up airmiles even though NAS are continuing to pay the monthly lease fees. The planes will therefore be 'younger' in terms of airmiles flown when the leases expire in 2025. Does that imply the residual value of the planes could be greater?

[rambutan2] 13/10/2019 14:20

Pimsim, thanks for your thoughts. Having previously always ignored the aircraft lease fund sector as the members were always at premiums, I was drawn to have a look by the discount here.

NAS certainly does look to be in a bit of a debt pickle. If it does default, perhaps rather than lease again, it would be better to sell? I wonder how the insti shareholders (M&G 49,937,979 – 23.86%, CCLA 26,672,987 – 12.74% and Schroders 5.5%, when last reported) view the situation as their say would hold a lot of weight with the board.

The Trent engine situation is surely unhelpful and would hinder any new lease, or sale, until it's properly sorted?

If NAS does go belly up, would there be a buyer for the whole business on the cheap, or could you end up with a 2nd hand 787 mkt depressed due to a load being up for sale?

[pimsim] 12/10/2019 18:18

Two big questions here,
1) How long will NAS be able to keep paying and, if it defaults, how quickly can the planes be re-leased and on what terms?
2) What will be the residual value of the planes when the leases terminate in 2026?

Not surprisingly people are focusing on the first question but actually it is probably the second that is more important long term.

Quick back of an envelope calc says currently each year........

Income $57m , Loan costs $35m ($25m loan repayments, $10m loan/swap interest),
Overheads $1m + Asset mgr fees $1.5m (incl discounted disposal fee due in 2025)
Net profit $19-20m while Dividend payments (at 9c/yr) $18.8m.

So roughly breakeven; Overheads and Asset Mgr fees will rise over time but loan interest will fall. Debt is being repaid at around $25m a year currently with $204m o/s as at latest half-year. Debt is due to be fully repaid by the end of the current leases.

What would be the worst case if NAS defaulted next month; maybe DPA receive no income from 2 of the planes for 6 months (a loss in income of $14m). Maybe the new lease only earns 80% of the old one (a further loss of $6m/yr for the next 7 years). All told a loss of $50-60m.

Now look at the second question. They assume the 4 assets will still be worth $80m each ($320m in total) at the end of current leases in 2026 while repayment of preference shares at par requires $210m. So in theory there is headroom of $110m. Note that $110m is double the amount required to offset any rental income loss described above. However, the $80m residual value per plane is highly speculative and subject to a range of factors that are completely unknown at the moment. This is ultimately the factor that will determine whether preference shareholders get repaid.

On a more positive note, if the prefs are fully repaid at par in 2026 then the current price of $0.79 implies a yield to maturity of 15% !!

[rambutan2] 12/10/2019 14:59

Assumptions:
The statements in this Prospectus relating to targeted net IRR in the paragraph “Distribution policy” in Part I of this Prospectus and targeted distributions in the paragraph “Income distributions” in Part I of this Prospectus with regard to target net IRR and target dividends (in each case made on pages 41 and 42) are made on the basis of defined assumptions (Assumptions). The Assumptions do not relate to the working capital of the Group and the statements in paragraph 4 of Part XIII of this Prospectus should not be regarded as having been based on, or as being contingent on, the Assumptions. The most material of the Assumptions are as follows:

(a) the Group pays US$1,502,960.09 monthly in capital repayments and interest payments in aggregate in respect of the First and Second Loans and US$1,468,880 monthly in capital repayments and interest payments in aggregate in respect of the Third and Fourth Loans;

(b) each of the Loans is fully amortised at the end of the life of the respective Leases;

(c) the Group receives monthly lease payments from the Lessees in respect of the Assets in full and in a timely fashion for the entire duration of the scheduled term of the relevant Lease (such lease payments amounting to US$4,774,261 in aggregate while all four Leases are in existence);

(d) the Company pays a dividend of 2.25 cents in February, May, August and November of every year, until August 2025 (inclusive), and a dividend of 1.035 cents from November 2025 to August 2026;

(e) the Existing Assets are sold at the end of the scheduled term of their respective Leases for US$80.04 million each and the New Assets are sold at the end of the scheduled term of their respective Leases for US80.165 million each; and

(f) the annual running costs of the Group for 2015 are US$1.493 million, inflating annually at a rate of 2.5 per cent.

[rambutan2] 12/10/2019 14:22

For the pessimists:

Norwegian
Norwegian is a low cost airline and uses the Existing Assets to operate low cost long haul flights. There is no guarantee that Norwegian’s business model to operate low cost, long haul flights or any other part of its business will be successful. Failure of any material part of Norwegian’s business model may have an adverse impact on its ability to comply with the Existing Leases.

In the event that the NAS Leases are terminated as a result of a default by Norwegian, there is a risk that the Company will not be able successfully to remarket the Existing Assets within the remarketing period specified in the Existing Loan Agreements and that (after using the security deposits and the Liquidity Reserve) the Company will not have sufficient liquidity to comply with its obligations under the Existing Loan Agreements. This may lead to a suspension in distributions paid on the Shares and/or a reduction in the value of the Shares and have an adverse effect on the Company and could ultimately result in the Existing Lenders enforcing their security and selling the relevant Existing Asset or Existing Assets on the market. There can be no guarantee that the Company will be able to re-lease the Existing Assets on terms as favourable as the NAS Leases, which may have an adverse effect on the Company and its ability to meet its investment objective. The price paid by the Company for the Existing Assets partly reflects the terms of the NAS Leases to which the Existing Assets are subject. Accordingly, were either or both of the Existing Assets to be re-leased on less favourable terms, this may have an adverse effect on the value of the Existing Assets and therefore the Share price.

The non-performance of the obligations by Norwegian under the NAS Leases or a winding-up of Norwegian could expose the Company to further unexpected expenses such as insurance cover for the non- performance of the obligations by Norwegian under the NAS Leases or a winding-up of Norwegian could expose the Company to further unexpected expenses such as insurance cover for the Existing Assets and the cost of repair and maintenance of the Existing Assets which would normally be borne by Norwegian pursuant to the terms of the NAS Leases. The Company may apply any security deposit and maintenance reserve amounts that it has received from Norwegian towards such expenses, but it will have to cover any shortfall to the extent that the security deposit and maintenance reserves are insufficient to cover all such expenses. Please see the risk factors entitled “Insurance of the Assets” and “Risks associated with the Boeing 787-8” on page 23 of this Prospectus.

[valhamos] 31/1/2019 16:48

I doubt DPA would have any problem at all putting the 787s out on new leases. The Dreamliner is very much in demand. The orders backlog is 622 aircraft as against 145 manufactured in 2018.

hxxps://nyc787.blogspot.com/2019/01/boeing-ends-2018-with-109-net-787.html

[bandit99] 31/1/2019 15:02

any thoughts on what happens if Norwegian go bust? Are the B787s instantly marketable elsewhere?

[valhamos] 24/11/2017 10:12

Everything seems to be on course according to the interim update yesterday.

For the industry as a whole 2017 is expected to be another year of above-average passenger growth.

Both Boeing and Airbus continue to forecast that the global passenger and freighter fleet will at least double by 2036 with 57 per cent and 60 per cent (Boeing and Airbus respectively) of new deliveries anticipated to be used for fleet growth.

As at 30 September 2017, 1,283 aircraft of the B787 family had been ordered by 66 customers. Boeing has delivered 600 Boeing 787 Dreamliner aircraft, of which 346 aircraft are B787-8s and 254 aircraft are B787-9s.

All this should provide good support for DPA Dreamliner end of lease asset values.

[valhamos] 30/8/2016 17:57

Solid interims were released last week (unfortunately the company releases its announcements other than at the more normal 7.00am time which means that they get less attention at the time).

Strong improvement in profits reported from the two lessees, Norwegian Air Shuttle and Thai Airways.

In fact global airline profits are expected to continue growing - "In June 2016, the International Air Transport Association (IATA) raised its net profit outlook for 2016. It expects global airline profits to amount to US$ 39.4 billion. This would mark the 5th year in a row of improving aggregated profits notwithstanding the assumption that global GDP will increase by 2.3 per cent which would be the slowest growth since 2010."

[valhamos] 19/5/2015 08:12

Informative quarterly update. Global passenger growth remains robust and 2014 proved to be one of the most profitable years for airlines with global profits expected to further increase in all regions to a total of USD 25.0 billion.

Against that trend Norwegian Air Shuttle has experienced one or two problems, most notable the impact of the pilot strike in March but ASK and RPK continue to grow. By the end of 2018 Norwegian will operate a fleet of 17 787s.

Also yesterday shareholders voted to approve plans to acquire two 787s on lease to Thai Airways so credit risk will no longer be concentrated on just one counterparty.