Airline Economics Growth Frontiers - Dublin January 2017
Stellwagen Capital – What’s the Mission? “Provide Innovative Financing Solutions to our Customers and become the Largest and Most Profitable Aviation Fund in the World”
Pillars of Success Exceptional Returns 3 4 2 5 1 Globally Innovative Experienced, Aviation Highly Sourcing Investment Incentivised Debt Market Efficient Investors Products Management Opportunity Low Cost & Capital Team Structure Unique Capability
Stellwagen Group Structure Stellwagen Group Loan Asset Portfolio Technology Origination Management Management Stellwagen Stellwagen Stellwagen Guardian Finance Technology Capital Holdings (“ StellFin ”) (“ StellTec ”) (“ StellCap ”) Seraph Aviation Management (“Seraph”)
It’s About People’s Attitude…………
Highly Experienced & Incentivised Management Team Management/Background Professional Experience Howard Millar: CEO - Ryanair, Almarai 28 years Edward Hansom: CRO - AerFi/GPA Group, SMBC 28 years Pradeep Hathiramani: CIO - Fifth Street, KKR, GATX 23 years Michelle O’Toole: Inv. Rel. - Blackstone, Lehman Brothers 9 years 88 years Total: Average of 20 years experience All invested & incentivised via bonus & shares
Traffic Growth Drives Opportunity Source: Airbus Global Market Forecast 2015-2034 (presentation), p.10.
Aircraft are a Low Risk Investment Asset Over 20 years of EETC loss history demonstrates very stable collateral price performance despite high levels of airline corporate defaults Loss and Recovery Rates for All EETCs (1994-2014) (2) Approximate Cumulative Tranche Cumulative Recovery Rate Loss Rate A 0.1% 99.9% B 1.4% 98.6% C 3.0% 97.0%
Aircraft Returns Compare Favourably to Other Asset Classes During periods of higher airline stress and defaults, aircraft values weakened, but for shorter periods and to a lesser extent than most other asset classes Asset Class Analysis (1986-2016) (1 ) Average Total Return Correlation with Asset Class Volatility of Returns (CAGR) Aircraft Aircraft (2) 6.8% 9.3% 1.00 S&P 500 7.4% 14.9% 0.52 US Real Estate (3) 7.9% 7.9% 0.48 (1) Sources: Seraph, Ascend, Guardian, NCREIF Real Estate Index, Bloomberg. (2) This analysis includes 38 passenger aircraft types, including both single- and twin-aisle models. Aircraft performance figures would be better on both measures (annual return and volatility) with simple asset selection. (3) US real estate is more volatile by region than the national figures reflected in the NCREIF index used here.
Aviation Debt Market Opportunity Aviation Banks retreat due to Basel III & IV and capital requirements US and EU export credit banks closed $127 billion of new aircraft deliveries in 2016, rising to $172 billion by 2020 $70 billion worth of aircraft to be re-financed annually Senior loan economics attractive for both airlines and lessors – Operating Lease Killer Very restricted competitive offerings from just a few banks
Senior Loan Investment Opportunity Provides secured financing to both airlines and lessors Very attractive balloon structure – cash flow light 10 year closed end investment grade fund Target return with leverage of 7% Innovative loan trading drives returns to over 10% A dynamic investment with significantly higher returns than competitors
Highly Efficient – Low Cost Structuring Highly efficient Ensure tax structure maximum returns No withholding generated for tax on investors and distributions Group Low fees Use technology negotiated with and outsourcing all service to keep costs low providers
It’s Never Plain Sailing
Stellwagen Capital Summary World leader in aviation investment funds Create and deliver innovative investment products Create and deliver innovative investment products Source capital & investors globally Source capital & investors globally - $120m equity hard circled Unique opportunity in aviation financing Unique opportunity in aviation financing Generate exceptional returns for investors Generate exceptional returns for investors Deliver highly profitable business
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