Deals of the Year 2018: Einn Volant represents win-win for GECAS and CDPQ
The winning 'Deal of the Year' in the 'Financial Services - Aviation Finance Joint Venture' category is the $2 billion Einn Volant Aircraft Leasing platform created by Caisse de depot et placement du Quebec and GECAS. The marriage of a major Canadian institutional asset manager and the world leading aircraft leasing company, using an Irish registered platform, once again demonstrates the way that aviation finance has become an ever-more acceptable asset class.
The plan is for the Irish registered platform, Einn Volant Aircraft Leasing, to be involved in the acquisition of modern fuel efficient aircraft from a diverse set of global airlines and in leasing them back under long-term leases. GECAS will source the transactions and, under a sistership condition, will invest in aircraft ownership opportunities alongside the platform to further align its interests with those of EVAL. GECAS will also act as servicer for the platform.
Part of the background to this is that when GECAS' parent GE was deemed an SIFI following changes in US financial regulation in the wake of the global financial crisis, the company actively sought to shed this unwanted designation by reducing the size of its GE Capital division, of which GECAS, is a part. Having achieved this in June 2016, GECAS then sought to maintain rather than grow its balance sheet in order to help avoid redesignation of GE as an SIFI.
However, the Financial CHOICE Act aims to undo many key provisions of the 2010 Dodd-Frank reform financial regulatory legislation, including the concept of an SIFI. Financial CHOICE has been passed by the House of Representatives but is most unlikely to be passed in the Senate in its current form. Einn Volant Aircraft Leasing, therefore, represents a good 'each-way' bet for GECAS, allowing it to benefit from the continuing growth in aircraft leasing while constraining the growth of its balance sheet.
Announcing the deal last June CDPQ president and CEO Michael Sabia said: 'High-quality aircraft will be chosen for their ability to withstand short-term cyclicality in a sector underpinned by strong long-term growth drivers.' GECAS president and CEO Alec Burger said the new platform was a natural expansion of the relationship between the highly regarded pension fund manager and GE.' The European Commission gave its approval to the venture last November under the EU Merger Regulation.
This transaction is significant in terms of its size and novel in terms of providing GECAS with the flexibility to finance future growth opportunities while also creating an entry point for CDPQ into the aviation financing and leasing industry. The transaction is also significant in that it matches CDPQ's stable capital with GECAS' extensive expertise and network to identify global investment opportunities.
Ken Rush, partner and head of asset & aviation finance team in Ireland at Walkers, said: 'Ireland remains one of the primary jurisdictions for aviation financing and leasing with continued investment from a wide investor base. This transaction is not only significant in terms of its $2bn scale but also providing an entry point for CDPQ into the high growth aviation financing and leasing sector."
Catherine Duffy, Chairman and Finance Partner, A&L Goodbody, said: 'This was significant as it represented GECAS’s first joint venture with CDPQ and CDPQ’s first investment in the aviation sector to create a new, capital efficient platform to finance future growth and opportunities in the aviation sector.'
A&L Goodbody acted as Irish counsel to GECAS and Walkers as Irish counsel to CDPQ. Other legal advisers were: Clifford Chance (New York) US counsel to GECAS, Milbank, Tweed, Hadley & McCloy (New York) US counsel to CDPQ, Torys (Canada), and Lavery (Canada).