Helicopter lessor Waypoint’s first note issuance

September 10, 2015
Source:  Aviation Finance

Waypoint Leasing, one of the world’s largest global helicopter lessors, has completed a note issuance of US$200 million senior secured notes – its first venture into the capital markets. The company tells Aviation Finance that it will use the proceeds to fund continued expansion and to free up further capacity under its existing secured revolving credit facility.

Waypoint CEO Ed Washecka said in a statement that the company ‘has now achieved the scale and the related credit rating to support the very attractive execution of our first capital markets transaction, a landmark financing for the business.’

CFO Alan Jenkins said the transaction further diversified capital access, adding longer term financing to Waypoint’s debt maturity profile and representing a further reduction in the cost of capital. ‘Our cost of funds has materially reduced over the past two years as we have successfully scaled and grown the business,’ he told Aviation Finance in an email response to questions. Earlier this year the company raised $185 million through three debt facilities, including its first unsecured loan and a five year $85 million facility with Deutsche Bank. The $200 million note issuance brings its total debt commitments to about $1.3 billion. This figure includes secured and unsecured revolving credit facilities of over $500 million and bank term loans and export credit agency financing of about $600 million.

The new senior secured notes have a maturity of seven years. Issued in three tranches, they provide both dollar and euro funding capacity and each tranche has a marginally different start date to position the relevant pools of aircraft. All tranches mature in Q4, 2022.

The notes have been issued to life insurance and pension companies by joint placement agents Goldman Sachs and SunTrust Robinson Humphrey. Co-placement agents were Deutsche Bank, BNP Paribas and RBC Capital Markets, with Mitsubishi UFJ Securities (USA) in the senior co-placement role.

Fleet growth
Waypoint started 2015 with 84 aircraft. It now has 108 operating in 25 countries and total assets of $1.3 billion. ‘We expect to materially add to that through the rest of 2015,’ Jenkins told Aviation Finance. ‘We have significant debt and equity capacity to continue to provide solutions for our customers and to execute on opportunities as they arise.’

Waypoint currently has order book arrangements in place with a number of helicopter manufacturers, with firm or option positons for over 95 aircraft, valued at over $1.4 billion, to be delivered over the next five years. This includes 20 Bell 525 Relentless aircraft announced last March.

Asked about plans for further OEM orders, Jenkins said: ‘Waypoint has ongoing dialogue and relationships with all of the helicopter manufacturers and continually assesses its fleet and new helicopter opportunities.’

Founded by Ed Washecka, Allan Rowe and Swati Rishi in 2011, Waypoint received a significant vote of confidence in April 2013 when it secured $375 million of equity growth capital from three parties: Michael Dell’s family investment vehicle, MSD Capital, Soros Fund Management and the Cartesian Capital Group.

These three investors injected a further $75 million in equity last November, when Waypoint reached agreement with private equity and infrastructure investment firm First Reserve to acquire a portfolio of 31 helicopters (18 AgustaWestland AW139s, 11 Sikorsky S-92s and two Sikorsky S76C++) on long-term lease with the CHC Group.

At the time of his company’s initial investment in Waypoint in 2013 Bill Jarosz, a partner at Cartesian, told the Financial Times it had been made partly because of the lessor’s “unusually strong management team” and also because there was less volatility in the value of helicopters than in that of other transport assets, such as ships or fixed-wing aircraft. Waypoint’s equity commitment now exceeds $450 million.

Future demand?
The recent placing demonstrates continued investor appetite for exposure to a leading player in an increasingly crowded helicopter leasing sector – at a time when the immediate future demand for helicopter operator services is somewhat uncertain.

Last month, for example, the world’s largest provider of helicopter services, Bristow Group, reported a second quarter net loss for 2015 of $3.3 million compared to net income of $44.1 million in the same period of 2014. At $15.9 million, net cash from operating activities was less than half the $37.3 million received in the same three months of last year.

Bristow said the year-on-year decline in financial results had been “significantly impacted by a decline in oil and gas activity, especially in our North Sea operations within our Europe Caspian region, while our Asia, Africa and Americas regions were impacted to a lesser degree. It warned that it expects results over the remainder of its fiscal year “to continue to be impacted by the market conditions affecting our oil and gas clients, partially offset by further SAR (search and rescue) bases that come on line over the remainder of the fiscal year and benefits from additional economic restructuring measures.”

Bristow President and CEO Jonathan Baliff said: “We initiated a $75-95 million cost efficiency program in February that mitigated the impacts of this downturn for our clients’ benefit. However, we will now implement a second phase economic restructuring to deliver an additional $60 million minimum in annualized cost base reductions as we see the velocity and duration of the downturn worsen.”

While Waypoint has a substantial order book, it says arrangements have been negotiated to include significant optionality, allowing the company to adjust to market conditions. The company has also previously pointed out that its activities are focused on geographic areas of greater opportunity, such as South America, and has argued that low oil prices have a much greater affect on offshore exploration than on offshore production activities.