Avolon has agreed to establish Constellation Aviation with infrastructure investor I Squared Capital and a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA). Subject to regulatory approvals and completion, the venture is expected to acquire a seed portfolio from Avolon with a current market value of US$1.4 billion. It comprises 22 aircraft averaging about five years old, leased to 17 airlines across 15 countries.
Avolon will retain a minority equity stake and act as Constellation’s exclusive aircraft manager and servicer, providing leasing, asset-management and technical capabilities. The companies have not specified the venture’s operating location or headquarters. They expect the platform to scale over time, but have set no growth target.
The portfolio transfer is expected to take place when the transaction completes; it has not yet closed. A syndicated debt facility from international banks will support the joint venture. BNP Paribas, Crédit Agricole CIB, Société Générale, ING, MUFG and Mizuho are joint lead bookrunners, with Mizuho also serving as financial adviser to the investors.
The venture is designed to provide airlines with fleet capacity while offering investors exposure to long-term contracted cash flows. The partners cite passenger-demand growth, limited aircraft manufacturing capacity and airlines’ use of leasing to renew and expand fleets as drivers for the platform.