Swiftair parent set to gain control of West Atlantic

Yesterday, shareholders of Sweden-based West Atlantic Group accepted what amounts to a takeover offer from Spain-based LUSAT Air S.L., the holding company that owns Aviation Leasing Spain, Cygnus Air, and Swiftair. The two companies entered into an MoU that would enable LUSAT to acquire a majority stake in West Atlantic. The deal is slated for expedited approval ahead of a possible no-deal Brexit and a share subscription is expected to take place today. A meeting with major bondholders that will seek approval for the transaction will be called by 15 April. Despite higher demand for West Atlantic’s jet freighter fleet, the company’s large ATP freighter fleet, of which seventeen are currently parked, has been a drag on the specialist cargo carrier’s balance sheet in recent years. Last year, the company lost US$3.8 million, despite revenue growth of 21%. Fredrik Groth, the company’s CEO for three years, stepped down in January and was replaced by Lars Jordahn – a promise to usher in a new era focused on “reduction of leverage.” The deal with LUSAT was therefore not unexpected. As part of the MoU, West Atlantic will issue new ordinary shares to LUSAT valued at €20 million. About half the capital will go to paying down existing bonds, while the remaining €10 million “will be used for capital needs within the Group,” according to a statement issued by West Atlantic. Following amortization of West Atlantic’s existing bond with the capital injection from LUSAT, West Atlantic will transfer the remaining bond claim to an SPV that will use freighter assets and rights to aircraft lease payments as collateral for the issue of a new bond. In the process, LUSAT will further amortize the new bond with €25 million that will go towards repurchasing assets held in the SPV. West Atlantic will also continue to sell off its parked ATP fleet, and proceeds will be used to pay down the new bond. We note that, in 2014, ATSG acquired a 25% stake in West Atlantic. It's unclear at this point how LUSAT's investment will affect ATSG's holdings. Last month, when West Atlantic announced a possible bond refinance, however, ATSG told Cargo Facts it was expecting a positive outcome from the results. Returning to the West Atlantic fleet, in January the group added the fourth and final 737-800BCF it had on order with GECAS, all of which currently operate on behalf of FedEx. West Atlantic also added a fourth 767-200F. For the remainder of 2019, however, apart from offloading additional ATP freighters, no further changes are expected at either of the group’s carriers, West Atlantic Sweden or its UK-based affiliate, West Atlantic. If West Atlantic’s bondholders approve the company’s takeover by LUSAT, the deal would be the latest in a string of recent high-profile shake-ups in Europe’s specialist carrier segment. In February, Ireland-based ASL Aviation Holdings announced its intent to be purchased by private equity firm Star Capital Partnership LLP for an undisclosed amount. At this point, it's unclear how LUSAT and Star Capital will impact the future trajectory of the European narrowbody freighter fleet. The current and future composition of the narrowbody freighter fleet will be a major subject of interest at Cargo Facts Asia in Shanghai, 15-17 April. In addition to a session devoted specifically to narrowbody passenger-to-freighter conversions, we will also have a presentation from Cargo Facts Consulting’s Managing Director, Frederic Horst, on this year’s Twenty-Year Freighter Forecast. For more information about Cargo Facts Asia, or to register, go to CargoFactsAsia.com .

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