Jetrader - Winter 2018 - 29

that relationship right and achieve what
the shareholders want.
As a public company, the shareholder
base is a lot more diverse. Shareholders
aren't so involved in the business, and they
tend to look at the business at a very high
level. They tend to look at the business in
terms of how it compares to generic valuation tools, and problems can arise when
those generic valuation tools aren't aligned
to the value drivers in the business. That's
probably the crux of the challenge for listed
companies, and the best way to overcome it
is by trying to educate the shareholder base,
but that's easier said than done. Although
our sector offers great risk-adjusted returns
to shareholders, it's difficult to get the
attention of shareholders and the investor
base, because at the end of the day we
are a niche sector; we're a small sector in
global terms.
GB: So you've had a very busy last few
months  - or probably last couple of
years. Now you're going to acquire SKY
Aviation Leasing International, and
you've made an order book with both
narrowbody manufacturers in Airbus
and Boeing. Could you touch on those
two points and the thought process
behind them?
RK: The team at SKY built a great portfolio, which is very closely aligned to the type
of portfolio that Goshawk itself had built.
The SKY portfolio is primarily narrowbody
focused, like ours. It has a very young average age with a long average remaining lease
term, with a good complement of lessees
in the portfolio without too much overlap.
Adding the two portfolios adds 17 lessees,

I believe, in six countries to our business,
so there's not too much overlap in that
context. Strategically, it made sense for us
to consider acquiring that business.
At the outset, we sat down to try and
figure out how we could differentiate ourselves in the process other than by price.
We rarely win because of price, and we concluded that we would be able to differentiate ourselves in terms of making ourselves
the lowest execution-risk bidder in that
formal RFP process. We did that by fully
engaging in the due diligence process, and
we up-fronted a lot of the due diligence
work. We very quickly put in place our funding for the acquisition - our debt and our
equity funding - and we very were very
proactive and engaged in terms of agreeing
on the purchase agreement document with
the SKY team.
What does the SKY acquisition do for
Goshawk? When we combine the businesses,
what will the benefits be? First, it de-risks
our business. We're now a larger business.
We will have more than 220 committed aircraft in the business post-acquisition of
SKY, and that diversification with additional
lessees de-risks the business.
Second, because we're a larger business, it brings us closer to getting an
investment-grade rating. Size matters to
the rating agencies, and with SKY we're
closer to the size of a business that will
achieve an investment-grade rating.
Third, with that investment-grade rating,
we will have access to additional sources of
debt funding. That de-risks our business,
because we have more diversification in the
debt side of our portfolio, and it also gives
us access to cheaper funding, which allows

us to be more competitive. Therefore, the
long-term sustainability of the business is
better. Ultimately the SKY acquisition does
very good, strategic things for our business.
GB: Could you talk a bit about the investment-grade process? And also on a wider
scale, there's been a lot of positivity in
the market about your liability management of the balance sheet. Could you also
talk a little bit about how you go about
doing that so successfully?
RK: On a very high level, we think about
it as there being three pools of debt that
we want to gain access to. The first pool
is bank debt, and banks offer a number of
debt products in the marketplace - primarily secured, some unsecured. The second
pool is private institutional debt, and that's
primarily unsecured debt. The third pool is
public institutional debt or public bonds.
We've been very successful in terms of
accessing the first two pools of debt. We
have a lot of different bank debt facilities,
both secured and unsecured, and in the second pool, the private institutional market,
we've been particularly innovative. We've
accessed the U.S. private-placement market
a number of times, and we're the largest
aircraft lessor to have accessed the U.S.
private placement market - having done
the largest deal in 2017. We have accessed
the Schuldschein markets in Germany, which
is essentially a European private placement
market, and we were the first lessor to
access that market. We've also done some
unsecured debt with institutions in Asia,
which is also quite unique. So we've been
very successful in terms of accessing that
second market.
Jetrader * Winter 2018 29
Jetrader - Winter 2018

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