Milestone Aviation celebrates its second birthday with more deals

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William Kelly, CEO of Milestone Aviation, reflects on the success of his helicopter leasing company as it celebrates its second birthday.

William Kelly, CEO of Milestone Aviation, reflects on the success of his helicopter leasing company as it celebrates its second birthday.

William Kelly, CEO of Milestone Aviation, has not had the time to celebrate his helicopter leasing company’s second birthday. There are too many potential deals out there including three transactions which should close in September. But if he had the time there is a lot to celebrate.

The company has signed leases on 53 helicopters worth more than $600 million since it launched in August 2010, with $500 million from Jordan Company and Nautic Partners. In its first two years it has worked with 20 operators across four continents and raised over $400 million in debt.

But this is just the start. By the end of 2012 it expects to have a portfolio of over 75 helicopters worth over $1.1 billion.

The company has adapted its business plan since it was first written in March 2012. Launched by Richard Santulli, the founder of the fractional jet company NetJets, and with six former NetJets managers – including Kelly (pictured, left), the former CEO of NetJets Europe – Milestone expected that a quarter of its portfolio would be business jets. In fact, it has closed just one business jet deal and is not looking for others.

Winning big customers

Santulli, the chairman of Milestone, had run a helicopter leasing company before launching NetJets, so the Milestone team was confident that it would find demand from customers. But they thought it might take time to win deals with larger customers. They were wrong about this with large global operators like Bristow, CHC and Inaer/Bond seeing the attraction. It now has closed transactions with three of the four largest helicopter operators in the world.

“Demand in the helicopter market is really strong,” says Kelly. “The oil and gas markets are very robust and there is a lot of interest in our product. We are now working on our second and third transactions with many of our customers.”

Selected transactions

OperatorCountryHelicopters on lease to Milestone
Aeroservicios EspecializadosMexicoB412EPs
CareFliteUSAFour A109E
BristowUSTwo Eurocopter EC225s , three 2011 Sikorsky S-92s (all in North Sea) 
CHCCanadaTwo Sikorsky S-92s and three Eurocopter AS332L2
EvergreenUSB412EP
Global VectraIndiaB412EP
Helijet InternationalCanadaThree S76C+
InaerSpain (global)One AW139, one EC135 and an A109E
Omni Taxi AereoBrazilFive Sikorsky S76C++ and an EC-225
Transportes Aereos PegasoMexicoFour EC-145

Source: Corporate Jet Investor/HeliInvestor


Speculative orders

Milestone’s model has some similarity to commercial aircraft leasing companies. Many commercial aircraft leasing lessors place orders for new aircraft without having firm customers. When it launched, Milestone was not planning to do this, but the strategy changed within months and now accounts for 13% of the firm’s business.

In December 2010, Milestone agreed to buy the last seven S-76C++s that Sikorsky was building. The deal was good for Sikorsky as it meant that they had guaranteed financing. It was also good for Milestone, which had signed operators up by March 2011. Since then, it has placed three more orders.

“We will not be doing a lot of forward orders,” says Kelly. “Probably about 20% of portfolio going forward will be future positions.”

As well as acquiring aircraft through sale/leasebacks, Milestone is also happy to take over existing orders from operators and pay pre-delivery or construction payments. This is unusual with commercial aircraft leasing companies.


Milestone’s forward orders

AnnouncedManufacturerAircraft
August  2012Sikorsky19 S-92
February 2012Eurocopter16 EC225
February 2012SikorskyThree S-92
October 2011American EurocopterFive EC130B4
June 2011SikorskyOne S-92 and two S-76 C++
December 2010SikorskyFive S-76C++

Source: Corporate Jet Investor/HeliInvestor


Raising debt

Leasing companies need leverage to obtain returns that satisfy private equity owners and Milestone had always planned to raise debt. In April this year it closed a $265 million facility led by Deutsche Bank with Japan’s Nomura and Huntington Bank, a regional US bank with headquarters near Milestone’s US office.

“We wanted to start with the equity and then build a business so we could go to banks and their credit committees with everything they need,” says Kelly. “We were delighted to have a mixture of big global banks and smaller regional banks that appreciate our international customers in the North Sea, Mexico, Brazil and South East Asia but like being able to lend to an Irish company.”

In retrospect the leasing company may have wished to have closed the $265 million loan with Deutsche Bank earlier as pricing was affected by problems in the Eurozone. But Milestone’s facility is the first time a helicopter leasing company has raised debt in this way and it took time to educate lenders.

“Helicopter leasing is a great model and in some ways banks would look at the residual values of helicopters, the underlying contracts and go ‘what is the catch?” says Kelly. “We worked hard to answer their questions.”

The deals with Sweden’s SEB and Société Générale – who have both financed helicopter operators before – closed much faster.

Milestone has also spoken with export credit agencies, which typically like companies to have been in operation for at least three years.


Debt deals

SizeArrangerParticipantsComments
$265 million term loanDeutsche BankNomura, Huntington Bank, CIT, 1st Source Bank, EverBank Commercial Finance and Credit SuisseMixed portfolio of aircraft located over the world
$75 millionSEBFor Scandinavian operator
$60 millionSociété GénéraleIncludes facility to cover pre-delivery payments (PDP).

Source: Corporate Jet Investor/HeliInvestor


New competitors and the next two years

“We always said that we wanted to work as partners with customers, manufacturers and banks,” says Kelly, “and we are delighted that so many leading companies are partnering with us.”

Since Milestone launched there have not been many new competitors apart from Lease Corporation International, a commercial aircraft leasing company, which ordered AgustaWestland helicopters with a list price of $400 million in February 2012. However, several other aircraft leasing companies are also looking at helicopters. Kelly says that demand is strong and that may attract new competitors.

“We are already competing with regional banks and other sources of capital and many operators want to diversify,” he says. “But not many people are offering 100% financing and that is where our product is very attractive.”

Kelly says that for now they are focusing on growing the company rather than raising more equity or thinking about listing the company.

“My boss [Richard Santulli] says that if you concentrate on building a great company you do not have to worry about things like raising equity. And that is what our focus is on now,” he says.

And that is why they do not have time for a party.

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