Creates world's largest aircraft lessor focused
solely on serving the regional aviation segment
HALIFAX,
NS, May 3, 2022 /CNW/ - Chorus Aviation Inc.
('Chorus') (TSX: CHR) announces that it has completed its
acquisition of Falko Regional Aircraft Limited ('Falko'), as
previously announced on February 27,
2022. This acquisition transforms Chorus into a premier
full-service provider in regional aviation with unique capabilities
to maximize value at every stage of an aircraft's lifecycle.
The completion of this transaction establishes Chorus as the
world's largest aircraft lessor focused solely on investing in the
regional aircraft leasing space, and results in a portfolio of 348
regional aircraft with an aggregate value of approximately
US$4.5 billion which are owned,
managed, and/or operated by Chorus subsidiaries. As contemplated by
the acquisition agreement, Chorus expects to acquire the beneficial
interests in five aircraft trusts on a deferred basis prior to the
end of the second quarter of 2022 (subject to the satisfaction or
waiver of specified conditions applicable to those transactions)
bringing the total to 353 aircraft.
"I'm extremely pleased and very optimistic about our future
growth opportunities," said Joe
Randell, President and Chief Executive Officer, Chorus.
"This transformative acquisition establishes Chorus as the world's
largest aircraft lessor focused on the regional aviation segment
and a leading worldwide provider in all aspects of regional
aviation. Further, the transaction is expected to be
accretive to earnings and earnings per share in
20221. With the addition of Falko's asset
management platform, we will shift to growing our leasing business
through an asset light model, significantly increasing cash flow
generation, improving return on invested capital, and facilitating
the pursuit of larger deals with more efficient access to equity
capital. Growth through accessing third party capital reduces
balance sheet exposure, lowering debt and residual value asset
risk, while also enhancing stability and diversity of earnings,
through asset management fees. The combined leasing
platforms also present a broadened market opportunity covering the
full age spectrum of regional aircraft from new deliveries to mid
and end-of-life aircraft. Chorus' technical skills and
capabilities, including aircraft repurposing, end of life
disassembly, and parts provisioning and sales, provide multiple
opportunities to maximize returns on aircraft assets."
Concurrent with the closing of the Falko acquisition, Chorus
closed the private placement with an affiliate of Brookfield
Special Investments Fund L.P. ('Brookfield') as previously announced on
February 27, 2022. As a result
of this transaction, Brookfield
beneficially owns 25,400,000 (Class B Voting Shares) of Chorus
(representing approximately 12.5% of Chorus' issued and outstanding
common shares2 of Chorus), 300,000 Series 1
Preferred Shares of Chorus and 18,642,772 common share purchase
warrants. Chorus and Brookfield
also entered into an Investor Rights Agreement in connection with
Brookfield's investment. This new
relationship with Brookfield gives
Chorus access to their extensive experience in asset management,
fundraising and capital markets.
"I'm deeply grateful to our team for delivering significant
value to our employees, customers, and shareholders. The Chorus
Aviation Capital team's dedication to growth since its inception in
2017 has helped make this significant milestone a reality; they are
a terrific complement to the Falko team, and we are very pleased to
welcome the Falko employees to the Chorus group. Our
immediate priority is to seamlessly integrate operations and ensure
the successful execution of the opportunities this transaction
brings. We believe the timing of this endeavour is opportune as
global air travel continues to resume and demand for regional
aircraft leasing increases," concluded Mr. Randell.
In accordance with the terms of the Investor Rights Agreement
between Chorus and Brookfield, Mr.
David Levenson, Managing Partner and
Global Head of Brookfield Special Investments, and Frank Yu, Managing Director, Brookfield Special
Investments have been appointed to the Chorus board of directors.
(Bios for Messrs. Levenson and Yu are available on Chorus' website
at www.chorusaviation.com). In addition, Mr. Paul Rivett has been appointed Chair of the
Chorus Board of Directors. Paul joined Chorus' board in 2021 and is
the co-founder and Chairman of NordStar Capital Inc., a company he
co-founded in 2020. Prior to co-founding NordStar, he served as the
President of Fairfax Financial Holdings Limited, a global insurance
holdings and value investing company, where he worked for nearly
two decades. Chorus' former Chair of the Board, Mr.
Richard Falconer and director, Mr.
Sydney John Isaacs, elected to
retire from the Chorus Board effective today, thereby enabling the
immediate appointment of the Brookfield nominees. The Chorus team is
very indebted for their dedication and commitment, and sincerely
thank them for their service.
Transaction Highlights
Increased size and scale:
- Portfolio of 348 owned, operated, and/or managed aircraft
with 32 airlines in 23 countries.
- Market opportunities are broadened and enhanced by strengthened
market competitiveness and ability to execute larger leasing
transactions.
- Full suite of service offerings and full age spectrum of
aircraft provides the ability to offer value-added solutions to
customers.
- Best-in-class trading platform with deep market insight and
relationships.
Financially accretive in the first year:
- Earnings and EPS in 2022 creating an attractive financial
profile.
- Asset management model increases cash flow generation, improves
return on invested capital, lowers the cost of capital and balance
sheet risk.
- Diversifies revenue streams and provides access to larger pools
of capital to accelerate growth.
- Brookfield's investment
immediately reduces net leverage3.
- Multiple aircraft exit strategies provide enhanced shareholder
returns.
- Well-capitalized to pursue further growth opportunities across
multiple acquisition channels.
Exceptional expertise in asset management, capital raising
and markets:
- Combines best-in-class management teams in regional
aviation with over 200 years experience.
- Establishes Brookfield as a strategic investor with a 12.5%
common share stake and adds Brookfield's expertise to Chorus' Board of
Directors.
Additional information including key metric projections for the
balance of fiscal 2022 will be provided concurrent with Chorus'
first quarter 2022 financial disclosure on May 5, 2022.
Endnotes
- Based on assumptions including currently contracted and planned
lease revenue, and asset management revenue, depreciation expense,
interest costs on the debt assumed with the acquisition, estimated
tax rates and USD/CAD exchange rate of 1.27. Preferred share
dividends are deducted for the purposes of calculating EPS.
- Refers to Chorus' Class A Variable Voting Shares and Class B
Voting Shares.
- Leverage is defined as pro forma net debt to equity.
Advisors
Deutsche Bank Securities Inc. was the
exclusive financial advisor to Chorus. Dentons UK and Middle East
LLP was the legal advisor to Chorus in connection with the
acquisition transaction, and Osler, Hoskin & Harcourt LLP was the legal
advisor to Chorus in connection with the private placement.
About Chorus Aviation Inc.
Chorus is a global provider
of integrated regional aviation solutions. Chorus' vision is
to deliver regional aviation to the world. Headquartered in
Halifax, Nova Scotia, Chorus is
comprised of Chorus Aviation Capital a leading lessor of regional
aircraft, and Jazz Aviation and Voyageur Aviation - companies that
have long histories of safe operations with excellent customer
service. Chorus provides a full suite of regional aviation support
services that encompasses every stage of an aircraft's
lifecycle, including aircraft acquisitions and leasing; aircraft
refurbishment, engineering, modification, repurposing and
preparation; contract flying; aircraft and component maintenance,
disassembly, and parts provisioning.
Chorus Class A Variable Voting Shares and Class B Voting Shares
trade on the Toronto Stock Exchange under the trading symbol 'CHR'.
Chorus 6.00% Senior Debentures, 5.75% Senior Unsecured Debentures
due December 31, 2024, 6.00%
Convertible Senior Unsecured Debentures due June 30, 2026, and 5.75% Senior Unsecured
Debentures due June 30, 2027 trade on
the Toronto Stock Exchange under the trading symbols 'CHR.DB',
'CHR.DB.A', 'CHR.DB.B', and 'CHR.DB.C', respectively.
www.chorusaviation.com
About Falko Regional Aircraft Limited
Falko is an
established asset management company actively engaged in all
aspects of commercial aircraft leasing, financing, and management
with particular focus on the regional aircraft market. The team of
specialists is focused on managing a portfolio of modern regional
jet and turboprop aircraft on lease to leading airlines worldwide,
in combination with a growing engine leasing and trading business.
Falko is globally positioned to offer comprehensive asset
management solutions to the regional aviation industry, with
offices and representation in Europe, Asia,
South America and Australia, from which extensive experience and
expertise can be deployed across all regions of the world.
Since 2011, Falko, through its managed funds and affiliates, has
acquired over 320 regional jet and turboprop aircraft worth in
excess of US $3 billion.
www.falko.com
About Brookfield Asset Management
Brookfield is a
leading global alternative asset manager with
approximately $700 billion of assets under management
across real estate, infrastructure, renewable power and transition,
private equity, and credit. Brookfield owns and operates
long-life assets and businesses, many of which form the backbone of
the global economy. Utilizing its global reach, access to
large-scale capital and operational
expertise, Brookfield offers a range of alternative
investment products to investors around the world—including public
and private pension plans, endowments and foundations, sovereign
wealth funds, financial institutions, insurance companies and
private wealth investors.
Brookfield is listed on the New
York and Toronto stock exchanges under the symbol
BAM and BAM.A respectively.
Forward-Looking Information
This news release includes
forward-looking information and statements. Forward-looking
information and statements are identified by the use of terms
and phrases such as "anticipate", "believe", "could", "estimate",
"expect", "intend", "may", "plan", "potential", "predict",
"project", "will", "would", and similar terms and phrases,
including references to assumptions. All information and statements
other than statements of historical fact are forward-looking and,
by their nature, are based on various underlying assumptions and
expectations that are subject to known and unknown risks,
uncertainties and other factors that may cause actual future
results, performance or achievements to differ materially from
those indicated in forward-looking information or statements. As a
result, there can be no assurance that the forward-looking
information and statements included in this news release will prove
to be accurate or correct.
Actual results may differ materially from anticipated results
indicated in forward-looking information and statements for a
number of reasons, including: a failure to complete the acquisition
of the beneficial interests in the five aircraft trusts mentioned
in this news release on the terms currently contemplated or at all;
Chorus' ability to successfully integrate Falko's operations and
employees and realize the anticipated benefits of the acquisition
transaction; the potential impact of the completion of the
acquisition transaction on relationships, including with employees,
suppliers, customers, investors and other providers of capital; a
prolonged duration of the COVID-19 pandemic (including as a result
of the emergence of new COVID-19 variants) and/or further
restrictive measures to minimize its public health impacts; the
impact of the COVID-19 pandemic on the financial strength of
Chorus' and Falko's contractual counterparties; changes in
the aviation industry and general economic conditions;
Chorus' ability to pay its indebtedness and otherwise remain in
compliance with its debt covenants; the risk of cross defaults
under debt agreements and other significant contracts; the risk of
asset impairments and provisions for expected credit losses; and
the risk factors in Chorus' most recent Annual Information Form and
in its public disclosure record available under its profile on
www.sedar.com. Forward-looking information and statements contained
in this news release represent Chorus' expectations as of the date
of this news release (or as of the date they are otherwise stated
to be made) and are subject to change after such date. Chorus
disclaims any intention or obligation to update or revise such
information or statements to reflect new information, subsequent
events or otherwise, except as required by applicable securities
laws. Readers are cautioned that the foregoing factors and risks
are not exhaustive.
SOURCE Chorus Aviation Inc.