by John Pletz | June 5, 2010 | Crain’s Chicago Business |
Jim Raff is swooping back into the aircraft market, looking for bargains and packing a $600-million bankroll from private-equity giant Carlyle Group.
He’s hoping to repeat the performance of his last fund, which successfully rode the industry’s bust and recovery cycle from 2004 to 2007.
“We think the time is right to start buying,” says the Chicago banker, who got his start 23 years ago lending money to United Airlines. Mr. Raff’s RPK Capital Partners hopes to leverage Carlyle’s funds to buy more than $1 billion in aircraft and engines or related bonds and debt.
He’s riding a wave of private-equity money flooding into the aircraft-leasing business on the theory that prices are nearing the bottom and will climb as aviation recovers. Connecticut private-equity firm Oak Hill Capital Management LLC and others invested $1.4 billion in Avolon, an aircraft leasing venture based in Ireland; San Francisco-based Jackson Square Aviation LLC raised $500 million from Oaktree Capital Management L.P.
The capital is crucial to the continued rebound of plane makers like Chicago-based Boeing Co. Its airline customers must sell off older planes before they can buy new ones like the 787. But more cash for leasing firms also means more competition for deals. “The biggest risk is if they’re all in a giant rush to invest that money in transactions that don’t make sense,” says Glen Langdon, CEO of Langdon Asset Management Inc. in San Francisco, which buys and sells aircraft.
Washington, D.C.-based Carlyle is making its first foray into aircraft finance, betting big on Mr. Raff and partners Paul Redman, Robert Gates and Chris Chaput. “We liked Jim’s strategy and approach,” says Adam Palmer, a Carlyle managing director. “When combined with his track record through the last cycle, we decided to partner with him and his team.”
Mr. Raff grew up in rural Connecticut and came to Chicago in 1987 as a lender for AMRO Bank. He later worked for Denver-based aircraft-leasing company Republic Financial Corp. and Boston-based BTM Capital Corp. before returning to Chicago in 2004 to start RPK Capital, a $200-million fund.
Photo: Erik Unger
by Jeremy Lemer | April 22, 2010 | Financial Times |
The Carlyle Group intends to invest $600m in a joint venture that will buy commercial aviation assets around the world in the latest sign of a gradual thaw in the battered aviation finance markets.
Carlyle, the private equity group, and RPK Capital Management, a Chicago based specialist in aviation investments, have set up a new company that will purchase over $1bn of assets thanks to leverage.
RPK, which will manage the portfolio and also invest $20m, intends to buy bank debt secured against assets such as jets and spare parts and also various aircraft and engines that will then be leased out to airlines.
The move marks the first time that Carlyle, which has over $88bn of assets under management, has invested in aircraft leasing and debt and is an unusual divergence from its usual practice of running its own investments.
In the past it has made substantial investments in the aerospace and defence sector but has mainly favoured manufacturing companies like Vought Aircraft Industries, a major component supplier.
Carlyle is one of a number of investment companies that have targeted aviation assets in recent weeks. In late March Oaktree Capital Management helped kick start Jackson Square Aviation, an aircraft leasing company, with a $500m investment.
Adam Palmer, a managing director at Carlyle, said that the company had looked at the market several times over the last few years but until now had never found the right moment, or the right business plan, to make it worthwhile.
“We are seeing signs of recovery in the airline consumer market, but the credit dislocation has been so severe that as capital comes back it is flowing into blue chip carriers like Lufthansa,” he said.
“There are hundreds of other airlines that are struggling to find financing … the question is will the markets be open to them or will there be some alternative structure that they are forced to look to? That is what we are trying to create.”
RPK will focus on lending and leasing to second and third tier airlines around the world and will also look at older aircraft. The group will take a cyclical approach, putting capital to work for about five to seven years.
Since the summer of 2009 capital markets have reopened to the major airlines and they have successfully raised billions of dollars to finance new aircraft orders and replenish their reserves.
But elsewhere financing remains tight as leasing companies, such as International Lease Finance Corp, that have traditionally supported the market sell assets rather than extending new financing and commercial banks husband their capital.
According to DVB Bank, a transport finance specialist, in 2010 about $30bn will be required to fund new deliveries to non-prime carriers alone – an amount that will only partially be filled by export credit agencies, such as the US Export-Import Bank, and other sources.
Evercore Partners and Debevoise & Plimpton advised Carlyle on the deal. RPK was advised by The Seabury Group and K&L Gates
By Jeremy Lemer
Published: April 22, 2010
by The Carlyle Group | April 22, 2010 |
Global private equity firm The Carlyle Group and RPK Capital Management, an aircraft leasing and investment company, today announced they have formed a partnership to invest $600 million in equity in a spectrum of global commercial aviation assets, including, aircraft, engines, and related securities and loans. With leverage, the new partnership, RPK Capital Partners, is expected to purchase well over $1 billion in aviation assets. The equity comes from Carlyle Partners V, Carlyle Strategic Partners II, RPK principals and other investors.
Carlyle Managing Director Adam Palmer said, “This new partnership marries Carlyle’s global footprint and decades of aerospace experience with RPK’s proven ability to create value in complex situations in the commercial aircraft sector at this opportune time. RPK’s responsive, creative and disciplined approach has enabled them to generate consistently superior returns.” RPK Co‐founder and Managing Partner James Raff said, “We are excited to partner with The Carlyle Group and leverage their global reach and relationships in this sector. There is a significant need for capital and expertise in the commercial aviation investment sector at this time. This new partnership will provide creative fleet solutions and liquidity to airlines, lessors, financial institutions and other non‐traditional owners of aviation assets worldwide.”
RPK is an integrated aircraft leasing and investment company founded in 2004 with headquarters in Chicago and offices in New York, San Francisco and London. The senior management team comprises four veterans of the aviation industry: James Raff, Paul Redman, Robert Gates and Christopher Chaput, who have extensive experience in acquiring, leasing, remarketing and financing aircraft, as well as substantial experience in aircraft related capital markets transactions. Concurrent with the closing of this transaction, Chris Chaput, who will be based in RPK’s New York office, joins RPK Capital Partners from The Seabury Group where he was a partner and head of structured finance. RPK’s capital base, flexible business model and unique transactional expertise allows it to provide tailored solutions to its various customers’ specific financing and fleet needs. Raymond Whiteman, Managing Director and Co‐head of Carlyle’s Global Distressed and Corporate Opportunities Fund, said, “Jim and his partners bring the right mix of industry expertise and financial acumen to grow RPK Capital Partners into an industry leader while helping their customers manage the many secular pressures facing the aviation industry.”
Carlyle was advised by Evercore Partners and Debevoise & Plimpton LLP. RPK was advised by The Seabury Group and K&L Gates LLP.
April 22, 2010
Washington, DC and Chicago, IL
