Aircraft leasing company Global Jet Capital published an article about its current business and prospects in a trade publication AIN Online. Highlights include the claim that “in 2019 alone, Global Jet Capital is on pace for $800 million in new business” and it’s “seeing a 20 percent year-over-year jump in business aviation leasing and financing business“.
“Global Jet Capital ..is paving the way for this growth by expanding its global presence, including the additions of fully functioning offices in Zurich and Hong Kong earlier this year. These offices joined existing facilities in Danbury, Connecticut; Boca Raton, Florida; and Mexico City.
Also propelling growth is its continued access to funding, including its third successful asset-backed security, bringing total assets securitized to over $2.1 billion.
The firm also continued to reinforce its leadership team, including the recent naming of financing veteran Stefan Abbruzzese as chief commercial officer. This enabled Dave Labrozzi to shift into the new role of vice chairman“
Given that the company – established in 2014 – is privately owned, we rarely learn about such new developments. However, keeping an eye on Global Jet is important because BDC exposure is very, very high: $466mn. Yet back in 2014, when GSO Blackstone first brought FS Investment into the credit, outstandings were just $1mn ! (Subsequently KKR has replaced GSO Blackstone). What’s more, the investment is exclusively in junior capital (sub debt and preferred) and concentrated in 4 FS-KKR Capital BDCs – publicly traded FSK and FSIC II, FSIC III and FS Energy & Power. (FSIC II and FSIC III will shortly be publicly traded). All that capital is under a bigger mountain of senior secured debt from third parties. The junior debt held is all in PIK form and yields 15.0% annually, which means income at risk is very high: $53mn. Finally, the last time the BDC exposure was valued the Preferred was discounted (90%).
We’re glad to hear that Global Jet is performing well – if their press release is to be believed – but regular monitoring is required as there is so much at stake. We have had a CCR 3 (Watch List) rating since IIIQ 2018, which will likely remain, whatever the valuation, given the size of the risks involved.