XOJet to get $2.5 bln to expand its fleet

[Number$Cruncher]

I would be getting more and more nervous. That's over $2.4 billion in debt to be serviced. At 7%, that would be about a half million dollars A DAY. It would have been good to see more of these funds coming as investments rather than loans.

The cost of equity (an "investment" in your comment) is far, far higher than debt.

 

[On Your Six]

I would be getting more and more nervous. That's over $2.4 billion in debt to be serviced. At 7%, that would be about a half million dollars A DAY. It would have been good to see more of these funds coming as investments rather than loans.

A lot of this funding would be put toward growth in the Middle East - and that's where the money is nowadays. You can bet that XOJet will negotiate volume discounts and a staggered order from manufacturers to ensure that risks are hedged. Some of the debt could be convertable debt which would play well if an IPO takes place in the future. It's better to have this funding now vs. when you are desparate...

 

[cherry20's]

This is directly form XOJET's website today. A couple more details of the whole deal:

OJET Launches International Expansion and Secures Financing Agreements for up to US$2.46 Billion
Rapid Growth Attracts Investment to Meet Escalating Worldwide Demand for Business Aviation, Launch International Joint Venture in Abu Dhabi, U.A.E.

GENEVA, SWITZERLAND — May 19, 2008 — Today at the European Business Aviation Convention, business aviation leader XOJET announced financing agreements for up to $2.46 billion to fund its North American operations and global expansion strategy. This marks the largest publicly-announced business aircraft financing package in history. XOJET also announced the proposed launch of a separate joint venture with investment company Tasameem Real Estate Company, LLC (Tasameem) to be headquartered in the United Arab Emirates’ capital city of Abu Dhabi.
The equity financing round was advised by Morgan Stanley. Multiple investors participated in debt and equity financings including global investors Tasameem, veteran aviation investor TPG, Export Development Canada (EDC), White Oak Global Advisors, LLC and XOJET founder Paul Touw. The strength of these financings reflects the high degree of confidence that XOJET’s investors have in the company’s U.S. management, proven business performance and in the growing demand for business aviation services.
$964 million in immediate financing will be made available to XOJET, which has already secured more than $500 million in previous funding. The remaining $1.5 billion in additional financing will be made available upon launch of the planned joint venture with Tasameem, which is expected to occur later this year. XOJET currently has 127 aircraft and aircraft orders valued at more than $3.1 billion.
XOJET’s global expansion strategy seeks to capitalize on the escalating worldwide demand for business jet travel. The joint venture with Tasameem in Abu Dhabi will leverage XOJET’s innovative operating model, stringent safety standards, and comprehensive operating experience to bring the company’s unique value proposition to customers traveling to, from, and within the Gulf Cooperation Council countries and the greater Middle East region.
This comprehensive financing package will also enable XOJET to be the first large-scale business jet operator to fund the vast majority of its own fleet. Traditional models of business aviation have customarily required the customer to fund the aircraft, or a fraction of the aircraft. With this comprehensive financing package, XOJET expects to self-finance its aircraft, removing this burden from its customers and expanding the breadth of its product offerings.
“The dynamics of a constrained commercial aviation system combined with the rapid rise of business opportunities in a global economy are driving historic growth in business aviation,” said Paul Touw, CEO of XOJET. “In an increasingly diversified and worldwide marketplace, business jets are becoming one of the most important tools for corporate competitive advantage.”
With commercial airline service under strain, business jet travel is growing at an unprecedented rate. In the United States, the FAA March 2008 forecast predicted average flight growth of 12.2 percent annually through 2010. The overseas business jet market is growing even more rapidly, with aircraft manufacturers predicting that more than 50 percent of aircraft demand will come from outside of North America, according to the annual Honeywell Business Jet Forecast.
“XOJET’s business model is changing the industry as it continues to outperform our expectations,” said David Bonderman, founding partner of TPG. “We are excited to continue to fund the company’s growth as it has assembled a world-class management team that continues to execute aggressively and successfully.”
“This significant financing series has created one of the strongest balance sheets in the industry,” said Eilif Serck-Hanssen, XOJET’s CFO and president of international operations. “Given today’s credit markets, the magnitude and size of these agreements suggests there is always capital for great ideas and growth markets.”

 

[Whale Rider]

See Next.......

 

[Whale Rider]

More..........

http://www.flightglobal.com/article....4bn-to-fund-fleet-and-mideast-expansion.html

 

[AeroDMB]

http://www.flightglobal.com/article....4bn-to-fund-fleet-and-mideast-expansion.html

Flight Global always seems to have more info, thanks for the article. Sounds like the long-range aircraft they are considering will be mainly based in the Middle East with the new joint venture. Will these long-range aircraft ever be launched from the U.S. on a regular basis and flown by domestic based XOJET pilots?

Also, I'm surprised to hear they are considering the Citation Columbus, seems like a Bombardier long-range product would be their direction. Any rumor as to how many additional aircraft they are intending on ordering in light of this new announcement?

 

[Whale Rider]

Flight Global always seems to have more info, thanks for the article. Sounds like the long-range aircraft they are considering will be mainly based in the Middle East with the new joint venture. Will these long-range aircraft ever be launched from the U.S. on a regular basis and flown by domestic based XOJET pilots?

Also, I'm surprised to hear they are considering the Citation Columbus, seems like a Bombardier long-range product would be their direction. Any rumor as to how many additional aircraft they are intending on ordering in light of this new announcement?

Its so early at this point, there are more questions than answers. I'm sure they won't base all of the Large Cabin Jets in the Middle East.

 

[Whale Rider]

XOJet CEO Explains How He Landed $2.5 Billion

http://jets.halogenguides.com/articles/1212-xojet-ceo-explains-how-he-landed-2-5-billion

 

[captain dad]

Collateral vs. Equity

The cost of equity (an "investment" in your comment) is far, far higher than debt.

Equity, is only considered equity, if what you are holding out values your debt.

In this case A/C are used as collateral against the loan. (Right now, the aircraft on property don't even cover your first payment.) The only problem with this is that you need to show a large profit and soon after assuming the debt or you start to hemorrhage money. At which point, you will start selling off A/C to pay the debt off for buying the A/C. A catch 22 of the business. (much like JetBlue and some of the airlines are doing right now.)

It is the "Pay to Play" scenario.

I agree a higher investment % as opposed to loan would have been more favorable. Still, getting someone to pony up $2.5 Billion is nothing to sneeze at. Hopefully, you won't all have to move to the sand box.

"Dealer, give this boy a stack of chips. I believe he wants to gamble."

In all seriousness, good luck guys. Be safe.

 

[Whale Rider]

Equity, is only considered equity, if what you are holding out values your debt.

In this case A/C are used as collateral against the loan. (Right now, the aircraft on property don't even cover your first payment.) The only problem with this is that you need to show a large profit and soon after assuming the debt or you start to hemorrhage money. At which point, you will start selling off A/C to pay the debt off for buying the A/C. A catch 22 of the business. (much like JetBlue and some of the airlines are doing right now.)

It is the "Pay to Play" scenario.

I agree a higher investment % as opposed to loan would have been more favorable. Still, getting someone to pony up $2.5 Billion is nothing to sneeze at. Hopefully, you won't all have to move to the sand box.

"Dealer, give this boy a stack of chips. I believe he wants to gamble."

In all seriousness, good luck guys. Be safe.

Thank God the the Fake financial analyst is here to tell us he knows more than the real millionaires running the show.

Thanks Captain Dad!