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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Jurisdiction of incorporation or organization)
Dun Laoghaire
County Dublin, Ireland
(Address of principal executive office)
Telephone number: +353 1 231 1900, Facsimile number: +353 1 231 1901
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Title of each class | Name of each exchange on which registered | |
American Depositary Shares | New York Stock Exchange | |
Common Shares, par value of $0.001 per share | New York Stock Exchange* |
* | Not for trading, but only in connection with the registration of American Depositary Shares representing these shares, pursuant to the requirements of the Securities and Exchange Commission. |
100 Manager Shares, par value of $0.001 per share
Large accelerated filero | Accelerated filerþ | Non-accelerated filero |
U.S. GAAPþ | International Financial Reporting Standards as issued | Othero | ||
by the International Accounting Standards Boardo |
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Exhibit 8.1 | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 13.1 |
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(Dollars in thousands, except share data) | ||||||||||||||||||||
JET-i Leasing LLC | ||||||||||||||||||||
Babcock & Brown Air Limited | (Predecessor Company) | |||||||||||||||||||
For the | ||||||||||||||||||||
period from | ||||||||||||||||||||
May 3, 2007 | ||||||||||||||||||||
(incorporation | ||||||||||||||||||||
date) to | ||||||||||||||||||||
For the years ended December 31, | December 31, | For the years ended December 31, | ||||||||||||||||||
2009 | 2008 | 2007 | 2007 | 2006 | ||||||||||||||||
Revenues | ||||||||||||||||||||
Operating lease revenue | $ | 213,964 | $ | 218,940 | $ | 26,042 | $ | 107,620 | $ | 56,566 | ||||||||||
Finance lease income | — | 2,446 | 2,365 | 7,477 | 1,668 | |||||||||||||||
Gain on sale of aircraft | — | 11,437 | — | — | — | |||||||||||||||
Gain on purchases of notes payable | 82,666 | — | — | — | — | |||||||||||||||
Lease termination settlement | 8,307 | — | — | — | — | |||||||||||||||
Interest and other income | 2,598 | 3,315 | 4,927 | 5,940 | 3,115 | |||||||||||||||
Total revenues | 307,535 | 236,138 | 33,334 | 121,037 | 61,349 | |||||||||||||||
Expenses | ||||||||||||||||||||
Depreciation | 83,650 | 74,161 | 8,573 | 34,548 | 17,976 | |||||||||||||||
Interest expense | 80,925 | 81,689 | 14,628 | 61,541 | 33,840 | |||||||||||||||
Interest expense — related party | — | — | — | 11,585 | 6,390 | |||||||||||||||
Selling, general and administrative | 21,094 | 20,989 | 4,866 | 4,588 | 3,321 | |||||||||||||||
Debt purchase option amortization | 6,053 | — | — | — | — | |||||||||||||||
Maintenance and other costs | 2,353 | 4,307 | 165 | 2,415 | 1,379 | |||||||||||||||
Mark-to-market of non-hedge derivatives | — | — | — | (5,898 | ) | 5,898 | ||||||||||||||
Debt extinguishment costs | — | — | — | 9,165 | — | |||||||||||||||
Hedging costs related to interest rate swap option | — | — | 1,725 | 5,423 | — | |||||||||||||||
Swap breakage costs | — | — | — | 12,500 | — | |||||||||||||||
Total expenses | 194,075 | 181,146 | 29,957 | 135,867 | 68,804 | |||||||||||||||
Net income (loss) before provision for income taxes | 113,460 | 54,992 | 3,377 | (14,830 | ) | (7,455 | ) | |||||||||||||
Provision for income taxes | 24,367 | 6,867 | 1,032 | 466 | 17 | |||||||||||||||
Net income (loss) | $ | 89,093 | $ | 48,125 | $ | 2,345 | $ | (15,296 | ) | $ | (7,472 | ) | ||||||||
Earnings per share: | ||||||||||||||||||||
Basic and diluted | $ | 2.89 | $ | 1.44 | $ | 0.19 | — | — | ||||||||||||
Pro forma | — | — | $ | 0.07 | — | — |
(Dollars in thousands, except shares) | ||||||||||||||||||||
JET-i Leasing LLC | ||||||||||||||||||||
Babcock & Brown Air Limited | (Predecessor Company) | |||||||||||||||||||
As of December 31, | As of December 31, | |||||||||||||||||||
2009 | 2008 | 2007 | 2007 | 2006 | ||||||||||||||||
Balance sheet data: | ||||||||||||||||||||
Total assets | $ | 2,024,132 | $ | 2,086,174 | $ | 1,589,226 | $ | 5,249 | $ | 1,010,875 | ||||||||||
Total liabilities | 1,539,608 | 1,696,761 | 1,098,724 | 2,766 | 983,175 | |||||||||||||||
Total shareholders’ equity/ member’s capital | 484,524 | 389,413 | 490,502 | 2,483 | 27,700 | |||||||||||||||
Number of shares | 30,279,948 | 32,488,911 | 33,603,450 | — | — |
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• | Babcock & Brown ceases to hold at least 5% of the issued and outstanding shares of B&B Air; | |
• | Babcock & Brown ceases to hold at least 51% of the capital stock of BBAM; | |
• | BBAM fails to deliver the audited financial statements of Babcock & Brown Limited to the agent and lenders in the Aircraft Acquisition Facility within 120 days of fiscal year end or the unaudited or audited financial statements for each semi-annual period within 90 days, and in each case such failure to deliver the required financial statements continues for 30 days after written notice from the agent (current default with respect to this provision has been waived to April 30, 2010, as described below); | |
• | Any Babcock & Brown Limited annual or quarterly financial statement required to be delivered as described above contains a going-concern or similar qualification in the audit opinion; | |
• | The insolvency of BBAM or any significant subsidiary of BBAM; and | |
• | BBAM default on recourse debt over $25 million. |
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• | at least 75% of our independent directors and holders of 75% or more of all of our outstanding common shares (measured by vote) determine by resolution that there has been unsatisfactory performance by our Manager that is materially detrimental to us; |
• | our Manager materially breaches the management agreement and fails to remedy such breach within 90 days of receiving written notice from us requiring it to do so, or such breach results in liability to us and is attributable to our Manager’s gross negligence, fraud or dishonesty, or willful misconduct in respect of the obligation to apply the standard of care; |
• | any license, permit or authorization held by the Manager which is necessary for it to perform the services and duties under the management agreement is materially breached, suspended or revoked, or otherwise made subject to conditions which, in the reasonable opinion of our board of directors, would prevent the Manager from performing the services and the situation is not remedied within 90 days; |
• | our Manager becomes subject to bankruptcy or insolvency proceedings that are not discharged within 75 days, unless our Manager is withdrawn and replaced within 90 days of the initiation of such bankruptcy or insolvency proceedings with an affiliate or associate of B&B that is able to make correctly the representations and warranties set out in the management agreement; |
• | B&B in aggregate ceases to hold (directly or indirectly) more than 50% of the issued share capital of our Manager; or |
• | an order is made for the winding up of our Manager, unless our Manager is withdrawn and replaced within 15 days with an affiliate or associate of B&B that is able to make correctly the representations and warranties set out in the management agreement. |
• | BBAM ceases to be at least majority-owned directly or indirectly by B&B; |
• | BBAM fails in any material respect to perform any material services under the servicing agreements in accordance with the standard of care or the conflicts standard in a manner that is materially adverse to us and our applicable subsidiaries taken as a whole; |
• | specified B&B entities (including BBAM) become subject to bankruptcy or insolvency proceedings; |
• | with respect to the servicing agreement for our Initial Portfolio, we have insufficient funds for the payment of interest on the notes for a period of at least 60 days; |
• | at least 15% of the number of aircraft assets in the Initial Portfolio remain off-lease but reasonably available for re-lease for a period of at least three months following specified events set forth in the trust indenture; |
• | without limiting BBAM’s rights under the security trust agreement, BBAM takes any steps for the purpose of processing the appointment of an administrative receiver or the making of any administrative order or for instituting a bankruptcy, reorganization, arrangement, insolvency, winding up, liquidation, composition or any similar proceeding under the laws of any jurisdiction with respect to any jurisdiction with respect to B&B Air Funding, and any of its subsidiaries, or any of the aircraft assets; |
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• | we cease to own all of the aircraft in our Initial Portfolio; |
• | BBAM withdraws from servicing a specified number of our aircraft in the Initial Portfolio for specified periods of time due to conflicts of interest; or | |
• | BBAM ceases to be actively involved in the aircraft leasing business. |
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• | impair our liquidity by using a significant portion of our available cash or borrowing capacity to finance acquisitions; | |
• | significantly increase our interest expense and financial leverage to the extent we incur additional debt to finance acquisitions; | |
• | incur or assume unanticipated liabilities, losses or costs associated with the aircraft or other aviation assets that we acquire; | |
• | incur other significant charges, including asset impairment or restructuring charges; or | |
• | be unable to maintain our ability to pay regular dividends to our shareholders. |
• | lack of availability of cash to pay dividends due to changes in our operating cash flow, capital expenditure requirements, working capital requirements and other cash needs; |
• | restrictions imposed by our financing arrangements, including under the Notes, our Aircraft Acquisition Facility and any indebtedness incurred in the future to refinance our existing debt or to expand our aircraft portfolio; | |
• | our inability to make acquisitions of additional aircraft that are accretive to cash flow; | |
• | application of funds to make and finance acquisitions of aircraft and other aviation assets; | |
• | reduced levels of demand for, or value of, our aircraft; | |
• | increased supply of aircraft; | |
• | obsolescence of aircraft in our portfolio; | |
• | lower lease rates on new aircraft and re-leased aircraft; | |
• | delays in re-leasing our aircraft after the expiration or early termination of existing leases; | |
• | impaired financial condition and liquidity of our lessees; | |
• | deterioration of economic conditions in the commercial aviation industry generally; |
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• | poor performance by our Manager, BBAM and their affiliates and other service providers and our limited rights to terminate them; | |
• | unexpected or increased maintenance, operating or other expenses or changes in the timing thereof; | |
• | a decision by our board of directors to cease distributing a portion of our cash flow available for distribution; | |
• | changes in Irish tax law, the tax treaty between the United States and Ireland (the “Irish Treaty’’) or our ability to claim the benefits of such treaty; | |
• | cash reserves which may be established by our board of directors; and | |
• | restrictions under Bermuda law on the amount of dividends that we may pay. |
We have substantial indebtedness that imposes constraints on our operations and could adversely affect our ability to pay dividends on our common shares.
• | all the aircraft and related leases in our portfolio secure debt obligations, the terms of which restrict our ability to sell aircraft and require us to use proceeds from sales of aircraft, in part, to repay amounts outstanding under those notes; |
• | we are required to dedicate a significant portion of our cash flow from operations to debt service payments, thereby reducing the amount of our cash flow available to pay dividends, fund working capital, make capital expenditures and satisfy other needs; |
• | restrictions on our subsidiaries’ ability to distribute excess cash flow to us under certain circumstances; |
• | lessee, geographical and other concentration requirements limit our flexibility in leasing our aircraft; |
• | requirements to obtain the consent of third parties including lenders, the financial guaranty policy provider for the Securitization, whom we refer to as the policy provider, and rating agency confirmations for certain actions; and |
• | restrictions on our subsidiaries’ ability to incur additional debt, create liens on assets, sell assets, make freighter conversions and make certain investments or capital expenditures. |
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• | passenger air travel and air cargo demand; | |
• | increased supply due to the sale of assets owned by other aircraft leasing companies; | |
• | geopolitical and other events, including war, acts of terrorism, outbreaks of epidemic diseases and natural disasters; | |
• | operating costs, availability of jet fuel and general economic conditions affecting our lessees’ operations; |
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• | governmental regulation, including new airworthiness directives; | |
• | interest rates; | |
• | airline restructurings and bankruptcies; | |
• | cancellations of orders for aircraft; | |
• | delays in delivery by manufacturers; | |
• | availability and cost of credit; | |
• | manufacturer production levels and technological innovation; | |
• | retirement and obsolescence of aircraft models; | |
• | manufacturers merging or exiting the industry or ceasing to produce aircraft or engine types; | |
• | accuracy of estimates relating to future supply and demand made by manufacturers and lessees; | |
• | reintroduction into service of aircraft or engines previously in storage; and | |
• | airport and air traffic control infrastructure constraints. |
• | the particular maintenance, damage and operating history of the airframes and engines; | |
• | the number of operators using that type of aircraft or engine; | |
• | whether an aircraft or other aviation asset is subject to a lease and, if so, whether the lease terms are favorable to the lessor; | |
• | the age of our aircraft and other aviation assets; | |
• | airworthiness directives and service bulletins; | |
• | aircraft noise and emission standards; | |
• | any tax, customs, regulatory and other legal requirements that must be satisfied when an aircraft is purchased, sold or re-leased; | |
• | compatibility of our aircraft configurations or specifications with other aircraft owned by operators of that type; and | |
• | decreases in the creditworthiness of our lessees. |
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• | airlines; | |
• | aircraft manufacturers; | |
• | financial institutions (including those seeking to dispose of repossessed aircraft at distressed prices); | |
• | aircraft brokers; | |
• | special purpose vehicles formed for the purpose of acquiring, leasing and selling aircraft; and | |
• | public and private partnerships, investors and funds, including private equity and hedge funds. |
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• | competition; | |
• | fare levels; | |
• | air cargo rates; | |
• | passenger air travel and air cargo demand; | |
• | geopolitical and other events, including war, acts of terrorism, outbreaks of epidemic diseases and natural disasters; | |
• | operating costs, availability and cost of jet fuel and general economic conditions affecting our lessees’ operations; |
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• | labor difficulties; | |
• | economic conditions and currency fluctuations in the countries and regions in which the lessee operates; and | |
• | governmental regulation of, or affecting, the air transportation business. |
• | result in a grounding of the aircraft; | |
• | cause us to incur costs in restoring the aircraft to an acceptable maintenance condition to re-lease the aircraft; | |
• | adversely affect lease terms in the re-lease of the aircraft; and | |
• | adversely affect the value of the aircraft. |
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• | the costs of casualty, liability, war and political risk insurance and the liability costs or losses when insurance coverage has not been or cannot be obtained as required or is insufficient in amount or scope; |
• | the costs of licensing, exporting or importing an aircraft, costs of storing and operating an aircraft, airport taxes, customs duties, air navigation charges, landing fees and similar governmental or quasi-governmental impositions; and |
• | penalties and costs associated with the failure of lessees to keep the aircraft registered under all appropriate local requirements or obtain required governmental licenses, consents and approvals. |
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• | downward pressure on demand for the aircraft in our fleet and reduced market lease rates and lease margins; |
• | a higher incidence of lessee defaults, lease restructurings, repossessions and airline bankruptcies and restructurings, resulting in lower lease margins due to maintenance and legal and other costs associated with the repossession, as well as lost revenue for the time the aircraft are off lease and possibly lower lease rates from the new lessees; |
• | an inability to lease aircraft on commercially acceptable terms, resulting in lower lease margins due to such aircraft not earning revenue and resulting in storage, insurance and maintenance costs; and |
• | a loss if our aircraft is damaged or destroyed by an event specifically excluded from an insurance policy, such as dirty bombs, bio-hazardous materials and electromagnetic pulsing. |
• | affect our lessees’ ability to make rental and other lease payments; | |
• | result in lease restructurings and aircraft and engine repossessions; |
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• | increase our costs of servicing and marketing aircraft; | |
• | impair our ability to re-lease the aircraft and other aviation assets or re-lease or otherwise dispose of the assets on a timely basis at favorable rates; and | |
• | reduce the proceeds received for the aircraft or other aviation assets upon any disposition. |
• | higher costs to airlines because of increased security measures; | |
• | the inconvenience of additional security measures; |
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• | the price and availability of jet fuel and the cost and practicability of obtaining fuel hedges under current market conditions; and |
• | significantly higher costs of aircraft insurance coverage for claims caused by acts of war, terrorism, sabotage, hijacking and other similar perils, and the extent to which such insurance has been or will continue to be available. |
• | an inability to acquire aircraft and related components on terms that will allow us to lease those aircraft and related components to customers at our anticipated profit levels, resulting in lower growth rates or a contraction in our fleet; |
• | poor customer support from the manufacturers of aircraft and components resulting in reduced demand for a particular manufacturer’s product, creating downward pressure on demand for those aircraft and components in our fleet and reduced market lease rates for those aircraft; and |
• | reduction in our competitiveness due to deep discounting by the manufacturers, which may lead to reduced market lease rates and may adversely affect the value of our portfolio and our ability to remarket or sell some of the aircraft in our fleet. |
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• | provisions that permit us to require any competitor of BBAM that acquires beneficial ownership of more than 15% of our common shares either to tender for all of our remaining common shares for no less than their fair market value, or sell such number of common shares to us or to third parties as would reduce its beneficial ownership to less than 15%, in either case within 90 days of our request to so tender or sell; |
• | provisions that reduce the vote of each common share held by a competitor of BBAM that beneficially owns 15% or more, but less than 50%, of our common shares to three-tenths of one vote per share on all matters upon which shareholders may vote; |
• | provisions that permit our board of directors to determine the powers, preferences and rights of any preference shares we may issue and to issue any such preference shares without shareholder approval; |
• | advance notice requirements by shareholders for director nominations and actions to be taken at annual meetings; and |
• | no provision for cumulative voting in the election of directors, such that all the directors standing for election may be elected by our shareholders by a plurality of votes cast at a duly convened annual general meeting, the quorum for which is two or more persons present in person or by proxy at the start of the meeting and representing in excess of 25% of all votes attaching to all shares in issue entitling the holder to vote at the meeting. |
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• | Babcock & Brown ceases to hold at least 5% of the issued and outstanding shares of B&B Air; | |
• | Babcock & Brown ceases to hold at least 51% of the capital stock of BBAM; | |
• | BBAM fails to deliver the audited financial statements of Babcock & Brown Limited to the agent and lenders in the Aircraft Acquisition Facility within 120 days of fiscal year end or the unaudited or audited financial statements for each semi-annual period within 90 days, and in each case such failure to deliver the required financial statements continues for 30 days after written notice from the agent (current default with respect to this provision has been waived to April 30, 2010, as described below); | |
• | Any Babcock & Brown Limited annual or quarterly financial statement required to be delivered as described above contains a going-concern or similar qualification; | |
• | The insolvency of BBAM or any significant subsidiary of BBAM; and | |
• | A BBAM default on recourse debt over $25 million. |
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Date of | ||||||
Lessee Name | Aircraft Type | Airframe Type | Manufacture | |||
1 Aeromexico | B737-700 | Narrowbody | 2005 | |||
2 Aeromexico | B737-700 | Narrowbody | 2005 | |||
3 Aigle Azur | A320-200 | Narrowbody | 1998 | |||
4 Air Berlin (1) | B737-800 | Narrowbody | 1999 | |||
5 Air China | B737-800 | Narrowbody | 2006 | |||
6 Atlant-Soyuz | B737-800 | Narrowbody | 2000 | |||
7 CCM | A320-200 | Narrowbody | 1995 | |||
8 CCM | A320-200 | Narrowbody | 1995 | |||
9 Chang’An Airlines | B737-800 | Narrowbody | 2006 | |||
10 China Southern | B757-200 | Narrowbody | 1999 | |||
11 China Southern | B757-200 | Narrowbody | 1999 | |||
12 Donavia | B737-500 | Narrowbody | 1992 | |||
13 Donavia | B737-500 | Narrowbody | 1992 | |||
14 Donbassaero | A320-200 | Narrowbody | 1997 | |||
15 Donbassaero | A320-200 | Narrowbody | 1997 | |||
16 easyJet | A319-100 | Narrowbody | 2007 | |||
17 Ethiopian Airlines | B757-200 | Narrowbody | 1997 | |||
18 Ethiopian Airlines | B757-200 | Narrowbody | 1998 | |||
19 Hainan Airlines | A319-100 | Narrowbody | 2006 | |||
20 Icelandair | B757-200 | Narrowbody | 2000 | |||
21 Icelandair | B757-200 | Narrowbody | 2000 | |||
22 Icelandair | B757-200SF (2) | Narrowbody | 1990 | |||
23 Kingfisher Airlines | A320-200 | Narrowbody | 2005 | |||
24 Kingfisher Airlines | A320-200 | Narrowbody | 2006 | |||
25 KLM | B777-200ER | Widebody | 2004 | |||
26 LTU | A330-200 | Widebody | 2001 | |||
27 Mexicana | A320-200 | Narrowbody | 1995 | |||
28 Norwegian Air | B737-800 | Narrowbody | 2001 | |||
29 Omni Air International | B757-200 | Narrowbody | 1989 | |||
30 Sky Airlines | B737-800 | Narrowbody | 2007 | |||
31 SpiceJet Limited | B737-800 | Narrowbody | 2006 | |||
32 SpiceJet Limited | B737-800 | Narrowbody | 2006 | |||
33 SpiceJet Limited | B737-800 | Narrowbody | 2006 | |||
34 SpiceJet Limited | B737-900ER | Narrowbody | 2007 | |||
35 SpiceJet Limited | B737-900ER | Narrowbody | 2008 | |||
36 Sunwing Airlines | B737-800 | Narrowbody | 2006 | |||
37 Swiss International | A320-200 | Narrowbody | 1995 | |||
38 Swiss International | A320-200 | Narrowbody | 1995 | |||
39 Swiss International | A320-200 | Narrowbody | 1995 | |||
40 Thomson Airways Ltd | B757-200 | Narrowbody | 1999 | |||
41 Thomson Airways Ltd | B757-200 | Narrowbody | 1999 | |||
42 Tiger Airways | A320-200 | Narrowbody | 2006 | |||
43 Titan Airways | B737-300QC (2) | Narrowbody | 1991 | |||
44 Transavia Airlines | B737-700 | Narrowbody | 2001 | |||
45 Travel Service Airlines | B737-800 | Narrowbody | 1999 | |||
46 TUI | B767-300ER | Widebody | 1997 | |||
47 United Air Lines | B747-400 | Widebody | 1993 | |||
48 US Airways | A319-100 | Narrowbody | 2000 | |||
49 US Airways | A319-100 | Narrowbody | 2000 | |||
50 US Airways | A319-100 | Narrowbody | 2000 | |||
51 US Airways | A319-100 | Narrowbody | 2000 | |||
52 Virgin America | A320-200 | Narrowbody | 2006 | |||
53 Virgin America | A320-200 | Narrowbody | 2006 |
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Date of | ||||||
Lessee Name | Aircraft Type | Airframe Type | Manufacture | |||
54 Virgin America | A320-200 | Narrowbody | 2007 | |||
55 Virgin America | A319-100 | Narrowbody | 2008 | |||
56 Volaris Airlines | A319-100 | Narrowbody | 1999 | |||
57 Volaris Airlines | A319-100 | Narrowbody | 2000 | |||
58 Volaris Airlines | A319-100 | Narrowbody | 2007 | |||
59 Vueling | A320-200 | Narrowbody | 2007 | |||
60 Vueling | A320-200 | Narrowbody | 2007 | |||
61 Yakutia | B757-200 | Narrowbody | 1996 | |||
62 Yakutia | B757-200 | Narrowbody | 1998 |
(1) | Aircraft was re-leased to Jeju Air in February 2010. | |
(2) | Freighter. |
Number of | ||||||
Aircraft Manufacturer | Aircraft Type | Aircraft | ||||
Airbus | A319-100 | 10 | ||||
A320-200 | 17 | |||||
A330-200 | 1 | |||||
Total | 28 | |||||
Boeing | B737-300QC | 1 | ||||
B737-500 | 2 | |||||
B737-700 | 3 | |||||
B737-800 | 11 | |||||
B737-900ER | 2 | |||||
B747-400 | 1 | |||||
B757-200 | 11 | |||||
B757-200SF | 1 | |||||
B767-300ER | 1 | |||||
B777-200ER | 1 | |||||
Total | 34 | |||||
Total | 62 | |||||
Number of | ||||
Airframe Type | Aircraft | |||
Narrow-body(1) | 58 | |||
Wide-body | 4 | |||
Total | 62 | |||
(1) | Includes two freighters. |
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Period from May 3, 2007 | ||||||||||||||||||||||||
Year ended December 31, | (Incorporation Date) to | |||||||||||||||||||||||
2009 | 2008 | December 31, 2007 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Europe, Middle East and Africa: | ||||||||||||||||||||||||
Germany | $ | 17,174 | 8 | % | $ | 16,353 | 7 | % | $ | 1,416 | 5 | % | ||||||||||||
The Netherlands | 16,331 | 8 | % | 13,990 | 6 | % | 728 | 3 | % | |||||||||||||||
United Kingdom | 9,624 | 5 | % | 17,388 | 8 | % | 3,120 | 12 | % | |||||||||||||||
Switzerland | 8,423 | 4 | % | 13,296 | 6 | % | 1,083 | 4 | % | |||||||||||||||
Other | 52,652 | 24 | % | 42,167 | 20 | % | 3,078 | 12 | % | |||||||||||||||
Europe, Middle East and Africa — Total | 104,204 | 49 | % | 103,194 | 47 | % | 9,425 | 36 | % | |||||||||||||||
Asia Pacific: | ||||||||||||||||||||||||
India | 27,451 | 13 | % | 26,604 | 12 | % | 2,189 | 8 | % | |||||||||||||||
China | 16,391 | 8 | % | 17,491 | 8 | % | 3,827 | 15 | % | |||||||||||||||
Other | 3,017 | 1 | % | 3,553 | 2 | % | 939 | 4 | % | |||||||||||||||
Asia Pacific — Total | 46,859 | 22 | % | 47,648 | 22 | % | 6,955 | 27 | % | |||||||||||||||
North America: | ||||||||||||||||||||||||
United States | 39,600 | 19 | % | 39,180 | 18 | % | 3,457 | 13 | % | |||||||||||||||
Other | 5,009 | 2 | % | 5,007 | 2 | % | 433 | 2 | % | |||||||||||||||
North America — Total | 44,609 | 21 | % | 44,187 | 20 | % | 3,890 | 15 | % | |||||||||||||||
Mexico, South and Central America: | ||||||||||||||||||||||||
Mexico | 18,292 | 8 | % | 19,802 | 9 | % | 4,086 | 16 | % | |||||||||||||||
Other | — | — | 4,109 | 2 | % | 1,686 | 6 | % | ||||||||||||||||
Mexico, South and Central America — Total | 18,292 | 8 | % | 23,911 | 11 | % | 5,772 | 22 | % | |||||||||||||||
Total Operating Lease Revenue | $ | 213,964 | 100 | % | $ | 218,940 | 100 | % | $ | 26,042 | 100 | % | ||||||||||||
Airframe Type | ||||||||||||
Year of Scheduled Lease Expiration | Narrow(1) | Wide | Total | |||||||||
2010 | 9 | — | 9 | |||||||||
2011 | 3 | 1 | 4 | |||||||||
2012 | 5 | — | 5 | |||||||||
2013 | 5 | 1 | 6 | |||||||||
2014 | 5 | — | 5 | |||||||||
2015 | 13 | 1 | 14 | |||||||||
2016 | 8 | 1 | 9 | |||||||||
2017 | 6 | — | 6 | |||||||||
2018 | 4 | — | 4 | |||||||||
Total | 58 | 4 | 62 | |||||||||
(1) | Includes one freighter each in 2014 and 2015. |
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Lessee | Sublessee | |
Icelandair | Air Niugini | |
Thomson Airways Ltd | Skyservice Airlines | |
Thomson Airways Ltd | Skyservice Airlines |
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• | flight equipment where original manufacturer’s prices are not relevant due to plane modifications and conversions; and |
• | flight equipment which is out of production and may have a shorter useful life due to obsolescence. |
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• | Operating lease revenue.We receive lease revenues from flight equipment under operating leases. Rental income from aircraft rents is recognized on a straight-line basis over the respective lease terms. Contingent rents are recognized as revenue when they are earned. Revenue is not recognized when collection is not reasonably assured. |
• | Finance lease income.Revenue from direct finance leases is recognized on the interest method to produce a level yield over the life of the finance lease. Expected unguaranteed residual values of leased assets are based on our assessment of residual values and independent appraisals of the values of leased assets remaining at expiration of a lease term. |
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Year ended December 31, | Increase/ | |||||||||||
2009 | 2008 | Decrease | ||||||||||
Revenues | ||||||||||||
Operating lease revenue | $ | 213,964 | $ | 218,940 | $ | (4,976 | ) | |||||
Finance lease income | — | 2,446 | (2,446 | ) | ||||||||
Gain on purchase of notes payable | 82,666 | — | 82,666 | |||||||||
Gain on sale of aircraft | — | 11,437 | (11,437 | ) | ||||||||
Lease termination settlement | 8,307 | — | 8,307 | |||||||||
Interest and other income | 2,598 | 3,315 | (717 | ) | ||||||||
Total revenues | 307,535 | 236,138 | 71,397 | |||||||||
Expenses | ||||||||||||
Depreciation | 83,650 | 74,161 | 9,489 | |||||||||
Interest expense | 80,925 | 81,689 | (764 | ) | ||||||||
Selling, general and administrative | 21,094 | 20,989 | 105 | |||||||||
Debt purchase option amortization | 6,053 | — | 6,053 | |||||||||
Maintenance and other costs | 2,353 | 4,307 | (1,954 | ) | ||||||||
Total expenses | 194,075 | 181,146 | 12,929 | |||||||||
Net income before provision for income taxes | 113,460 | 54,992 | 58,468 | |||||||||
Income tax provision | 24,367 | 6,867 | 17,500 | |||||||||
Net income | $ | 89,093 | $ | 48,125 | $ | 40,968 | ||||||
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For the period | ||||||||||||
from May 3, | ||||||||||||
2007 | ||||||||||||
(incorporation | ||||||||||||
Year ended | date) to | |||||||||||
December 31, | December 31, | Increase/ | ||||||||||
2008 | 2007 | (decrease) | ||||||||||
(Dollars in thousands) | ||||||||||||
Revenues | ||||||||||||
Operating lease revenue | $ | 218,940 | $ | 26,042 | $ | 192,898 | ||||||
Finance lease income | 2,446 | 2,365 | 81 | |||||||||
Gain on sale of aircraft | 11,437 | — | 11,437 | |||||||||
Interest and other income | 3,315 | 4,927 | (1,612 | ) | ||||||||
Total revenues | 236,138 | 33,334 | 202,804 | |||||||||
Expenses | ||||||||||||
Depreciation | 74,161 | 8,573 | 65,588 | |||||||||
Interest expense | 81,689 | 14,628 | 67,061 | |||||||||
Selling, general and administrative | 20,989 | 4,866 | 16,123 | |||||||||
Maintenance and other costs | 4,307 | 165 | 4,142 | |||||||||
Hedging costs related to interest rate swap option | — | 1,725 | (1,725 | ) | ||||||||
Total expenses | 181,146 | 29,957 | 151,189 | |||||||||
Net income from continuing operations before provision for income taxes | 54,992 | 3,377 | 51,615 | |||||||||
Provision for income taxes | 6,867 | 1,032 | 5,835 | |||||||||
Net income | $ | 48,125 | $ | 2,345 | $ | 45,780 | ||||||
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Dividends paid | ||||||||
Dividend payment date | per share | Total cash requirement | ||||||
2009: | ||||||||
November 20, 2009 | $ | 0.20 | $ | 6.1 million | ||||
August 20, 2009 | $ | 0.20 | $ | 6.1 million | ||||
May 20, 2009 | $ | 0.20 | $ | 6.1 million | ||||
February 20, 2009 | $ | 0.20 | $ | 6.5 million | ||||
2008: | ||||||||
November 20, 2008 | $ | 0.50 | $ | 16.7 million | ||||
August 20, 2008 | $ | 0.50 | $ | 16.7 million | ||||
May 20, 2008 | $ | 0.50 | $ | 16.8 million | ||||
February 20, 2008 | $ | 0.50 | $ | 16.8 million |
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Redemption Date | Price | |||
Before April 14, 2010 | 100.36 | % | ||
On or after April 14, 2010, but before October 14, 2010 | 100.27 | % | ||
On or after October 14, 2010, but before April 14, 2011 | 100.17 | % | ||
On or after April 14, 2011, but before October 14, 2011 | 100.09 | % | ||
On or after October 14, 2011 | 100.00 | % |
• | Aircraft Dispositions.The ability of B&B Air Funding to sell aircraft is limited under the Securitization documentation. B&B Air Funding may sell up to ten aircraft without the consent of the policy provider and additional aircraft with the consent of the policy provider provided that such sales do not violate the concentration limits discussed below and the price is above 107% of the obligations of the notes allocable to such aircraft. B&B Air Funding may also sell aircraft provided that (1) sales in any one year do not exceed 10% of the initial average base value of all our aircraft as adjusted for depreciation as provided in the indenture, (2) such sales do not violate the concentration limits, (3) Moody’s confirms its rating on the notes and (4) the policy provider consents. |
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• | Concentration Limits.B&B Air Funding may only enter into a future lease (other than a renewal, extension or restructuring of any lease) if, after entering into such future lease, B&B Air Funding is in compliance with certain criteria in respect of limits based on, among other things, the proportion of our portfolio leased to any single lessee, the regional concentration of our lessees and the sovereign ratings of the countries in which our lessees are located. B&B Air Funding will be permitted to vary from these limits if B&B Air Funding receives a confirmation from Moody’s that it will not lower, qualify or withdraw its ratings on the notes as a result of such lease and the policy provider consents to such lease. These limits may place limits on B&B Air Funding’s ability (absent a third-party consent) to re-lease the aircraft in our Initial Portfolio to certain customers at certain times, even if to do so would provide the best risk-adjusted cash flow and would be within our risk policies then in effect. |
• | Debt Service Coverage Ratio.From (and including) the monthly period beginning in July 2010 and continuing through July 2012, B&B Air Funding is required to maintain a debt service coverage ratio of 1.80 to 1. In the event that such debt service coverage ratio is not maintained for two consecutive months, all amounts on deposit in the collections account will be applied towards the outstanding principal balance of the notes after the payment of expenses, senior hedge payments and amounts due and owing to the policy provider and the liquidity facility provider. |
• | Leases.When re-leasing any aircraft, B&B Air Funding must do so in accordance with certain core lease provisions set forth in the Indenture. The core lease provisions include, but are not limited to, maintenance, return conditions in respect of the aircraft, lease termination events and prohibitions on the assignments of the leases. These core lease provisions may not be amended without the consent of the policy provider. |
• | Additional Aircraft.B&B Air Funding is not permitted to acquire any aircraft other than the aircraft in the Initial Portfolio unless certain conditions are satisfied, including that the acquisition does not result in an event of default under the transaction documents and does not result in a default under the applicable concentration limits. We have the right to contribute additional aircraft from time to time to B&B Air Funding. In the event that additional notes are issued to finance the acquisition of additional aircraft, B&B Air Funding must obtain the prior written consent of the policy provider and liquidity facility provider and a confirmation from the rating agencies rating the notes that they will not lower, qualify or withdraw their ratings on the notes as a result of the acquisition. Additional aircraft may include, among other things, aircraft, engines and entities with an ownership or leasehold interest in aircraft or engines. Any additional notes issued will rank pari passu in right of payment of principal and interest with B&B Air Funding’s outstanding notes. The acquisition of additional aircraft will also require the approval of the directors of B&B Air Funding. |
• | Modification of Aircraft and Capital Expenditures.B&B Air Funding is generally not permitted to make capital expenditures in respect of any optional improvement or modification of an aircraft in the Initial Portfolio, including aircraft conversions from passenger to cargo aircraft, or for the purpose of purchasing or otherwise acquiring any engines or parts outside of the ordinary course of business. However, B&B Air Funding may make capital expenditures in the ordinary course of business in connection with an existing or new lease or the sale of an aircraft, and capital expenditures where: (1) conversions or modifications are funded by capital contributions from us, (2) modification payments are made and the aggregate net cash cost does not exceed 5% of the aggregate initial average base value of the Initial Portfolio (other than modification payments funded, with capital contributions from us) or (3) modification payments permitted under the servicing agreement that do not require the express prior written approval of B&B Air Funding. Subject to certain conditions set forth in the indenture, B&B Air Funding is also permitted to use funds available to make scheduled principal payments on the Notes and amounts available for distributions to us for the purpose of converting passenger aircraft in the Initial Portfolio to freighter or mixed use configuration. |
• | Other Covenants.The Indenture contains other covenants customary for a securitization, including covenants that restrict the investment and business activities of B&B Air Funding, maintain the special purpose and bankruptcy remoteness characteristics of B&B Air Funding, limit the amount and type of debt, guarantees or other indebtedness that can be assumed by B&B Air Funding entities, restrict B&B Air Funding’s ability to grant liens or other encumbrances, require the maintenance of certain airline hull, liability, war risk and repossession insurance and limit the ability of the members of B&B Air Funding to merge, amalgamate, consolidate or transfer assets. |
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• | Babcock & Brown ceases to hold at least 5% of the issued and outstanding shares of B&B Air; | ||
• | Babcock & Brown ceases to hold at least 51% of the capital stock of BBAM; | ||
• | BBAM fails to deliver the audited financial statements of Babcock & Brown Limited to the agent and lenders in the Aircraft Acquisition Facility within 120 days of fiscal year end or the unaudited or audited financial statements for each semi-annual period within 90 days, and in each case such failure to deliver the required financial statements continues for 30 days after written notice from the agent (current default with respect to this provision has been waived to April 30, 2010, as described below); | ||
• | Any Babcock & Brown Limited annual or semi-annual financial statement required to be delivered as described above contains a going-concern or similar qualification; | ||
• | The insolvency of BBAM or any significant subsidiary of BBAM; and | ||
• | A BBAM default on recourse debt over $25 million. |
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• | Aircraft Dispositions.The ability of B&B Air Acquisition to sell aircraft is limited by the terms of the Aircraft Acquisition Facility. Any sale after the end of the availability period requires prior written consent of the agent and that B&B Air Acquisition must receive a minimum cash sales price equal to at least the debt allocable to that aircraft plus certain expenses. | ||
• | Concentration Limits.B&B Air Acquisition may only enter into a future lease if, after entering into such future lease, B&B Air Acquisition is in compliance with certain criteria in respect of limits based on, among other things, the proportion of our portfolio leased to any single lessee, the regional concentration of our lessees and aircraft type and age concentration limits. These limits may place limits on B&B Air Acquisition’s ability (absent lender consent) to re-lease their aircraft to certain customers at certain times, even if to do so would provide the best risk-adjusted cash flow and would be within our risk policies then in effect. |
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• | Interest Coverage Ratio.B&B Air Acquisition is required to maintain a monthly interest coverage ratio of at least 1.1 to 1, and a rolling three-month interest coverage ratio of at least 1.25 to 1. | ||
• | Leases.When re-leasing any aircraft, B&B Air Acquisition must receive agent consent. Follow-on leases must also be in accordance with certain provisions set forth in the Aircraft Acquisition Facility. The requirements include, but are not limited to, maintenance, insurance and minimum lease rental rates and conditions. | ||
• | Modification of Aircraft and Capital Expenditures.B&B Air Acquisition is generally not permitted to make capital expenditures in respect of any optional improvement or modification of an aircraft if the aggregate cost of such modifications and improvements exceeds 7.5% of the aircraft value determined as of the date the aircraft was acquired, without the prior written consent of the agent. | ||
• | Other Covenants.The Aircraft Acquisition Facility contains other customary covenants, including covenants that restrict the investment and business activities of B&B Air Acquisition, maintain the special purpose and bankruptcy remoteness characteristics of B&B Air Acquisition, limit the amount and type of debt, guarantees or other indebtedness that can be assumed by B&B Air Acquisition entities, restrict B&B Air Acquisition’s ability to grant liens or other encumbrances, require the maintenance of certain airline hull, liability, war risk and repossession insurance and limit the ability of the members of B&B Air Acquisition to merge, amalgamate, consolidate or transfer assets. |
• | interest or principal is not paid when due, | ||
• | failure to make certain other payments and such payments are not made within 20 business days of receiving written notice, | ||
• | failure to maintain required insurance levels, | ||
• | failure to comply with certain other covenants and such noncompliance continuing for 20 business days after receipt of written notice, | ||
• | B&B Air Acquisition or any of its subsidiaries becoming the subject of insolvency proceedings, | ||
• | certain early terminations of B&B Air Acquisition’s swap agreements, | ||
• | failure to meet interest coverage ratios, | ||
• | Babcock & Brown ceasing to hold at least 5% of the issued and outstanding shares of B&B Air; and | ||
• | Babcock & Brown ceasing to hold at least 51% of the capital stock of BBAM. |
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• | One Airbus A320-200 on lease to Vueling (Spain), formerly Clickair; | ||
• | One Boeing 757-200 on lease to Icelandair (Iceland); | ||
• | One Boeing 757-200SF on lease to Icelandair (Iceland); | ||
• | One Boeing 777-200ER on lease to KLM (The Netherlands); | ||
• | One Airbus A330-200 on lease to LTU (Germany); | ||
• | One Boeing 737-800 on lease to Sky Airlines (Turkey); | ||
• | One Boeing 737-900ER on lease to SpiceJet (India); | ||
• | One Boeing 747-400 on lease to United Air Lines (USA); | ||
• | One Airbus A319-100 on lease to Virgin America (USA); and | ||
• | One Airbus A320-200 on lease to Virgin America (USA). |
• | Four Airbus A319-100s on lease to US Airways (USA); | ||
• | One Airbus A320-200 on lease to Vueling (Spain), formerly Clickair; | ||
• | One Boeing 737-900ER on lease to SpiceJet (India); and | ||
• | One Boeing 757-200 on lease to Icelandair (Iceland). |
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2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||||||
Principal payments under the Notes(1) | $ | 9,245 | $ | 9,186 | $ | 37,453 | $ | 80,131 | $ | 85,027 | $ | 437,634 | $ | 658,676 | ||||||||||||||
Interest payments under the Notes(2) | 5,958 | 5,830 | 5,692 | 5,093 | 4,344 | 8,889 | 35,806 | |||||||||||||||||||||
Principal payments under the Aircraft Acquisition Facility (3) | 30,043 | 31,665 | 155,021 | 377,837 | — | — | 594,566 | |||||||||||||||||||||
Interest payments under the Aircraft Acquisition Facility (4) | 14,853 | 14,330 | 13,557 | 5,068 | — | — | 47,808 | |||||||||||||||||||||
Principal payments under the Credit Facility(5) | 32,290 | — | — | — | — | — | 32,290 | |||||||||||||||||||||
Interest payments under the Credit Facility(5) | 404 | — | — | — | — | — | 404 | |||||||||||||||||||||
Payments to affiliates of B&B under our management agreement(6) | 6,219 | 6,219 | 6,219 | 6,219 | 6,219 | 110,382 | 141,477 | |||||||||||||||||||||
Payments to affiliates of B&B under our administrative servicing agreement for our Initial Portfolio(7) | 777 | 777 | 777 | 777 | 777 | 3,111 | 6,996 | |||||||||||||||||||||
Payments to affiliates of B&B under our servicing agreements for additional aircraft(8) | 3,055 | 3,017 | 2,992 | 1,848 | — | — | 10,912 | |||||||||||||||||||||
Payments to affiliates of B&B under our servicing agreement for our Initial Portfolio(9) | 3,232 | 2,924 | 2,731 | 2,361 | 2,154 | 5,143 | 18,545 | |||||||||||||||||||||
Total | $ | 106,076 | $ | 73,948 | $ | 224,442 | $ | 479,334 | $ | 98,521 | $ | 565,159 | $ | 1,547,480 | ||||||||||||||
(1) | Until July 2010, there are no scheduled principal payments on the Notes. For each month between July 2010 and August 2012, there are scheduled principal payments in fixed amounts of approximately $1.0 million per month, in each case subject to satisfying certain debt service coverage ratios and other covenants. Thereafter, cash flow will not be available to us for the payment of dividends since principal payments are not fixed in amount but rather are determined monthly based on revenues collected and costs and other liabilities incurred prior to the relevant payment date. The final maturity of the Notes is November 14, 2033. |
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(2) | Interest payments assume LIBOR remains at the current rate through the term of the Notes and reflect amounts we expect to pay after giving effect to interest swaps and amounts payable to our policy provider. | |
(3) | Commencing November 7, 2009, B&B Air Acquisition began making principal payments under its Aircraft Acquisition Facility. Subject to an extension by the lenders as provided in the agreement, all amounts outstanding on November 6, 2012 must be repaid in four quarterly installments. | |
(4) | Interest payments assume LIBOR remains at the current rate through the term of the facility and reflect amounts we expect to pay after giving effect to interest swaps. | |
(5) | There are no scheduled principal payments due during the term of the Credit Facility. Interest is payable monthly and equal to the interest proceeds on the pledged Notes. The Credit Facility is scheduled to mature on August 16, 2010 but provides the Company with two 1-year extension options upon the payment of a fee at each extension date equal to 2.5% of the then-outstanding principal amount. | |
(6) | Our management agreement provides that we pay base and rent fees and a management expense amount of $6.0 million annually, adjusted for increases in the consumer price index (“CPI”), to our Manager. Base and rent fees paid to BBAM under our servicing agreements are credited toward (and thereby reduce) such fees payable under our management agreement and the amounts in the table assume that such credit reduces the base and rent fees payable under the management agreement to $0. See “Management Agreement.” | |
(7) | Our management agreement provides that we pay our Manager an administrative agency fee initially equal to $750,000 per annum, adjusted for CPI increases, for each aircraft securitization financing we complete. | |
(8) | The servicing agreement between BBAM and B&B Air Acquisition provide that they pay BBAM an administrative agency fee of $20,000 per month. B&B Air Acquisition will also pay BBAM a rent fee equal to 3.5%, respectively, of the aggregate amount of basic rent actually collected for all or any part of a month. Amounts in the table reflect the rent fee for our aircraft as of December 31, 2009. | |
(9) | Our servicing agreement for our Initial Portfolio provides that we will pay BBAM a base fee of $150,000 per month, adjusted for CPI increases, which will also increase by 0.01% of the maintenance-adjusted base value (at the time of acquisition) of each additional aircraft acquired into B&B Air Funding that is not an aircraft in our Initial Portfolio. We will also pay BBAM a rent fee equal to 1.0%, of the aggregate amount of basic rent actually collected for all or any part of a month for any of their aircraft plus 1.0% of the aggregate amount of basic rent due for all or any part of a month for any of our aircraft. Amounts in the table reflect the rent fee for aircraft in B&B Air Funding’s portfolio as of December 31, 2009. |
Name | Age | Position | ||||
Colm Barrington | 64 | Chief Executive Officer and Director | ||||
Gary Dales | 54 | Chief Financial Officer | ||||
Steven Zissis | 50 | Chairman and Director | ||||
James Fantaci | 63 | Director | ||||
Erik G. Braathen | 54 | Director | ||||
Sean Donlon | 70 | Director | ||||
Joseph M. Donovan | 55 | Director | ||||
Susan M. Walton | 50 | Director |
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• | selecting independent auditors for approval by our shareholders; |
• | reviewing the scope of the audit to be conducted by our independent auditors, as well as the results of their audit; |
• | approving audit and non-audit services provided to us by the independent auditors; |
• | reviewing the organization and scope of our internal system of audit, financial and disclosure controls; |
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• | overseeing internal controls and risk management; |
• | overseeing our financial reporting activities, including our annual report, and the accounting standards and principles followed; |
• | reviewing and approving related-party transactions and preparing reports for the board of directors on such related-party transactions; and |
• | conducting other reviews relating to compliance by our employees with our policies and applicable laws. |
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Shares Beneficially Owned | ||||||||
Name | Number | Percent | ||||||
Babcock & Brown Limited | 4,422,529 | 14.6 | % | |||||
Thornburg Investment Management Inc. (1) | 1,943,500 | 6.4 | % | |||||
Neuberger Berman Group LLC (2) | 1,896,125 | 6.3 | % |
(1) | The information above and in this footnote is based on information taken from the Schedule 13G filed by Thornburg Investment Management Inc. with the SEC on January 8, 2010. Thornburg Investment Management Inc. has sole voting power and sole dispositive power over 1,943,500 ADSs. | |
(2) | The information above and in this footnote is based on information taken from the Schedule 13G filed by Neuberger Berman Group LLC with the SEC on June 11, 2009. Neuberger Berman Group LLC and Neuberger Berman LLC have sole voting power over 1,220,800 ADSs and shared dispositive power over 1,896,125 ADSs. |
Date | ADSs Repurchased | Price per share | ||||||||||
BBGP Aircraft Holdings Ltd | April 1, 2009 | 2,074,528 | $ | 4.05 | ||||||||
Babcock & Brown Cayman Ltd | April 9, 2009 | 63,761 | $ | 3.86 | ||||||||
Babcock & Brown Direct Investment Fund Ltd | April 30, 2009 | 70,674 | $ | 5.25 |
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• | managing our portfolio of aircraft and other aviation assets and the administration of our cash balances; | |
• | if requested by our board, making available a member of the core management team of our Manager as our nominee on the board of directors of any of our subsidiaries (provided that each such member must be agreed between us and our Manager); | |
• | assisting with the implementation of our board’s decisions; | |
• | providing us suitably qualified and experienced persons to perform the management and administrative services for us and our subsidiaries, including persons to be appointed by our board to serve as our dedicated chief executive and chief financial officers (who shall remain employees of, and be remunerated by, our Manager or an affiliate of our Manager while serving in such capacities); | |
• | performing or procuring the performance of all reasonable accounting, tax, corporate secretarial, information technology, reporting and compliance services for us and our subsidiaries, including the preparation and maintenance of our accounts and such financial statements and other reports and filings as we are required to make with any governmental agency (including the SEC) or stock exchange; | |
• | supervising financial audits of us by an external auditor as required; | |
• | managing our relations with our investors and the public, including: |
• | preparing our annual reports and any notices of meeting, papers, reports and agendas relating to meetings of our shareholders; and | ||
• | assisting in the resolution of any complaints by or disputes with our investors and any litigation involving us (other than litigation in which our interests are adverse to those of our Manager or Babcock & Brown); and |
• | using commercially reasonable efforts to cause us to comply with all applicable laws. |
• | sourcing opportunities relating to aircraft and other aviation assets, including using its commercially reasonable efforts to notify us of potential aviation asset investment opportunities that come to the attention of our Manager and which our Manager acting reasonably believes may be of interest to us as investments; |
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• | in relation to identified potential opportunities to purchase or sell aircraft and other aviation assets, investigating, researching, evaluating, advising and making recommendations on or facilitating such opportunities; | |
• | with respect to prospective purchases and sales of aircraft and other aviation assets, conducting negotiations with sellers and purchasers and their agents, representatives and financial advisors; and | |
• | otherwise providing advice and assistance to us in relation to the evaluation or pursuit of aviation asset investment or disposition opportunities as we may reasonably request from time to time. |
• | the expansion of our Manager’s core management team with additional personnel as may be required by developments or changes in the commercial aircraft leasing industry (whether regulatory, economic or otherwise) or the compliance or reporting environment for publicly listed companies in the United States (whether as a result of changes to securities laws or regulations, listing requirements or accounting principles or otherwise); and |
• | making available individuals (other than members of our Manager’s core management team) as our nominees on the boards of directors of any of our subsidiaries. |
• | that matter has been the subject of a recommendation by our Manager; or |
• | the failure to make that decision, take that action or omit to take that action would breach the fiduciary duties of our directors or any law. |
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• | that matter has been the subject of a recommendation by our Manager; or |
• | the failure to make that decision, take that action or omit to take that action would breach the fiduciary duties of our directors or any law. |
(1) | carry out any transaction with an affiliate of our Manager on our behalf, it being understood that Babcock & Brown affiliates have been appointed as the exclusive Servicer for our portfolio of aircraft, and that our Manager may delegate the provision of all or any part of the services under the management agreement to any person affiliated or associated with Babcock & Brown; | |
(2) | carry out any aviation asset investment or disposition transaction, or sequence of related aviation asset investment or disposition transactions with the same person or group of persons under common control, for us if the aggregate purchase price to be paid or the gross proceeds to be received by us in connection therewith would exceed $200 million; | |
(3) | carry out any aviation asset investment or disposition transaction if the sum of all the purchase prices to be paid or of all the gross proceeds to be received by us in connection with all such transactions during any quarter would exceed $500 million; | |
(4) | appoint or retain any third-party service provider to assist our Manager in providing management and administrative services if: |
• | the amount to be paid by our Manager and reimbursed by us or paid by us to the third party with respect to any particular matter, or series of related matters, is reasonably likely to exceed $1 million; or |
• | as a result of the appointment or retention, the amount to be paid by our Manager and reimbursed by us or paid by us to all such third-party service providers appointed or retained in any rolling 12-month period is reasonably likely to exceed $5 million; |
(5) | appoint or retain any third-party service provider to assist our Manager in providing ancillary management and administrative or the origination and disposition services if: |
• | the amount to be paid by our Manager and reimbursed by us or paid by us to the third party with respect to any particular matter, or series of related matters, is reasonably likely to exceed $1 million; or |
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• | as a result of the appointment or retention, the amount to be paid by our Manager and reimbursed by us or paid by us to all such third-party service providers appointed or retained in any rolling 12-month period is reasonably likely to exceed $7.5 million; or |
(6) | hold any cash or other assets of ours, provided that our Manager may cause our cash and other assets to be held in our name or any custodian for us nominated or approved by us. |
• | a base fee of $150,000 per month per subsidiary we establish for the purpose of entering into an aircraft securitization financing, which will increase by 0.01% of the maintenance-adjusted base value (at the time of acquisition) of each additional aircraft acquired beyond the Initial Portfolio, in the case of B&B Air Funding, or beyond the initial portfolio of aircraft financed with the proceeds of the applicable aircraft securitization financing (the amount of the base fee will be subject to adjustment as set forth below under “— Fees and Expenses — Adjusting the Base Fees and Administrative Agency Fees’’); and |
• | a rent fee equal to 1.0% of the aggregate amount of basic rent due for all or any part of a month for any of such aircraft plus 1.0% of the aggregate amount of basic rent actually paid for all or any part of a month for any of such aircraft. |
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• | 100% of the notional amount will be paid as a dividend on our common shares, without the payment of any incentive fee to our Manager, up to a dividend of $0.575 per common share; | ||
• | 90% of the incremental notional amount in excess of $0.575 per common share will be paid as a dividend on our common shares and 10% of the incremental notional amount will be paid to our Manager as an incentive fee until each common share receives a dividend of $0.650; | ||
• | 80% of the incremental notional amount in excess of $0.650 per common share will be paid as a dividend on our common shares and 20% of the incremental notional amount will be paid to our Manager as an incentive fee until each common share receives a dividend of $0.800; and | ||
• | 75% of the incremental notional amount in excess of $0.800 per common share will be paid as a dividend on our common shares and 25% of the incremental notional amount will be paid to our Manager as an incentive fee. |
• | the amount of the incentive fee (or applicable portion thereof to be paid in the form of shares),divided by |
• | the average closing price of one common share for the 15 consecutive trading days following the announcement of the declaration of the applicable dividend on shares (minus the per share amount of the dividend for any trading day before the ex-dividend date for the dividend). |
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• | quarterly payments of $1.5 million, subject to an annual adjustment indexed to the consumer price index applicable to the previous year, to our Manager to defray expenses. | |
We refer to this foregoing amount as the “management expense amount.” The management expense amount is subject to adjustment by notice from our Manager and the approval of the independent directors on our board of directors. |
• | for all our costs paid for us by our Manager (other than remuneration and certain expenses in relation to our Manager’s core management team and our Manager’s corporate overhead), including the following items which are not covered by the management expense amount: |
• | directors’ fees for the directors on our board of directors and our subsidiaries, |
• | directors’ and officers’ insurance for our and our subsidiaries’ directors and officers, |
• | travel expenses of the directors (including flights, accommodation, taxis, entertainment and meals while traveling) to attend any meeting of the board of our company, |
• | fees and expenses relating to any equity or debt financings we enter into in the future, |
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• | fees and expenses of the depositary for our ADSs, | ||
• | costs and expenses related to insuring our aircraft and other aviation assets, including all fees and expenses of insurance advisors and brokers, | ||
• | costs incurred in connection with organizing and hosting our annual meetings or other general meetings of our company, | ||
• | costs of production and distribution of any of our security holder communications, including notices of meetings, annual and other reports, press releases, and any prospectus, disclosure statement, offering memorandum or other form of offering document, | ||
• | website development and maintenance, | ||
• | travel expenses of the core management team and other personnel of Babcock & Brown (including flights, accommodation, taxis, entertainment and meals while traveling) related to sourcing, negotiating and conducting transactions on our behalf and attending any meeting of the board or our company, | ||
• | external legal counsel, | ||
• | fees of third party consultants, accounting firms and other professionals, | ||
• | external auditor’s fees, and | ||
• | internal auditor’s fees. |
• | for all taxes, costs, charges and expenses properly incurred by our Manager in connection with |
• | the provision of ancillary management and administrative services, |
• | the engagement of professional advisors, attorneys, appraisers, specialist consultants and other experts as requested by us from time to time; or which our Manager considers reasonably necessary in providing the services and discharging its duties and other functions under the management agreement, including, without limitation, the fees and expenses of professional advisors relating to the purchase and sale of aircraft and other aviation assets. |
• | Babcock & Brown in aggregate ceases to hold (directly or indirectly) more than 50% of the issued share capital of our Manager; |
• | our Manager becomes subject to bankruptcy or insolvency proceedings that are not discharged within 75 days, unless our Manager is withdrawn and replaced within 90 days of the initiation of such bankruptcy or insolvency proceedings with an affiliate or associate of Babcock & Brown that is able to make correctly the representations and warranties set out in the management agreement; |
• | at least 75% of our independent directors and holders of 75% or more of all of our outstanding common shares (measured by vote) determine by resolution that there has been unsatisfactory performance by our Manager that is materially detrimental to us; |
• | our Manager materially breaches the management agreement and fails to remedy such breach within 90 days of receiving written notice from us requiring it to do so, or such breach results in liability to us and is attributable to our Manager’s gross negligence, fraud or dishonesty, or willful misconduct in respect of the obligation to apply the standard of care; |
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• | any license, permit or authorization held by our Manager which is necessary for it to perform the services and duties under the management agreement is materially breached, suspended or revoked, or otherwise made subject to conditions which, in the reasonable opinion of our board of directors, would prevent our Manager from performing the services and the situation is not remedied within 90 days; or | |
• | an order is made for the winding up of our Manager, unless our Manager is withdrawn and replaced within 15 days with an affiliate or associate of Babcock & Brown that is able to make correctly the representations and warranties set out in the management agreement. |
• | we are delisted from the NYSE; |
• | we fail to make any payment due under the management agreement to our Manager within 15 days after the same becomes due; |
• | we otherwise materially breach the management agreement and fail to remedy the breach within 90 days of receiving written notice from our Manager requiring us to do so; |
• | we or any of our significant subsidiaries become subject to bankruptcy or other insolvency proceedings; |
• | an order is made for the winding up of our company; or |
• | any person or group (as defined under the Exchange Act) acquires more than 15% of any class of our voting securities. |
• | dealing or conducting business with us, our Manager, any affiliate or associate of Babcock & Brown or any shareholder of ours; | ||
• | being interested in any contract or transaction with us, our Manager, any affiliate or associate of Babcock & Brown or any shareholder of ours; | ||
• | acting in the same or similar capacity in relation to any other corporation or enterprise; | ||
• | holding or dealing in any of our shares or other securities or interests therein; or | ||
• | co-investing with us. |
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• | lease marketing and remarketing, including lease negotiation; |
• | collecting rental payments and other amounts due under leases, collecting maintenance payments where applicable, lease compliance and enforcement and delivery and accepting redelivery of aircraft under lease; |
• | implementing aircraft dispositions; |
• | monitoring the performance of maintenance obligations of lessees under the leases in a manner consistent with the practices employed from time to time by BBAM with respect to aircraft owned or managed by it; |
• | using commercially reasonable efforts to maintain compliance with certain of our obligations in our financing agreements; |
• | procuring legal and other professional services with respect to the lease, sale or financing of the aircraft, any amendment or modification of any lease, the enforcement of our rights under any lease, disputes that arise as to any aircraft or for any other purpose that BBAM reasonably determines is necessary in connection with the performance of its services; |
• | periodic reporting of operational information relating to the aircraft, including providing certain reports to the policy provider; and |
• | certain aviation insurance related services. |
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• | The Servicing Agreement may be terminated prior to its scheduled termination date in the case of certain events, including Babcock & Brown ceasing to own at least 50.1% of the voting or economic interest in BBAM; or |
• | The bankruptcy or insolvency of BBAM or Babcock & Brown International Pty Ltd. |
• | a base fee of $150,000 per month, which will increase by 0.01% of the maintenance-adjusted base value (at the time of acquisition) of each additional aircraft acquired into B&B Air Funding that is not an aircraft in our Initial Portfolio; and |
• | a rent fee equal to 1.0% of the aggregate amount of basic rent due for all or any part of a month for any of aircraft belonging to our Initial Portfolio, plus 1.0% of the aggregate amount of basic rent actually paid for all or any part of a month for any of such aircraft. |
• | lease marketing and remarketing, including lease negotiation; |
• | collecting rental payments and other amounts due under leases, lease compliance and enforcement and accepting delivery of aircraft under lease; and |
• | providing legal and accounting services, including preparing and providing reports as required by the Aircraft Acquisition Facility and providing other services to cause B&B Air Acquisition to comply with the Aircraft Acquisition Facility. |
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• | An event of default under the Aircraft Acquisition Facility, including Babcock & Brown ceasing to hold at least 5% of the issued and outstanding shares of B&B Air; |
• | Babcock & Brown ceasing to hold at least 51% of the capital stock of BBAM; |
• | BBAM fails to deliver the audited financial statements of Babcock & Brown Limited to the agent and lenders in the Aircraft Acquisition Facility within 120 days of fiscal year end or the unaudited or audited financial statements for each semi-annual period within 90 days, and in each case such failure to deliver the required financial statements continues for 30 days after written notice from the agent; |
• | Any Babcock & Brown Limited annual or quarterly financial statement required to be delivered as described above contains a going-concern or similar qualification; |
• | The insolvency of BBAM or any significant subsidiary of BBAM; and |
• | A BBAM default on recourse debt over $25 million. |
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Dividends paid | ||||||||
Dividend payment date | per share | Total cash requirement | ||||||
2009: | ||||||||
November 20, 2009 | $ | 0.20 | $ | 6.1 million | ||||
August 20, 2009 | $ | 0.20 | $ | 6.1 million | ||||
May 20, 2009 | $ | 0.20 | $ | 6.1 million | ||||
February 20, 2009 | $ | 0.20 | $ | 6.5 million | ||||
2008: | ||||||||
November 20, 2008 | $ | 0.50 | $ | 16.7 million | ||||
August 20, 2008 | $ | 0.50 | $ | 16.7 million | ||||
May 20, 2008 | $ | 0.50 | $ | 16.8 million | ||||
February 20, 2008 | $ | 0.50 | $ | 16.8 million |
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High | Low | |||||||
2007 | $ | 23.90 | $ | 16.56 | ||||
2008 | 18.85 | 4.70 | ||||||
2009 | 10.29 | 2.50 |
High | Low | |||||||
2008: | ||||||||
Quarter ending March 31, 2008 | 18.85 | 13.40 | ||||||
Quarter ending June 30, 2008 | 16.94 | 8.73 | ||||||
Quarter ending September 30, 2008 | 14.00 | 8.03 | ||||||
Quarter ending December 31, 2008 | 10.25 | 4.70 | ||||||
2009: | ||||||||
Quarter ending March 31, 2009 | 7.79 | 2.50 | ||||||
Quarter ending June 30, 2009 | 8.45 | 4.11 | ||||||
Quarter ending September 30, 2009 | 10.29 | 6.29 | ||||||
Quarter ending December 31, 2009 | 9.90 | 7.95 |
High | Low | |||||||
2009: | ||||||||
September 2009 | $ | 10.29 | $ | 8.01 | ||||
October 2009 | 9.90 | 8.31 | ||||||
November 2009 | 9.35 | 7.95 | ||||||
December 2009 | 9.40 | 8.70 | ||||||
2010: | ||||||||
January 2010 | 10.94 | 9.04 | ||||||
February 2010 | 10.42 | 8.76 |
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1) | Management Agreement, dated as of October 2, 2007, between Babcock & Brown Air Management Co. Limited and Babcock & Brown Air Limited. See Item 7.B “Related Party Transactions — Management Agreement.’’ |
2) | Servicing Agreement, dated as of October 2, 2007, among Babcock & Brown Aircraft Management LLC, Babcock & Brown Aircraft Management (Europe) Limited, Babcock & Brown Air Funding I Limited and AMBAC Assurance Corporation. See Item 7.B “Related Party Transactions — Servicing Agreement.’’ |
3) | Administrative Services Agreement, dated as of October 2, 2007, among Deutsche Bank Trust Company Americas, AMBAC Assurance Corporation, Babcock & Brown Air Management Co. Limited and Babcock & Brown Air Funding I Limited. See Item 7 “Related Party Transactions — Administrative Services Agreements.’’ |
4) | Registration Rights Agreement, dated as of October 2, 2007, among private investors and Babcock & Brown Air Limited. See Item 7 “Related Party Transactions — Registration Rights Agreement.’’ |
5) | Trust Indenture, dated as of October 2, 2007, among Deutsche Bank Trust Company Americas, BNP Paribas, AMBAC Assurance Corporation and Babcock & Brown Air Funding I Limited. See Item 5 “Liquidity and Capital Resources — Financing — Securitization.’’ |
6) | Security Trust Agreement, dated as of October 2, 2007, between Deutsche Bank Trust Company Americas, and Babcock & Brown Air Funding I Limited. See Item 5 “Liquidity and Capital Resources — Financing — Securitization.’’ |
7) | Aircraft Acquisition Facility, dated as of November 7, 2007 among Babcock & Brown Air Acquisition I Limited, the Lenders from time to time party thereto and Credit Suisse, New York Branch. See Item 5 “Liquidity and Capital Resources — Financing — Aircraft Acquisition Facility.’’ |
8) | Servicing and Administrative Services Agreement, dated as of November 7, 2007 among Babcock & Brown Aircraft Management LLC, Babcock & Brown Aircraft Management (Europe) Limited, Babcock & Brown Air Acquisition I Limited and each Aircraft Subsidiary that becomes a party thereto. See Item 7 “Related Party Transactions — Servicing Agreement.’’ |
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• | An “Irish Holder” is a holder of our shares that (1) beneficially owns our shares by virtue of holding the related ADSs evidenced by the relevant American Depositary Receipt or ADR; (2) in the case of individual holders, is resident or ordinarily resident in Ireland under Irish taxation laws; and (3) in the case of a holder that is a company, is resident in Ireland under Irish taxation laws and is not also a resident of any other country under any double taxation agreement entered into by Ireland. |
• | A “Non-Irish Holder” is a Holder of our shares that is not an Irish Holder and has never been an Irish Holder. |
• | A “US Holder” is a holder of our shares that: (1) beneficially owns our shares by virtue of holding the related ADSs evidenced by the relevant ADR; (2) is a resident of the United States for the purposes of the Ireland/United States Double Taxation Convention; (3) in the case of an individual holder, is not also resident or ordinarily resident in Ireland for Irish tax purposes; (4) in the case of a corporate holder, is not resident in Ireland for Irish tax purposes and is not ultimately controlled by persons resident in Ireland; and (5) is not engaged in any trade or business and does not perform independent personal services through a permanent establishment or fixed base in Ireland. |
• | “Relevant Territory” is defined as a country with which Ireland has a double tax treaty, (which includes the United States), or a member state of the European Union other than Ireland. |
• | who are ultimately controlled by persons resident in a Relevant Territory and who are not ultimately controlled by persons not resident in a Relevant Territory; or |
• | who are resident in a Relevant Territory and not controlled by Irish residents; or |
• | whose principal class of shares or the principal class of shares of whose 75% or greater parents are substantially and regularly traded on a recognized stock exchange in a Relevant Territory; or which are wholly owned by two or more companies, each of whose principal class of shares are substantially and regularly traded on a recognized stock exchange in a Relevant Territory may receive dividends free from DWT where they provide the ADS depository with the relevant documentation required by Irish law. |
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• | an individual resident in a Relevant Territory; or | ||
• | a corporation that is ultimately controlled by persons resident in a Relevant Territory; or | ||
• | a corporation whose principal class of shares (or whose 75% or greater parent’s principal class of shares) are substantially and regularly traded on a recognized stock exchange in a Relevant Territory; or | ||
• | a corporation that is wholly owned by two or more corporations each of whose principal class of shares is substantially and regularly traded on a recognized stock exchange in a Relevant Territory; or | ||
• | otherwise entitled to an exemption from DWT. |
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• | Excess distributions by us to a U.S. Holder would be taxed in a special way. “Excess distributions” are amounts received by a U.S. Holder with respect to our shares in any taxable year that exceed 125% of the average distributions received by such U.S. Holder from us in the shorter of either the three previous years or such U.S. Holder’s holding period for shares before the present taxable year. Excess distributions must be allocated ratably to each day that a U.S. Holder has held our shares. A U.S. Holder must include amounts allocated to the current taxable year in its gross income as ordinary income for that year. A U.S. Holder must pay tax on amounts allocated to each prior taxable year in which we were a PFIC at the highest rate in effect for that year on ordinary income and the tax is subject to an interest charge at the rate applicable to deficiencies for income tax. |
• | The entire amount of gain realized by a U.S. Holder upon the sale or other disposition of shares will also be treated as an excess distribution and will be subject to tax as described above. |
• | The tax basis in shares that were acquired from a decedent who was a U.S. Holder would not receive a step-up to fair market value as of the date of the decedent’s death but would instead be equal to the decedent’s basis, if lower than fair market value. |
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Babcock & Brown Air Limited
March 8, 2010
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For the year ended December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Audit fees(1) | $ | 1,036 | 95.0 | % | $ | 1,159 | 97.2 | % | ||||||||
Audit-related fees | — | — | — | — | ||||||||||||
Tax fees | — | — | �� | — | — | |||||||||||
All other fees | 54 | 5.0 | % | 34 | 2.8 | % | ||||||||||
Total | $ | 1,090 | 100.0 | % | $ | 1,193 | 100.0 | % | ||||||||
(1) | Audit fees include annual audit fees for B&B Air and its subsidiaries. |
Total Number of | ||||||||||||||||
Shares | Approximate Dollar | |||||||||||||||
Purchased as Part | Value | |||||||||||||||
Total | Average | of a | of Shares that may | |||||||||||||
Number | Price | Publicly | yet be | |||||||||||||
of Shares | Paid Per | Announced | Purchased Under the | |||||||||||||
Period | Purchased | Share | Repurchased Plan | Plans or Programs | ||||||||||||
April 1-30, 2009 | 2,208,963 | $ | 4.08 | 2,208,963 | $14.4 million |
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and Shareholders of Babcock & Brown Air Limited
March 8, 2010
F-2
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(Dollar amounts in thousands, except par value data)
December 31, 2009 | December 31, 2008 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 95,972 | $ | 56,763 | ||||
Restricted cash and cash equivalents | 139,241 | 113,658 | ||||||
Rent receivables | 3,927 | 4,148 | ||||||
Flight equipment held for operating leases, net | 1,748,988 | 1,830,612 | ||||||
Deferred tax asset, net | 10,465 | 40,734 | ||||||
Fair market value of derivative asset | 30 | 2,368 | ||||||
Other assets, net | 25,509 | 37,891 | ||||||
Total assets | 2,024,132 | 2,086,174 | ||||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | 5,780 | 13,809 | ||||||
Rentals received in advance | 9,656 | 9,476 | ||||||
Payable to related parties | 8,106 | 2,728 | ||||||
Security deposits | 34,425 | 35,664 | ||||||
Maintenance payment liability | 118,224 | 88,526 | ||||||
Notes payable, net | 657,649 | 826,301 | ||||||
Borrowings under aircraft acquisition facility | 594,566 | 597,471 | ||||||
Credit facility | 32,290 | — | ||||||
Fair market value of derivative liabilities | 65,726 | 113,374 | ||||||
Other liabilities | 13,186 | 9,412 | ||||||
Total liabilities | 1,539,608 | 1,696,761 | ||||||
Shareholders’ equity | ||||||||
Common shares, $0.001 par value; 499,999,900 shares authorized; 30,279,948 and 32,488,911 shares issued and outstanding at December 31, 2009 and 2008, respectively | 30 | 32 | ||||||
Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding | — | — | ||||||
Additional paid-in capital | 490,818 | 499,882 | ||||||
Retained earnings (deficit) | 47,844 | (16,584 | ) | |||||
Accumulated other comprehensive loss, net | (54,168 | ) | (93,917 | ) | ||||
Total shareholders’ equity | 484,524 | 389,413 | ||||||
Total liabilities and shareholders’ equity | $ | 2,024,132 | $ | 2,086,174 | ||||
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(Dollar amounts in thousands, except per share data)
Period from | ||||||||||||
May 3, 2007 | ||||||||||||
(Incorporation | ||||||||||||
Year ended | Year ended | Date) to | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Revenues | ||||||||||||
Operating lease revenue | $ | 213,964 | $ | 218,940 | $ | 26,042 | ||||||
Finance lease income | — | 2,446 | 2,365 | |||||||||
Gain on sale of aircraft | — | 11,437 | — | |||||||||
Gain on purchases of notes payable | 82,666 | — | — | |||||||||
Lease termination settlement | 8,307 | — | — | |||||||||
Interest and other income | 2,598 | 3,315 | 4,927 | |||||||||
Total revenues | 307,535 | 236,138 | 33,334 | |||||||||
Expenses | ||||||||||||
Depreciation | 83,650 | 74,161 | 8,573 | |||||||||
Interest expense | 80,925 | 81,689 | 14,628 | |||||||||
Hedging costs | — | — | 1,725 | |||||||||
Selling, general and administrative | 21,094 | 20,989 | 4,866 | |||||||||
Debt purchase option amortization | 6,053 | — | — | |||||||||
Maintenance and other costs | 2,353 | 4,307 | 165 | |||||||||
Total expenses | 194,075 | 181,146 | 29,957 | |||||||||
Net income before provision for income taxes | 113,460 | 54,992 | 3,377 | |||||||||
Provision for income taxes | 24,367 | 6,867 | 1,032 | |||||||||
Net income | $ | 89,093 | $ | 48,125 | $ | 2,345 | ||||||
Weighted average number of shares — basic and diluted | 30,831,637 | 33,524,074 | 12,584,008 | |||||||||
Earnings per share — basic and diluted | $ | 2.89 | $ | 1.44 | $ | 0.19 | ||||||
Dividends declared and paid per share | $ | 0.80 | $ | 2.00 | $ | -- |
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(Dollar amounts in thousands)
Notes | Accumulated | |||||||||||||||||||||||||||||||||||||||
Additional | Receivable | Retained | Other | Total | Total | |||||||||||||||||||||||||||||||||||
Manager Shares | Common Shares | Paid-in | for Common | Earnings | Comprehensive | Shareholders’ | Comprehensive | |||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Shares | (Deficit) | Loss, net | Equity | Income (Loss) | |||||||||||||||||||||||||||||||
Balance May 3, 2007 (incorporation date) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | -- | ||||||||||||||||||||||||
Issuance of common shares | — | — | 1,000,000 | 1 | 9 | — | — | — | 10 | |||||||||||||||||||||||||||||||
Cancellation of common shares | — | — | (1,000,000 | ) | (1 | ) | (9 | ) | — | — | — | (10 | ) | |||||||||||||||||||||||||||
Issuance of manager and common shares, net of underwriting fees and offering costs of $26,444 | 100 | — | 33,603,450 | 34 | 746,402 | (321,354 | ) | — | — | 425,082 | ||||||||||||||||||||||||||||||
Collections of notes receivable for common shares and offering costs | — | — | — | — | — | 319,527 | — | — | 319,527 | |||||||||||||||||||||||||||||||
Interest received on notes receivable for common shares | — | — | — | — | 877 | — | — | 877 | ||||||||||||||||||||||||||||||||
Deemed distribution to predecessor company, net | — | — | — | — | (240,940 | ) | — | — | — | (240,940 | ) | |||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 2,345 | — | 2,345 | $ | $2,345 | ||||||||||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax benefit of | ||||||||||||||||||||||||||||||||||||||||
$2,342 | — | — | — | — | — | — | — | (16,389 | ) | (16,389 | ) | (16,389 | ) | |||||||||||||||||||||||||||
Comprehensive loss, net | $ | (14,044 | ) | |||||||||||||||||||||||||||||||||||||
Balance December 31, 2007 | 100 | $ | — | 33,603,450 | $ | 34 | $ | 506,339 | $ | (1,827 | ) | $ | 2,345 | $ | (16,389 | ) | $ | 490,502 | ||||||||||||||||||||||
Collections of notes receivable for common shares | — | — | — | — | — | 1,827 | — | — | 1,827 | |||||||||||||||||||||||||||||||
Dividends to shareholders | — | — | — | — | — | — | (67,054 | ) | — | (67,054 | ) | |||||||||||||||||||||||||||||
Other | — | — | — | — | 140 | — | — | — | 140 | |||||||||||||||||||||||||||||||
Shares repurchased | — | — | (1,114,539 | ) | (2 | ) | (6,597 | ) | — | — | — | (6,599 | ) | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 48,125 | — | 48,125 | $ | 48,125 | |||||||||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax benefit of | ||||||||||||||||||||||||||||||||||||||||
$11,075 | — | — | — | — | — | — | — | (77,528 | ) | (77,528 | ) | (77,528 | ) | |||||||||||||||||||||||||||
Comprehensive loss, net | $ | (29,403 | ) | |||||||||||||||||||||||||||||||||||||
Balance December 31, 2008 | 100 | $ | — | 32,488,911 | $ | 32 | $ | 499,882 | $ | — | $ | (16,584 | ) | $ | (93,917 | ) | $ | 389,413 | ||||||||||||||||||||||
Dividends to shareholders | — | — | — | — | — | — | (24,665 | ) | — | (24,665 | ) | |||||||||||||||||||||||||||||
Shares repurchased | — | — | (2,208,963 | ) | (2 | ) | (9,064 | ) | — | — | — | (9,066 | ) | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 89,093 | — | 89,093 | $ | 89,093 | |||||||||||||||||||||||||||||
Net change in the fair value of derivatives, net of deferred tax liability of | ||||||||||||||||||||||||||||||||||||||||
$5,710 | — | — | — | — | — | — | — | 39,974 | 39,974 | 39,974 | ||||||||||||||||||||||||||||||
Reclassified from other comprehensive income into earnings, net of deferred tax of $32 | — | — | — | — | — | — | — | (225 | ) | (225 | ) | (225 | ) | |||||||||||||||||||||||||||
Comprehensive income, net | $ | 128,842 | ||||||||||||||||||||||||||||||||||||||
Balance December 31, 2009 | 100 | $ | — | 30,279,948 | $ | 30 | $ | 490,818 | $ | — | $ | 47,844 | $ | (54,168 | ) | $ | 484,524 | |||||||||||||||||||||||
F-5
Table of Contents
(Dollar amounts in thousands)
Period from | ||||||||||||
May 3, 2007 | ||||||||||||
(Incorporation | ||||||||||||
Year ended | Year ended | Date) to | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Cash Flows from Operating Activities | ||||||||||||
Net Income | $ | 89,093 | $ | 48,125 | $ | 2,345 | ||||||
Adjustments to reconcile net income to net cash flows provided by operating activities: | ||||||||||||
Gain on purchases of notes payable | (82,666 | ) | — | — | ||||||||
Gain on sale of aircraft | — | (11,437 | ) | — | ||||||||
Depreciation | 83,650 | 74,161 | 8,573 | |||||||||
Amortization of debt issuance and write-off of debt extinguishment costs | 7,251 | 7,532 | 1,467 | |||||||||
Amortization of lease incentives | 4,315 | 2,333 | — | |||||||||
Amortization of debt purchase option | 6,053 | — | — | |||||||||
Amortization of lease discounts/premiums and other items | (1,349 | ) | (1,910 | ) | 189 | |||||||
Direct finance lease income | — | (2,446 | ) | (2,365 | ) | |||||||
Maintenance payment liability relieved | — | (8,463 | ) | — | ||||||||
Deferred income taxes | 24,198 | 7,054 | 36 | |||||||||
Unrealized gain on derivative instruments | (257 | ) | (156 | ) | — | |||||||
Proceeds from termination of swap contract | — | 2,065 | — | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Rent receivables | (829 | ) | (3,316 | ) | (832 | ) | ||||||
Other assets | 3,499 | (5,600 | ) | (8,934 | ) | |||||||
Payable to related parties | 5,378 | 430 | 1,651 | |||||||||
Accounts payable and accrued liabilities | (2,948 | ) | (1,973 | ) | 6,464 | |||||||
Rentals received in advance | 180 | 1,801 | 7,675 | |||||||||
Other liabilities | 2,801 | 3,012 | 5,891 | |||||||||
Net cash flows provided by operating activities | 138,369 | 111,212 | 22,160 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Acquisition of aircraft comprising the Initial Portfolio | — | (54,068 | ) | (1,139,952 | ) | |||||||
Purchase of flight equipment | — | (451,579 | ) | (228,423 | ) | |||||||
Deposits on flight equipment purchases | — | — | (700 | ) | ||||||||
Lessor contribution to maintenance | (7,107 | ) | (9,964 | ) | — | |||||||
Proceeds from sale of aircraft | — | 42,145 | — | |||||||||
Proceeds from direct finance lease | — | 2,700 | 2,635 | |||||||||
Net cash flows used in investing activities | (7,107 | ) | (470,766 | ) | (1,366,440 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||||
Restricted cash and cash equivalents | (25,583 | ) | (1,037 | ) | (112,621 | ) | ||||||
Security deposits received | 6,552 | 8,931 | 24,842 | |||||||||
Security deposits returned | (6,741 | ) | (5,913 | ) | (1,943 | ) | ||||||
Maintenance payment liability receipts | 38,208 | 39,137 | 7,590 | |||||||||
Maintenance payment liability disbursements | (8,510 | ) | (7,687 | ) | — | |||||||
Debt issuance costs | (204 | ) | (894 | ) | — | |||||||
Option to purchase notes payable | (7,000 | ) | — | — | ||||||||
Proceeds from credit facility | 30,837 | — | — | |||||||||
Proceeds from aircraft acquisition facility | — | 464,898 | 122,908 | |||||||||
Proceeds from issuance of notes payable, net | — | — | 825,149 | |||||||||
Notes payable purchases | (82,976 | ) | — | — | ||||||||
Repayment of notes payable | — | (24,908 | ) | — | ||||||||
Repayment of aircraft acquisition facility | (2,905 | ) | — | — | ||||||||
Interest received on notes receivable for common shares | — | — | 877 |
F-6
Table of Contents
Period from | ||||||||||||
May 3, 2007 | ||||||||||||
(Incorporation | ||||||||||||
Year ended | Year ended | Date) to | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Collections of notes receivable for common shares | — | 1,827 | 67,556 | |||||||||
Proceeds from issuance of IPO shares, net | — | — | 401,353 | |||||||||
Proceeds from private placement shares | — | — | 24,195 | |||||||||
Shares repurchased | (9,066 | ) | (6,599 | ) | (10 | ) | ||||||
Dividends paid | (24,665 | ) | (67,054 | ) | — | |||||||
Net cash flows (used in) provided by financing activities | (92,053 | ) | 400,701 | 1,359,896 | ||||||||
Net increase in cash | 39,209 | 41,147 | 15,616 | |||||||||
Cash at beginning of period | 56,763 | 15,616 | — | |||||||||
Cash at end of period | $ | 95,972 | $ | 56,763 | $ | 15,616 | ||||||
Supplemental Disclosure: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 73,420 | $ | 72,936 | $ | 10,168 | ||||||
Taxes | 32 | 659 | 341 | |||||||||
Noncash Investing and Financing Activities: | ||||||||||||
Debt issuance costs netted with proceeds from credit facility | 1,453 | — | — | |||||||||
Security deposit applied to rent receivable | 1,050 | — | — | |||||||||
Maintenance liabilities transferred for Initial Portfolio | — | — | 42,259 | |||||||||
Noncash consideration exchanged for aircraft | — | — | 251,971 | |||||||||
Noncash transactions from purchase of flight equipment: | ||||||||||||
Security deposits | — | 10,693 | — | |||||||||
Maintenance payment liability | — | 15,689 | — | |||||||||
Other liabilities | — | 2,267 | — | |||||||||
Noncash transactions from sale of aircraft: | ||||||||||||
Security deposits | — | (946 | ) | — |
F-7
Table of Contents
For the year ended December 31, 2009
F-8
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
• | The success of the Company is dependent on the performance of the commercial aviation industry. A downturn in the industry could adversely impact the lessee’s ability to make payments, increase the risk of unscheduled lease termination and depress lease rates and the value of the Company’s aircraft. |
• | The Company will require access to the capital markets to refinance its current portfolio of aircraft and to grow its business through the acquisition of additional aircraft. The availability period under the Aircraft Acquisition Facility expired on November 6, 2009. (See Note 7) The Company intends to refinance the Aircraft Acquisition Facility, but may not be able to do so on acceptable terms or at all if the current dislocation of the financial markets continues. In addition, the Company is subject to risks associated with movements in interest rates, which may impact the Company’s obligations under its debt facilities and its derivative contracts. The Company also bears the credit risks of its counterparties in its derivative contracts. |
• | The Company also faces risks associated with its management and servicing arrangements. The Company relies on an external servicer to manage its business and service its aircraft portfolio. Babcock & Brown, the ultimate parent of the Company’s servicer, Babcock & Brown Aircraft Management (“BBAM”) and the Manager, was placed into voluntary administration in Australia on March 13, 2009. Babcock & Brown has informed the Company that Babcock & Brown International Pty Ltd. (“BBIPL”), which is both the main operating and asset-owning entity in the Babcock & Brown group, continues to pursue its business plan to sell all of its assets. Although no definitive transaction has been announced, the Company expects Babcock & Brown to sell substantially all of its aviation-related assets, including the assets and servicing agreements associated with BBAM. In addition, the departure of any key employee or a significant number of professionals from the manager or servicer could have a material adverse effect on the Company’s performance. |
• | Some of the Company’s agreements with Babcock & Brown, as well as the agreements governing the Notes and the Aircraft Acquisition Facility, contain provisions that are linked to the financial performance and ownership of Babcock & Brown and BBAM which could result in a servicer replacement event and an event of default under the Aircraft Acquisition Facility (see Note 7). |
F-9
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
• | Flight equipment where original manufacturer’s prices are not relevant due to plane modifications and conversions. |
• | Flight equipment which is out of production and may have a shorter useful life or lower residual value due to obsolescence. |
F-10
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
F-11
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
F-12
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
F-13
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
December 31, 2009 | December 31, 2008 | |||||||
(Dollars in thousands) | ||||||||
Cost | $ | 1,912,825 | $ | 1,910,798 | ||||
Accumulated depreciation | (163,837 | ) | (80,186 | ) | ||||
Net Flight Equipment Held for Operating Lease | $ | 1,748,988 | $ | 1,830,612 | ||||
December 31, 2009 | December 31, 2008 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Europe, Middle East and Africa: | ||||||||||||||||
Germany | $ | 130,674 | 8 | % | $ | 136,712 | 8 | % | ||||||||
The Netherlands | 126,636 | 7 | % | 132,116 | 7 | % | ||||||||||
United Kingdom | 72,569 | 4 | % | 76,120 | 4 | % | ||||||||||
Switzerland | 39,290 | 2 | % | 42,394 | 2 | % | ||||||||||
Other | 455,406 | 26 | % | 461,949 | 25 | % | ||||||||||
Europe, Middle East and Africa — Total | 824,575 | 47 | % | 849,291 | 46 | % | ||||||||||
Asia Pacific: | ||||||||||||||||
India | 254,141 | 15 | % | 263,450 | 15 | % | ||||||||||
China | 142,925 | 8 | % | 148,731 | 8 | % | ||||||||||
Other | 36,302 | 2 | % | 37,689 | 2 | % | ||||||||||
Asia Pacific — Total | 433,368 | 25 | % | 449,870 | 25 | % | ||||||||||
F-14
Table of Contents
December 31, 2009 | December 31, 2008 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
North America: | ||||||||||||||||
United States | 302,756 | 17 | % | 315,972 | 17 | % | ||||||||||
Other | 39,115 | 3 | % | 40,603 | 2 | % | ||||||||||
North America — Total | 341,871 | 20 | % | 356,575 | 19 | % | ||||||||||
Mexico, South and Central America: | ||||||||||||||||
Mexico | 149,174 | 8 | % | 155,710 | 9 | % | ||||||||||
Mexico, South and Central America — Total | 149,174 | 8 | % | 155,710 | 9 | % | ||||||||||
Off-lease — Total | — | — | 19,166 | 1 | % | |||||||||||
Total Flight Equipment | $ | 1,748,988 | 100 | % | $ | 1,830,612 | 100 | % | ||||||||
Period from May 3, 2007 | ||||||||||||||||||||||||
Year ended | Year ended | (Incorporation Date) to | ||||||||||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Europe, Middle East and Africa: | ||||||||||||||||||||||||
Germany | $ | 17,174 | 8 | % | $ | 16,353 | 7 | % | $ | 1,416 | 5 | % | ||||||||||||
The Netherlands | 16,331 | 8 | % | 13,990 | 6 | % | 728 | 3 | % | |||||||||||||||
United Kingdom | 9,624 | 5 | % | 17,388 | 8 | % | 3,120 | 12 | % | |||||||||||||||
Switzerland | 8,423 | 4 | % | 13,296 | 6 | % | 1,083 | 4 | % | |||||||||||||||
Other | 52,652 | 24 | % | 42,167 | 20 | % | 3,078 | 12 | % | |||||||||||||||
Europe, Middle East and Africa — Total | 104,204 | 49 | % | 103,194 | 47 | % | 9,425 | 36 | % | |||||||||||||||
Asia Pacific: | ||||||||||||||||||||||||
India | 27,451 | 13 | % | 26,604 | 12 | % | 2,189 | 8 | % | |||||||||||||||
China | 16,391 | 8 | % | 17,491 | 8 | % | 3,827 | 15 | % | |||||||||||||||
Other | 3,017 | 1 | % | 3,553 | 2 | % | 939 | 4 | % | |||||||||||||||
Asia Pacific — Total | 46,859 | 22 | % | 47,648 | 22 | % | 6,955 | 27 | % | |||||||||||||||
North America: | ||||||||||||||||||||||||
United States | 39,600 | 19 | % | 39,180 | 18 | % | 3,457 | 13 | % | |||||||||||||||
Other | 5,009 | 2 | % | 5,007 | 2 | % | 433 | 2 | % | |||||||||||||||
North America — Total | 44,609 | 21 | % | 44,187 | 20 | % | 3,890 | 15 | % | |||||||||||||||
Mexico, South and Central America: | ||||||||||||||||||||||||
Mexico | 18,292 | 8 | % | 19,802 | 9 | % | 4,086 | 16 | % | |||||||||||||||
Other | — | — | 4,109 | 2 | % | 1,686 | 6 | % | ||||||||||||||||
Mexico, South and Central America — Total | 18,292 | 8 | % | 23,911 | 11 | % | 5,772 | 22 | % | |||||||||||||||
Total Operating Lease Revenue | $ | 213,964 | 100 | % | $ | 218,940 | 100 | % | $ | 26,042 | 100 | % | ||||||||||||
F-15
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
Year ending December 31, | (Dollars in thousands) | |||
2010 | $ | 203,176 | ||
2011 | 186,655 | |||
2012 | 176,336 | |||
2013 | 151,506 | |||
2014 | 132,653 | |||
Thereafter | 178,690 | |||
Future Minimum Rental Payments under Operating Leases | $ | 1,029,016 | ||
Year ending December 31, | (Dollars in thousands) | |||
2010 | $ | 5,164 | ||
2011 | 5,164 | |||
2012 | 5,164 | |||
2013 | 3,393 | |||
2014 | 1,063 | |||
Thereafter | 313 | |||
Future amortization of lease incentives | $ | 20,261 | ||
F-16
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
December 31, 2009 | December 31, 2008 | |||||||
(Dollars in thousands) | ||||||||
Loan issuance costs, net | $ | 17,983 | $ | 27,018 | ||||
Lease premiums | 3,519 | 4,120 | ||||||
Other assets | 4,007 | 6,753 | ||||||
Total Other Assets | $ | 25,509 | $ | 37,891 | ||||
Year ending December 31, | (Dollars in thousands) | |||
2010 | $ | 601 | ||
2011 | 601 | |||
2012 | 601 | |||
2013 | 601 | |||
2014 | 601 | |||
Thereafter | 514 | |||
Total future amortization of lease premiums | $ | 3,519 | ||
F-17
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
Presented below are the anticipated future minimum principal payments due for the Notes as of December 31, 2009.
Year ending December 31, | (Dollars in thousands) | |||
2010 | $ | 9,245 | ||
2011 | 9,186 | |||
2012 | 37,453 | |||
2013 | 80,131 | |||
2014 | 85,027 | |||
Thereafter | 437,634 | |||
Future Minimum Principal Payments Due | $ | 658,676 | ||
Redemption Date | Price | |||
Before April 14, 2010 | 100.36 | % | ||
On or after April 14, 2010, but before October 14, 2010 | 100.27 | % | ||
On or after October 14, 2010, but before April 14, 2011 | 100.17 | % | ||
On or after April 14, 2011, but before October 14, 2011 | 100.09 | % | ||
On or after October 14, 2011 | 100.00 | % |
F-18
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
• | Babcock & Brown ceasing to own at least 50.1% of the voting or economic interest in BBAM; or |
• | The bankruptcy or insolvency of BBAM or Babcock & Brown International Pty Ltd. |
Balance as of | Balance as of | |||||||
Aircraft Acquisition Facility: | December 31, 2009 | December 31, 2008 | ||||||
(Dollars in thousands) | ||||||||
Principal — Tranche A | $ | 410,566 | $ | 413,471 | ||||
Principal — Tranche B | 184,000 | 184,000 | ||||||
Borrowings under aircraft acquisition facility | 594,566 | 597,471 | ||||||
Equity Tranche | 96,000 | 96,000 | ||||||
Total Aircraft Acquisition Facility | $ | 690,566 | $ | 693,471 | ||||
Year ending December 31, | (Dollars in thousands) | |||
2010 | $ | 30,043 | ||
2011 | 31,665 | |||
2012 | 155,021 | |||
2013 | 377,837 | |||
2014 | — | |||
Thereafter | — | |||
Future Minimum Principal Payments Due | $ | 594,566 | ||
F-19
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
• | Babcock & Brown ceases to hold at least 5% of the issued and outstanding shares of B&B Air; |
• | Babcock & Brown ceases to hold at least 51% of the capital stock of BBAM; |
• | BBAM fails to deliver the audited financial statements of Babcock & Brown Limited to the agent and lenders in the Aircraft Acquisition Facility within 120 days of fiscal year end or the unaudited or audited financial statements for each semi-annual period within 90 days, and in each case such failure to deliver the required financial statements continues for 30 days after written notice from the agent; |
• | Any Babcock & Brown Limited annual or semi-annual financial statement required to be delivered as described above contains a going-concern or similar qualification; |
• | The insolvency of BBAM or any significant subsidiary of BBAM; and |
• | A BBAM default on recourse debt over $25 million. |
F-20
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
F-21
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
Gain | ||||||||||||||||||||||||||||||||
Reclassified | ||||||||||||||||||||||||||||||||
Adjusted | Loss | from | ||||||||||||||||||||||||||||||
Fair | Fair | Recognized in | Accumulated | |||||||||||||||||||||||||||||
Swap | Market | Market | Accumulated | Other | ||||||||||||||||||||||||||||
Hedge | Contract | Value of | Credit | Value of | Deferred | Other | Comprehensive | |||||||||||||||||||||||||
Interest | Notional | Derivative | Risk | Derivative | Tax | Comprehensive | Loss into | |||||||||||||||||||||||||
Maturity Date | Rate | Amount | Liability | Adjustment | Liability | Benefit | Loss | Income | ||||||||||||||||||||||||
Interest rate swap contracts: | ||||||||||||||||||||||||||||||||
10/14/2015 | 4.93 | % | $ | 266,272 | $ | (21,240 | ) | $ | 1,004 | $ | (20,236 | ) | $ | 2,530 | $ | (17,706 | ) | $ | — | |||||||||||||
10/14/2015 | 4.93 | % | 266,272 | (21,240 | ) | 1,004 | (20,236 | ) | 2,530 | (17,706 | ) | — | ||||||||||||||||||||
11/15/2015 | 4.36 | % | 27,665 | (1,755 | ) | 57 | (1,698 | ) | 212 | (1,486 | ) | — | ||||||||||||||||||||
12/15/2015 | 4.37 | % | 27,669 | (1,756 | ) | 56 | (1,700 | ) | 212 | (1,488 | ) | — | ||||||||||||||||||||
9/15/2015 | 4.36 | % | 28,155 | (1,807 | ) | 62 | (1,745 | ) | 218 | (1,527 | ) | — | ||||||||||||||||||||
11/15/2015 | 4.37 | % | 27,918 | (1,791 | ) | 59 | (1,732 | ) | 216 | (1,516 | ) | — | ||||||||||||||||||||
1/14/2015 | 3.40 | % | 63,581 | (2,184 | ) | 19 | (2,165 | ) | 271 | (1,894 | ) | — | ||||||||||||||||||||
3/15/2018 | 3.31 | % | 195,087 | (3,206 | ) | (533 | ) | (3,739 | ) | 467 | (3,272 | ) | — | |||||||||||||||||||
8/15/2015 | 3.85 | % | 31,771 | (1,352 | ) | 26 | (1,326 | ) | 167 | (1,159 | ) | — | ||||||||||||||||||||
5/15/2016 | 4.49 | % | 46,877 | (3,144 | ) | 111 | (3,033 | ) | 379 | (2,654 | ) | — | ||||||||||||||||||||
3/15/2015 | 4.22 | % | 27,773 | (1,662 | ) | 56 | (1,606 | ) | 201 | (1,405 | ) | — | ||||||||||||||||||||
4/15/2015 | 4.07 | % | 29,857 | (1,586 | ) | 41 | (1,545 | ) | 193 | (1,352 | ) | — | ||||||||||||||||||||
10/15/2016 | 4.25 | % | 27,773 | (1,491 | ) | 16 | (1,475 | ) | 184 | (1,291 | ) | — | ||||||||||||||||||||
10/15/2012 | 2.30 | % | 109,170 | (1,326 | ) | (27 | ) | (1,353 | ) | 169 | (1,184 | ) | — | |||||||||||||||||||
Accrued interest | (2,137 | ) | (2,137 | ) | — | |||||||||||||||||||||||||||
Total — derivative liabilities | $ | 1,175,840 | $ | (67,677 | ) | $ | 1,951 | $ | (65,726 | ) | $ | 7,949 | $ | (55,640 | ) | $ | — | |||||||||||||||
Gain | ||||||||||||||||||||||||||||||||
Reclassified | ||||||||||||||||||||||||||||||||
Adjusted | Gain | from | ||||||||||||||||||||||||||||||
Fair | Fair | Recognized in | Accumulated | |||||||||||||||||||||||||||||
EURO to | Swap | Market | Market | Accumulated | Other | |||||||||||||||||||||||||||
US Dollar | Contract | Value of | Credit | Value of | Deferred | Other | Comprehensive | |||||||||||||||||||||||||
Conversion | Notional | Derivative | Risk | Derivative | Tax | Comprehensive | Loss into | |||||||||||||||||||||||||
Maturity Date | Rate | Amount | Instrument | Adjustment | Instrument | Liability | Loss | Income | ||||||||||||||||||||||||
Cross currency coupon swap contract: | ||||||||||||||||||||||||||||||||
1/15/2016 | 1EURO to US1.4452 | 1,650 | 24 | 6 | 30 | (4 | ) | 26 | — | |||||||||||||||||||||||
Terminated Contract | — | — | — | — | (207 | ) | 1,446 | 225 | ||||||||||||||||||||||||
Total — derivative asset | $ | 1,650 | $ | 24 | $ | 6 | $ | 30 | $ | (211 | ) | $ | 1,472 | $ | 225 | |||||||||||||||||
Year ending December 31, | (Dollars in thousands) | |||
2010 | $ | 295 | ||
2011 | 296 | |||
2012 | 279 | |||
2013 | 264 | |||
2014 | 263 | |||
Thereafter | 256 | |||
Total future amortization of terminated cross currency coupon swap contract | $ | 1,653 | ||
F-22
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
Period from | ||||||||||||
May 3, 2007 | ||||||||||||
(Incorporation | ||||||||||||
Year ended | Year ended | Date) to | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Deferred tax expense: | ||||||||||||
Ireland | $ | 24,212 | $ | 7,054 | $ | 36 | ||||||
France | (14 | ) | — | — | ||||||||
Deferred tax expense — total | 24,198 | 7,054 | 36 | |||||||||
Current tax expense: | ||||||||||||
Ireland: | ||||||||||||
Current | 156 | 286 | 996 | |||||||||
Adjustment for prior period’s tax provision | — | (868 | ) | — | ||||||||
France | 13 | 52 | — | |||||||||
United States | — | 343 | — | |||||||||
Current tax expense (benefit) — total | 169 | (187 | ) | 996 | ||||||||
Total Income Tax Expense | $ | 24,367 | $ | 6,867 | $ | 1,032 | ||||||
December 31, 2009 | December 31, 2008 | |||||||
(Dollars in thousands) | ||||||||
Ireland: | ||||||||
Excess of tax depreciation over book depreciation | $ | (19,162 | ) | $ | 4,196 | |||
Net operating loss carryforwards | 41,604 | 23,121 | ||||||
Net unrealized losses on derivative instruments | 7,738 | 13,417 | ||||||
Net earnings of non-European Union member subsidiary | (19,715 | ) | — | |||||
Deferred Tax Asset, Net | $ | 10,465 | $ | 40,734 | ||||
F-23
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
Period from | ||||||||||||
May 3, 2007 | ||||||||||||
Year ended | Year ended | (Incorporation Date) to | ||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||
(Percentage) | ||||||||||||
Irish statutory corporate tax rate on trading income | 12.5 | % | 12.5 | % | 12.5 | % | ||||||
Incremental effect of higher tax rate on non-trading income | — | 0.5 | % | 18.3 | % | |||||||
Gain on purchases of Notes | 9.1 | % | — | — | ||||||||
Amortization of debt purchase options | 0.7 | % | ||||||||||
Adjustment for prior period’s tax provision | — | (1.6 | %) | — | ||||||||
Other | (0.8 | %) | 1.1 | % | (0.2 | %) | ||||||
Income tax expense | 21.5 | % | 12.5 | % | 30.6 | % | ||||||
December 31, 2009 | December 31, 2008 | |||||||
(Dollars in thousands) | ||||||||
Unamortized lease discounts | $ | 2,313 | $ | 4,887 | ||||
Lease incentive obligation | 6,523 | 2,333 | ||||||
Other | 4,350 | 2,192 | ||||||
Total Other Liabilities | $ | 13,186 | $ | 9,412 | ||||
Year ending December 31, | (Dollars in thousands) | |||
2010 | $ | 867 | ||
2011 | 338 | |||
2012 | 338 | |||
2013 | 338 | |||
2014 | 338 | |||
Thereafter | 94 | |||
Total future amortization of lease discounts | $ | 2,313 | ||
F-24
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
Period from | ||||||||||||
May 3, 2007 | ||||||||||||
(Incorporation | ||||||||||||
Year ended | Year ended | Date) to | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Net income | $ | 89,093 | $ | 48,125 | $ | 2,345 | ||||||
Net change in unrealized gain (loss) on fair value of derivative instruments, net of tax benefit | 39,749 | (77,528 | ) | (16,389 | ) | |||||||
Total comprehensive income (loss) | $ | 128,842 | $ | (29,403 | ) | $ | (14,044 | ) | ||||
Period from May 3, 2007 | ||||||||||||||||
Year ended | Year ended | (Incorporation Date) | ||||||||||||||
December 31, 2009 | December 31, 2008 | to December 31, 2007 | ||||||||||||||
Basic and diluted | Basic and diluted | Basic and diluted | Pro forma | |||||||||||||
(Dollars in thousands, except share and per share data) | ||||||||||||||||
Numerator | ||||||||||||||||
Net income | $ | 89,093 | $ | 48,125 | $ | 2,345 | $ | 2,345 | ||||||||
Denominator | ||||||||||||||||
Weighted average number of shares outstanding for the period | 30,831,637 | 33,524,074 | 12,584,008 | 33,603,450 | ||||||||||||
Earnings per share | $ | 2.89 | $ | 1.44 | $ | 0.19 | $ | 0.07 |
F-25
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
F-26
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Fixed base fee payments (1) | $ | 1,866 | $ | 1,866 | $ | 1,866 | $ | 1,866 | $ | 1,866 | $ | 7,461 | $ | 16,791 | ||||||||||||||
Fixed administrative agency fee payments due from B&B Air Funding (1) | 777 | 777 | 777 | 777 | 777 | 3,111 | 6,996 | |||||||||||||||||||||
Fixed administrative agency fee payments due from B&B Air Acquisition | 240 | 240 | 240 | 160 | — | — | 880 | |||||||||||||||||||||
Fixed payments for Management Expenses (1) | 6,219 | 6,219 | 6,219 | 6,219 | 6,219 | 110,382 | 141,477 | |||||||||||||||||||||
Total | $ | 9,102 | $ | 9,102 | $ | 9,102 | $ | 9,022 | $ | 8,862 | $ | 120,954 | $ | 166,144 | ||||||||||||||
(1) | Amounts in the table assume CPI rates in effect for 2010 remain constant in future periods. |
December 31, 2009 | December 31, 2008 | |||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Notes payable | $ | 657,649 | $ | 480,084 | $ | 826,301 | $ | 413,151 | ||||||||
Aircraft acquisition facility | 594,566 | 536,505 | 597,471 | 491,301 | ||||||||||||
Credit facility | 32,290 | 32,290 | — | — | ||||||||||||
Derivative asset | 30 | 30 | 2,368 | 2,368 | ||||||||||||
Derivative liabilities | 65,726 | 65,726 | 113,374 | 113,374 |
F-27
Table of Contents
Notes to Consolidated Financial Statements
For the year ended December 31, 2009
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
December 31, 2009: | ||||||||||||||||
Derivative asset | — | 30 | — | 30 | ||||||||||||
Derivative liabilities | — | 65,726 | — | 65,726 | ||||||||||||
December 31, 2008: | ||||||||||||||||
Derivative asset | — | 2,368 | — | 2,368 | ||||||||||||
Derivative liabilities | — | 113,374 | — | 113,374 |
March 31, | June 30, | September 30, | December 31, | |||||||||||||
(Dollars in thousands, except per share data) | 2009 | 2009 | 2009 | 2009 | ||||||||||||
Total revenues | $ | 109,080 | $ | 64,519 | $ | 67,795 | $ | 66,141 | ||||||||
Net income | $ | 46,951 | $ | 13,994 | $ | 14,449 | $ | 13,699 | ||||||||
Earnings per share | $ | 1.45 | $ | 0.46 | $ | 0.48 | $ | 0.45 |
March 31, | June 30, | September 30, | December 31, | |||||||||||||
(Dollars in thousands, except per share data) | 2008 | 2008 | 2008 | 2008 | ||||||||||||
Total revenues | $ | 51,945 | $ | 57,199 | $ | 66,310 | $ | 60,684 | ||||||||
Net income | $ | 11,684 | $ | 11,062 | $ | 16,029 | $ | 9,350 | ||||||||
Earnings per share | $ | 0.35 | $ | 0.33 | $ | 0.48 | $ | 0.28 |
F-28
Table of Contents
Condensed Balance Sheets
(DOLLARS IN THOUSANDS)
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 95,797 | $ | 56,684 | ||||
Restricted cash and cash equivalents | — | — | ||||||
Receivable from subsidiaries | — | 96 | ||||||
Notes receivable from subsidiaries | 90,219 | — | ||||||
Investments in subsidiaries | 356,453 | 332,265 | ||||||
Deferred tax asset, net | — | 422 | ||||||
Other assets, net | 427 | 2,005 | ||||||
Total assets | 542,896 | 391,472 | ||||||
Liabilities | ||||||||
Payable to related parties | 5,778 | 441 | ||||||
Payable to subsidiaries | 32,643 | — | ||||||
Deferred tax liability, net | 18,982 | — | ||||||
Accrued and other liabilities | 969 | 1,618 | ||||||
Total liabilities | 58,372 | 2,059 | ||||||
Shareholders’ equity | 484,524 | 389,413 | ||||||
Total liabilities and shareholders’ equity | $ | 542,896 | $ | 391,472 | ||||
F-29
Table of Contents
Condensed Statements of Income
Period from | ||||||||||||
May 3, 2007 | ||||||||||||
(Incorporation | ||||||||||||
Year ended | Year ended | Date) to | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Revenues | ||||||||||||
Equity in earnings of subsidiaries | $ | 113,051 | $ | 51,622 | $ | 2,981 | ||||||
Intercompany management fee income | 5,100 | 5,100 | 1,275 | |||||||||
Interest and other income | 98 | 548 | 1,298 | |||||||||
Total revenues | 118,249 | 57,270 | 5,554 | |||||||||
Expense | ||||||||||||
Selling, general and administrative | 10,038 | 9,567 | 3,115 | |||||||||
Net income from continuing operations before provision for income taxes | 108,211 | 47,703 | 2,439 | |||||||||
Income tax provision (benefit) | 19,118 | (422 | ) | 94 | ||||||||
Net income | $ | 89,093 | $ | 48,125 | $ | 2,345 | ||||||
Weighted average number of shares | 30,831,637 | 33,524,074 | 12,584,008 | |||||||||
Basic and diluted earnings per share | $ | 2.89 | $ | 1.44 | $ | 0.19 |
F-30
Table of Contents
Condensed Statements of Cash Flows
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND FOR THE PERIOD FROM MAY 3, 2007 (INCORPORATION DATE) TO DECEMBER 31, 2007
Period from | ||||||||||||
May 3, 2007 | ||||||||||||
Year ended | Year ended | (Incorporation Date) to | ||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||
Cash Flows from Operating Activities | ||||||||||||
Net Income | $ | 89,093 | $ | 48,125 | $ | 2,345 | ||||||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||||||
Equity in earnings of subsidiaries | (113,051 | ) | (51,622 | ) | (2,981 | ) | ||||||
Income tax benefit | 19,118 | (422 | ) | — | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Payable to subsidiaries | 32,739 | 34,203 | (34,299 | ) | ||||||||
Other assets | 1,578 | (1,217 | ) | (788 | ) | |||||||
Payable to related parties | 5,337 | 345 | 96 | |||||||||
Accrued and other liabilities | (363 | ) | 426 | 876 | ||||||||
Net cash flows provided by (used in) operating activities | 34,451 | 29,838 | (34,751 | ) | ||||||||
Cash Flows from Investing Activities | ||||||||||||
Capital contributions to subsidiaries | (176 | ) | (20,114 | ) | (444,588 | ) | ||||||
Distributions received from subsidiaries | 128,788 | 83,397 | 20,757 | |||||||||
Notes receivable from subsidiaries | (90,219 | ) | — | — | ||||||||
Net cash flows provided by (used in) investing activities | 38,393 | 63,283 | (423,831 | ) | ||||||||
Cash Flows from Financing Activities | ||||||||||||
Movement in restricted cash and cash equivalents | — | 19,816 | (19,816 | ) | ||||||||
Dividends paid | (24,665 | ) | (67,054 | ) | — | |||||||
Proceeds from issuance of shares, net | — | 401,353 | ||||||||||
Proceeds from private placement | — | 24,195 | ||||||||||
Repurchase of common shares | — | (10 | ) | |||||||||
Interest received on notes receivable for common shares | — | 877 | ||||||||||
Collections received on notes receivable for common shares | — | 67,556 | ||||||||||
Collections made on subscription notes receivable | 1,827 | — | ||||||||||
Shares repurchased | (9,066 | ) | (6,599 | ) | — | |||||||
Net cash flows (used in) provided by financing activities | (33,731 | ) | (52,010 | ) | 474,155 | |||||||
Net increase in cash | 39,113 | 41,111 | 15,573 | |||||||||
Cash at beginning of period | 56,684 | 15,573 | — | |||||||||
Cash at end of period | $ | 95,797 | $ | 56,684 | $ | 15,573 | ||||||
Supplemental Disclosure of Non Cash Activities: | ||||||||||||
Taxes paid | $ | — | $ | — | $ | 341 | ||||||
Noncash financing activities: | ||||||||||||
Issuance of other receivables to JET-i for transfer of aircraft | — | — | (251,971 | ) | ||||||||
Proceeds from notes receivable for common shares | — | — | 251,971 |
F-31
Table of Contents
and Board of Directors of Babcock & Brown Air Limited
March 18, 2008
F-32
Table of Contents
(in thousands)
Assets | ||||
Cash and cash equivalents | $ | 5,181 | ||
Other assets, net | 68 | |||
Total assets | 5,249 | |||
Liabilities | ||||
Accounts payable and accrued liabilities | 1,135 | |||
Payable to related parties | 316 | |||
Other liabilities | 1,315 | |||
Total liabilities | 2,766 | |||
Member’s capital | ||||
Member’s contributions | 328,304 | |||
Distributions to Member | (302,261 | ) | ||
Accumulated deficit | (23,560 | ) | ||
Total member’s capital | 2,483 | |||
Total liabilities and member’s capital | $ | 5,249 | ||
F-33
Table of Contents
(in thousands)
Revenues | ||||
Operating lease revenue | $ | 107,620 | ||
Finance lease income | 7,477 | |||
Interest income | 5,190 | |||
Mark-to-market of non-hedge derivatives | 5,898 | |||
Other revenues | 750 | |||
Total revenues | 126,935 | |||
Expenses | ||||
Depreciation | 34,548 | |||
Interest expense | 61,541 | |||
Interest expense — related party | 11,585 | |||
Debt extinguishment costs | 9,165 | |||
Selling, general and administrative | 4,588 | |||
Maintenance and other costs | 2,415 | |||
Hedging costs related to interest rate swap option | 5,423 | |||
Swap breakage costs | 12,500 | |||
Total expenses | 141,765 | |||
Net loss before provision for income taxes | (14,830 | ) | ||
Provision for income taxes | 466 | |||
Net loss | $ | (15,296 | ) | |
F-34
Table of Contents
(in thousands)
Member’s | Distributions | Accumulated | Total Member’s | |||||||||||||
Contributions | to Member | Deficit | Capital | |||||||||||||
Balance December 31, 2006 | $ | 35,964 | — | $ | (8,264 | ) | $ | 27,700 | ||||||||
Capital contributions | 19,165 | — | — | 19,165 | ||||||||||||
Capital contributions in excess of net book value of assets transferred | 273,175 | — | — | 273,175 | ||||||||||||
Distributions to Member | — | (302,261 | ) | — | (302,261 | ) | ||||||||||
Net loss | — | — | (15,296 | ) | (15,296 | ) | ||||||||||
Balance December 31, 2007 | $ | 328,304 | $ | (302,261 | ) | $ | (23,560 | ) | $ | 2,483 | ||||||
F-35
Table of Contents
(in thousands)
Cash Flows from Operating Activities | ||||
Net loss | $ | (15,296 | ) | |
Adjustments to reconcile net loss to net cash flow provided by operating activities: | ||||
Depreciation | 34,548 | |||
Amortization of debt issuance costs | 1,627 | |||
Debt extinguishment costs | 9,165 | |||
Amortization of lease discounts and other items | (1,730 | ) | ||
Mark-to-market of non-hedge derivatives | (5,898 | ) | ||
Direct finance lease income | (7,477 | ) | ||
Changes in operating assets and liabilities: | ||||
Rent receivables | 740 | |||
Other assets | (2,223 | ) | ||
Accounts payable and accrued liabilities | (5,454 | ) | ||
Rentals received in advance | (4,261 | ) | ||
Security deposits and maintenance payment liabilities retained | (3,929 | ) | ||
Accrued interest payable | (3,143 | ) | ||
Other liabilities | 97 | |||
Net cash flows provided by (used in) operating activities | (3,234 | ) | ||
Cash Flows from Investing Activities | ||||
Purchase of flight equipment | (263,350 | ) | ||
Lessor contributions to maintenance | (4,856 | ) | ||
Proceeds from transfer of flight equipment at historical cost | 1,014,752 | |||
Deposits on flight equipment purchases | 300 | |||
Proceeds from transfer of investment in direct finance leases at historical cost | 71,965 | |||
Proceeds from finance leases | 8,165 | |||
Net cash flows provided by (used in) investing activities | 826,976 | |||
Cash Flows from Financing Activities | ||||
Movement in restricted cash and cash equivalents | 101,194 | |||
Proceeds from security deposits and maintenance payment liabilities | 31,156 | |||
Security deposits and maintenance payment liabilities paid | (14,675 | ) | ||
Security deposits transferred | (22,572 | ) | ||
Proceeds from warehouse credit facility | 260,173 | |||
Proceeds from warehouse credit facility — related party | — | |||
Repayments of warehouse credit facility | (1,078,175 | ) | ||
Repayments of warehouse credit facility — related party | (80,000 | ) | ||
Loan issuance costs | (638 | ) | ||
Financing from related parties, net | 14,043 | |||
Capital contributions | — | |||
Contributions received in excess of net book value of assets transferred | 21,203 | |||
Distributions paid to Member | (50,290 | ) | ||
Net cash flows provided by (used for) financing activities | (818,581 | ) | ||
Net increase in cash | 5,161 | |||
Cash at beginning of period | 20 | |||
Cash at end of period | $ | 5,181 | ||
Supplemental Disclosure of Non Cash Activities: | ||||
Cash paid during the period for: | ||||
Interest | $ | 74,691 | ||
Taxes | $ | 6 | ||
Noncash investing and financing activities: | ||||
Conversion of payable to related party to capital contribution | $ | 19,165 | ||
Contribution of other receivable for transfer of aircraft and related assets and liabilities | $ | 251,971 | ||
Distribution of other receivable to Member | $ | (251,971 | ) |
F-36
Table of Contents
For the Year Ended December 31, 2007
F-37
Table of Contents
Notes to the Predecessor Consolidated Financial Statements
For the Year Ended December 31, 2007
F-38
Table of Contents
Notes to the Predecessor Consolidated Financial Statements
For the Year Ended December 31, 2007
F-39
Table of Contents
Notes to the Predecessor Consolidated Financial Statements
For the Year Ended December 31, 2007
Europe — Developed: | ||||||||
United Kingdom | $ | 8,991 | 8 | % | ||||
Sweden | — | — | ||||||
France | 6,601 | 6 | % | |||||
Other | 25,291 | 24 | % | |||||
Europe — Developed | 40,883 | 38 | % | |||||
Asia Pacific: | ||||||||
India | 19,134 | 18 | % | |||||
China | 10,801 | 10 | % | |||||
Other | 1,620 | 1 | % | |||||
Asia Pacific | 31,555 | 29 | % | |||||
North America: | ||||||||
United States | 8,120 | 8 | % | |||||
Other | 4,605 | 4 | % | |||||
North America | 12,725 | 12 | % | |||||
South and Central America: | ||||||||
Mexico | 16,918 | 16 | % | |||||
Other | 5,539 | 5 | % | |||||
South and Central America | 22,457 | 21 | % | |||||
Total Operating Lease Revenue | $ | 107,620 | 100 | % | ||||
F-40
Table of Contents
Notes to the Predecessor Consolidated Financial Statements
For the Year Ended December 31, 2007
F-41
Table of Contents
Notes to the Predecessor Consolidated Financial Statements
For the Year Ended December 31, 2007
(Dollars in thousands) | ||||
Deferred Tax Expense | ||||
Ireland | $ | (14 | ) | |
Luxembourg | (4 | ) | ||
(18 | ) | |||
Less valuation allowance | 4 | |||
Total Deferred Tax Expense | (14 | ) | ||
Current Tax Expense | ||||
Ireland | 446 | |||
Luxembourg | 34 | |||
Total Current Tax Expense | 480 | |||
Total Income Tax Expense | $ | 466 | ||
F-42
Table of Contents
Notes to the Predecessor Consolidated Financial Statements
For the Year Ended December 31, 2007
Income taxes payable | $ | 415 | ||
Accrual for major maintenance activities and costs | 900 | |||
Total Other Liabilities | $ | 1,315 | ||
F-43
Table of Contents
Notes to the Predecessor Consolidated Financial Statements
For the Year Ended December 31, 2007
Three months ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
(Dollars in thousands) | 2007 | 2007 | 2007 | 2007 | ||||||||||||
Total revenues | $ | 30,962 | $ | 39,185 | $ | 37,418 | $ | 19,370 | ||||||||
Net income (loss) | (708 | ) | 10,640 | (17,443) | (7,785 | ) | ||||||||||
F-44
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | |||
1.1 | Memorandum of Association* | |||
1.2 | Bye-laws* | |||
2.1 | Deposit Agreement between Deutsche Bank Trust Company Americas and Babcock & Brown Air Limited.* | |||
4.1 | Management Agreement, dated as of October 2, 2007, between Babcock & Brown Air Management Co. Limited and Babcock & Brown Air Limited.* | |||
4.2 | Servicing Agreement, dated as of October 2, 2007, among Babcock & Brown Aircraft Management LLC, Babcock & Brown Aircraft Management (Europe) Limited, Babcock & Brown Air Funding I Limited and AMBAC Assurance Corporation.* | |||
4.3 | Administrative Services Agreement, dated as of October 2, 2007, among Deutsche Bank Trust Company Americas, AMBAC Assurance Corporation, Babcock & Brown Air Management Co. Limited and Babcock & Brown Air Funding I Limited.* | |||
4.4 | Registration Rights Agreement, dated as of October 2, 2007, among private investors and Babcock & Brown Air Limited.* | |||
4.5 | Trust Indenture, dated as of October 2, 2007, among Deutsche Bank Trust Company Americas, BNP Paribas, AMBAC Assurance Corporation and Babcock & Brown Air Funding I Limited.* | |||
4.6 | Security Trust Agreement, dated as of October 2, 2007, between Deutsche Bank Trust Company Americas, and Babcock & Brown Air Funding I Limited.* | |||
4.7 | Cash Management Agreement between Deutsche Bank Trust Company Americas and Babcock & Brown Air Funding I Limited.* | |||
4.8 | Director Service Agreement between Babcock & Brown Air Limited and each director thereof.* | |||
4.9 | Aircraft Acquisition Facility, dated as of November 7, 2007 among Babcock & Brown Air Acquisition I Limited, the Lenders from time to time party thereto and Credit Suisse, New York Branch.** | |||
4.10 | Servicing and Administrative Services Agreement, dated as of November 7, 2007 among Babcock & Brown Aircraft Management LLC, Babcock & Brown Aircraft Management (Europe) Limited, Babcock & Brown Air Acquisition I Limited and each Aircraft Subsidiary that becomes a party thereto.** | |||
8.1 | List of subsidiaries of the Company. | |||
12.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |||
12.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |||
13.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
* | Previously filed with the Registration Statement on Form F-1, File No. 333-145994. | |
** | Previously filed with the Annual Report on Form 20-F for the year ended December 31, 2007. |
83
Table of Contents
Babcock & Brown Air Limited | ||||
By: | /s/ Colm Barrington | |||
Colm Barrington | ||||
Chief Executive Officer and Director |
84