IPO FILING: Babcock & Brown Air Limited, Aircraft Lease Operator (FLY)

Babcock & Brown Air Limited has filed with the SEC in the US to list shares.  The Bermuda-based company is selling 18,695,650 common shares in the form of American Depositary Shares, or ADSs, and underwriters are getting just over 2.8 million shares in the overallotment option from selling shareholders.  Babcock & Brown has set a range for its ADS’s of $22.00 to $24.00 and it has been approved to trade on the NYSE under the ticker “FLY.”

The underwriting syndicate includes Morgan Stanley, Citigroup, Merrill Lynch, Credit Suisse, Jefferies, and J.P. Morgan.  This is a newly organized company formed by Babcock & Brown to acquire and lease commercial jet aircraft and other aviation assets that will be leased under long-term contracts to airlines around the globe. 

It plans to use proceeds to grow its portfolio through acquisitions of aircraft and assets.  The company believes this will increase distributable cash flows, while paying regular quarterly dividends to shareholders.  The new company’s initial portfolio of 47 commercial jet aircraft includes 45 narrow-body passenger aircraft, one wide-body passenger aircraft and one freighter. Boeing aircraft comprises 56% of its fleet and Airbus aircraft comprise the remaining 44% and planes were manufactured between 1989 and 2007 with a weighted average age of 5.7 years. the company says its long-term leases are scheduled to expire between 2007 to 2021.  Its operations are spread among 29 different airlines in 16 countries and its leases have a weighted average remaining lease term of 5.9 years.  Lastly, it will acquire 44 of the aircraft as part of the Initial Portfolio from JET-i Leasing LLC with proceeds from this IPO.

Babcock & Brown hasover 25 years of experience in the aircraft industry as the fifthlargest aircraft leasing company in the world measured by thenumber of owned and managed aircraft in its portfolio. BBAM managesover 240 aircraft valued at over $6 billion and has leased aircraft tomore than 140 airlines worldwide.

If this sounds a lot like Aircastle Limited (NYSE:AYR) or AerCap Holdings N.V. (NYSE:AER), it is because the models are almost identical in major portions of the businesses.

Jon C. Ogg
September 12, 2007

Jon Ogg produces the 24/7 Wall St. SPECIAL SITUATION INVESTING NEWSLETTER; he does not own securities in the companies he covers.