Burnham Sterling & Co. LLC (Burnham Sterling), a financial advisory firm specializing in transportation assets, announced it acted as sole financial and placement advisor in a Japanese Operating Lease with Call Option (JOLCO) for Avianca, Latin America’s second-largest airline. The transaction financed three aircraft, including one Boeing 787 and two Airbus A320s. It was Avianca’s first JOLCO transaction and the first JOLCO closed on an FAA-registered aircraft using a tokumei kumiai (TK) owner, a type of Japanese limited partnership, which is the preferred investment vehicle for Japanese investors. The transaction offered Avianca 100 percent financing at attractive rates with a fixed price early buyout option at approximately 10 years.
“This is Avianca’s fourth successful transaction with Burnham Sterling,” said Lucia Avila, Corporate Finance Director of Avianca. “We’d heard about JOLCOs for some time, and we turned to Burnham Sterling as our long-term partner in aircraft financings to evaluate, structure and place this JOLCO to meet Avianca’s needs. Burnham Sterling successfully structured the transaction while also sourcing low-cost, long-term, on-shore debt in Japan. This transaction opened an entirely new investor market for Avianca, and we are absolutely thrilled with the pricing, terms and results achieved by Burnham Sterling.”
“We took a first-time JOLCO issuer to the Japanese market and closed this transaction on time and at the projected economics,” said Michael Dickey Morgan, Executive Managing Director at Burnham Sterling. “The JOLCO product can provide airlines with 100 percent financing at very competitive all-in financing costs. This particular JOLCO is notable because Avianca typically registers its aircraft with the FAA, and we successfully addressed the US withholding tax issues related to FAA-registered aircraft leased under a Japanese TK structure, allowing Avianca to tap the deepest source of JOLCO investors in Japan.”
Burnham Sterling structured and placed the transaction with four institutional investors in Europe and Japan. Burnham Sterling and its affiliates have now financed 17 new narrow-body and wide-body aircraft for Avianca valued at over US$1.0 billion.