Malaysia’s AirAsia Selling Merah Aviation to US PE Firm Castlelake for $768m

The disposal represents AirAsia Group Berhad's on-going strategy to focus on its core airline operating business as well as its digital initiatives.

Photo from AirAsia Philippines

Malaysia-headquartered low-cost carrier AirAsia Group Berhard is selling 25 planes owned by Merah Aviation Asset Holding Limited to US private equity firm Castlelake in a deal valued at $768 million, AirAsia announced on its website.

AirAsia, through its indirect wholly-owned subsidiary Asia Aviation Capital Limited, entered into agreements to sell Merah Aviation, which will comprise 25 existing aircraft, to AS Air Lease Holdings 5T DAC, an entity indirectly controlled by Castlelake.

Castlelake will also purchase four new aircraft that will be delivered to AirAsia in 2019, the airline said in a statement. The 29 planes – Airbus’ A320-200ceo and A320neo – will be leased back to AirAsia.

“This transaction is part of AirAsia’s ongoing transformation into something more than an airline. As we move towards becoming a travel technology company, the disposal of these aircraft will not only unlock significant value but also bring us closer to our goal of being a truly digital company,” said AirAsia Group CEO Tony Fernandes.

The buyer, Castlelake specializes in providing creative, flexible capital solutions for its airline partners. Since its inception in 2005, Castlelake has invested in and managed more than 500 aircraft on behalf of its funds.

With the closing of this transaction, Castlelake’s current fleet will comprise more than 250 aircraft.

“Castlelake is pleased to support AirAsia as it pursues its strategic goals by offering full-service leasing and capital solutions,” said Castlelake managing partner Evan Carruthers.

As of September 30, 2018, Castlelake manages private funds and debt vehicles with approximately $13 billion in assets, on behalf of its investors, including endowments, foundations, public and private pension plans, private funds, family offices, insurance companies and sovereign wealth funds.

BNP Paribas is acting as financial advisor to AAGB while Stephenson Harwood LLP and Tay & Partners are acting as legal counsels to AAGB. Castlelake retained Vedder Price PC as legal counsel. –

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