Eton Park adds new positions
Eric Mindich’s Eton Park Capital Management added new positions in Allergan Inc. (AGN), Armstrong World Industries (AWI), B/E Aerospace (BEAV), and AerCap Holdings (AER). Eton Park exited its positions in Equinix (EQIX), Moody’s (MCO), and Mead Johnson Nutrition (MJN) in 2Q14.
Eton Park started a new position in AerCap Holdings (AER) that accounts for 1.39% of the fund’s second quarter portfolio. Market Realist reported last month that David Einhorn’s Greenlight Capital has also started a new position in AerCap.
Overview of AerCap Holdings
Netherlands-based AerCap is an integrated global aviation company with a leading market position in aircraft leasing. The company acquires aviation assets at attractive prices and leases the assets to suitable lessees. It efficiently manages the funding and other lease-related costs. It also provides aircraft management services.
AerCap has 1,300 owned and managed aircraft in its current fleet. It has an attractive portfolio of 363 high-demand, fuel-efficient aircraft on order. The company serves over 200 customers in more than 90 countries with comprehensive fleet solutions. It provides part-out and engine leasing services through its subsidiary, AeroTurbine.
AerCap completes acquisition of ILFC
AerCap finalized the $7.6 billion purchase of International Lease Finance Corp (or ILFC) in May. AerCap shares have surged since December when the company announced the acquisition of ILFC from American International Group Inc. (or AIG).
Under the terms of the agreement, AerCap paid AIG $3 billion in cash and 97,560,976 AerCap ordinary shares. This represented a ~46% ownership position in AerCap’s ordinary share capital. AerCap said in its latest results announcement that the ILFC integration activities are on track.
A press release from Fitch on a review of aircraft lessors said that AerCap’s acquisition of ILFC was an important and positive industry development because it “represented what is expected to be the last transfer of a large fleet of leased aircraft.”
The ratings agency also believes that “a material consolidation in the industry is now complete, with two large players—AerCap and General Electric’s (GE) GE Capital Aviation Services (or GECAS)—controlling close to half of all lessor-owned aircraft globally. An increase in the sector’s market capitalization has increased investor visibility and should lead to improved access to capital markets for other aircraft lessors such as the IPOs of Avolon and China Aircraft Leasing Co.”
Acquisition drives improvement in financial performance
2Q14 results beat estimates with net income of $138.3 million compared to $75.7 million for the corresponding period in 2013. 2Q14 reported basic earnings per share (or EPS) of $0.84 compared to $0.67 for the corresponding period in 2013. The ILFC transaction accounted for most of the increase in net income and EPS over 2Q13. Total revenues surged 227% to $806.8 million from $247 million.
AerCap executed 122 aircraft transactions during 2Q14. It said in its earnings release, “As of June 30, 2014, we had committed to purchase 350 aircraft with scheduled delivery dates up to 2022. Over 90% of our committed aircraft purchases delivering 2014 through December 2016 and ~50% of our committed aircraft purchases delivering 2014 through 2022 are placed, either under lease contract or a letter of intent.”
The next part of this series will discuss Eton Park’s exit from a position in Equinix (EQIX) during 2Q14.