TIDMDPA
RNS Number : 1816M
DP Aircraft I Limited
17 September 2021
17 September 2021
DP Aircraft I Limited (the 'Company')
Interim Report and Accounts
The Company is pleased to provide a copy of the Unaudited
Condensed Consolidated Interim Report for the six-month period
ended 30 June 2021 (the "Interim Report"), which is available from
the Company's registered office and will shortly be available to
view or download from the Company's website www.dpaircraft.com
For further information, please contact:
Aztec Financial Services (Guernsey) Limited +44(0) 1481 748863
Sarah Felmingham / Chris Copperwaite
DP AIRCRAFT I LIMITED
UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT
FOR THE SIX-MONTH PERIODED 30 JUNE 2021
FACT SHEET
Ticker DPA
Company Number 56941
ISIN Number GG00BBP6HP33
SEDOL Number BBP6HP3
Traded Specialist Fund Segment ('SFS') of the London Stock
Exchange
SFS Admission Date 4-Oct-13
Share Price US$ 0.04 at 30 June 2021
Earnings per share US$ (0.1129) for the period ended 30 June
2021
Country of Incorporation Guernsey
Current Shares in Issue 209,333,333
Administrator and Company Secretary Aztec Financial Services
(Guernsey) Limited
Asset Manager DS Aviation GmbH & Co. KG
Auditor KPMG, Chartered Accountants
Corporate Broker Investec Bank Plc
Aircraft Registrations LN-LNA (under receivership - see note
3a)
LN-LNB (under receivership - see note 3a)
HS-TQD
HS-TQC
Aircraft Serial Numbers 35304 (under receivership - see note
3a)
35305 (under receivership - see note 3a)
35320
36110
Aircraft Type and Model Boeing 787-8
Lessees Thai Airways International Public Company Limited ('Thai
Airways')
Website www.dpaircraft.com
SUMMARY
COMPANY OVERVIEW
DP Aircraft I Limited (the 'Company') was incorporated with
limited liability in Guernsey under the Companies (Guernsey) Law,
2008 on 5 July 2013 with registered number 56941.
The Company was established to invest in aircraft. The Company
is a holding company, and initially made its investment in aircraft
through four wholly owned subsidiary entities, DP Aircraft Guernsey
I Limited, DP Aircraft Guernsey II Limited, DP Aircraft Guernsey
III Limited and DP Aircraft Guernsey IV Limited (collectively and
hereinafter, the 'Borrowers'), each being a Guernsey incorporated
company limited by shares and two intermediate lessor companies, DP
Aircraft Ireland Limited and DP Aircraft UK Limited (the
'Lessors'), an Irish incorporated private limited company and a UK
incorporated private limited company respectively. DP Aircraft
Guernsey I Limited, DP Aircraft Guernsey II Limited and DP Aircraft
Ireland Limited are no longer subsidiaries of the Company with
effect from 26 February 2021 following the loss of control as a
result of receivership proceedings described on the next page under
Norddeutsche Landesbank Girozentrale and in note 3a. The Company
and its remaining subsidiaries (the Borrowers and the Lessors)
comprise the Group (the 'Group').
Pursuant to the Company's Prospectus dated 27 September 2013,
the Company offered 113,000,000 Ordinary Shares of no-par value in
the capital of the Company at an issue price of US$ 1.00 per share
by means of a Placing. The Company's Shares were admitted to
trading on the Specialist Fund Segment of the London Stock Exchange
on 4 October 2013 and the Company was listed on the Channel Islands
Securities Exchange until 27 May 2015.
On 5 June 2015, the Company offered 96,333,333 Ordinary Shares
of no-par value in the capital of the Company at an issue price of
US$ 1.0589 per share by means of a Placing. These Shares were
admitted to trading on the Specialist Fund Segment of the London
Stock Exchange on 12 June 2015.
In total there are 209,333,333 Ordinary Shares in issue with
voting rights.
In addition to the equity raised above, the Group also utilised
external debt to fund the initial acquisition of the aircraft.
Further details are given within this summary section.
INVESTMENT OBJECTIVE
The Company's investment objective is to obtain income and
capital returns for its Shareholders by acquiring, leasing and
then, when the Board considers it appropriate, selling aircraft
(the 'Asset' or 'Assets').
THE BOARD
The Board comprises independent non-executive directors. The
directors of the Board are responsible for managing the business
affairs of the Company and Group in accordance with the Articles of
Incorporation and have overall responsibility for the Company's and
Group's activities, including portfolio and risk management while
the asset management of the Group is undertaken by DS Aviation GmbH
& Co. KG (the 'Asset Manager').
THE ASSET MANAGER
The Asset Manager has undertaken to provide the asset management
services to the Company and Group under the terms of an asset
management agreement but does not undertake any regulated
activities for the purpose of the UK Financial Services and Markets
Act 2000.
BREXIT
The Directors do not expect that the United Kingdom ('UK')
withdrawal from the European Union ('EU') will have a significant
impact on the Company given the nature of its operations. However,
they continue to monitor the airline industry for any potential
impact on the Company.
CORONAVIRUS ('COVID-19')
COVID-19 rapidly spread across the globe and continues to create
widespread restrictions on the ability of people to travel,
socialise and leave their homes. Global financial markets reacted
sharply to this pandemic and concerns remain regarding the
long-term economic impact that this may have on a global scale.
COVID-19 has had a significant impact on the airline sector, and by
extension the aircraft leasing sector. More information is provided
below and in the Asset Manager's Report.
NORWEGIAN AIR SHUTTLE ('NORWEGIAN' / 'NAS')
As detailed in the 31 December 2020 financial statements, the
lease agreements with NAS were, in the judgement of the Directors
de-facto terminated in December 2020. Therefore, no rental income
has been earned from NAS in the current period.
The Group has submitted claims against NAS for losses suffered
but do not expect the Group to receive any compensation due to the
related lending bank enforcing their security rights over the lease
contracts after declaring an Event of Default as detailed
below.
Whilst the High Court approved the survival plan for NAS and
related companies on 22 April 2021 this is not expected to have an
impact on the Group and the position in relation to the
aircraft.
NORDDEUTSCHE LANDESBANK GIROZENTRALE AND THREE OTHER CONSORTIUM
MEMBERS ('NordLB')
On 24 February 2021, NordLB declared an Event of Default under
the relevant loan agreements with the Company's two borrower
subsidiaries (see note 3a), DP Aircraft Guernsey I Limited and DP
Aircraft Guernsey II Limited, which meant that NordLB was entitled
to enforce rights under the relevant security documents. On 26
February 2021, the Company received notices of security enforcement
and loan acceleration from NordLB; and accordingly, receivers were
appointed in relation to the two aircraft previously leased to NAS
(NAS aircraft), the related lease and contract rights, and the
shares in the Irish special purpose vehicle which holds title to
the NAS aircraft. NordLB has therefore taken control of the process
of disposing of the two NAS aircraft, with the proceeds of sale
(along with relevant aircraft-specific cash balances, claims
against Norwegian and shares in Norwegian held as security) being
applied in the first instance to pay off any outstanding amounts
owed to the bank, and any balance remaining thereafter being
remitted to the relevant subsidiaries of the Company. The
subsidiaries will then in turn use monies received from NordLB, if
any, to repay loans advanced to them by the Company. However, the
directors consider the prospects of any recovery to be remote.
Concurrently with the inception of the loan transaction the
Company had entered into an ISDA Swap Agreement with NordLB. Under
the terms of the swap the Company was a fixed interest rate payer
and a floating interest rate payee. The event of default detailed
above also extends to the ISDA Swap Agreement.
The developments mentioned above for the loans and related swaps
impact solely upon DP Aircraft Guernsey I Limited and DP Aircraft
Guernsey II Limited; they have no effect upon the Company's
arrangements in respect of the aircraft which it leases to Thai
Airways; and there is no recourse by NordLB to the Company
itself.
Due to the receivership proceedings mentioned above, and as
detailed in note 3a, the directors have concluded that the Company
has lost control of DP Aircraft Ireland Limited and the assets and
liabilities of DP Aircraft Guernsey I Limited and DP Aircraft
Guernsey II Limited and as a result the assets, liabilities, income
and expenses of these investees no longer form part of these
consolidated accounts with effect from 26 February 2021. Please
refer to note 7 of the interim financial statements for details
regarding the financial impact of loss of control.
THAI AIRWAYS INTERNATIONAL PCL ('THAI AIRWAYS' / 'THAI')
The suspension of travel due to COVID-19 in caused significant
financial difficulties for Thai. Due to these financial
difficulties Thai Airways entered business rehabilitation under
Thailand's Central Bankruptcy Court on 27 May 2020, with a view to
a restructuring of the airline. The Central Bankruptcy Court
finally approved Thai's Business Rehabilitation plan on 15 June
2021.
In March 2021 the Company signed a Letter of Intent ('LOI') with
Thai Airways under which the parties agreed to amend the existing
lease terms. The new terms provide for a power by the hour ('PBH')
arrangement until the December 2022 (i.e., rent will be payable by
reference to actual monthly utilisation of the Thai aircraft), with
scaled back monthly fixed lease payments thereafter until 2026,
reflecting the reduced rates now seen in the market. The lease term
was extended for 3 years to December 2029, with further scaled back
monthly lease payments starting from January 2027, and the Group
retaining a right of early termination in December 2026 after
consulting the Lenders. Also, per the LOI it was agreed that Thai
would not be required to pay rent due under the old lease agreement
accrued between 15 September 2020 and the amendment effective date.
The effective date for the lease modification is 15 June 2021,
being the date at which the Thailand's Central Bankruptcy Court
approved the restructuring. Thai Airways also undertook to ensure
that the Thai aircraft were airworthy and in-flight ready condition
in all respects by 30 June 2021 and this has been achieved. On 1
March 2021 a corresponding agreement was reached with the bank
providing finance for the aircraft leased to Thai Airways as
detailed below.
DEKABANK DEUTSCHE GIROZENTRALE AND THREE OTHER CONSORTIUM
MEMBERS ('DekaBank')
On 6 May 2021, subsequent to the new lease arrangements entered
into by the Company and Thai as described above, the Company and
DekaBank have amended and restated the existing loan facility
agreements in respect of the Thai aircraft to accommodate the new
lease terms. Repayments of principal will be deferred until the end
of the PBH arrangement, 31 December 2022; and the Company and
DekaBank will enter into discussions at that time to determine how
best to schedule interest payments, principal repayments and a
final balloon repayment, having regard for both the income being
received by the Company in respect of the Thai aircraft, and the
running costs of the Company and its subsidiaries. From the
effective date interest is charged on the deferred principal at the
percentage rate per annum equal to the sum of five per cent. (5.0%)
per annum (which, for the avoidance of doubt, includes the Margin)
plus LIBOR for the applicable period (such rate to be determined by
the Facility Agent). Prior to the end of the PBH arrangement
DekaBank and the Company will enter into negotiations to fix the
rate for the period post the PBH Arrangement.
Prior to the loan amendment detailed above, the Company and
DekaBank had agreed that the Company would only be required to make
interest payments on its borrowings relating to the assets leased
to Thai, with no concomitant capital repayment obligation; and that
the Company would make no dividend payments while deferrals
remained outstanding under those borrowings.
GOING CONCERN
The Directors have considered the Group's cash requirements for
a period of 12 months from the signing of these interim financial
statements. This forecast shows the likely need for further equity
to be raised to fund the period post 12 months and to allow for
other contingencies given the Group's circumstances. However, the
Directors believe that it is appropriate to prepare these interim
financial statements under the going concern basis of preparation
due to:-
-- The continuing support of DekaBank which made loans to the
Group (with certain loan concessions);
-- The ongoing viability of Thai Airways following approval by
Thailand's Central Bankruptcy Court of the revised lease per the
LOI and, the ability of Thai Airways to satisfy the terms of the
LOI for the revised lease;
-- The expectation that an equity fund raise will be successful based on liaison with sufficient shareholders;
-- Having regard to the limited recourse nature of the loans
which means NordLB debt default impacts solely upon DP Aircraft
Guernsey I Limited and DP Aircraft Guernsey II Limited and has no
effect upon the Company's arrangements in respect of the aircraft
which it leases to Thai Airways; and there is no recourse by NordLB
to the Company itself ; and
-- The expectation that all operational requirements will continue to be fulfilled.
Refer to Going Concern on pages 22 and 23 for additional details
regarding going concern and related uncertainties. No adjustments
have been made to the interim financial statements in the event
that the Company was unable to continue as a going concern.
IMPAIRMENT
In line with each reporting date, but more relevant in light of
the developments of COVID-19, a detailed impairment assessment of
the aircraft and lease premiums have been undertaken. Following
this review an impairment of US$ nil (31 December 2020: US$
148,300,052 was booked against the aircraft and US$ nil (31
December 2020: US$ 22,017,459) against the lease premium. (See Note
3 for further details).
DISTRIBUTION POLICY
Under normal circumstances, the Company aims to provide
Shareholders with an attractive total return comprising income,
from distributions through the period of the Company's ownership of
the Assets, and capital, upon any sale of the Assets. The Company
targets a quarterly distribution in February, May, August and
November of each year. The target distribution is US$ 0.0225 per
Share per quarter. The target dividends are targets only and should
not be treated as an assurance or guarantee of performance or a
profit forecast. Investors should not place any reliance on such
target dividends or assume that the Company will make any
distributions at all.
Due to the impact of COVID-19 on the aviation industry and
therefore our lessors, the Board suspended the payment of dividends
from 3 April 2020 until further notice. The suspension remains in
place to date. As mentioned before, the lending bank (NordLB) in
relation to the Company's two aircraft that was leased to the
Norwegian group have declared an Event of Default and enforced
their security rights in respect of the NAS aircraft. This coupled
with the fact that any lease rental payments received by the
Company in respect of the Thai aircraft are expected to be applied
exclusively towards the running costs of the Company and its
subsidiaries, and interest payments and principal repayments to the
Thai lenders (DekaBank), means that there is no realistic prospect
of the Company's shareholders receiving a dividend or other
distribution for the foreseeable future. The Board and its advisers
will be consulting with shareholders in the future with a view to
determining the best course of action to take for the future of the
Company.
HIGHLIGHTS
LOSS FOR THE PERIOD
The loss for the period ended 30 June 2021 is US$ 24,171,431 and
loss per share is US$ 0.1155. The loss for the period ended 30 June
2020 was US$ 71,992,915 and loss per share was US$ 0.3439.
The loss recognised in the current interim period is mainly
attributable to losses suffered on write off of rentals receivable,
loss of control of subsidiary undertakings and movement in fair
value of investment in Norwegian. Refer to page 27 for full details
of results for the interim period. The June 2021 loss is less
compared to the same period in the prior year mainly due to fact
that no further impairment losses have been recognised in the
current interim period.
Note, as a result of loss of control of two subsidiary
undertakings as detailed in note 3 of the Notes to the interim
financial statements, the results of DP Aircraft Guernsey I Limited
and DP Aircraft Guernsey II Limited form part of the interim
financial statements only up to 26 February 2021.
NET ASSET VALUE ('NAV')
The NAV per share was US$ 0.1626 at 30 June 2021 (31 December
2020: US$ 0.2781). The price per share for the same dates was US$
0.04 (31 December 2020: US$ 0.06). NAV per share has decreased due
to the loss made during the interim period (see above).
INTERIM DIVIDS
As a result of the COVID-19 pandemic impact on global aviation
and especially its lessees, the Group has suspended dividends from
3 April 2020 until further notice to help preserve liquidity.
Further details on the impact of the COVID-19 pandemic can be found
within the Summary and the Asset Manager's Report.
OFFICIAL LISTING
The Company's Shares were first admitted to trading on the
Specialist Fund Segment of the London Stock Exchange on 4 October
2013.
CHAIRMAN'S STATEMENT
I am pleased to present Shareholders with the Interim Report of
the Company for the six-month period to 30 June 2021.
The loss per share for the period was US$ 0.1155 compared to
loss per share of US$ 0.3439 for the same period last year. The net
asset value per share at the period-end was US$ 0.1626 compared to
US$ 0.2781 at 31 December 2020.
As investors will be aware the half year has presented further
significant challenges to the global aviation market as it has
endeavoured to deal with the effects of the COVID-19 virus on its
operations. Airlines, irrespective of geography, particularly those
serving long-haul routes, have been consequentially impacted.
As you are aware the two Boeing 787-8 aircraft, LN-LNA and
LN-LNB (the 'Assets') previously leased to Torskefjorden Leasing
Limited, part of Norwegian, have been placed into receivership
along with the related cash balances and proceeds from sale of the
Norwegian shares previously received. The NAS Lenders have
therefore taken control of the NAS Assets, with the proceeds of
sale being applied in the first instance to pay off any outstanding
amounts owed to the NAS Lenders, and any balance remaining
thereafter being remitted to the relevant subsidiaries of the
Company.
As previously noted, these developments impact solely upon the
Assets; they have no effect upon the Company's arrangements in
respect of the aircraft which it leases to Thai Airways; and there
is no recourse by the NAS Lenders to the Company itself. The
aircraft are now being managed by advisors appointed by the
Receiver. These assets and the associated liabilities are no longer
recognised on the balance sheet with any intergroup loans fully
provided for.
We are pleased to advise both Thai aircraft are now operational
and progress is being made to finalise lease documentation
reflecting the LOI signed in March 2021. Income has been received
under the new Power by the Hour (PBH) arrangement which is in place
until the end of 2022 with scaled back monthly lease payments
thereafter until 2026, reflecting the reduced rates now seen in the
market. The lease term was extended by 3 years to December 2029,
with further scaled back monthly lease payments starting from
January 2027, and the Group retaining a right of early termination
in December 2026 after consulting the Lenders.
One of the Thai engines was deemed beyond economical repair
('BER'). The relevant TQC Thai aircraft is flying in commercial
service with a replacement engine. We are receiving full PBH rental
payments until an equivalent Trent 1000 engine is received from
Rolls Royce. All efforts are being taken to resolve the replacement
in conjunction with Thai Airways, Rolls Royce and the Lenders.
Revised arrangements with the Thai Airways lender were completed
in respect of the Thai Assets related loans, to accommodate the new
lease arrangements described above. Repayments of principal will be
deferred until the end of the PBH arrangement; and the Company and
the Thai Lenders will enter into discussions at that time to
determine how best to structure debt service and to measure the
final balloon repayment, having regard for both the income being
received by the Company under the PBH arrangement in respect of the
Thai Assets, the running costs of the Company and its subsidiaries
and the interest rates prevailing at that time.
As previously noted, there is no realistic prospect of the
Company's shareholders receiving a dividend or other distribution
for the foreseeable future.
The situations identified above including certain ongoing
operational matters of the Parent have been determined by the
Directors to represent a material uncertainty that may cast doubt
upon the Company's ability to continue as a going concern (see
pages 22 and 23).
The focus of the Company remains the preservation of the
Company's long-term financial stability, although the challenges
facing the Company are significant.
The Company intends to undertake an equity tap issue to provide
additional finance to support the business going forward. As
previously noted, the ongoing cash burn, once significant
restructuring costs have ceased, will be considerably reduced on an
annual basis.
I would like to thank the Board for their significant support
over the period with many meetings taking place. Thanks also go to
the team at the Asset Manager and Administrator for their
considerable support and assistance.
I would like to thank our Investors for their continued support
in the Company. The Board and its advisers have been consulting
further with shareholders since March 2021 and will be consulting
further in the coming days.
Jon Bridel
Chairman
ASSET MANAGER'S REPORT
THE AIRLINE MARKET
COVID-19 Pandemic in brief
The COVID-19 pandemic still impacts everyday life and
travelling, both domestic and international, around the globe. This
has a significant impact on the airline industry, including airline
restructurings and bankruptcies. The number of stored aircraft
worldwide remains high. Although, vaccination coverage is
increasing, different virus variants leading to increased infection
rates have added to travel restrictions imposed by various
governments. It seems that vaccination coverage and the spread of
virus variants run a race. It is impossible to determine the total
impact on the airline and aviation industry or when all COVID-19
restrictions might be globally lifted.
Global
-- Current Situation
o Largest decline in demand since WW2
o Drop of 60% in air passenger numbers in 2020
o Decrease in international tourist receipts of USD 1.3
trillion
o Cargo demand was back on 2019-levels by January 2021
o Half of announced and scheduled resumption of service to be
withdrawn again
-- Outlook
o Domestic markets anticipated to recover first
o Passenger numbers 2021 expected to be 44-47% below
2019-levels
o Estimated seat capacity 2021 to be 35-38% below
2019-levels
o Anticipated return to 2019-level not before 2024
o In the short term, travellers prefer domestic and short- to
medium-haul destinations; e.g., German tourists spend more at
European destinations in May 2021 than before the Pandemic
2019 2020 2021
Revenues [billion] 838 372 458
------ -------- -------
Capacity (ASK) [% YoY] vs.
2019 3.4 (56.7) (47.2)
------ -------- -------
Demand (RPK) [% YoY] vs. 2019 4.1 (65.9) (57.0)
------ -------- -------
Passenger Load Factor [%] 82.6 65.1 67.3
------ -------- -------
Passenger Yield [% YoY] vs.
2019 (3.7) (8.7) (3.0)
------ -------- -------
Net Results [billion USD] 26.4 (126.4) 47.7
------ -------- -------
CO2 [million tonnes] 905 495 580
------ -------- -------
Source: IATA April 2021
Europe
Impact of COVID-19
-- 70% decline in overall demand (RPK) in 2020
-- 58% drop in total capacity (ASK) in 2020
-- Intra-European travel was hit hard by the second wave; markets expected to open in phases
-- Passenger revenue in 2021 estimated to decrease by 75 - 86
billion USD compared to 2019-levels
-- Passenger numbers in 2021 expected to be 49-56% below 2019-levels
Asia
Impact of COVID-19
-- 62% decline in overall demand (RPK) in 2020
-- 45% drop in total capacity (ASK) in 2020
-- The domestic Chinese market already fully recovered in 2020
-- Passenger revenue in 2021 estimated to decrease by 110 - 115
billion USD compared to 2019-levels
-- Passenger numbers in 2021 expected to be 46-48% below 2019-levels
Outlook & Conclusion
The COVID-19 pandemic continues to put significant burden on
airlines. Even if the level of coronavirus cases flattens and
travel bans are gradually lifted resulting from a worldwide mass
vaccination, it will take years until capacity and numbers of
passenger will return to pre-COVID-19 levels. The longer the
pandemic continues, the more the industry will rely on governmental
and creditor support. As most of the governmental support - if any
- are in form of credits, airlines` financial results will be
negatively impacted for the next years, even if passenger travel
might already have returned to pre-COVID-19 levels. Some
governments only granted their support subject to the power of
co-decision making which impacts the airline's flexibility and
results in conflicts of interest in regard to future strategic
measurements.
All outlooks shared in this report are based on historic data
and assumptions made by industry experts. It can be considered as a
potential guideline. From a historical point of view, the airline
industry has proven to be resilient and has recovered from all
previous crises and up to date 2021 shows a slight recovery
compared to the previous year. However, this time, any recovery
will take significantly longer as the decline in passenger traffic
is not only driven by an economic downturn but a continuing global
pandemic. According to McKinsey, these aspects will lead to the
necessity of adapting to long-term changes. For example, business
travel has been partially substituted by video conferences and
might never recover to pre-Covid levels, as many companies
significantly progressed in digitalisation - taking advantage of
resultant travel cost reductions.
Clearly, this time the recovery period will take significantly
longer than average to return to pre-COVID-19 levels and as long as
the pandemic lasts and most of the travel restrictions remain in
place, the number of airlines filing for bankruptcy and
restructuring will continue. As the pandemic is still continuing,
it is impossible to assess the total impact of the COVID-19
pandemic at the current stage.
THE LESSEE
Thai Airways International Public Company Limited
Impact from COVID-19 pandemic
-- 20 aircraft in operation and 75 aircraft in storage
-- Thai Smile, a subsidiary of Thai Airways, suspended all
scheduled domestic flights from 21(st) July until 19(th) August
2021 in compliance with the regulations by the Thai Government's
COVID-19 containment
-- Shareholders equity as at 31(st) December 2020 remained
negative (THB -128,665 million; appr. USD -4,294 million);
potential delisting from the SET (Stock Exchange of Thailand) after
three years
-- No submission of first quarter results but half-year results announced to be published
-- Annual results of 2020 stated a net loss of THB 141 billion
(appr. USD 4.7 billion) compared to a net loss of THB 12 billion
the previous year; passenger numbers dropped by 76%
-- Acceptance to sell one of its office buildings in Bangkok for
an amount of Bt1.81 billion (appr. USD 58 million) to generate
cash
Restructuring and Rehabilitation Process since 2(nd) March
2021
-- 12(th) May 2021: Scheduled voting of the creditors on the
business rehabilitation plan had been postponed by a week
-- 19(th) May 2021: Creditor's Meeting - more than 90% of the
votes accepted the Rehabilitation Plan including three plan
amendment petitions and the Creditors' Committee had been
appointed
-- 28(th) May 2021: Hearing of the Central Bankruptcy Court to
consider the Rehabilitation Plan in which two objection petitions
were raised; hearing of reading the court order had been
deferred
-- 15(th) June 2021: Hearing of reading the court order -
Approval of the Business Rehabilitation Plan including the
nominated Plan Administrators by the Central Bankruptcy Court
-- 8(th) July 2021: Plan Administrator's Meeting - approval of
the plan to decrease the registered capital by about THB 5 billion
(appr. USD 154 million) due to a write-off of unissued and unsold
shares
-- Implementation of Business Rehabilitation Plan limited to a
period of five years, extensions can be granted by the Central
Bankruptcy Court
Outlook & Opportunities post-COVID-19 pandemic - The 'New
Thai Airways'
-- Measures to be taken
o Reduction of fleet and aircraft types to minimise maintenance
costs and increase crew efficiency; different aircraft types put up
for sale, including A300s, A330s and A340s
o Amendment of aircraft Leases with more favourable terms and
lease rates, e.g., Power-by-the Hour contracts
o Adjustment of flight routes and cancellation of low return
flights
o Downsizing the workforce and flattening the hierarchy
-- Capital raise of about USD 1.5 billion necessary to repay the debt
-- Fleet of 86 aircraft and five different aircraft types in 2025; phasing-out Boeing 747s
-- Thai expects to return to profits in 2023 and to state shareholder equity above zero in 2030
-- Thailand's economy is dependent on tourism and Thai Airways
benefits from measures initiated by the Government to stimulate
tourism arrivals (objective to return to pre-Covid levels before
2025), such as the "sandbox model":
o Opening of specific regions to foreign fully vaccinated
tourists from countries considered as "low-risk" without any
mandatory quarantine requirements
o 1st July 2021: Province of Phuket reopened
-- Arrival of nearly 2,000 tourists within the first five days
-- Thai operates flights from London, Frankfurt, Paris, and Zurich to Phuket
-- 426 inbound flights expected during July
-- 100,000 tourist arrivals targeted for the third quarter 2021
o 15(th) July 2021: Islands Koh Samui, Koh Phangan and Koh Tao
re-opened
o If the sandbox model proves to be successful, further
provinces will follow to be opened
Comments & conclusions
Thai Airways is dependent on the tourism sector, particularly on
in-bound tourism which has been severely impacted by the COVID-19
pandemic. The carrier remains dependent on any decision made by the
Government to elevate or soften travel restrictions. The Thai
Government's establishment of the sandbox model is a first move to
support tourism, although strict requirements need to be met. And
it is important for Thai that this model proves to be successful
and sustainable to support the step-by-step re-opening of the
country. Unfortunately, the increasing number of cases in Thailand
might not be supportive.
The process of business rehabilitation made a significant step
forward with the approval of the Business Rehabilitation Plan by
the creditors and the Central Court of Bankruptcy. Negotiated and
signed agreements with several lessors for a PBH-period facilitate
the carrier the smooth increase of international operations without
the back-breaking burden of fixed monthly lease rentals. From the
stakeholders` perspective, including creditors and lessors, the
final impact of the Business Rehabilitation Process continues to
remain unknown for the time being and undoubtfully, most
stakeholders and presumably all operating lessors will suffer
significant losses.
Thai's current decision to keep the B787 in their future fleet
is backed by the fact that both DP Aircraft owned B787s have been
brought back into commercial service. Having a fleet of modern
aircraft, including amongst others B787s and A350s, supports Thai
to compete with other carriers and to base operations on a
competitive cost level, particularly if jet fuel prices increase
over time.
Nevertheless, there is no guarantee for the airline's survival
and Thailand is also hit by an increasing number of daily COVID-19
cases. However, it might be considered that the carrier's long-term
existence is in the interest of the country as tourism counted for
one fifth of the country's national income (pre-Covid). A
successful proof of the "sandbox-model" could be a first step on
the long road of recovery of Thai Airways.
THE ASSETS
Update B787
-- Monthly production rate to be reduced below five aircraft monthly
-- 82 undelivered B787s in storage due to COVID-19 pandemic and fuselage defects
-- According to the world's biggest lessor AerCap, the
re-opening of the transatlantic market might brighten the outlook
for the B787 which AerCap considers as one of the most successful
widebody aircraft
Assets & Operations
Overview
Both aircraft TQC and TQD are back in commercial operations. TQC
completed the return-to-service check at Don Mueang Airport in
Bangkok 4(th) June 2021, operated its test flight 21(st) June 2021
and returned to commercial operations 29(th) June 2021. TQD
completed the return-to-service check at Don Mueang Airport in
Bangkok 15(th) June 2021, operated its test flight 4(th) July 2021
and returned to commercial operations 8(th) July 2021. Since then,
both aircraft have been deployed to Tokyo (Japan) and have been
operated to Europe to fly tourists to Phuket as part of the
sandbox-model.
AIRCRAFT OPERATIONS Thai Airways
HS-TQC HS-TQD
---------------------- -------------------
Cabin Layout 24 Business Class Seats
240 Economy Class Seats
-------------------------------------------
LAST PHYSICAL INSPECTION
-------------------------------------------
Date 23.06.2021 6.07.2021
---------------------- -------------------
Place Bangkok Airport (BKK)
-------------------------------------------
Type of inspection Inspection after return-to-service-check
-------------------------------------------
AIRFRAME STATUS
(31(st) July 2021)
---------------------- -------------------
Total Flight Hours 17,013 15,642
---------------------- -------------------
Total Flight Cycles 3,835 3,615
---------------------- -------------------
Hours/cycles ratio since delivery 4.44 4.33
---------------------- -------------------
Titled Engines Report
As at 31(st) HS-TQC HS-TQD
July 2021
ESN 10239 ESN 10240 ESN 10244 ESN 10244
---------- -------------------- ---------- ----------
Total Time
[Flight Hours] 15,436 10,518 11,188 16,911
---------- -------------------- ---------- ----------
Total Flight
Cycles 3,455 2,583 2,698 3,707
---------- -------------------- ---------- ----------
Location On-wing Shop On-wing On-wing
---------- -------------------- ---------- ----------
Remarks ESN 10240 beyond
economical repair;
to be replaced
by Rolls-Royce
---------- -------------------- ---------- ----------
As the titled engine ESN 10240 was declared a total loss, the
asset manager has worked together with Thai Airways to
appropriately replace that engine. A replacement engine had been
suggested and the process of reviewing the respective records and
physical condition has been completed. As soon as all commercial
aspects are agreed, the suggested replacement engine will be
accepted and a title transfer performed. The complete technical
process of the engine replacement, including testing, is supported
and monitored closely by the asset manager's on-site team. Apart
from this, a temporary replacement engine is installed on TQC to
support the commercial operations.
Asset Manager's actions to ensure asset value
Keeping the assets under management in the best possible
condition and in accordance with the manufacturer's requirement is
the top priority for DS Aviation as DP Aircraft's Asset Manager.
Given the unfortunate combination of the two circumstances of Trent
1000 issues and the COVID-19 pandemic, TQC and TQD had been stored
since different dates back in 2019 until mid-2021. This, including
some findings during the storage inspections as well as Thai
undergoing restructuring, made a closer monitoring of the assets
essential, particularly during the storage period. This included
amongst others :
-- On-site representative
-- Additional physical and records inspections as well as follow-up inspections
-- Following-up on findings' rectification
-- Back-to Birth records review
-- Regular calls with Lessee
-- Negotiation of asset condition as part of restructuring agreements
All these measures proved to be successful as TQC and TQD are
the first of Thai`s stored B787 fleet which returned to commercial
service. Although the current utilisation of the aircraft is lower
than back in 2019 before the pandemic hit the global airline
industry, it is a positive sign and generates income for the
Lessor.
Comments and Conclusions
COVID-19 not only impacts the airline and travel industry but
the entire aviation business, including manufacturers. As some
airlines even downsized their fleet, particularly through
retirement of older less fuel-efficient aircraft, they are
reluctant in placing new orders and look for opportunities to
cancel orders or postpone deliveries. Boeing announced stopping
production of the B747 last year and further to postpone its first
B777X delivery. However, the second quarter 2021 showed a slight
recovery in Boeing's aircraft deliveries, numbers rose from 20 to
79 compared with the same quarter in the previous year.
Airlines gradually started to bring back stored aircraft into
commercial operations as travel demand increased. Airlines who take
advantage of the lower lease rates and purchase prices in the
market, generally decide for efficient and new technology aircraft
such as B787s or A350s (as example in the wide body segment) as due
to airline failures and restructurings resulting from the pandemic,
even these new technology aircraft have entered the secondary
market. Airlines who are able to benefit from this situation might
have a significant advantage on the longer term as their cost
structure might be more competitive. It remains to be seen when and
if lease rates will return to pre-Covid levels.
In these times of uncertainty, it remains essential for Lessors
to closely monitor the asset conditions and put all efforts to keep
the value of the aircraft.
DS Aviation GmbH & Co. KG
Member of Dr. Peters Group
Stockholmer Allee 53
44269 Dortmund, Germany
DIRECTORS
Jonathan (Jon) Bridel, Non-Executive Chairman (56)
Jon is a Guernsey resident and is currently a non-executive
director of The Renewables Infrastructure Group Limited (FTSE 250),
Sequoia Economic Infrastructure Income Fund Limited (FTSE 250) and
SME Credit Realisation Fund Limited (in wind down) which are listed
on the Main Market of the London Stock Exchange. Other companies
include Fair Oaks Income Fund Limited. Jon was previously Managing
Director of Royal Bank of Canada's investment businesses in the
Channel Islands and served as a director on other RBC companies
including RBC Regent Fund Managers Limited. Prior to joining RBC,
Jon served in a number of senior management positions in banking,
specialising in credit and corporate finance and private businesses
as Chief Financial Officer in London, Australia and Guernsey having
previously worked at Price Waterhouse Corporate Finance in
London.
Jon graduated from the University of Durham with a degree of
Master of Business Administration, holds qualifications from the
Institute of Chartered Accountants in England and Wales (1987)
where he is a Fellow, the Chartered Institute of Marketing and the
Australian Institute of Company Directors. Jon is a Chartered
Marketer and a Member of the Chartered Institute of Marketing, a
Chartered Director and Fellow of the Institute of Directors and a
Chartered Fellow of the Chartered Institute for Securities and
Investment.
Jeremy Thompson, Non-Executive Director (66)
Jeremy Thompson is a Guernsey resident with sector experience in
Finance, Telecoms, Aerospace and Oil & Gas. He acts as a
non-executive director to a number of businesses which include
three private equity funds and to an Investment Manager serving the
listed NextEnergy Solar Fund Limited. In addition, Jeremy is also a
non-executive director of London listed Riverstone Energy Limited.
Between 2005 and 2009 he was a director of multiple businesses
within a London based private equity group. This entailed board
positions on both private, listed and SPV companies and highly
successful exits. Prior to that he was CEO of four autonomous
global businesses within Cable & Wireless PLC and earlier held
CEO roles within the Dowty Group. Jeremy has studied and worked in
the UK, USA and Germany.
Jeremy currently serves as chairman of the States of Guernsey
Renewable Energy Team and is a commissioner of the Alderney
Gambling Control Commission. He is also an independent member of
the Guernsey Tax Tribunal panel. Jeremy is an engineering graduate
of Brunel (B.Sc) and Cranfield (MBA) Universities and attended the
UK's senior defence course (Royal College of Defence Studies). He
holds the Institute of Directors (IoD) Certificate and Diploma in
Company Direction and is an associate of the Chartered Institute of
Arbitration. He completed an M.Sc in Corporate Governance in 2016
and qualified as a Chartered Company Secretary in 2017.
Harald Brauns, Non-Executive Director (67)
Harald is a German banker with extensive experience in the
specialised lending sector. He joined NORD/LB Hannover, Germany in
1977 with a first engagement in the shipping segment. In 1985 he
started the aircraft finance activities for the bank from scratch.
As the Global Head of Aircraft Finance, he built successively a
team of more than 40 dedicated aviation experts located in
Hannover, New York and Singapore. Focused on an asset-based
business model with sophisticated solutions for selected clients he
and his team advanced to global leaders in commercial aircraft
finance with an exposure of well above US$ 10 billion split over a
portfolio of 650 aircraft assets. After more than 35 years in the
aviation industry Harald retired in October 2019. He is a resident
in Germany and was appointed as a non-executive director of the
Company with effect from 1 November 2019.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
These are the principal risks and uncertainties that the Group
is facing and expects to continue to facing in the second half of
2021.
Geopolitical and economic risks
The Company leases aircraft to customers operating in multiple
jurisdictions exposing it to (i) many and varying economic, social,
legal and geopolitical risks, (ii) instability in key markets and
(iii) global health pandemics. The Directors continue to monitor
the development of COVID-19 and are continuing to assess the impact
on the Company. Exposure to multiple jurisdictions may adversely
affect the Company's future performance, position and growth
potential. The adequacy and timeliness of the Company's response to
emerging risks in these jurisdictions are of critical importance to
the mitigation of their potential impact on the Company.
Exposure to the commercial airline industry
As a supplier to and partner of the airline industry, the Group
is exposed to the financial condition of the airline industry as it
leases its aircraft to commercial airline customers. The financial
condition of the airline industry is affected by, among other
things, geopolitical events, outbreaks of communicable pandemic
diseases and natural disasters, fuel costs and the demand for air
travel. To the extent that any of these factors adversely affect
the airline industry they may result in (i) downward pressure on
lease rates and aircraft values, (ii) higher incidences of lessee
defaults, restructuring, and repossessions and (iii) inability to
lease aircraft on commercially acceptable terms.
Thai Airways
Thai went into debt rehabilitation on 27 May 2020 and the
business rehabilitation plan was only just approved on 15 June 2021
by the Central Bankruptcy Court of Thailand. There is risk that the
business rehabilitation plan does not achieve the desired results,
and this could have an adverse impact on the entity's lease
arrangement with Thai Airways. Rental due up to 14 September 2020
was to be resolved as part of the rehabilitation and there is no
guarantee that the Group will recover partially or in full the
amounts due as the rehabilitation plan is put into action.
The continuing impact of COVID-19 is likely to impact passenger
numbers for Thai given the reduced Chinese and regional demand.
This is particularly relevant for the Group given the aircraft
leased to Thai Airways is under a PBH arrangement up to 31 December
2022. There is no guarantee that the Group will receive any rental
payments from Thai Airways during this period.
COVID-19 Impact
COVID-19 has spread across the globe, with major outbreaks
across China, the Middle East, Europe and America, resulting in
widespread restrictions on the ability of people to travel,
socialise and leave their homes. COVID-19 has had a significant
impact for the airline sector, and by extension the aircraft
leasing sector. Thai Airways entered into restructuring in 2020 and
is still in the first stages of implementing an approved
rehabilitation plan. NAS put its lessee entity into liquidation in
early 2021 following a de-facto termination of the lease agreement
with the Group in December 2020. Given the continuing evolution of
the significant impact of, and the uncertainties created by
COVID-19, this has meant that this risk has now become the most
significant.
Asset risk
The Company's Assets comprise of four Boeing 787-8 aircraft.
However, two aircraft that were leased to NAS have been taken over
by NordLB in February 2021 following NordLB declaring an Event of
Default on its loan agreements and enforcing its security rights to
the aircraft.
The Group bears the risk of selling or re-leasing the remaining
aircraft in its fleet at the end of their lease terms or if the
lease is terminated. If demand for aircraft decreases market lease
rates may fall, and should such conditions continue for an extended
period, it could affect the market value of aircraft in the fleet
and may result in a further
impairment charge. The Directors have engaged an asset manager
with appropriate experience of the aviation industry to manage the
fleet and remarket or sell aircraft as required to reduce this
risk. Any lasting impact of the COVID-19 situation on both aircraft
demand and lease rates continues to be unknown.
There is no guarantee that, upon expiry or cessation of the
leases, the Assets could be sold or released for an amount that
would enable shareholders to realise a capital profit on their
investment or to avoid a loss. Costs regarding any future
re-leasing of the Assets would depend upon various economic factors
and would be determinable only upon an individual re-leasing event.
Potential reconfiguration costs could in certain circumstances be
substantial.
Key personnel risk
The ability of the Company to achieve its investment objective
is significantly dependent upon the advice of certain key personnel
at DS Aviation GmbH & Co. KG; there is no guarantee that such
personnel will be available to provide services to the Company for
the scheduled term of the Leases or following the termination of
the Lease. However, Key Man clauses within the Asset Management
agreement do provide a base line level of protection against this
risk.
Credit risk & counterparty risk
Credit risk is the risk that a significant counterparty will
default on its contractual obligations. The Group's most
significant counterparty is Thai Airways as lessee and provider of
income and DekaBank Deutsche Girozentrale ('DekaBank') as holder of
the Group's cash and restricted cash. The lessee does not maintain
a credit rating. Thai Airways is currently in the early stages of
implementing a rehabilitation plan. The credit rating of DekaBank
is Aa2 (2020: Aa2).
There is no guarantee that the business rehabilitation process
of Thai Airways will be successful. Failure of any material part of
the business rehabilitation plan may have an adverse impact on its
ability to comply with its obligations under the LOI entered into
during March 2021.
Any failure by Thai Airways to pay any amounts when due could
have an adverse effect on the Group's ability to comply with its
obligations under the DekaBank loan agreements and could result in
the lenders enforcing their security and selling the relevant
Assets on the market potentially negatively impacting the returns
to investors. In mitigation, Thai Airways is an international
full-service carrier and is important to Thai's economy and as such
it is unlikely that the Government will not provide it with the
necessary support to see it through its restructure. However, there
is no guarantee and hence a significant risk remains.
Liquidity risk
In order to finance the purchase of the Assets, the Group
entered into loan agreements. Pursuant to the loan agreements, the
lenders are given first ranking security over the Assets. Under the
provisions of each of the loan agreements, the Borrowers are
required to comply with loan covenants and undertakings. A failure
to comply with such covenants or undertakings may result in the
relevant lenders recalling the relevant loan, as has been the case
with NordLB. In such circumstances, the Group may be required to
remarket the relevant Asset (either sell or enter into a subsequent
lease) to repay the outstanding relevant loan and/or re-negotiate
the loan terms with the relevant lender.
As detailed in the Summary report on page 5, NordLB has declared
an Event of Default and enforced its security over the Group's NAS
aircraft, related lease contract rights, cash balances and shares
held in Norwegian. The NordLB debt default impacts solely upon the
two NAS aircraft and has no effect upon the Company's arrangements
in respect of the aircraft which it leases to Thai Airways; and
there is no recourse by NordLB to the Company itself.
Boeing
Company exposure to Boeing in terms of ongoing guarantees and
commitments could be negatively impacted with any ongoing 737-Max
problems and as yet the financial impact upon Boeing in terms of
financial compensation and potential loss of orders is not known
although it is expected these matters will be resolved in time.
Rolls Royce
Company exposure to Rolls Royce in terms of ongoing guarantees
and commitments could be negatively impacted with the Trent 1000
engine issues and as yet the financial impact upon Rolls Royce in
terms of financial compensation, loss of capacity and loss of
orders is not known. The Company believes that its engines will
actually benefit from the current maintenance and refurbishments
underway. Announcements by Rolls Royce have implied that the low
pressure turbine and other issues are now under control.
GOING CONCERN
Going Concern - Material Uncertainty
The Directors have prepared the interim financial statements for
the period ended 30 June 2021 on the going concern basis. However,
the Directors have identified the matters referred to below, in
addition to Company operational requirements that may not be within
the control of the Company, which indicate the existence of a
material uncertainty that may cast significant doubt on the
entity's ability to continue as a going concern and that the
Company may, as a consequence, be unable to realise its assets and
discharge its liabilities in the normal course of business.
COVID-19 has resulted in widespread restrictions on the ability
of people to travel, socialise and leave their homes and has had a
material negative effect on the airline sector, and by extension
the aircraft leasing sector. As at 30 June 2021 the Company has two
(2) Boeing 787 aircraft (the 'Aircraft') leased to Thai Airways
International ('Thai').
The application of the going concern basis of preparation is
dependent upon the Company's aircraft leasing and the related
financing activities as described below.
Thai - leases and related loans
The Thai Leases
In March 2021 the Company signed a LOI with Thai Airways under
which the parties agreed to amend the existing lease terms. The new
terms provide for a PBH arrangement until 31 December 2022 (i.e.,
rent will be payable by reference to actual monthly utilisation of
the Thai aircraft), with scaled back monthly fixed lease payments
thereafter until 2026, reflecting the reduced rates now seen in the
market. The lease term was extended for 3 years to December 2029,
with further scaled back monthly lease payments starting from
January 2027, and the Group retaining a right of early termination
in December 2026 after consulting the Lenders. Thai Airways also
undertook to ensure that the Thai aircraft are airworthy and in
flight ready condition in all respects by 30 June 2021, and this
has been achieved. A corresponding agreement was reached with the
bank providing finance for the aircraft leased to Thai Airways, see
below.
The Thai Loans
On 6 May 2021, subsequent to the new lease arrangements entered
into by the Company and Thai as described above, the Company and
DekaBank have amended and restated the existing loan facility
agreements in respect of
the Thai aircraft to accommodate the new lease terms. Repayments
of principal will be deferred until the end of the PBH arrangement,
31 December 2022; and the Company and DekaBank will enter into
discussions at that time to determine how best to schedule interest
payments, principal repayments and a final balloon repayment,
having regard for both the income being received by the Company in
respect of the Thai aircraft, and the running costs of the Company
and its subsidiaries. The loan is secured by charges over the two
Thai aircraft and the underlying leases.
The Directors expect that the Thai rehabilitation plan, approved
on 15 June 2021, which is in the early stages of implementation
will succeed and, under the terms of the new lease to be entered
into with Thai based on the LOI signed on 2 March 2021 and the
corresponding agreement reached with the bank providing finance for
the aircraft leased to Thai Airways (DekaBank), the Company will
have sufficient liquidity from (i) the lease payments from Thai and
(ii) monies that will be raised from an equity fund raise expected
to be successful based on liaison with sufficient shareholders and
(iii) utilising certain of its own funds to continue to meet all of
its obligations under the Thai loans as well as operating costs for
the Group.
NordLB and loans advanced to former subsidiaries
The default and enforcement of security as detailed previously
impact solely upon the two NAS aircraft. They have no effect upon
the Company's arrangements in respect of the aircraft which it
leases to Thai Airways and there is no recourse by NordLB to the
Company itself.
Conclusion
The Directors have considered the Group's cash requirements for
a period of 12 months from the signing of these interim financial
statements. This forecast shows the likely need for further equity
to be raised to fund the period post 12 months and to allow for
other contingencies given the Group's circumstances. However, the
Directors believe that it is appropriate to prepare these interim
financial statements under the going concern basis of preparation
due to:-
-- The continuing support of DekaBank which made loans to the
Group (with certain loan concessions);
-- The ongoing viability of Thai Airways following approval by
Thailand's Central Bankruptcy Court of the revised lease per the
LOI and, the ability of Thai Airways to satisfy the terms of the
LOI for the revised lease;
-- The expectation that an equity fund raise will be successful based on liaison with sufficient shareholders;
-- Having regard to the limited recourse nature of the loans
which means NordLB debt default impacts solely upon DP Aircraft
Guernsey I Limited and DP Aircraft Guernsey II Limited and have no
effect upon the Company's arrangements in respect of the aircraft
which it leases to Thai Airways; and there is no recourse by NordLB
to the Company itself ; and
-- The expectation that all operational requirements will continue to be fulfilled.
No adjustments have been made to the interim financial
statements in the event that the Company was unable to continue as
a going concern.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
For the six months ended 30 June 2021
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules (the 'DTR') of the UK's Financial Conduct
Authority (the 'UK FCA').
In preparing the condensed set of interim financial statements
included within the half-yearly financial report, the directors are
required to:
-- prepare and present the condensed set of interim financial
statements in accordance with IAS 34 Interim Financial Reporting
issued by the International Accounting Standards Board ('IASB') and
the DTR of the UK FCA;
-- ensure the condensed set of interim financial statements has adequate disclosures;
-- select and apply appropriate accounting policies; and
-- make accounting estimates that are reasonable in the circumstances.
The Directors are responsible for designing, implementing and
maintaining such internal controls as they determine is necessary
to enable the preparation of the condensed set of interim financial
statements that is free from material misstatement whether due to
fraud or error.
We confirm that to the best of our knowledge:
(1) The condensed set of consolidated interim financial
statements included within the half-yearly financial report of DP
Aircraft I Limited ('the Company') for the six months ended 30 June
2021 (the 'interim financial information') which comprises
Condensed Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed
Consolidated Statement of Cash Flows, Condensed Consolidated
Statement of Changes in Equity and the related explanatory notes,
have been presented and prepared in accordance with IAS 34 Interim
Financial Reporting, issued by the IASB, and the DTR of the UK
FCA.
(2) The interim financial information presented, as required by
the DTR of the UK FCA, includes:
a. an indication of important events that have occurred during
the first six months of the financial year, and their impact on the
condensed set of interim financial statements;
b. a description of the principal risks and uncertainties for
the remaining six months of the financial year;
c. related parties' transactions that have taken place in the
first six months of the current financial year and that have
materially affected the financial position or the performance of
the enterprise during that period; and
d. any changes in the related parties' transactions described in
the last annual report that could have a material effect on the
financial position or performance of the enterprise in the first
six months of the current financial year.
On behalf of the Board
Director Director
INDEPENT REVIEW REPORT TO THE MEMBERS OF DP AIRCRAFT I
LIMITED
Introduction
We have been engaged by DP Aircraft I Limited ("the Entity" or
"the Group") to review the condensed set of consolidated financial
statements in the half-yearly financial report for the six months
ended 30 June 2021 which comprises condensed consolidated statement
of comprehensive income, condensed consolidated statement of
financial position, condensed consolidated statement of cash flows,
condensed consolidated statement of changes in equity, and the
related explanatory notes. Our review was conducted in accordance
with the Financial Reporting Council's International Standard on
Review Engagements 2410 (UK and Ireland), 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' .
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2021 is not prepared, in all material
respects in accordance with IAS 34 Interim Financial Reporting as
issued by the International Accounting Standards Board ("IASB") and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Material uncertainty related to going concern
We draw attention to Note 3 ('Significant Judgements and
Estimates - Going Concern') in the financial statements, which
outlines the Group's dependencies on the ongoing viability of Thai
Airways, which alongside the continuing support of the Group's
lender, DekaBank, are key uncertainties in the coming 12 months.
Furthermore, the directors consider that there is an expectation
that the Group will require further equity to be raised in the
period post 12 months from the date of approval of these financial
statements. These events or conditions indicate that a material
uncertainty exists that may cast significant doubt on the Group's
ability to continue as a going concern. Our opinion is not modified
in respect of this matter.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA. As disclosed in note 2, the annual financial
statements of the Group for the year ended 31 December 2020 were
prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB"). The directors are responsible for
ensuring that the condensed set of consolidated financial
statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as
issued by the International Accounting Standards Board
("IASB").
Our responsibility
Our responsibility is to express to the Entity a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with the Financial
Reporting Council's International Standard on Review Engagements
(UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Entity in accordance with the
terms of our engagement. Our review has been undertaken so that we
might state to the Entity those matters we are required to state to
it in this report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Entity for our review work, for this report,
or for the conclusions we have reached.
Niall Naughton 16 September 2021
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Harbourmaster Place
IFSC
Dublin 1
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
For the six-month period ended 30 June 2021
30 June 2021 30 June 2020
(unaudited) (unaudited)
Note US$ US$
Revenue
Lease rental income 4 12,915,197 27,449,994
Expenses
Asset management fees 23 (525,325) (512,512)
Asset Manager's disposal fee 23 - 2,479,634
General and administrative expenses 5 (1,750,546) (1,081,706)
Depreciation and amortisation 10 (87,581) (10,857,218)
Impairment charge on aircraft and
related components 10 - (86,892,116)
Expected credit loss on receivables 15 (12,508,499) (1,304,638)
(14,871,951) (98,168,556)
Operating loss (1,956,754) (70,718,562)
Net (losses)/gains on financial assets
at fair value 12 (8,547,935) 3,085,028
Gain on derivatives at fair value 459,015 -
Loss on loss of control of subsidiary
undertakings 7 (9,874,940) -
Dividend income 9,549 -
Finance costs 6 (4,314,137) (4,417,263)
Finance income 11,693 94,110
Net finance costs (22,256,755) (1,238,125)
Loss before tax (24,213,509) (71,956,687)
Taxation 8 42,078 (36,228)
Loss for the period (24,171,431) (71,992,915)
---------------------------------------------------- ----- ------------- ----------------------------
Other Comprehensive Loss
Items that are or may be reclassified
to profit or loss
Cash flow hedges - changes in fair
value 21 - (3,529,174)
Cash flow hedges - reclassified to
profit or loss 21 - 632,113
---------------------------------------------------- ----- ------------- ----------------------------
Total Other Comprehensive Loss - (2,897,061)
---------------------------------------------------- ----- ------------- ----------------------------
Total Comprehensive Loss for the period (24,171,431) (74,889,976)
---------------------------------------------------- ----- ------------- ----------------------------
US$ US$
Loss per Share for the period - basic
and diluted 9 (0.1155) (0.3439)
---------------------------------------------------- ----- ------------- ----------------------------
All the items in the above statement derive from continuing
operations.
The notes on pages 31 to 54 form an integral part of these
interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
As at 30 June 2021
30 June 2021 31 December
2020
(unaudited) (audited)
Note US$ US$
NON-CURRENT ASSETS
PPE - Aircraft & Related
Components 10 126,512,419 126,600,000
Total non-current assets 126,512,419 126,600,000
CURRENT ASSETS
Cash and cash equivalents 2,036,054 6,949,167
Restricted cash 14 19,111,945 27,438,332
Trade and other receivables 15 440,700 45,930
Investments held at fair
value 12 - 15,630,526
Assets held for sale 11 - 82,000,000
Loans receivable at fair 13 - -
value
Total current assets 21,588,699 132,063,955
TOTAL ASSETS 148,101,118 258,663,955
----------------------------------- ----- -------------- --------------
EQUITY
Share capital 19 210,556,652 210,556,652
Accumulated losses (176,516,888) (152,345,457)
Total equity 34,039,764 58,211,195
NON-CURRENT LIABILITIES
Bank borrowings 18 98,413,859 -
Maintenance reserves 16 14,460,682 14,460,682
Total non-current liabilities 112,874,541 14,460,682
CURRENT LIABILITIES
Bank borrowings 18 138,617 180,915,582
Derivative instrument liabilities 21 - 4,183,715
Trade and other payables 17 1,048,196 892,781
----------------------------------- ----- -------------- --------------
Total current liabilities 1,186,813 185,992,078
TOTAL LIABILITIES 114,061,354 200,452,760
----------------------------------- ----- -------------- --------------
TOTAL EQUITY AND LIABILITIES 148,101,118 258,663,955
----------------------------------- ----- -------------- --------------
The financial statements on pages 27 to 54 were approved by the
Board of Directors and were authorised for issue on 16 September
2021. They were signed on its behalf by:
Jon Bridel Jeremy Thompson
Chairman Director
The notes on pages 31 to 54 form an integral part of these
interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the six-month period ended 30 June 2021
30 June 30 June 2020
2021
(unaudited) (unaudited)
US$ US$
Loss for the period (24,171,431) (71,992,915)
Adjusted for:
Depreciation 87,581 8,676,208
Amortisation - 2,181,010
Impairment loss - 86,892,116
Amortisation of deferred finance costs - 146,003
Finance costs 4,314,137 4,271,260
Income tax expense (42,078) 36,228
Loss on loss of control of subsidiary 9,874,940 -
undertakings
Net losses/(gains) on financial assets
at fair value 8,547,935 (3,085,028)
Gain on derivatives at fair value (459,015) -
Expected credit loss 12,508,499 1,304,638
Changes in:
Decrease in security deposits payable - (10,974,880)
Increase in maintenance provision - 1,287,945
Decrease in deferred income - (2,555,135)
Decrease in Asset Manager's performance
fee - (2,479,634)
Increase in trade and other payables 270,978 542,496
(Increase)/decrease in trade and other
receivables (12,903,269) 48,463
Income taxes paid - (36,228)
NET CASH FLOW (USED IN)/FROM OPERATING ACTIVITIES (1,971,723) 14,262,547
---------------------------------------------------- ------------- -------------
INVESTING ACTIVITIES
Sale proceeds of investments held at 4,069,880 -
fair value
Cash impact on loss of control of subsidiary (5,456,182) -
undertakings (see note 7)
Restricted cash 1,490,797 5,382,644
---------------------------------------------------- ------------- -------------
NET CASH FLOW FROM INVESTING ACTIVITIES 104,495 5,382,644
---------------------------------------------------- ------------- -------------
FINANCING ACTIVITIES
Dividends paid - (4,710,000)
Bank loan principal repaid (274,173) (10,809,624)
Bank loan interest paid (2,469,951) (3,732,773)
Swap interest paid (301,761) (575,976)
NET CASH FLOW USED IN FINANCING ACTIVITIES (3,045,885) (19,828,373)
---------------------------------------------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 6,949,167 12,216,093
Decrease in cash and cash equivalents (4,913,113) (183,182)
---------------------------------------------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT OF PERIOD 2,036,054 12,032,911
---------------------------------------------------- ------------- -------------
The notes on pages 31 to 54 form an integral part of these
interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
For the six-month period ended 30 June 2021
Share Accumulated Hedging Total
Capital Losses Reserve Equity
Note US$ US$ US$ US$
As at 1 January 2020 210,556,652 7,491,594 (2,348,841) 215,699,405
Total comprehensive
loss for the period
Loss for the period - (71,992,915) - (71,992,915)
Other comprehensive
loss - - (2,897,061) (2,897,061)
--------------------------------- ----- ------------ -------------- ------------ ---------------
Total comprehensive
loss - (71,992,915) (2,897,061) (74,889,976)
-------------------------------- -------------------- -------------- ------------ ---------------
Transactions with owners
of the Company
Dividends 20 - (4,710,000) - (4,710,000)
--------------------------------- ----- ------------ -------------- ------------ ---------------
As at 30 June 2020 (unaudited) 210,556,652 (69,211,321) (5,245,902) 136,099,429
--------------------------------- ----- ------------ -------------- ------------ ---------------
As at 1 January 2021 210,556,652 (152,345,457) - 58,211,195
Total comprehensive
loss for the period
Loss for the period - (24,171,431) - (24,171,431)
Total comprehensive
loss - (24,171,431) - (24,171,431)
-------------------------------- -------------------- -------------- ------------ -------------
Transactions with owners
of the Company
Dividends 20 - - - -
As at 30 June 2021 (unaudited) 210,556,652 (176,516,888) - 34,039,764
--------------------------------- ----- ------------ -------------- ------------ -------------
The notes on pages 31 to 54 form an integral part of these
interim financial statements.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
For the six-month period ended 30 June 2021
1) GENERAL INFORMATION
The unaudited condensed consolidated interim financial
statements (the 'interim financial statements') incorporate the
results of the Company and that of wholly owned subsidiary
entities, DP Aircraft Guernsey I Limited (consolidated up to 26
February 2021), DP Aircraft Guernsey II Limited (consolidated up to
26 February 2021), DP Aircraft Guernsey III Limited, DP Aircraft
Guernsey IV Limited (collectively and hereinafter, the
'Borrowers'), each being a Guernsey incorporated company limited by
shares and two intermediate lessor companies, DP Aircraft Ireland
Limited (consolidated up to 26 February 2021) and DP Aircraft UK
Limited (the 'Lessors'), an Irish incorporated private limited
company and a UK incorporated private limited company respectively.
The Company and its subsidiaries (the Borrowers and the Lessors)
comprise the Group.
DP Aircraft I Limited (the 'Company') was incorporated on 5 July
2013 with registered number 56941. The Company is admitted to
trading on the Specialist Fund Segment of the London Stock
Exchange.
The Share Capital of the Company comprises 209,333,333 Ordinary
Shares of no-par value and one Subordinated Administrative Share of
no-par value.
The Company's investment objective is to obtain income and
capital returns for its shareholders by acquiring, leasing and
then, when the Board considers it appropriate, selling
aircraft.
2) SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The interim financial statements for the period 1 January 2021
to 30 June 2021 have been prepared in accordance with International
Accounting Standard ('IAS') 34 'Interim Financial Reporting' issued
by the International Accounting Standards Board ('IASB')and the
Disclosure and Transparency Rules (the 'DTRs') of the UK's
Financial Conduct Authority (the 'FCA').
The interim financial statements do not include all the
information and disclosures required in the annual financial
statements and should be read in conjunction with the Group's
annual report and consolidated financial statements for the year
ended 31 December 2020. The Group's annual financial statements for
the year ended 31 December 2020 have been prepared in accordance
with International Financial Reporting Standards ('IFRS') issued by
the IASB and are available on the Company's website or from the
Company Secretary.
The interim financial statements have been prepared on the basis
of the accounting policies set out in the Group's annual
consolidated financial statements for the year ended 31 December
2020 but also taking into account any new policies that will be
applied in the Group's annual consolidated financial statements for
the year ended 31 December 2021.
These are not-statutory financial statements. The last statutory
financial statements were issued on 12 May 2021, and they were not
qualified.
The Directors have concluded that there are no new standards,
amendments to standards and interpretations that are effective for
annual periods beginning on 1 January 2021 which have a material
impact on the interim financial statements.
3) SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of unaudited condensed consolidated interim
financial statements in compliance with IAS 34 requires management
to make judgements, estimates and assumptions about the carrying
amount of assets and liabilities that are not readily apparent from
their sources.
Information about assumptions and estimation uncertainty at 30
June 2021 that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities in the
interim financial statements for the period are:
a) Significant judgements
Going Concern - material uncertainty
The Directors have prepared the interim financial statements for
the period ended 30 June 2021 on the going concern basis. However,
the Directors have identified the matters referred to below, in
addition to Company operational requirements that may not be within
the control of the Company, which indicate the existence of a
material uncertainty that may cast significant doubt on the
entity's ability to continue as a going concern and that the
Company may, as a consequence, be unable to realise its assets and
discharge its liabilities in the normal course of business.
COVID-19 has resulted in widespread restrictions on the ability
of people to travel, socialise and leave their homes and has had a
material negative effect on the airline sector, and by extension
the aircraft leasing sector. As at 30 June 2021 the Company has two
(2) Boeing 787 aircraft (the 'Aircraft') leased to Thai Airways
International ('Thai').
The application of the going concern basis of preparation is
dependent upon the Company's aircraft leasing and the related
financing activities as described below.
Thai - leases and related loans
The Thai Leases
In March 2021 the Company signed a LOI with Thai Airways under
which the parties agreed to amend the existing lease terms. The new
terms provide for a PBH arrangement until 31 December 2022 (i.e.,
rent will be payable by reference to actual monthly utilisation of
the Thai aircraft), with scaled back monthly fixed lease payments
thereafter until 2026, reflecting the reduced rates now seen in the
market. The lease term was extended by 3 years to December 2029,
with further scaled back monthly lease payments starting from
January 2027, and the Group retaining a right of early termination
in December 2026 after consulting the Lenders. Thai Airways also
undertook to ensure that the Thai aircraft are airworthy and in
flight ready condition in all respects by 30 June 2021, and this
has been achieved. A corresponding agreement was reached with the
bank providing finance for the aircraft leased to Thai Airways, see
below.
The Thai Loans
On 6 May 2021, subsequent to the new lease arrangements entered
into by the Company and Thai as described above, the Company and
DekaBank have amended and restated the existing loan facility
agreements in respect of the Thai aircraft to accommodate the new
lease terms. Repayments of principal will be deferred until the end
of the PBH arrangement, 31 December 2022; and the Company and
DekaBank will enter into discussions at that time to determine how
best to schedule interest payments, principal repayments and a
final balloon repayment, having regard for both the income being
received by the Company in respect of the Thai aircraft, and the
running costs of the Company and its subsidiaries. The loan is
secured by charges over the two Thai aircraft and the underlying
leases.
The Directors expect that the Thai rehabilitation plan, approved
on 15 June 2021, which is in the early stages of implementation
will succeed and, under the terms of the new lease to be entered
into with Thai based on the LOI signed on 2 March 2021 and the
corresponding agreement reached with the bank providing finance for
the aircraft leased to Thai Airways (DekaBank), the Company will
have sufficient liquidity from (i) the lease payments from Thai and
(ii) monies that will be raised from an equity fund raise expected
to be successful based on liaison with sufficient shareholders and
(iii) utilising certain of its own funds to continue to meet all of
its obligations under the Thai loans as well as operating costs for
the Group.
NordLB and loans advanced to former subsidiaries
The default and enforcement of security as detailed previously
impact solely upon the two NAS aircraft. They have no effect upon
the Company's arrangements in respect of the aircraft which it
leases to Thai Airways and there is no recourse by NordLB to the
Company itself.
Conclusion
The Directors have considered the Group's cash requirements for
a period of 12 months from the signing of these interim financial
statements. This forecast shows the likely need for further equity
to be raised to fund the period post 12 months and to allow for
other contingencies given the Group's circumstances. However, the
Directors believe that it is appropriate to prepare these interim
financial statements under the going concern basis of preparation
due to:-
-- The continuing support of DekaBank which made loans to the
Group (with certain loan concessions);
-- The ongoing viability of Thai Airways following approval by
Thailand's Central Bankruptcy Court of the revised lease per the
LOI and, the ability of Thai Airways to satisfy the terms of the
LOI for the revised lease;
-- The expectation that an equity fund raise will be successful based on liaison with sufficient shareholders;
-- Having regard to the limited recourse nature of the loans
which means NordLB debt default impacts solely upon DP Aircraft
Guernsey I Limited and DP Aircraft Guernsey II Limited and have no
effect upon the Company's arrangements in respect of the aircraft
which it leases to Thai Airways; and there is no recourse by NordLB
to the Company itself ; and
-- The expectation that all operational requirements will continue to be fulfilled.
No adjustments have been made to the interim financial
statements in the event that the Company was unable to continue as
a going concern.
Loss of control of subsidiary undertakings
The Directors have concluded that the Company has lost control
of DP Aircraft Guernsey I Limited, DP Aircraft Guernsey II Limited
and DP Aircraft Ireland Limited as a result of receivership
proceedings instigated by NordLB following an Event of Default on
the NordLB loans and the enforcement of security NordLB had over
the two NAS aircraft, the related lease and contract rights, cash
and the shares in the Irish special purpose vehicle which holds
title to the NAS aircraft.
The Directors considered the following factors that need to all
be present for control to exist in reaching their conclusion:
-- power over the investee;
-- exposure or rights to variable returns from its involvement with the investee; and
-- the ability to use its power to affect the amount of the investor's returns.
The Directors determined that effective from 26 February 2021,
when the NAS aircraft were placed in receivership, the Company lost
the power over the investees as the Company no longer had the right
to direct the relevant activities of the investees, for example how
the aircraft is utilised, disposed of or the value of any such
disposal. That power is now with the receiver following the
enforcement of NordLB security
As a result of the loss of control DP Aircraft Ireland Limited
and the assets and liabilities of DP Aircraft Guernsey I Limited
and DP Aircraft Guernsey II, the group has derecognised the assets
and liabilities of these subsidiaries as at 26 February 2021. A
resulting loss on loss of control has been recognised in profit or
loss.
Fair value of loans advanced to the former subsidiaries as well
as the fair value of the shares held in the formers subsidiaries on
loss of control is dependent on monies that the former subsidiaries
expect to receive from NordLB. NordLB has appointed a receiver to
dispose of the two NAS aircraft, with the proceeds of sale (along
with relevant aircraft specific cash balances, claims against
Norwegian and shares in Norwegian held as security) being applied
in the first instance to pay off any outstanding amounts owed to
the bank, and any balance remaining thereafter being remitted to
the relevant former subsidiaries of the Company. After NordLB loans
are paid off, no surplus proceeds are expected to be received
therefore the loans and the retained interest in the subsidiaries
have a nil fair value on loss of control.
Note, the loans advanced to the former subsidiaries are limited
recourse loans and on initial recognition the Group has economic
exposure to the underling aircraft value and cash flows instead of
exposure to the borrowers' overall credit risk and cash flows.
Therefore, the loans are classified as financial assets at fair
value through profit or loss in line with IFRS 9 Financial
Instruments ('IFRS 9').
Modification of borrowings
During the period there was a restructure of the loans advanced
by DekaBank. The Directors have, in line with IFRS 9, assessed
whether the modification was substantial. If deemed substantial,
then the original loan liability would have been derecognised and a
new loan liability recognised. The assessment was done on a
quantitative basis and compared the net present value of the
modified cash flows including any fees payable or receivable
against the net present value of the remaining cash flows of the
loan prior to the modification, both discounted at the original
effective interest rate. A difference of 10% or more would have
been considered substantial as is advised in IFRS 9. The directors
have assessed this and considered the modification not to be
substantial.
b) Significant estimates
Impairment of property, plant and equipment
As with each reporting date, but more relevant in light of the
developments of COVID-19, a detailed impairment assessment of the
aircraft and lease premiums has been undertaken.
IFRS requires an assessment of the aircraft carrying value
versus the higher of the value in use and fair value less cost to
sell. The lease encumbered value is the value of the aircraft on
lease, given a specified lease payment stream (rents and terms),
and estimated future base value adjusted for return condition at
lease termination, and an appropriate discount rate i.e., value in
use.
Thai Aircraft
In considering the impairment of the Thai aircraft the board
considered both the value in use and the fair value less costs to
sell. The value in use is based on independent valuations. The fair
value less costs to sell is based on the current market values
based on independent valuations. The board considered it
appropriate not to apply any discounts and adjustments for these
aircraft given the specific circumstances of these aircraft.
The fair values (current market value) estimated by the
independent valuers support the carrying values of the aircraft. In
addition, the lease encumbered (value in use) also continue to
support the carrying value of the aircraft. The key estimates in
calculating the lease encumbered values derived by the independent
valuers were the aircraft residual values at end of the respective
leases and the ability of Thai to pay future rental income which is
captured in the discount rate applied. A range between 7.5-8% has
been applied as the discount rate by the independent valuers. As
the current market values support the carrying costs the discount
rate has not been adjusted to be a specific rate to the Company as
opposed a third party buyer.
The board considered all possible valuation ranges and concluded
that the aircraft were not impaired further as at 30 June 2021.
Therefore, no impairment loss has been recognised during the
interim period ended 30 June 2021 (30 June 2020: US$
71,238,614).
The board also considered if there was an indication that the
prior year Thai aircraft impairment of US$ 58,839,697 had reversed
in full or partially during the period and concluded that based on
the possible ranges of the aircraft valuations, there was no
reversal during the interim period ended 30 June 2021.
The board also considered if there was an indication that the
prior year Thai aircraft lease premium impairments of US$ 9,198,446
(fully impaired) had reversed in full or partially during the
period and concluded that based on the fact that there has been no
changes to the lease terms that led to impairment in the first
place, there was no impairment reversal during the interim period
ended 30 June 2021.
Depreciation of aircraft
The Group depreciates the Assets on a straight-line basis over
the remaining lease life, taking into consideration the estimated
residual value at the end of the lease term. In making a judgement
regarding these estimates the Directors will consider previous
sales of similar aircraft and other available aviation information.
The Group engages three Independent Expert Valuers each year to
provide a valuation of the Assets and take into account the average
of the three valuations provided. In performing their valuations,
the Independent Expert Valuers will have regard to factors such as
the prevailing market conditions (which may impact on the resale
value of the Assets), the leases (including the scheduled rental
payments and remaining scheduled term of the leases) and the
creditworthiness of the lessees. Accordingly, any early termination
of the leases may impact on the valuation of the Assets.
Residual value estimates of the Aircraft were determined by the
full life inflated values at the end of the leases from three
external valuations and discounted by the inflation rate
incorporated into those valuations
and the lease premium was determined to have a US$ nil residual
value at the end of the leases.
The full life inflated value is the appraiser's opinion of the
underlying economic value of the aircraft in an open, unrestricted,
stable market environment with a reasonable balance of supply and
demand and assumes full consideration of its "highest and best
use". An aircraft's full life value is founded in the historical
trend of values and in the projection of value trend and presumes
an arm's-length, cash transaction between willing, able and
knowledgeable parties, acting prudently, with an absence of duress
and with a reasonable period of time available for marketing. The
full life inflated values used within the interim financial
statements match up the two lease termination dates and have been
discounted by the inflation rate incorporated into the valuations.
The residual value of the aircraft does not represent the current
fair value of the aircraft.
The residual value estimates at the end of each year are used to
determine the aircraft depreciation of future periods. The residual
value estimates for aircraft not held for sale as at 31 December
2020 was US$ 125,572,493 (31 December 2019: US$ 132,158,208),
carrying value as at 31 December 2020 was US$ 126,000,000 (31
December 2019: US$ 194,508,960). As a result, the year ending 31
December 2021 and future aircraft depreciation charges for aircraft
not held for sale, with all other inputs staying constant, will be
US$ 175,160 (2019: US$ 10,635,167). The actual aircraft
depreciation charge for 2022 onwards will vary based on the
residual value estimates as at 31 December 2021.
4) LEASE RENTAL INCOME
Period ended Period ended
30 June 2021 30 June 2020
US$ US$
Total lease rental
income 12,915,197 27,449,994
--------------------- -------------------- --------------------
Rental income per customer in the current period is made up as
follows:
Period ended Period ended
30 June 2021 30 June 2020
US$ US$
Norway - 13,721,154
Thailand 12,915,197 13,728,840
Total lease rental income 12,915,197 27,449,994
---------------------------- ------------- -------------
All lease rental income was derived from two customers, one
located in Norway and one in Thailand and all four Assets leased
were Boeing 787-8 aircraft. As detailed in the 31 December 2020
annual financial statements, the lease agreements with NAS were in
the judgement of the Directors de-facto terminated in December
2020, therefore no rental income has been earned from NAS in the
current period.
The lease agreements with Thai Airways are still in place
however these were amended during the period. In March 2021 the
Group signed a Letter of Intent ('LOI') with Thai Airways under
which the parties agreed to amend the existing lease terms. The new
terms provide for a power by the hour ('PBH') arrangement until
December 2022 (i.e. rent will be payable by reference to actual
monthly utilisation of the Thai aircraft), with scaled back monthly
fixed lease payments thereafter until 2026, reflecting the reduced
rates now seen in the market.
The lease term was extended by 3 years to December 2029 (the
"Extension Period") with further scaled back monthly lease payments
starting from January 2027, and the Group retaining a right of
early termination in December 2026 after consulting the Lenders.
Also, per the LOI it was agreed that Thai would not be required to
pay rent accrued under the old agreements between 15 September 2020
and the amendment effective date (see note 15). The effective date
for the amendment is 15 June 2021.
The contractual future lease rentals to be received under
non-cancellable operating leases effective as at the reporting date
are:
Boeing 787-8 Boeing 787-8 Boeing 787-8 Boeing 787-8 Total
Serial No: Serial No: Serial No: Serial No:
35304 35305 35320 36110
30 June 2021 US$ US$ US$ US$
< 1 year - - - - -
1 to 2 years - - 3,060,000 3,060,000 6,120,000
2 to 3 years - - 6,120,000 6,120,000 12,240,000
3 to 4 years - - 6,120,000 6,120,000 12,240,000
4 to 5 years 6,120,000 6,120,000 12,240,000
>5 years 2,698,065 2,035,846 4,733,911
- - 24,118,065 23,455,846 47,573,911
-------------- ----------------------------- ------------- ------------- -----------
Boeing 787-8 Boeing 787-8 Boeing 787-8 Boeing 787-8 Total
Serial No: Serial No: Serial No: Serial No:
35304 35305 35320 36110
30 June 2020 US$ US$ US$ US$
< 1 year 8,400,000 8,400,000 13,745,640 13,712,040 44,257,680
1 to 2 years 8,400,000 8,400,000 13,745,640 13,712,040 44,257,680
2 to 3 years 8,400,000 8,400,000 13,745,640 13,712,040 44,257,680
3 to 4 years 8,400,000 8,400,000 13,745,640 13,714,040 44,257,680
4 to 5 years 7,956,826 8,400,000 13,745,640 13,712,040 43,814,506
>5 years - 848,174 19,472,990 17,140,050 37,461,214
41,556,826 42,848,174 88,201,190 85,700,250 258,306,440
-------------- ------------- ------------- ------------- ------------- ------------
5) GENERAL AND ADMINISTRATIVE EXPENSES
30 June 2021 30 June 2020
(unaudited) (unaudited)
US$ US$
Restructuring costs 1,170,073 640,507
Legal and professional fees 104,826 100,017
Directors' fees and expenses 119,063 109,576
Administration fees 232,631 141,656
Insurance 12,492 28,393
Audit fees 41,585 26,806
Other fees and expenses 69,876 34,751
----------------------------------- ------------- -------------
Total general and administrative
expenses 1,750,546 1,081,706
----------------------------------- ------------- -------------
The restructuring fees include professional fees in relation to
the renegotiation of the aircraft leases and associated bank loans.
Administration fees were higher in the current interim period
because of significant extra work required.
6) FINANCE COSTS
30 June 2021 30 June 2020
(unaudited) (unaudited)
US$ US$
Loan interest paid
and payable 3,146,054 3,639,147
Amortisation of deferred finance costs - 146,003
------------------------------------------------- ------------- -------------
Total finance costs at effective interest
rate* 3,146,054 3,785,150
Swap interest paid and payable 228,277 -
Swap breakage costs (see note 939,806 -
21)
Cash flow hedges reclassified
from other comprehensive income - 632,113
-------------------------------------------- --- ------------- -------------
Total finance costs 4,314,137 4,417,263
------------------------------------------------- ------------- -------------
* On liabilities measured at amortised cost
7) LOSS OF CONTROL OF SUBSIDIARY UNDERTAKINGS
As detailed in note 3, the Group lost control of the
subsidiaries DP Aircraft Ireland Limited and the assets and
liabilities of DP Aircraft Guernsey I Limited and DP Aircraft
Guernsey II Limited effective 26 February 2021 as a result of
receivership proceedings instigated by NordLB following an Event of
Default on the NordLB loan and enforcement of security NordLB had
over the two NAS aircraft, the related lease and contract rights,
and the shares in the Irish special purpose vehicle which holds
title to the NAS aircraft.
As a result of the loss of control of DP Aircraft Ireland
Limited and the assets and liabilities of DP Aircraft Guernsey I
Limited and DP Aircraft Guernsey II Limited, the Group has
derecognised the assets and liabilities of these subsidiaries as at
the date control was determined to be lost, being 26 February 2021.
A resulting loss on loss of control of subsidiary undertakings has
been recognised in profit or loss. The interest retained in the
former subsidiaries as well as the loans advanced to them, were
measured at fair value at the date of loss of control.
Effect of loss of control summarised:
26 February 2021
(unaudited)
US$
Assets and liabilities derecognised
Assets held for sale 82,000,000
Investments held at fair value 3,012,711
Cash and cash equivalents 5,456,182
Restricted cash 6,835,590
Trade and other payables (4,664,507)
Bank loan and interest payable (82,765,036)
Net assets 9,874,940
--------------------------------------------- -----------------
Consideration:
Investment retained in former subsidiaries -
Loans advanced to former subsidiaries -
Cash consideration received -
--------------------------------------------- -----------------
Total consideration -
--------------------------------------------- -----------------
Loss on loss of control of subsidiary
undertakings (9,874,940)
--------------------------------------------- -----------------
Cash flow on loss of control of subsidiary
undertakings:
Consideration received -
Cash and cash equivalents disposed of (5,456,182)
--------------------------------------------- -----------------
Net cash outflow (5,456,182)
--------------------------------------------- -----------------
8) TAXATION
With the exception of DP Aircraft Ireland Limited and DP
Aircraft UK Limited, all companies within the Group are exempt from
taxation in Guernsey and are charged an annual exemption fee of
GBP1,200 each (2020: GBP1,200).
DP Aircraft Ireland Limited and DP Aircraft UK Limited are
subject to taxation at the applicable rate in Ireland and the
United Kingdom respectively. The amount of tax credit during the
period ended 30 June 2021 was US$ 42,078 (period 1 January 2020 to
30 June 2020: tax charge of US$ 36,228). The Directors do not
expect the taxation payable or refundable to be material to the
Group.
A tax reconciliation has not been presented in these interim
financial statements as the effective tax rate of 0.18% is not
material and the reconciliation is not relevant to the
understanding of the Company's results for the period end.
9) LOSS PER SHARE
30 June 2021 30 June 2020
(unaudited) (unaudited)
US$ US$
Loss for the period (24,171,431) (71,992,915)
Weighted average number of shares 209,333,333 209,333,333
Loss per share (0.1155) (0.3439)
------------------------------------ ------------- -------------
There are no instruments in issue that could potentially dilute
earnings per Ordinary Share in future periods.
10) PROPERTY, PLANT & EQUIPMENT - AIRCRAFT & RELATED COMPONENTS
Aircraft Lease Premium Total
30 June 2021 (unaudited) (unaudited) (unaudited)
US$ US$ US$
COST
As at 1 January and 30 June
2021 238,731,161 17,398,493 256,129,654
----------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION
As at 1 January 2021 53,291,464 8,200,047 61,491,511
Charge for the period 87,581 - 87,581
As at 30 June 2021 53,379,045 8,200,047 61,579,092
----------------------------- ------------ -------------- ------------
IMPAIRMENT
As at 1 January 2021 58,839,697 9,198,446 68,038,143
Charge for the period - - -
As at 30 June 2021 58,839,697 9,198,446 68,038,143
----------------------------- ------------ -------------- ------------
CARRYING AMOUNT
As at 30 June 2021 126,512,419 - 126,512,419
----------------------------- ------------ -------------- ------------
Aircraft Lease Premium Total
(audited) (audited) (audited)
US$ US$ US$
COST
As at 1 January 2020 476,751,161 46,979,793 523,730,954
Reclassified as held for sale (238,020,000) (29,581,300) (267,601,300)
----------------------------------------- -------------- -------------- --------------
As at 31 December 2020 238,731,161 17,398,493 256,129,654
----------------------------------------- -------------- -------------- --------------
ACCUMULATED DEPRECIATION / AMORTISATION
As at 1 January 2020 102,498,694 20,600,314 123,099,008
Charge for the year 17,352,415 4,362,020 21,714,435
Reclassified as held for sale (66,559,645) (16,762,287) (83,321,932)
----------------------------------------- -------------- -------------- --------------
As at 31 December 2020 53,291,464 8,200,047 61,491,511
----------------------------------------- -------------- -------------- --------------
IMPAIRMENT
As at 1 January 2020 - - -
Charge for the year 148,300,052 22,017,459 170,317,511
Reclassified as held for sale (89,460,355) (12,819,013) (102,279,368)
----------------------------------------- -------------- -------------- --------------
As at 31 December 2020 58,839,697 9,198,446 68,038,143
----------------------------------------- -------------- -------------- --------------
CARRYING AMOUNT
As at 31 December 2020 126,600,000 - 126,600,000
----------------------------------------- -------------- -------------- --------------
The residual value estimates at the end of each year are used to
determine the aircraft depreciation of future periods. The residual
value estimates of the leases for the aircraft not held for sale as
at 31 December 2020 was US$ 125,572,493 (31 December 2019: US$
132,158,208). As a result, the year ending 31 December 2021 and
future aircraft depreciation charges for aircraft not held for
sale, with all other inputs staying constant, will be US$ 175,160
(2019: US$ 10,635,167). The actual aircraft depreciation charge for
2022 onwards will vary based on the residual value estimates as at
31 December 2021.
As detailed in note 3, as at 30 June 2021 there are no further
impairments to the aircraft and lease premium. There are also no
reversals of prior year impairments.
The loans entered into by the Group to complete the purchase of
the two aircraft not held for sale are cross collateralised. Each
of the loans are secured by way of security taken over each of the
two aircraft.
11) ASSETS HELD FOR SALE
The following major asset class has been classified as held for
sale:
30 June 2021 31 December
2020
(unaudited) (audited)
Property, Plant and Equipment - Aircraft - 82,000,000
------------------------------------------ -------------- ------------
- 82,000,000
--------------------------------------------------------- ------------
During the period, the assets held for sale have been
derecognised as a result of loss of control of DP Aircraft Guernsey
I Limited and DP Aircraft Guernsey II Limited as detailed in note
7.
12) INVESTMENTS HELD AT FAIR VALUE
30 June 2021 31 December 2020
(unaudited) (audited)
US$ US$
Opening balance 15,630,526 -
Additions - 40,490,218
Disposal proceeds (4,069,880) -
Realised loss (1,252,152) -
Unrealised fair value loss to
date of loss of control (7,295,783) (24,859,692)
Loss of control of subsidiary undertakings (3,012,711) -
(see note 7)
Closing balance - 15,630,526
--------------------------------------------- ----------------- -----------------
Fair value movement is made up as follows:
Realised loss (1,252,152) -
Unrealised loss (7,295,783) (24,859,692)
Closing balance (8,547,935) (24,859,692)
------------------ ------------ -------------
Included within investments was the investment in Norwegian that
was held through the former subsidiaries, DP Aircraft Guernsey I
Limited and DP Aircraft Guernsey II Limited. The investment in
Norwegian has been derecognised as a result of loss of control of
these subsidiary undertakings during the period as detailed in note
7.
Also, from 26 February 2021, included in the investments held at
fair value through profit and loss are the shares retained in the
former subsidiaries DP Aircraft Guernsey I Limited and DP Aircraft
Guernsey II Limited, see note 7 regarding loss of control of the
two subsidiaries. The fair value of the investment is based on net
proceeds expected to be received by the former subsidiaries from
NordLB post sale of the aircraft seized by NordLB. Based on
probability weighted outcomes, the directors consider it unlikely
that any proceeds will be received from NordLB and hence the
investment in the former subsidiaries has been valued at US$ nil as
at 30 June 2021.
13) LOANS RECEIVABLE AT FAIR VALUE
30 June 2021 31 December
2020
(unaudited) (audited)
US$ US$
DP Aircraft Guernsey I Limited - -
DP Aircraft Guernsey II Limited - -
-------------------------------- ------------- ------------
Total - -
-------------------------------- ------------- ------------
The loans receivable are in relation to loans advanced to
subsidiaries undertakings DP Aircraft Guernsey I Limited and DP
Aircraft Guernsey II Limited by the Company. On initial recognition
of the loans, after loss of control of the subsidiary undertakings
on 26 February 2021, it was determined that the loans advanced have
nil fair value (i.e., the loans are credit impaired at initial
recognition). See note 3 for more details. The nominal principal
value of each loan as at 30 June 2021 is US$ 57,905,079 and US$
57,472,307 respectively for DP Aircraft Guernsey I Limited and DP
Aircraft Guernsey II Limited.
The loans advanced are due to be repaid at the Company's request
and no later than 30 June 2025 and are unsecured. Technically the
loans bears interest at 9.61% however, given the loans advanced to
the former subsidiary undertakings remain credit impaired, no
interest is being recognised. Any recovery of the loan amounts,
which is unlikely, is expected in the next 12 months after the two
NAS aircraft have been sold by the receiver and hence the loans
have been classified as current assets within the interim financial
statements and are carried at nil fair value as at period end.
14) RESTRICTED CASH
30 June 2021 31 December 2020
(unaudited) (audited)
US$ US$
Security deposit
accounts 90 5,054,768
Lease rental accounts 3,554,107 -
Maintenance reserves 15,557,748 22,383,564
Total restricted
cash 19,111,945 27,438,332
------------------------ ------------- -----------------
The majority of security deposits have been transferred to lease
rental accounts during the period and are being used to service
loan payments due to DekaBank in accordance with the DekaBank
financing arrangements.
As part of the DekaBank loan agreement amendment (see note 18),
it was agreed that monies received into the Lease Rental Accounts
during the PBH and fixed rent period would be transferred into
Borrower Rental Accounts and applied in a specific manner as agreed
between the parties. Therefore, these monies have been classified
as restricted cash.
As a result of loss of control of DP Aircraft Guernsey I Limited
and DP Aircraft Guernsey II Limited as detailed in note 7, the
group derecognised maintenance reserves restricted cash of US$
6,835,590 from its accounts during the period. The remaining
maintenance reserves relate only to Thai Airways.
15) TRADE AND OTHER RECEIVABLES
30 June 2021 31 December
2020
(unaudited) (audited)
US$ US$
Prepayments 34,002 45,930
Rent receivable 13,666 10,111,605
Deferred revenue 393,032 -
Total trade and other receivables 440,700 10,157,535
------------------------------------------- ------------- -------------
Less : L ifetime Expected Credit
Loss provision
Rent receivable - (10,111,605)
------------------------------------- --- ------------- -------------
Total provision - (10,111,605)
------------------------------------------- ------------- -------------
Net trade and other receivables 440,700 45,930
------------------------------------------- ------------- -------------
In the prior year the receivable was in relation to outstanding
amounts due under the Thai leases and was fully provided for. The
prior year rent receivable of US$ 10,111,605 has been written off
in the current period as the balance will not be recovered
following an amendment to the lease agreement with Thai. As part of
the amendment, parties agreed that Thai would not pay rent due
under old leases for the period 15 September 2020 to 15 June 2021.
Also, per the amendment, rental due up to 14 September 2020 is to
be resolved as part of the Thai rehabilitation. There is no
expectation that this rental will be recovered given the continuing
impact of COVID-19 on the airline sector and as a result this has
also been fully written off. Also, as a result of the amendment,
rental due between 1 Jan 2021 and 14 June 2021 of US$ 2,396,894 has
been provided for and fully written off during the period to 30
June 2021.
The Group applies the IFRS 9 simplified approach to measuring
ECL using a lifetime ECL provision for trade receivables. Movements
in the impairment allowance for trade receivables are as
follows:
30 June 2021 31 December
2020
(unaudited) (audited)
US$ US$
Opening provision for ECL 10,111,605 -
Increase during the period/year 12,508,499 11,416,244
Receivable written off (22,620,104) (1,304,639)
---------------------------------------- ------------- ------------
Closing provision for ECL - 10,111,605
---------------------------------------- ------------- ------------
16) MAINTENANCE RESERVES LIABILITY
30 June 2021 31 December 2020
(unaudited) (audited)
US$ US$
Refundable to Thai Airways 14,460,682 14,460,682
Total maintenance reserves 14,460,682 14,460,682
---------------------------------------- ------------------------------ -----------------------------
Maintenance reserves liability relates to funds received from
Thai Airways reserved for covering the cost of maintenance.
17) TRADE AND OTHER PAYABLES
30 June 2021 31 December 2020
(unaudited) (audited)
US$ US$
Swap interest payable - 73,483
Accruals and other
payables 1,021,746 720,674
Corporation tax payable 26,450 98,624
-----------------
Total trade and other payables 1,048,196 892,781
--------------------------------- --- ------------- -----------------
18) BANK BORROWINGS
30 June 31 December 2020
2021
(unaudited) (audited)
US$ US$
Current liabilities: bank interest payable
and bank borrowings 138,617 180,915,582
Non-current liabilities: bank borrowings 98,413,859 -
-----------------
Total liabilities 98,552,476 180,915,582
--------------------------------------------- ------------ -----------------
The borrowings are repayable as follows:
30 June 2021 31 December 2020
(unaudited) (audited)
US$ US$
Interest payable 138,617 238,969
Within one year - 180,676,613
In two to five years 91,306,089 -
After five years 7,107,770 -
Total bank borrowings 98,552,476 180,915,582
------------------------ ------------- -----------------
The table below analyses the movements in the Group's bank
borrowings:
30 June 2021 31 December 2020
(unaudited) (audited)
US$ US$
Opening balance 180,676,613 190,529,679
Repayment of loan (274,173) (11,700,921)
Amortisation of deferred finance
costs - 1,847,855
Interest capitalised 541,972 -
Loss of control of subsidiary undertakings (82,530,553) -
(see note 7)
---------------------------------------------- ------------- -----------------
Principal bank borrowings 98,413,859 180,676,613
Interest payable 138,617 238,969
Total bank borrowings 98,552,476 180,915,582
--------------------------------------------- ------------- -----------------
The table below sets out an analysis of net debt and the
movements in net debt for the period ended 30 June 2021:
Cash and cash Derivative
equivalents Principal Interest Instrument* Net Debt
US$ US$ US$ US$ US$
At 1 January
2021 6,949,167 (180,676,613) (238,969) (4,257,198) (178,223,613)
Cash flows (4,913,113) 274,173 2,469,951 301,761 (1,867,228)
Non cash:-
Fair value
movement - - - 459,015 459,015
Interest charge - - (3,146,054) (228,277) (3,374,331)
Interest capitalised - (541,972) 541,972 - -
Termination - - - 3,724,699 3,724,699
Loss of control
of subsidiary
undertakings - 82,530,553 234,483 - 82,765,036
-------------- -------------- ------------ ------------- --------------
At 30 June
2021 2,036,054 (98,413,859) (138,617) - (96,516,422)
-------------- -------------- ------------ ------------- --------------
*Including interest payable of US$ nil (2020: US$ 84,207).
The table below sets out an analysis of net debt and the
movements in net debt for the period ended 30 June 2020:
Cash and Derivative
cash equivalents Principal Interest Instrument Net Debt
US$ US$ US$ US$ US$
At 1 January
2020 12,216,093 (190,529,679) (317,062) (2,376,913) (181,007,561)
Cash flows (183,182) 10,809,624 3,732,773 575,976 14,935,191
Non cash:-
Fair value movement - - - (2,897,063) (2,897,063)
Amortisation
of
deferred finance
costs - (146,003) - - (146,003)
Interest charge - - (3,639,147) (632,113) (4,271,260)
------------------ -------------- ------------ ------------ --------------
At 30 June 2020 12,032,911 (179,866,058) (223,436) (5,330,113) (173,386,696)
------------------ -------------- ------------ ------------ --------------
The balance of unamortised deferred finance costs at 30 June
2021 was US$ nil (30 June 2020: US$ 1,701,852).
The loans consist of the following:
30 June 2021 31 December 2020
(unaudited) (audited)
US$ US$
DekaBank Deutsche Girozentrale 98,552,476 98,001,743
Norddeutsche Landesbank - 82,913,839
Total loans 98,552,476 180,915,582
--------------------------------- --- ------------- -----------------
As a result of loss of control of DP Aircraft Guernsey I Limited
and DP Aircraft Guernsey II Limited as detailed in note 7, the
Group has derecognised the NordLB loan. Therefore, the remaining
balance of bank borrowings relates only to DekaBank.
a) Norddeutsche Landesbank Girozentrale
During the period ended 31 December 2014 the Company utilised
the proceeds from the initial public offering and the proceeds of
two separate loans from Norddeutsche Landesbank Girozentrale
('NordLB') of US$ 79,800,000 each to fund the purchase of two
Boeing 787-8 aircraft (NAS Aircraft). The balance on the loans at
30 June 2021 was US$ nil (31 December 2020: US$82,913,839).
The committed term of each loan was from the drawdown date until
the date falling twelve years from the
Delivery Date of the relevant Asset. Interest on each NordLB
loan was payable in arrears on the last day of each interest
period, which was one month long (the 'Interest Period'). Interest
on each loan accrued at a floating rate of interest which was
calculated using LIBOR for the length of the Interest Period and a
margin of 2.6 per cent per annum (the 'loan Margin') ('Loan
Floating Rate'). The Group had entered into an ISDA-standard
hedging arrangement with NordLB as hedging provider in connection
with the Loans, in order to provide for a fixed interest rate of
5.06% and 5.08% to be payable in respect of the loans throughout
the whole term.
The NordLB loans entered into by the Group to complete the
purchase of the first two Assets are cross
collateralised. Each of the first and second loan is secured by
way of security taken over the first and second
Assets and enforce security over both Assets. This means that a
default on one loan places both of the Assets
at risk.
Due to missed loan repayments, on 24 February 2021, NordLB
declared an Event of Default under the relevant loan agreements
with the Company's two borrower subsidiaries which meant that
NordLB was entitled to enforce rights under the relevant security
documents. On 26 February 2021, the Company received notices of
security enforcement and loan acceleration from NordLB, and
accordingly, receivers were appointed in relation to the two NAS
aircraft, the related lease and contract rights, the restricted
cash and the shares in the Irish special purpose vehicle which
holds title to the NAS aircraft. NordLB has therefore taken control
of the process of disposing of the two NAS aircraft, with the
proceeds of sale (along with relevant aircraft-specific cash
balances, claims against Norwegian and shares in Norwegian held as
security) being applied in the first instance to pay off any
outstanding amounts owed to the bank, and any balance remaining
thereafter being remitted to the relevant subsidiaries of the
Company.
These developments impact solely upon the two NAS aircraft; they
have no effect upon the Company's arrangements in respect of the
aircraft which it leases to Thai Airways; and there is no recourse
by NordLB to the Company itself.
The instigation of receivership proceedings as detailed above
led to a loss of control of the relevant subsidiaries, see note 7
for further details.
b) DekaBank Deutsche Girozentrale
During the year ended 31 December 2015 the Company utilised the
proceeds from the placing and the proceeds of two separate loans
from DekaBank Deutsche Girozentrale ('DekaBank') of US$ 78,500,000
each to fund the purchase of two Boeing 787-8 aircraft. The balance
on the loans at 30 June 2021 was US$ 98,552,476 (31 December 2020:
US$ 98,001,743).
The committed term of each loan was from the drawdown date until
the date falling twelve years from the Delivery Date of the
relevant Asset. Each Loan was to be amortised with repayments every
month in arrears over the term in amounts as set out in a schedule
agreed by the Company and the Lenders. Amortisation will be on an
annuity-style (i.e., mortgage-style) basis.
Interest on each DekaBank loan is payable in arrears on the last
day of each interest period, which is one month long. Interest on
the loan accrues at a fixed rate of 4.10 per cent including a
margin of 1.95 per cent per annum. If any amount is not paid by the
Borrower when due under the loan agreements, interest will accrue
on such amount at the then current rate applicable to the loan plus
2.0 per cent per annum. No interest accrued on unpaid amounts
during the period as there was an agreement to defer principal
repayments as mentioned below.
The DekaBank loans entered into by the Group to complete the
purchase of the third and fourth Assets are
cross collateralised. Each of the third and fourth loan is
secured by way of security taken over the third and fourth Assets
and enforce security over both Assets. This means that a default on
one loan places both of the Assets at risk. Following the
enforcement of security and sale of the aircraft, the remaining
proceeds, if any, may be substantially lower than investors'
initial investment in the Company.
On 6 May 2021, subsequent to the new lease arrangements entered
into by the Company and Thai as described in note 4, the Company
and DekaBank have amended and restated the existing loan facility
agreements in respect of the Thai aircraft to accommodate the new
lease terms. Repayments of principal will be deferred until the end
of the PBH arrangement, 31 December 2022; and the Company and
DekaBank will enter into discussions at that time to determine how
best to schedule interest payments, principal repayments and a
final balloon repayment, having regard for both the income being
received by the Company in respect of the Thai aircraft, and the
running costs of the Company and its subsidiaries. From the
effective date interest is charged on the deferred principal at the
percentage rate per annum equal to the sum of five per cent. (5.0%)
per annum (which, for the avoidance of doubt, includes the Margin)
plus LIBOR for the applicable period (such rate to be determined by
the Facility Agent).
Prior to the loan amendment detailed above, the Company and
DekaBank had agreed that the Company would only be required to make
interest payments on its borrowings relating to the assets leased
to Thai, with no concomitant capital repayment obligation; and that
the Company would make no dividend payments while deferrals
remained outstanding under those borrowings.
The loan related to Aircraft 35320 has a final maturity date of
9 December 2026 and the loan related to Aircraft 36110 has final
maturity date of 29 October 2026.
19) SHARE CAPITAL
Period ended 30 June 2021 (unaudited) Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid (no par Number Number Number
value):
Shares as at 1 January 2021 and
30 June 2021 1 209,333,333 209,333,334
---------------------------------------- --------------- ------------ ------------
Share capital: US$ US$ US$
Share capital as at 1 January 2021
and 30 June 2021 1 210,556,651 210,556,652
---------------------------------------- --------------- ------------ ------------
Period ended 30 June 2020 (unaudited) Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid (no par Number Number Number
value):
Shares as at 1 January 2021 and
30 June 2020 1 209,333,333 209,333,334
---------------------------------------- --------------- ------------ ------------
US$ US$ US$
Share capital as at 1 January 2021
and 30 June 2020 1 210,556,651 210,556,652
---------------------------------------- --------------- ------------ ------------
Subject to the applicable company law and the Company's Articles
of Incorporation, the Company may issue an unlimited number of
shares of par value and/or no-par value or a combination of
both.
The Subordinated Administrative Share is held by the Asset
Manager.
Holders of Subordinated Administrative Shares are not entitled
to participate in any dividends and other distributions of the
Company. On a winding up of the Company the holders of the
Subordinated Administrative Shares are entitled to an amount out of
the surplus assets available for distribution equal to the amount
paid up, or credited as paid up, on such shares after payment of an
amount equal to the amount paid up, or credited as paid up, on the
Ordinary Shares to the Shareholders. Holders of Subordinated
Administrative Shares shall not have the right to receive notice of
and have no right to attend, speak and vote
at general meetings of the Company except if there are no
Ordinary Shares in existence.
The Directors are entitled to issue and allot C Shares. No C
Shares have been issued since the Company was incorporated.
20) DIVIDS
As a result of the Coronavirus ('COVID-19') pandemic impact on
global aviation and especially its lessees the Group has suspended
dividends until further notice to help preserve liquidity. Further
details on the impact of the COVID-19 pandemic can be found within
the Directors' Report. Therefore, dividends declared and paid
during the period ended 30 June 2021 are US$ nil (30 June 2020: US$
4,710,000).
21) FAIR VALUE MEASUREMENT
Financial assets and financial liabilities at amortised cost
The fair value of cash and cash equivalents, trade and other
receivables, restricted cash and trade and other payable
approximate their carrying amounts due to the short-term maturities
of these instruments.
Financial assets at fair value through profit or loss
As at period end the Group holds loans and unquoted investments
in the former subsidiaries, DP Aircraft Guernsey I Limited and DP
Aircraft Guernsey II Limited. The loans and investments have a fair
value of US$ nil and have been valued based on the cash expected to
be received from the former subsidiaries. Therefore, the loans and
investments are categorised within level 3 of the IFRS 13 fair
value hierarchy.
Financial liabilities designated as hedging instruments
The fair value of the Group's derivative interest rate swaps was
determined by reference to the mid-point on the yield curves
prevailing on the reporting date and represented the net present
value of the differences between the contracted and the valuation
rate when applied to the projected balances to the period from the
reporting date to the contracted expiry date.
The interest rate swaps were valued on a recurring basis and
were categorised within level 2 of the fair value hierarchy
required by IFRS 13 Fair Value Measurement ('IFRS 13').
During the period, the derivative interest rate swaps have been
terminated with effect from 25 February 2021. See note 6 for
details re breakage costs charged on termination.
The following table details the contractual undiscounted cash
flows of the interest rate swaps:
As at 30 June 2021 Next 12 months 2 to 5 years After 5 years Total
US$ US$ US$ US$
Floating rate receivable - - - -
Fixed rate payable - - - -
------------------------- --------------- ------------- -------------- ------
Interest rate swaps - - - -
------------------------- --------------- ------------- -------------- ------
Financial liabilities designated as hedging instruments
(continued)
As at 30 June 2020 Next 12 months 2 to 5 years After 5 years Total
US$ US$ US$ US$
Floating rate receivable 2,103,667 4,070,744 10,141 6,184,552
Fixed rate payable (3,868,340) (7,619,745) (17,099) (11,505,184)
-------------------------- --------------- ------------- -------------- -------------
Interest rate swaps (1,764,673) (3,549,001) (6,958) (5,320,632)
-------------------------- --------------- ------------- -------------- -------------
During the period ended 30 June 2021, a fair value gain of US$
459,015 (30 June 2020: US$ nil) was recognised in profit or loss on
the interest rate swaps.
Transfers between levels
The Company determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation based on the
lowest level input that is significant to the fair value
measurement as a whole at the end of each reporting period.
There were no transfers between level 1 and level 2 fair value
measurements and no transfers into or out of level 3 fair value
measurements during the six-month period ended 30 June 2021 or in
the year ended 31 December 2020.
22) RELATED PARTY TRANSACTIONS
The Directors of the Company received total fees from the Group
as follows:
Current fee 30 June 2021 30 June 2020
(annual) (unaudited) (unaudited)
GBP US$ US$
Jon Bridel (Chairman) 66,000 44,545 40,138
Jeremy Thompson (Chairman of the
Audit Committee and Senior Independent
Director) 53,700 37,864 32,635
Harald Brauns (Chairman of the
Management Engagement Committee) 58,800 36,654 36,803
Total 178,500 119,063 109,576
----------------------------------------- ------------ ------------- -------------
22) RELATED PARTY TRANSACTIONS (CONTINUED)
Following the Directors annual review of the Directors' fees and
subsequent approval at the Company's AGM on 1 July 2020, with
effect from 1 April 2020 the Directors receive the following
fees:
-- Jon Bridel, Chairman GBP66,000 per annum;
-- Jeremy Thompson, Chairman of the Audit Committee and Senior
Independent Director GBP53,700 per annum; and
-- Harald Brauns GBP58,800 per annum.
The directors are entitled to additional fees for significant
extra work and these were accrued in the last six month period to
31 December 2020.
The Directors' interests in the shares of the Company are
detailed below:
30 June 2021 31 December 2020
Number of Number of
ordinary shares ordinary shares
Jon Bridel and connected persons 90,000 90,000
Jeremy Thompson 15,000 15,000
Harald Brauns - -
23) MATERIAL CONTRACTS
Asset Management Agreement
The Asset Management Agreement dated 19 September 2013, between
the Company and DS Aviation was initially amended on 5 June 2015 to
reflect the acquisition of two new aircraft. A second amendment via
a side letter, effective 1 January 2021, was made to the Asset
Management Agreement on 7 May 2021.
The initial amendment provides a calculation methodology for the
disposal fee which will only become payable when all four of the
Assets (first two currently under receivership and second two
currently held by the Group) have been sold after the expiry of the
second Thai Airways lease in December 2026. The fee will be
calculated as a percentage of the aggregate net sale proceeds of
the four Assets, such percentage rate depending upon the Initial
Investor Total Asset Return per share being the total amount
distributed to an initial investor by way of dividend, capital
return or otherwise over the life of the Company. If each of the
Assets is sold subsequent to the expiry of their respective leases,
the percentage rate shall be:
-- Nil if the Initial Investor Total Asset Return per Share is less than 205%;
-- 1.5% if the Initial Total Asset Return per Share equals or
exceeds 205% but is less than 255%;
-- 2% if the Initial Total Asset Return per Share equals or
exceeds 255% but is less than 305%; or
-- 3% if the Initial Total Asset Return per Share equals or exceeds 305%.
In the event that any of the Assets is sold prior to the expiry
of its lease the percentage hurdles set out above will be adjusted
on the following basis:
(i) an amount will be deducted in respect of each Asset sold
prior to the expiry of its lease, equal to the net present value of
the aggregate amount of dividends per share that were targeted to
be paid but were not paid as a result of the early divestment of
the relevant Asset; and
(ii) a further amount will be deducted, in respect of each Asset
sold prior to the expiry of its lease, equal to the amount by which
the proportion of the non-dividend component of the relevant
percentage hurdle attributable to the relevant Asset would need to
be reduced in order to meet its net present value.
Per the second amendment, payment of any Disposal Fee per above
(if any) in connection with the sale of any of the Assets currently
under receivership is subordinated to the DekaBank loans and wi
ll only become payable after the loans (including the deferred
element) have been repaid or prepaid in full.
The disposal fee is a cash-settled payment to the Asset Manager.
There is no disposal fee expected to be payable and hence no
provision recognised within these interim financial statements.
The provisions related to Asset Manager base fee have been
revised under the second amendment. Under the second amendment, the
Asset Manager is paid a monthly base fee of US$ 24,764 per asset in
respect of the first two Assets and US$ 15,085 per asset in respect
of the second two Assets increasing by 2.5 per cent per annum from
May 2021.
The monthly base fee in relation to the first two Assets as set
out above shall be payable up to (and including) the month of June
2021, and thereafter no such monthly base fee shall be payable. The
Asset Manager shall not be required to provide any services in
relation to the first two Assets from 1 July 2021 (inclusive).
Notwithstanding the aforementioned, if the Company and the Asset
Manager agree that further services will be provided with respect
to the first two Assets after June 2021, then the monthly base fee
shall recommence for each month that such services are
provided.
Prior to the second amendment, the Asset Manager was paid a base
fee of US$ 21,354 per month in respect of the first two Assets
increasing by 2.5% per annum and US$ 16,666 per month in respect of
the second two Assets increasing by 2.5% per annum from May
2016.
As consideration for the Asset Manager agreeing to a reduction
of the monthly base fee in respect of the second two Assets as set
out above, the Company agreed that, when permissible as advised by
the corporate broker, the Asset Manager shall receive an allocation
of shares in the Company determined to be of a value equivalent to
the reduction in the monthly base fee with respect to the second
two Assets. The share allocation will be carried out using a share
price for the conversion which is fair and reasonable as advised by
corporate broker.
In the six-month period ended 30 June 2021 Asset Management fees
totalled US$ 525,325 (six-month period ended 30 June 2020 US$
512,512) of which US$ 206,535 was due at 30 June 2021 (31 December
2020: US$87,249).
24) SEGMENTAL INFORMATION
The Group is engaged in one operating segment, being acquiring,
leasing and subsequent selling of aircraft. The geographical
location of the Assets of the Group is Thailand, where the Assets
are registered. The income arising from the lease of the Assets
originates from a lessee based in Thailand.
25) SUBSEQUENT EVENTS
There were no significant events post 30 June 2021 to date that
require disclosure in the interim accounts.
COMPANY INFORMATION
Directors Jonathan Bridel
Jeremy Thompson
Harald Brauns
Registered Office East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
Channel Islands
Asset Manager DS Aviation GmbH & Co. KG
Stockholmer Allee 53
44269 Dortmund
Germany
Solicitors to the Company Norton Rose Fulbright LLP
(as to English law) 3 More London Riverside
London
SE1 2AQ
United Kingdom
Advocates to the Company Mourant Ozannes
(as to Guernsey law) Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 4HP
Channel Islands
Auditor KPMG, Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
Ireland
Administrator and Company Secretary Aztec Financial Services
(Guernsey) Limited
East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GssY1 3PP
Channel Islands
Corporate Broker Investec Bank Plc
30 Gresham Street
London
EC2V 7QN
United Kingdom
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END
IR FLFLLADIDLIL
(END) Dow Jones Newswires
September 17, 2021 07:39 ET (11:39 GMT)
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