07-Apr-2010 4:53 PM

Babcock & Brown Air gains on new management agreements, heavy trading at Aircastle

Babcock & Brown Air's shares gained 6.1% in trading yesterday, hitting an 18-month high of USD11.46 per share. Since Friday, the company’s shares have gained more than 12.5%.

Pushing the stock up is news that the lessor will be partnering with the current management team of Babcock & Brown Aircraft Management to invest in BBAM LP, a newly formed, privately-held aircraft leasing and management business.

BBAM LP will be “one of the world’s leading aircraft leasing and management companies”, according to B&B Air. It will provide management services to B&B Air and will service its aircraft portfolio, as well as also being a party to servicing and remarketing agreements covering an additional 230 aircraft.

B&B Air has agreed to purchase a 15% interest in the new business, with the remaining 85% to be owned by the current management team of Babcock & Brown Aircraft Management.

B&B Air has also agreed to repurchase 2 million B&B Air shares from Babcock & Brown Ltd at USD8.78 per share, a significant discount on the current share price. These repurchased shares represent approximately 6.6% of B&B Air’s outstanding shares.

Babcock & Brown Aircraft Management will purchase the majority of the aviation assets of B&B and its affiliates (Babcock & Brown Aircraft Management, Babcock & Brown Air Management Co Ltd and certain other companies that manage and service B&B Air and its aircraft portfolio). It is expected that substantially all the current employees involved in these businesses will transfer to BBAM LP.

As part of the transactions, the management team of BBAM LP has agreed to acquire an additional one million B&B Air shares, again at USD8.78 per share, representing another 3.3% of B&B Air share and bring the total acquisition to 3 million shares an 9.9% of the company.

On completion of the transactions, B&B Air will seek shareholder approval for a change in the company’s name.

Meanwhile, heavy trading has sent Aircastle shares up 6.9%. The stock traded three times its average daily volume on Tuesday.

Selected Aviation suppliers’ daily share price movements (% change): 06-Apr-2010