Korean investors to commit $100m to aircraft fund

More South Korean institutional investors have joined the wave of aircraft financings.

South Korea’s Police Mutual Aid Association (PMAA) and four other South Korean institutional investors will commit $100 million to the mezzanine tranche of a $300 million aircraft fund launched by a German aircraft leasing firm, whose identity was undisclosed.

The investors are accounting for the whole mezzanine tranche of the fund. It is expected to deliver four to six percent annual return per maturity of five, 11 and 12 years. The capital raised will be used to purchase two Boeing 777-330ER for a lease to Emirates Airline by the end of this month.

The five Korean investors will each invest between 10 to 30 billion won in the fund.

Hana Financial Investment Company is the arranger of the mezzanine tranche.

The 777-300ER is the best-selling large airplane model. Today, over 796 versions of the model have been ordered or are used by 36 airlines globally.

Recently, the aircraft financing market has attracted a lot of Korean investors including banks, insurance companies and pension funds. Investors believe the demand for aircraft will continue to grow due to the increase in global tourists. Therefore, it has emerged as an alternative investment option that provides steady and long-term yields.

Last month, Korea’s Public Official Benefit Association partnered with the Yellow Umbrella Mutual Aid to invest in Air France’s lease of two aircraft. Korean local bank KEB Hana Bank also signed a $42 million loan to Philippine Airlines. The bank has invested in a total of six aircraft financing deals so far this year.