South Korea’s Public Officials Benefit Association (POBA) will commit a total of $42 million in the mezzanine debt tranches of two aircraft funds launched by domestic brokerage firms, HI Investment & Securities, and Taurus Investment & Securities, respectively.
The pension fund will underwrite the entire $20 million B-type mezzanine tranche of the $200 million fund raised by HI Investment & Securities. The fund will be used to purchase two used Boeing 777 models to lease to Emirates Airline for four years.
POBA will put the other $22 million in another $83 million aircraft fund raised by Taurus Investment & Securities. The fund is to be used to acquire a used Airbus A330 model to lease to Singapore Airline for six years.
“For POBA, we are pursuing absolute returns with stable and regular cash flows, and aircraft suppliers provide us with this kind of characteristic,” said Dong Hun Jang, chief investment officer of POBA.
“As you can imagine, carriers’ credibility is very important to us; we prefer highly-regarded global carriers with a sound financial background.”
POBA will continue to increase its allocation to aircraft financing next year as it is looking to diversify its alternative investment exposure.
Jang prefers to invest in blind pool funds managed by GPs with good track records than to invest in individual projects, which require more time for internal evaluation processes.
POBA made its first foray in aircraft financing this year and has invested a total of around $100 million in five aircraft carriers to date.
It partnered with Yellow Benefit Mutual Aid to lend $34 million in mezzanine debt to Air France’s $115.7 million lease of a Boeing 777-300ER aircraft in October.