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To obtain income returns and a capital return for its Shareholders by acquiring, leasing and then selling aircraft.
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Thanks again Carcosa, that is exactly what I was looking for.
Good luck for the future.
I wrote extensively about DNA3 here over the years.
https://www.lemonfool.co.uk/viewtopic.php?f=33&t=24434&sid=2b3f9d1f5d1ac007e541a7018804f8db&start=80
TLDR: Minimal upside.
Hello Carcosa,
Many thanks for the full response. I guess the question is; if the planes are going to be returned to Doric, plus $12m, what is the implication for shareholders?
Under typical aircraft leasing conditions a lessor has to return the aircraft back to the lessor in accordance with the re conditions set out during the commencement of the lease. This is normal almost boiler plate contract clauses. Essentially all the original equipment has to be placed on the aircraft e.g. aircraft engines/APU's would have been placed on other airframes during the normal course of business so they have to be removed from wherever they may be and re-installed on the lease aircraft. This also applies to other components eg avionics etc although there is some room to accept equivalent parts as these may not be life limited. Typically the interior/seating has to be returned to a particular standard. These latter issues may have a cash element payment as, for example, the interior will be impossible to return to original condition.
However the aircraft must also be returned in a serviceable condition with a pre-agreed minimal life expectancy and here is the rub. Often the aircraft will have to undergo a 'C' check which is a major overhaul taking several weeks. Additionally the engines must be to a minimum engine modification standard and will almost certainly have to go for a shop visit. This means in practice to return an aircraft to the lessor may cost the airline $20-40m.
However having an aircraft returned to the lessor implies that the lessor will be re-leasing it to another operator. Unfortunately this cannot occur with A380's as there are no customers for the aircraft type so its just going for scrap, in which case the potential recovery is largely based on the materials irrespective of its serviceability. Therefore a 'happy' medium is for the lessor to offer the airline an option to pay them a certain cash payment ($12m) and the airline 'saves' an unnecessary expenditure of $8m - $28m.
Should be noted that an airline would start to plan an aircraft redelivery to the lessor around 6 months or more prior to the end of the lease and the likes of Doric are informing it's investors they have formally issued a side letter for the $12m and whilst it has not been formally accepted its almost certain, given the timescales involved, that the airline intends to sign the side-letter.
Hope that helps.
Can someone explain the significance, if any, of the Redelivery Condition announcements. I can see that they are probably legal requirements 8(?) months ahead of the contract expiry.
If this is true then exciting times ahead https://youtu.be/eEo0WOlfWb0?si=AmoczYWhVMLnYlJZ
The French OEM stopped manufacturing the double-deckers in 2021. Sheikh Ahmed, however, said the airline would continue to expand its fleet with more A380s from lessors for ‘the right price. “The A380 will stay with us until at least 2035. We will continue to buy it for the right price,” he said.
Just missing that the final rents are reduced in the period after the initial 10 years. Looks like for the final year at least the rent is halved. But still some cash accumulation as far as I can see
Good to see that all borrowings on the four aircraft have been repaid. Assuming that Emirates continue to pay the same amount of rent until the leases expire then DNA3 should amass a reasonable cash sum before November 2026. As I understand it rent received in the last fy was around £77m and loan repayments just under £50m. Does this suggest cash will increase by around £150m allowing for operating expenses or am I missing something?
Https://mediaoffice.ae/en/news/2023/May/11-05/Emirates-Group-announces#:~:text=Group%20revenue%20of%20AED%20119.8,(US%24%2011.6%20billion).
Cheers Andy, Just need to pop on AA4 as well ;p
Nice write up
It has tremendous upside potential and yields 15%+ along the way. same for DNA2 and I'm liking AA4 as well. This sector is rerating
Update: Doric Nimrod Air Three
This aircraft leasing fund has, like VPC Specialty Lending, covered here last week, attracted the attention of investors known for their ability to extract value. Elliott Investment Management, an “activist”, has bought a stake in Doric Nimrod Air Three as well as in sister fund DNA2 and in Amedeo Air Four Plus, a similar vehicle.
The shares at 47.5p stand 43pc below our tip at 83p in August 2019, although readers who followed our advice will have received 26.8p a share in dividends.
We have little concern that the airline to which DNA3’s Airbus A380 planes are leased, Emirates, will fail to pay the rent; hence we remain confident that the trust will pay its divis. There is more scope for doubt over the residual value of the aircraft when the leases expire in 2025, although things have changed markedly since the dark days of the pandemic, when no one could see a future for these enormous airliners.
Now Airbus and Boeing are struggling to fulfil orders on time, partly thanks to global supply chain bottlenecks, and suddenly having aircraft in their possession is valuable again for airlines. So Emirates may decide to extend its leases or buy the planes outright; even if it allows the leases to expire there is now more chance that value can be realised from these aircraft on the open market.
Nick Greenwood, manager of the Migo Opportunities trust, says aircraft leasing is one of the sectors he is “taking a good look at”. Hold.
Questor says: hold
Ticker: DNA3
Share price at close: 47.5p
Elliott Investment Management could a fun time they are not know as passive investors.
No doubt reading it wrong but has someone just gone from 0% to 14% holding? Assuming i am wrong as would imagine we would have seen some move on the price?
Emirates will buy the aircraft from DNA1.
My thoughts here as to how it may affect DNA3
https://www.lemonfool.co.uk/viewtopic.php?f=33&t=24434&p=514729#p514729
Also see https://inews.co.uk/news/emirates-refuses-cancel-flights-heathrow-airport-1741009. Emirates see a future for the a380
https://edition.cnn.com/travel/article/a380-superjumbo-comeback/index.html
topped up again here today - should be dividend announcemnet later today also.
Taken from:
Doric Nimrod Air Three Limited, Half-Yearly Financial Report, For the period from 1 April 2021 to 30 September 2021
"All payments by Emirates during the Period and throughout the Lease have been made in accordance with the terms of the Lease. All four of the Company’s Aircraft were put into storage in March 2020. MSNs 132 and 136 are currently stored at DWC. MSNs 133 and 134 have been stored at DXB since July 2021. "
Cannot help but think that these planes will be worth a lot more if they have not been flying
Thanks Devon - yeah arrived today - strange as Interactive Investor usually pre fund dividends but not for this one. Anyway happy days - annual yield for me now around 24%!
It's there.