Avation plc 2026 bond issuer call exercised

A few months ago I spotted a very interesting bond

Company with smart people at the helm were unhappy with their public debt which had too big coupon, and they were pretty vocal about it ...



We advised to buy the bond to play the fact that company would use their issuer call capacity as soon as they could buy back their bond at par (from 1 November 2025)

And guess what ... they re doing it

Avation plc, an aircraft lease company

1. Avation Plc 2026 debt (US05351CAA53) Company will probably try to exercise issuer call 10% YTM at maturity / 13.5% at issuer call date (1 Nov 2025) May 2025 Mathias Lascar [email protected] [phone]

2. Investment case We think the going concern of the company is good now Company thinks its current B- SnP from 2022 doesn’t reflect present company’s situation The AVTCAP 8 ¼ 10/31/26 Corp bond was issued in 2018 with an initial maturity at 2023 In May 2021, in the aftermath of Covid 19, bonds experienced several changes Maturity extended to 2026 Coupon increased from 6.5% to 8.5% or alternatively 9% in PIK AVAP is speaking to various investors to co-invest in future aircraft leases, hence there is possibly more financing possibilities now than in 2021 According to company’s latest report (see slide 4), company’s overall debt represents 56% of its assets, so there is a nice buffer on the debt.

3. Avation plc in a nutshell Avation PLC is a commercial passenger aircraft leasing company headquartered in Singapore, it is mostly a narrowbody aircraft lessor. Company was founded in 2006 and operates 32 aircraft, a few Airbus, 1 Boeing and 17 ATRs All aircraft are fully leased Furthermore, it has 11 ATRs on order for deliveries between Q2/2025 and Q2/2028 and a further 24 purchase rights (on ATR again). As ATR is the only manufacturer of such small aircraft, it benefits from demand in this area, and AVAP with its exposure has no problems placing these aircrafts to clients. There is a market at the moment for reselling delivered aircraft In March / April 2025, AVAP pre sold to deliver aircraft with a 5m USD gain Aircraft to be delivered in Oct and Nov 2025 have been placed already

4. Valuation Difficult for us to value company, especially a leasing co (!) Company mentions a NAV/share of GBP 2.94 Stock trades 1.50 GBP, so discount to NAV stands at 49% Our point is that the discount to NAV offers a big buffer on the net debt reimbursement capacity, the higher the discount, the more debt is ‘covered’ by assets Company metrics below lead us to think company is not over geared

5. Verbatim conf call on the 2026 debt (1) CFO stated in last conference call of 25 Feb 2025 that ‘we are currently in dialogue with our investment banking partners, exploring alternatives to refinance this bond issue, and will report on this project in due course’. A lot of Q&A during the H1 conference call we around the possible bond repurchase

6. Verbatim conf call on the 2026 debt (2) Verbatim of Mr Chatfield executive chairman answering a question on the 2026 bond (Feb 2025): In the bond, yes, well, there's choices around the bond because -- I mean, at the moment, it's not really refinanceable until close to the end of this year because there's a 4% prepayment penalty. It's callable at 104 until October of this year. So we're not going to pay 4% to call it early. So we can either issue a new bond or we can do a term loan with banks because, clearly, we did one a couple of weeks ago that was a great success that was, substantially -- the coupon is substantially lower than what we'd ever get in terms of the bond market. So we have choices there, and we're going to evaluate those choices carefully. We're going to do some work with the credit rating agencies to see how our credit's improved because, clearly, it has , our total debt's come down . We've got $148 million worth of unencumbered aircraft. Clearly, we're in quite a good place. So we can see what the credit trajectory is. And we will talk to a number of -- at the right time, we'll talk to investors, the bond investors and see what their views are. And we'll also talk to banks to see where we get to with the term loan market because, clearly, in our business, coupon is everything and it drives the yield and drives the cash flow and drives the profitability of the company. I think that's the complete answer. The plan is to investigate the bond market in parallel with looking at the credit ratings and looking at the actual bond market as well as the bank market at the right time. And so we've started that process already. So we're probably six months early, but we've already started to look at it.

7. Acquisition attempt in 2023 / potential partnerships in 2025 In Nov 2023, Avation Plc revealed it was approached that summer about a potential takeover offer Avation said at the time its adviser was approached over the summer of 2023 about a potential takeover offer. However, the adviser was "unable to verify the funding package of the potential bidder" so broke off talks. The bidder’s identity was not revealed During the H1/2025 conf call in Feb 2025, management mentioned financial or even possible strategic partners showing interest in co investing on leased planes alongside AVAP Could reduce interest rates and more globally make business easier to finance

8. Several other interesting elements Company focuses on credit quality of its clients Narrowbody aircrafts (ATRs) are in strong demand and the secondary market sees increasing prices Due to its order book, company may monetize nicely from this trend In March / April 2025, AVAP pre sold to deliver aircraft with a 5m USD gain AVAP signing a new client, Etihad, a good credit quality airline which according to company reassures lenders on the quality of AVAPs clients. AVAP buys back its 2026 unsecured bonds regularly, in 2025 company acquired almost 10m USD of bonds Also, in late 2022 and early 2023, Avation Plc tried to acquire 100mUSD of these notes at 86% of pair ( Investegate | Company Announcement )

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