Sharjah-based Aerotranscargo FZE has signed up investment banks Oppenheimer & Co. Inc and Emirates NBD Capital to sell USD300 million in senior unsecured bonds. The firm plans to use the bulk of the funds raised to purchase used B777s, presumably for conversion into freighters, as well as engines.

A Reuters report detailing the proposed transaction coincides with a move by ratings agency Fitch to assign the airline a long-term issuer default rating (IDR) of BB with a stable outlook. Reuters says the banks will hold a global investors call on Monday, September 12, after which the bond offering could follow. Internal documents reveal that the proposed bonds will be non-callable for three years.

Aerotranscargo's core business is servicing one to three-year contracts with logistics operators focusing on e-commerce shipments from China to Europe. Although headquartered in Sharjah, its production carrier is Moldova-based Aerotranscargo (F5, Chisinau) which is 49% owned by Guneet Mirchandani, but who is the chairman and outright owner of Aerotranscargo FZE.

Reuters notes Mirchandani is also the majority shareholder of UK-based Air One Aviation Limited which is the exclusive sales agent for Aerotranscargo FZE and enjoys a fixed commission of 7.5% of revenue. Air One controls One Air (HC, London Stansted), a start-up currently undergoing certification in the United Kingdom using B747-400(BDSF) G-UNET (msn 25075), formerly ER-BBB with Aerotranscargo.

Aerotranscargo FZE will use USD250 million to improve fleet capacity, USD22.5 million for general corporate expenses, USD20 million on new headquarters in Sharjah, and USD7.5 million for transaction fees and expenses. Fitch has assigned the issue a recovery rating of RR4.

According to the ch-aviation fleets advanced module, Aerotranscargo operates eight aircraft including two B747-400(BCF)s, four B747-400(BDSF)s, one B747-400FSCD, and at the other end of the capacity spectrum, one Saab 340A(F) wet-leased from Airest (AEG, Tallinn Lennart Meri).

"(Aerotranscargo's) current fleet's average age is about 29.1 years and the company plans to keep operating these aircraft for the foreseeable future. Aerotranscargo FZE owns the airframes and plans to purchase all the engines, which are leased currently, with the proceeds of the planned senior unsecured bond," Fitch said.

"Aerotranscargo FZE also plans to expand its fleet through the purchase of two to three used B777 aircraft per year as they become available during 2023-2026. We believe this fleet size is adequate for Aerotranscargo FZE to operate in its chosen air cargo segment."

Aerotranscargo FZE recorded a net profit of USD87.4 million in the first half of 2022 on revenues of USD291.8 million. Net profit was up 29.9% compared to the same 2021 period while revenues increased 57.6%.