RYAAY Ryanair Holdings PLC

By Robert Wall

LONDON--Stellwagen Group, the privately owned Irish transportation financing company, Wednesday said it was setting up a new aviation funding arm and planned to raise $5 billion in the first three years to finance planes.

The company named Howard Millar, a board member at Ryanair Holdings PLC and the Irish budget airline's former chief financial officer, as chief executive of the newly created Stellwagen Capital and chief operating officer of the group.

Mr. Millar said many banks that had been providing debt finance to airlines to buy planes have retreated amid increased regulatory demands on the financial institutions to hold capital. "We think there is an enormous opportunity for huge pools of capital to be deployed," Mr. Millar said, adding "we have $1 billion to nearly $2 billion in deals in the pipeline" over the next 18 months.

The retrenchment of banks has seen operating lessors win business from airlines, Mr. Millar said in an interview. Stellwagen would seek to win some of that business by offering airlines a cost-competitive debt option in which they still own the plane.

Mr. Millar said the company would seek to raise $1 billion in initial capital between October and the end of the year. It is eyeing $5 billion in raised capital in the first three years. The company plans to offer a 5% to 8% coupon to investors, Mr. Millar said.

The initial funding round will target U.S. insurance companies, and European and Middle East investment banks. A second funding round of $1 billion, targeted for early 2017, would be structured to enable European pension funds and sovereign wealth funds, which can only invest in regulated entities, to participate, Mr. Millar said.

The company would provide debt finance to airlines principally for single-aisle planes, Mr. Millar said, such as the Boeing Co. 737 and Airbus Group SE A320, which are the backbone of commercial aviation. The loans would typically be structured over 10 years to 12 years.

Stellwagen said the investment vehicle would be listed in Dublin.

Write to Robert Wall at Robert.Wall@wsj.com

(END) Dow Jones Newswires

May 18, 2016 04:00 ET (08:00 GMT)

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