Wng Capital Llc

Abstract

In late 2013, an analyst at WNG Capital LLC, Wenbo Su, must recommend whether the terms of a sale-and-leaseback deal are value adding for WNG. WNG was an operating lessor of used commercial aircraft manufactured by Airbus Group and Boeing Corporation. The lessee in the deal was a small private airline based in the United Kingdom. The essence of the transaction was to transform the airline from being the owner of certain aircraft in its fleet to being the lessee of the aircraft for the ensuing 12 months. The airline would have full use of the aircraft, but would not own the aircraft or have use of the aircraft after the end of the lease. The cash flows to all parties were complicated, and Su planned to conduct a thorough analysis of the proposed lease terms before making a recommendation to WNG's CEO, Michael Gangemi. The student's challenge is to assume Su's role and develop a discounted cash flow analysis to estimate the NPV to WNG Capital. The broader discussion of the case prompts students to answer how the airline benefits from the deal. This analysis and discussion form the basis of understanding the value of leasing as a value-adding financial product. Excerpt UVA-F-1777 Rev. Apr. 21, 2017 WNG Capital LLC WNG succeeds because we create value for all our stakeholders. Our model allows both airlines and investors to achieve their financial objectives. —Michael Gangemi, CEO WNG Capital LLC In late 2013, Wenbo Su, an analyst at WNG Capital LLC (WNG), a U.S.-based asset management firm, was reviewing the terms of a proposed transaction for his employer. WNG specialized in aviation leases, and Su was evaluating the terms of a proposed purchase and leaseback deal with a small private airline based in the United Kingdom. The essence of the transaction would be to transform the airline from being the owner of certain aircraft in its fleet to being the lessee of the aircraft for 12 months (through the end of 2014). WNG would be the new owner of the equipment (aircraft and related parts) and would act as the lessor in the deal. The airline would have full use of the aircraft but would not own the aircraft or have use of the aircraft after the end of the lease. The cash flows to all parties were complicated, and Su planned to conduct a thorough analysis of the proposed lease terms before making a recommendation to WNG's CEO, Michael Gangemi. . . .