Q2 2021 Fortress Transportation and Infrastructure Investors LLC Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Q2, 2021 and fortress transportation and infrastructure investors LLC earnings.
Earnings Conference call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need the press star 1 on your telephone.
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Please press star zero and.
I would now like to hand, the conference over to your speaker today, Alan and rainy.
Thank you April and we'd like to welcome you to the fortress transportation and infrastructure second quarter 2021 and earnings call. Joining me here today are Joe Adams, Our Chief Executive Officer, and Scott Christopher our Chief.
At the officer.
We have posted and an investor presentation, and our press release on our website, which we encourage you to download if you have not already done so and please note that this call is open to the public and listen only mode and is being webcast. In addition, we'll be discussing some non-GAAP financial measures during the call today, including.
Moving fad the rent.
Conciliation of the best measure because of the most directly comparable GAAP measures can be found and the earnings supplement.
Before I turn the call over to Joe I would like to point out that certain statements made today will be forward looking statements regarding future earnings each day.
And it's by their nature are uncertain and may differ materially from.
Actual results and we encourage you to review of the disclaimers in our press release and Investor presentation regarding non-GAAP financial measures and forward looking statements and to review the risk factors contained in our quarterly report filed with the SEC.
And I would like to turn the call over to Joseph Thank.
Alan.
To start today I am pleased to announce our 2005th dividend as the public company and our 14th consecutive dividend since inception, the dividend of <unk> 33 per share will be paid on August 30th based on the shareholder of record date of August 16th.
Now, let's start with the numbers.
The key metrics for us are adjusted.
The EBITDA and fad or funds available for distribution and.
Adjusted EBITDA for Q2, 2021 was $68 million compared to Q1.2021 of $47.2 million and Q2 of 2020 of $66.5 million.
Fad was <unk> 60.
And $3 million, and Q2, 2021 versus $14.4 million and Q1, and 2021 and $47.3 million in Q2.2020.
On the normalized basis, excluding sales proceeds and nonrecurring items Q2, 2021, Fad was $15.7 million.
The 8 compared to $9.8 million and Q1, and 2021 and $38.2 million and Q2.2020.
During the second quarter of the $68.3 million Fad number was comprised of $116.2 million from our aviation leasing portfolio negative $2.5 million from our infrastructure business.
And negative $45.4 million from corporate and other.
Now starting with aviation.
Aviation experienced a meaningful increase in activity and passenger markets and Q2, and our portfolio of engine products and services is picking up momentum.
And while we achieved our goal of.
The millions of EBITDA and Q2 up from $60 million and Q1, we are seeing a slightly slower ramp due to continuing COVID-19 travel restrictions related to the delta variant for.
Particularly in Europe.
As a result, and we're now projecting 2021 EBITDA of $400 million as compared to our previous projection.
And of $450 million for the full year.
The engine leasing market is particularly strong as airlines look to ramp up flying while continuing the minimize maintenance capital spending.
Q2 was our second most active quarter for engine leasing with 23, new leases delivered bringing engine utilization.
And to 65%, excluding new engine acquisitions.
We recently started new programs with 2 to 5 engines, each with major airlines and the Americas that we could see growing to over 20 engines each over the next year.
While a little bit behind the Americas, we expect the.
Phenomenon to occur in Europe later this year.
Also new investment opportunities are increasing and as illustrated by our agreement to purchase 12, <unk> hundred 19, <unk> on for year lease to 1 of the U S majors.
Our 3 CFM 56 maintenance product.
Same programs are all gaining momentum and broad market acceptance the.
The U S M or used serviceable material program in Q2 with AAR was very active with approximately $15 million of orders booked or closed.
The strong and growing demand gives us confidence and hitting our targeted 20 engine tear downs.
<unk> for this year with 1 million per engine profit or 20 million total profit for 2021.
Our module factory has also been busy with 125 active users on the web site and a handful of sales of exchanges consummated.
We have big aspirations for growth and the module factory and the next.
And it's 18 months and several sizable active campaigns now being negotiated.
Thirdly, the PMA with Chromalloy has made big strides with the second part and production preparing for final submission to the FAA and September.
All in all of the market is shaping.
12, the better.
And we had hoped for our unique and proprietary approach to the commercial jet engine market.
Now, let's turn to infrastructure.
Starting with a part of that.
Part of the high levels of activity this quarter are bringing the long term vision into sharp focus.
Speaking of.
We started in 2016 with of vacant property of 600 acres on the Delaware River with Conrail rail service and a small underground unused storage cavern.
By 2024, and we expect the completed of fully capable world class natural gas liquids hub comprised.
<unk> 3 plus million barrels of highly efficient underground storage capable of handling butane propane and ethane condensate propylene and other refined products for export via all sized ships, including Vlccs and for important opportunities as market dictates.
Yes.
Product movements will be available by rail, both inbound and outbound and be at Norfolk, southern or CSS.
Water across multiple new high capacity deepwater docks by type from all major North American and producing regions and by truck via our newest state funded highway access.
<unk> Road.
And all of this and 1 of the most desirable east coast locations.
In addition, we have 250, plus developable acres, which are ideally suited and will likely be utilized for staging and manufacturing of offshore wind farm components and new plastics recycling.
Access all of these.
And the reason we are highly confident that this vision will become reality is we were doing much of this today.
And Q2, we brought in and $1.1 million barrels of LPG by rail and.
And safely and efficiently loaded 17 marine vessels and our dock.
The butane to local markets.
And so by truck and have expanded our capabilities to handle propane.
And importantly, we are on the map with global LPG players throughout the value chain.
Turning to the long Ridge I am pleased to report that the 2 and a half year of 600 million plus power plant construction project.
<unk> is nearly completed 2 months early and on budget and thanks to the more than 500 skilled and hard working men and women involved in designing and building the state of the art highly efficient power plant. We expect full scale 24, 7 operations to start in the early September.
As a reminder, we've entered into.
For the 7 to 10 year fixed price power sales contracts that start in early 2022 with investment grade Counterparties for 94 per cent of the plant's output and we have secured of 100 per cent of the natural gas requirements and and effective low cost fixed price through our ownership of local gas wells thus locking.
And the spread for 8 and a half years.
Importantly, we are on track by the end of this year to become 1 of the first hydrogen and fuel power plants in North America, and the first worldwide and and.
G H class turbine.
Having multiple pathways to generate and carbon free energy is of high priority and.
We believe extremely valuable.
Like are part of we're fortunate to also have 200 plus acres of attractive well connected developable industrial property to add to the site's upside value.
And we are in active negotiations with 3 different crypto mining companies to host their operations.
And provide low cost of 24, 7 power with the options of conferred to carbon neutral power as well.
And with lots of interest and different approaches available we've been focusing on minimizing our investment and crypto specific assets, while maximizing the upside through fixed price power contracts and profit.
Office sharing.
We believe and investment of 20 million or less and Transformers, which have multiple uses for us we will have a 1 year payback.
We're also on the final stages of negotiations to host the facility.
But uses of new technology to make biodegradable plastics using natural gas.
Cash and electricity as the primary inputs.
Finally, our Frac sand and road sell trans loading operations achieved record volume in Q2 of nearly 300000 tons up from 202 hundred 30000 tons last year.
Now of Jefferson the Big development of Jefferson.
It's obviously, the new 10 year contract with Exxonmobil and.
New operation will utilize the recently built pipelines connecting the Jefferson with the Exxonmobil Beaumont refinery, which is undergoing a major expansion and Jefferson's Marine Marine docks Jefferson will construct $1.9 million.
Sales of new storage to be utilized by Exxon Mobil for refined product storage and export beginning in January 2023.
In addition to the significant Exxonmobil base volumes. This infrastructure will enable us to attract additional customers to further optimize this new domestic and international refined product.
Products hub.
And bind with the existing growing refined products rail to Mexico business. This new strategic Jefferson Exxonmobil tie and further enhances the logistics capability of the Beaumont refinery complex.
Our crude business with Motiva is also poised to.
The grow again, following the reduced refinery throughput due to the COVID-19 related demand destruction.
But with volume is picking up we're seeing motiva and utilizing the existing storage and pipeline connectivity for types of barrels from Cushing via our pay line connection imported fuel oil by water.
Wax crude.
<unk> from Utah and renewed focus on Canadian heavy crude by rail.
So with our growing array of connectivity options and prime location next to the 2 largest refineries in North America. We're extremely excited about the list of commercial opportunities ahead that will leverage and optimize our investments.
And the Jefferson and infrastructure.
Turning now to Transtar were pleased to report that the acquisition of Transtar from U S. C of O closed yesterday. So next quarter, we'll be just and it will be discussing financial results for this new segment.
We're excited to add a significant rail business, which performs.
You'll functions on 2 major North American and integrated steel complexes under exclusive long term contracts.
And while we're just getting started we have identified several opportunities for near term operating improvements and long term growth, including developing the for additional railroads included and the deal.
<unk>.
Transtar has a strong management team in place who are all very excited to growing spanned the business.
And we were very much looking forward to getting on it.
Turning now to a couple of corporate items first we launched this week of $425 million and municipal bond offering.
At Jefferson.
The proceeds will finance the expansion capex, including assets related to the 10 year Exxon deal and approximately 175 million to the upstream to F tie and available for general corporate purposes rates.
Rates and terms for these long term nonrecourse financing.
It will be extremely attractive and this cash infusion of $175 million at the parent level, along with approximately $150 million and revolver capacity puts F tie and a very strong liquidity position.
Second with the 2 infrastructure enhancements now done.
We will be progress.
Wrestling and the plan and accelerating the timeline to split aerospace and infrastructure into 2 companies and eliminate K ones for shareholders. We hope to have the timeline defined in Q3 with the goal of executing the spin before year end.
To sum up both infrastructure.
Continuing on the aerospace are in great shape and infrastructure with the addition of Transtar, which has a 15 year initial term and the new 10 year contract with Exxon Mobil at Jefferson, we have substantially increased the amount and tenor of contracted revenue and EBITDA as the.
And as always our plan.
Structure, adding.
Having long ridge, which is already over 90%.
<unk> and having strong indications of <unk> from suppliers and off takers and executed long term contracts infrastructure is more than ready to become a standalone company.
Well the aviation the transition to a vertically.
The integrated Aerospace company targeting the largest engine market and the world is well underway.
And the recovery, while not in a straight line is definitely happening.
With that I will turn the call back to Allen.
Thank you Jim.
Later, you May now open the call for Q&A.
On a.
As a reminder, if you would like to.
You asked the question. Please press Star then the number 1 on your telephone keypad.
Again that of Star then the number 1 of them.
And your first question is from Josh Sullivan with the benchmark.
Hey, good morning.
Good.
Morning.
Just a question of on the new 12 clean the lease order you have with the major U S. Airline there could you give us some color around that contract because it's the new relationship and what's the total opportunity. There do you think this is going to attract other U S. Major airlines of of similar caliber and going forward.
Yes, I did and we're very excited about and it's a.
Mentioned previously we've I think given the.
The cut the pandemic, we've been able to access airlines. The previously we'd probably we would not have had as.
And as much access to and part of it is just the need they have for capital, but also part of it is.
The focus on the engine side of the business. So so we see that as the door opener for.
More business, but also the ability to integrate our products offering into the on.
Mix in terms of the equation and so when we go.
And then there of shop visits or do we can be talking about modules.
And <unk> swaps TMA use service for material and we're already doing it that to some level with this existing airline so it gives us the opportunity to increase the volume.
And 1 of the 1 of the prohibitions obviously people have always had is it.
And if if you havent assets owned by a leasing company and you want to put PMA and it.
And usually the leasing companies had been.
Prohibited debt, we actually if we own the assets, we have an ability to give ourselves permission and so.
And the reason of a very very low cost so.
So I think it is the door opener for us too.
And as I've said vertically integrate.
Provide a broader range of services and any anybody has ever done before and actually save the money, so and we see very.
The level of interest and both U S and PMA and is very very high so I think as this picks up.
It's gonna give us additional.
Additional ways to do business.
With big carriers.
And then maybe just more broadly can you just give us color generally on the leasing market and our durations extending on leases.
How does the recent marking and responding to the uptick here and then the depth of variant.
Yes, I think.
And the engine.
The market is heading up very nicely and then we're not doing any I think the the aero when people were doing power by the hour deals is over and lease rates are trending up terms of extending out. So I think it's the recent deals we've done and the engine side are very.
And at least as good as what we're doing and 2019 and I think it's going to go higher.
Basically the laws of supply and demand and there always is.
We know that.
Everybody is deferring maintenance as much as they can and so they're starting to line up assets and they're lining up engines in particular for longer terms and so we're getting and the guard portfolios.
And has now extended out 18 months and.
We're signing up we just signed up sales from the large airlines that have a 3 year term so.
Think of rates and terms of.
Going up and maintenance reserve rates, which is also another sort of.
A very important economic part of the lease are and never really went down.
Down and.
And the manufacturers the.
The maintenance reserve rates are set by taking the estimated cost of the shop visit and dividing it by the number of hours and the Oems keep raising and the parts of prices, even and even in this pandemic period, so of maintenance reserve rates.
And are still very strong so so all and all I think the.
On the engine lease market is is trending up very nicely.
And then if I could just sneak 1 last 1 on Europe can you just talk a little bit about the you know the market for <unk> 56 assets on the secondary market just what you're seeing at this point.
Yes, most of what we've been trying to do is buy older.
818, <unk> hundred 19, <unk> 77, and 7 hundreds and.
And then get rid of the airframe and so we're buying engines.
On a buying a whole clean and and then scrapping the airframe and the acquisition that waves makes the most sense, we've been acquiring assets and probably the.
Price as we've ever bought the net.
Sometimes it's lower than a million dollars for and engine. So.
So.
And that's been very fruitful, we added 27, new engines and the second quarter, which is 1 of the reasons our utilization looks a little bit lower because we found some really good investments to put on the books and.
And that reflected about 10 points of utilization so really it was more like 65, but but the.
But that's the best way to create and engine today, because there's very very few buyers for off leased older assets if.
If you have not and if you don't have the revenue stream attached and it's and older.
Other assets.
We might be the only did so.
And like that dynamic.
And I appreciate the time and thank you.
Yep.
Your next question is from Giuliano Bologna with Compass point.
Good morning, I guess following on on a similar.
You were talking about some of some of these rates.
Moving higher and and there's been some interest rate discussion around that point.
The curious you know not necessarily specific dollar wise, but I'd be curious from a magnitude of protective kind of how and how much lease rates have moved and at least not a percentage basis from kind of where they were and kind of are they up 5% of 10.
10 per cent of the 20% of and I'm just curious from a magnitude perspective, how much of these rates of and building for specific because you have on debt.
And then.
Yeah, I would say that I'm, probably the from permanently prepaying debt at the bottom of the opinions and probably.
Probably declined 25% from 530.
And 30%.
The top and worst and I think most of that 25.30 per cent now has gone and it's been.
If it's back very close to pre pandemic.
And that's great and.
And then thinking about the idea of some business kind.
Kind of a little bit more holistically, you, obviously have the the module factory, which it seems to be kicking off and.
It.
The things on the early success.
And I'd be curious if there's a sense of kind of of the magnitude of the you know the.
Or how big you could grow the module factory from the kind of a throughput perspective, because you obviously have to have some engines and inventory and kind of of what that opportunity could look like overtime.
Yes.
And do that.
And to add some engines and inventory and currently I think the only.
And up to 200 chip and adjusted.
So a lot of the airlines were talking to the right now and looking at starting with programs that could be 10 or 20 and on a.
A year.
Talking about 10 of 20 modules.
But they.
They have fleets that can be hundreds and hundreds of engine. So the.
And they're looking at that is really of a starter kit.
So we think debt.
Basically we can grow if we get people started doing it.
And it has a flywheel effect and you can just grow listen so our 200 engine fleet.
You know it might grow to 304 hundred just remember there's 22000 engines and the world of this type of show so going from 204 hundred to 6 on it doesn't really move the needle and so I think we can scale.
And our inventory along with the needs of the of the customer.
But the upside of how many people do is really on.
Very significant very day once they integrate this into the way they operate on the maintenance side it's on.
<unk> is quite significantly.
And then if you put on top of that and you add PNA into it which will we will start to happen.
The next year.
It could become.
Even much bigger.
That's great and.
And then just thinking about the.
The split of the business.
And you'll just have a few different components of that should be decent contributors starting next year. Your current star.
And I can put out so far of about $80 million.
The 70 to 80 million of kind of the Scotts run rate for Jefferson and soon it can be scaling up and now that all of the pipelines are complete are there you know and you haven't.
And on another call it $60 million on the power plant and a $15 million from Roberto.
Put you on the 200 and side of things, there's probably some overhead.
For the numbers you'd get allocated for that segment.
But and that's.
And kind of looking beyond that.
And the Exxon deal, but then you know the.
You were making some comments about <unk> and expanding to the cold 3 million barrels of storage.
Kind of sounds like the all of the phase 2 that had been discussed and curious if there's been any change.
And that would be.
The phase 2 project or our outlook because it used to beat all of the $500 million of Capex ballpark and then the expectation was 150 million of EBITDA, but you're still pursuing a similar strategy is that what you're referring to the 24.
Yeah, Yeah that was the description of the complete the change to and.
And just kind of of hasn't changed we've zeroed in on more and I think we're specifically on exactly what we need to build and when we need to build it and.
And the capital expectation and I think there's less and $500 million of discipline, partially because we've invested already some of the infrastructure and it's going to be us. So I would think of it as more of it $400 million and the.
Everything has changed as I had listed of about 8 different products and when we first started this we were thinking protein and do you change the.
And lots of different ideas from people coming to the us actually suggesting propylene as an example, or.
And some of the natural gas liquids condensate.
The other and find products and then we've had further discussions.
Fairly recent about pipeline connectivity.
Which would also expand both the capabilities as well as the.
And the product offerings. So I think it's the only gotten better in terms of the upside and the capitals.
And probably a little bit.
Some of them and what we had forecast so so it's.
And so I didn't sound enthusiastic, saying and you know and extremely enthusiastic because it's it's it's all happening and the conversations are.
And the real.
That's great.
I appreciate it all of the insight and.
I'll jump back in the queue.
Yeah.
Your next question is from Chris Wetherbee with Citi.
That's what my guidance.
Maybe just touching on Jefferson and you're obviously getting the academy of Dod was of great stuff on the right direction.
Seems like there's probably a decent amount of ex storage opportunity of states go up the facility and he and I guess, it's probably the building interest.
And coming to you guys of I don't know Joe If you could just maybe give us a little bit of color in terms of what sort of the deal prospect pipeline looks like and check with them right now and I'm guessing, there's probably a couple of deals and the offer that maybe it could.
Coming to fruition and and then maybe if you could talk about.
And what the timing of that might look like and I don't want to hear from them on what you have here, but I'm just kind of trying to get a sense of what the ramp up of might look like.
Yes, I think we've.
We continually every time, we do a deal.
And you don't have a meeting and we end up for the longer list of them and.
Could be credit and so that's the fun part and so we've got multiple projects sort of a handful of projects for each of Exxon and motiva debt or that are real.
I would say that they always with these large.
Entities, they always take longer than we would like but we do get.
Get there and it's 1 of our it and sort of seems we seem to have staying power and these negotiations and so so.
But the number of opportunities are significant and and it's on both refined products and crude and you should think about.
From the macro point of view these neither of the 2 and 2023 Exxon will be the largest refinery.
And in North America. So, it's 600000 barrels a day in and 600000 barrels a day out and the same for Motiva, So you're talking over a million barrels a day right in our backyard. So so we have.
Lots of things that happen and things and we don't even anticipate like importing fuel oil for example.
We would never of guests, that's something on the radar, but and it becomes a topic or storing and intermediate and and.
And so a lot of those things come about because you just have regular conversations but there are many many different projects and once you get once you get connected and once you're on a regular dialogue timing wise the.
The.
And the new storage takes about a year so it's.
We have probably the lead time on on a lot of these projects to do that now that we have the types of though it's it's a lot easier because you can you can go and say you.
We have the connection already so we don't have to worry about that part of it and and so it's mostly the.
Building discussions I would say that the typical lead time of the 9 months through the year.
Okay. Okay. That's helpful. I appreciate that and then just making sure I understand the here I'm going to go back to the aviation guide the $50 million there.
What are sort of the variables that debt sort of you know.
And could drive that to 400.
Just maybe a little bit higher than 400, or maybe creates the risk to it I guess I'd want to make sure I understand part of the most important dynamics.
Of that guide, our as we think about hitting that and for the rest of the year.
And the 2 biggest movers would be.
The number of flying hours so exempt.
The <unk> ramp up flying.
Our revenues increase on the maintenance reserve side and so if you look back to the I think it was third quarter of 2019 was our best quarter, because it was 85% utilization and every airline was 5.3 to 400 hours a month. So for every aircraft. So.
And that's probably the biggest 1 and thats, where the ramp up of services, particularly in the U S. We've seen a lot of South America has seen a lot of Europe is just lag. It's just been slower developed of the cross border and the United States is great. Because 50 states you can always travel for not always I should say, but.
Historically you could.
Travel between what was bigger and others.
And without or without showing the path for it but in Europe. It's it's different so I think that is the slower but Europe Europe will follow and I indicated I think that will happen later this year, where you'll start to see more flying but but the activity of flying activity is number 1 and then the second is the acquisition.
Missions and so we've got.
And the 1 deal I mentioned is closing this week or next week.
And then.
We have 1 other large deal of the European Carolina, the carrier that should close by the fourth quarter. So those I think of the 2.
And of flying hours and acquisitions.
Okay got it that's super helpful. I appreciate the comments on where I got thank you.
And then.
Your next question is from Justin long with Stephens, Inc.
Hey, Good morning, this is George sellers on for Justin.
I guess to start could you talk about the EBITDA you expect to be generated from the maintenance.
And parts pieces within aviation and any update you can provide around that.
The ramp of that number into the second half of this year and into 2022 would be great.
I assume youre talking about the free.
The JV that.
USA on and the.
And.
What's the third the.
And Martin County.
On the module factories, so those 3 exactly.
We believe that $50 million for the year is still a good number for those 3.
That the the decrease from $4.50.
And then 400 was largely on leasing revenues and so those 3.
And of produce about 50 this year, we haven't forecast yet for next year, what we think those will be but.
Safe to assume it's going to be higher.
Got it Okay. That's helpful and then turning to.
The Jefferson could.
Could you walk through your latest thoughts on how you expect EBIT out of ramp at Jefferson through the.
This year, and and then into 2022, as well and and <unk>.
Think about that expectation, maybe you could also speak to the level of visibility you have around that based on contracts that you already have on hand.
For the.
We believe that the run rate for the fourth quarter of the end of 2020, 1 for Jefferson will be $70 million to $80 million so that.
And next year.
Again, we haven't really put on official forecast out there, but I wish I would assume the $100 million and north.
Okay, great. Thank you so much I'll leave it there.
Thanks.
Your next question is from Rob Salmon with Wolfe Research.
Hey, good morning, guys and thanks for taking the question I guess, Joe to start off with just the bigger picture.
The question could you discuss how you expect the the 2 companies.
And he has to look following the split from a capital structure perspective.
And as we look forward.
Sure.
And we're targeting.
Maintain the level of debt and each company and maintain a double of the ratings for each 1.
So part of the.
Next few months of the process of going through that with our own financial modeling and then I'll share rating agencies to work through the details, but that's that's our objective and.
But it will be the the infrastructure business would be and a U S.
Domestic seaport and you'll have mostly project financed and the like the Jefferson and bonds, we talked about our long ridge are all financed at the entity level.
And then the corporate debt would be.
And at aviation.
Which would be a non U S Corporation.
And.
<unk>.
And we would be targeting debt to maintain the double b rating.
Yeah, that's helpful and and I mean.
Historically, the the appetite company more broadly has kind of targeted both growth and as well as kind of of a return of.
The capital to shareholders.
How do you see kind of the the dividend.
Coming out of <unk> across the 2 companies have have you guys kind of.
3 of those dynamics at this point or is that still a work in progress.
And we don't anticipate of change and that I think it's still going to be the the investment objective is going to be income plus gross.
So I don't expect that to change.
And part of it and now and that would be true for both of the the company is looking for.
Yes.
And then.
Couple of quick historically right.
And historically I think you would see higher dividends on aviation and then you would see on infrastructure.
Yes that makes sense given the investments.
And then just a couple of quick follow ups with the aviation segment can you give us a sense on.
Of the capital investments that you guys are planning and in the back half of the year debt.
That's underpinned and the $400 million of.
The EBITDA, you're expecting that company to generate.
Right now we're looking at about 300 million of additional investments that are all under LOI from the eminent and we haven't added and anything beyond that.
Perfect and is that pretty evenly weighted between the 2 quarters or is it more fourth quarter. I know you had mentioned there is a big deal youre expecting and closed in the fourth quarter.
And we just closed the large loans and American Airlines.
We're supposed to sit on it.
[laughter].
Yes, I would say evenly weighted.
Yes, yes.
Got it.
And then.
And I think that's right and if we look at the June just of June in terms of the utilization rate.
Can you give us a sense of how that exited the quarter relative to the 65% utilization.
On ex the adjustments that you had noted with the transaction that the transaction that you guys completed during the quarter.
Yeah.
And it was I think when you the exit rate.
<unk> was up from the beginning of the quarter about 10% 10 percentage points.
Okay helpful. Appreciate the time guys.
I think we reported 23 engines on lease because I think we are.
Added during the quarter, which is a pretty good quarter.
<unk>.
And we expect probably the.
Potentially look 30 on and Q3.
Yeah.
Appreciate it thanks for the color.
Right.
Your next question is from Frank Galanti with Stifel.
Yeah.
Thank you for taking my question.
I wanted to follow up on the <unk>.
I guess, the 3 horsemen or whatever you want to call. It the the JV the much of victory USAA and he had said $50 million was your expectations for this year can.
Can you kind of talk about how.
And I guess what does that.
And I assume its been done already.
And specifically the second quarter.
It's probably at the out.
5 of them.
Yes.
Okay, that's helpful and kind of staying on the aviation side can you.
Great. The second PMA part of I guess, the PMA parts generally.
How is the first 1 Ben.
And kind of give us an update on how the penetration has been from.
And the interest level from out of it from third parties.
And then how the.
Talking about the update on the timeline for the second and the 3.4 of 5 parts.
Yeah. So on.
The first part of the interest level is very highly of.
The other couple of airlines.
On the water ordered it.
Exactly.
The strength.
The background.
And if there.
We have a lot of interest a couple of big Airlines have ordered it and 1 airline is actually flying it and.
And installed it and.
And.
I think the.
The further.
Penetration is for.
The bit delay.
And there's not a lot of shop visits going on and so it is most airlines as I mentioned, they're burning off screen time, and so they're not doing a lot of on the.
Major overhauls and so a lot of airlines are waiting and show that builds up and there also.
Waiting to be able to current with the second part, which we expect and as I said.
Because of that final submission of the FAA and September which would hopefully imply a year and approval.
And that's the first 2 of the second the.
The second batch of parts and.
As expected for 2000 and late 2022 early 2023.
The addition.
Additional 3 parts.
Okay that debt is helpful and then I think for the.
Last question and I wanted to walk through.
And the kind of capex needs.
And in your prepared remarks you'd mentioned.
Part of that financing of Jefferson and 100.
The $8 million, it's gonna be upstream to the parent and you've got $150 million.
The left and the Undrawn.
The revolver, but you'd mentioned about 300 million of Capex.
Capex needed for the aviation.
And I could be off on this but the transfer of purchased.
Purchase was closed.
But I guess just wanted to walk through.
What level of equity contribution of needed from EFT high kind of across the various businesses and.
And then the add on to that the 100 plus million of Jefferson needed for the expansion.
Where what are the capex needs.
And the.
The next few quarters.
So on the Jefferson and Capex needs will all be financed by the spun to offering.
Zero medium for Jefferson.
And needed for the long ridge year on needed for Continental and so those are those are easy.
And sorry is fully financed.
Closed yesterday.
And then as you mentioned, if we do $300 million of acquisitions, we've got 175 million plus the undrawn revolver to fund that so there are no additional capital unfunded capital requirements for this year everything is funded.
Okay, Great. That's very helpful. Thanks very much.
Ex.
And again, if he would like to ask a question. Please press Star then the number 1 on your telephone keypad and Youre.
Next question is from Robert Dodd with Raymond James.
Hi, guys.
A question on the dividend and this feels.
A flashback.
The previously J, you'll say you know went went bad and covers the dividend by a factor of 2 you'd consider.
Consider taking up the dividend obviously by my math certainly by the fourth quarter of maybe the third.
You'd be in excess of that obviously that would also be right before the spin or separation.
So can you give us any thoughts on on the.
Is that still a good rule of thumb and does that apply to make the the separated businesses as well.
Yes. It is a good rule of thumb and yes. Your math is pretty good and we will factor of that in.
If and when it sort of coincident with the spend will.
And.
Okay got it. Thank you 1.1 more if I kept unrelated to that you you talked about.
The the the leasing wait so basically back to Pee pandemic levels, but at the same time of the airlines of burning down on that Green time, you know the which.
Lack of the bedroom do you think there's there's meaningful upside to lease rates I mean, we can see what happened and the rental car market. If you run the at least you know you're from Ya Ya Ya Ya Ya your portfolio down of eventually you know.
Missing moves significantly do you think there's there's a risk in your favour all of of material uptick and lease pricing. If airlines continue to run green time down while you've got available and chips.
Yes, we have been we've been saying that all along and should we think by the fourth quarter of this year first quarter of next year the theirs day.
And then we'll outstrips supply.
Now unlike rental car companies and we can't go from charging you know the 18th.
[laughter].
And $800 a day, so we will most likely what what we've done historically and it's just get better longer terms and higher maintenance reserves and and just better all around deals and the rent and you know.
The airlines get very very sensitive to rent so you're trying to find other ways to make more money.
Because of that becomes.
A relationship you know, saying and you don't want to if you're going to do and.
Continuing business and you're getting parts on the maintenance side and the building programs.
And I wanted to take full advantage of of your your position or you'll pay for it later, so so it's rented a little bits of but there is.
And you're not going to be flexible on it and you know I could if the lunch. If if everyone else is paying $60000 a month and you're not going to go ahead and and give them and.
Deal and 30.
30, so you'll you'll you'll get you might get 50, the instead of the 12 months of you'll you'll get a 3 year deal and you may the tweak the maintenance reserves and make them higher.
Got it kind of I appreciate that thank you.
Yeah.
Yeah, and now for the quest.
And that this time I went out of turn it back to Alan and Janie for classes and remind.
Thank you April and and thank you all for participating and today's conference call and we look forward to update and you extra Q3.
Ladies and gentlemen, this concludes today's conference call.
You May now does come on.
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