by Agnieszka Opalka
The New Piper Aircraft, Inc., based in Vero Beach, FL, is a leading manufacturer of general aviation aircraft. Founded in 1937, the company became famous for its yellow "Cub", a cloth covered, two-seat airplane used in World War II. With years of steady growth, great brand loyalty and the manufacturing of industry-renowned, high quality and excellent performance aircrafts, Piper has grown into a major industry player and the only general aviation manufacturer to offer a complete line of aircraft for every general aviation mission.
In July 2003, American Capital completed the buyout and recapitalization of its portfolio company, The New Piper Aircraft, Inc. ("Piper"), by purchasing $57 million of Piper's senior debt for $34 million and providing a revolving loan facility. In addition, American Capital exchanged $22 million of the purchased senior debt for common equity in Piper. American Capital's original $20 million investment in subordinated debt is now a senior facility. American Capital now owns 94% of Piper's voting equity.
Affiliates of Exeter Capital Partners, a private equity firm and long time investor in Piper, made an additional common equity investment of approximately $1 million for 6% of the common equity as part of the recapitalization.
"This is an exciting opportunity for American Capital to continue our relationship with Piper," said American Capital Senior Vice President and Managing Director Gordon O'Brien. "We are working with a strong CEO, an industry veteran and innovator, who oversees a well established worldwide dealer network selling an unmatched product offering to a remarkably loyal customer base. Piper's installed base of 100,000 aircraft worldwide feeds its large proprietary parts business, and its underlying intellectual property is protected by numerous Federal Aviation Administration Type Certificates that govern manufacture of its planes. Its exemplary track record of new product releases and strong pipeline of new products also bode well for its future. Furthermore, we believe this transaction enhances the value of our original investment.'
The New Piper Aircraft, Inc. specializes in the design and production of general aviation aircraft, seating 2 to 6 individuals, serving individual owner operators, flight schools and commercial flight training centers worldwide. One of three major U.S. manufacturers of general aviation aircraft, Piper currently manufactures nine models from trainers and high-performance aircraft for personal and business use to turbine-powered business aircraft. The company recently unveiled two new aircraft - the Piper 6X and 6XT - which are slated for production later this year. In all, Piper will manufacture 11 different models by year's end.
The company enjoys extraordinary brand loyalty from its customers, who find in its extensive product line all the models they need to progress from entry-level aircraft to the company's flagship - the Piper Meridian. Piper's first single-engine turboprop, the Meridian, was introduced in 2000. Pictured here is the Seminole, the multi-engine advanced training aircraft relied upon by flight schools and major commercial airlines that train pilots for its simplicity, stability and safety.
With an excellent, high quality product line, Piper has established a large operating base of more than 100,000 aircraft worldwide. In addition, Piper has been extremely successful in creating significant brand loyalty within its customer base, resulting from its successful "Step-Up" program in which Piper builds brand loyalty and good customer relations as soon as a pilot begins flying a Piper. As pilots improve their flying skills and receive advanced ratings that qualify them to advance to the next, more sophisticated aircraft, they can easily trade in their existing Piper model and graduate to a more advanced Piper aircraft available through one of the company's 39 dealerships worldwide. Piper's longlasting relationships with many of its dealers, some of whom have been selling Piper products since the 1930s, coupled with Piper's extensive product line that allows pilots to advance within the Piper fleet, enables the company to expand its customer life cycle. Pictured above is the SARATOGA II TC, the high performance, luxury aircraft, an excellent choice for pilots interested in either business or recreational flying.
In addition to its aircraft production, Piper has an attractive and stable spare parts business that supports its large fleet of existing aircraft. Piper is the sole supplier of many of the service parts for its planes, many of which are proprietary.
The general aviation industry, which encompasses all aviation business other than military and commercial, caters to owner/operators, corporations, flight training schools and governments, realizing an estimated $40 billion in revenue annually. Prior to the recent recession and the economic impact of the terrorist attacks on September 11th, the industry had experienced steady growth stimulated by Congress' passage of the General Aviation Revitalization Act ("GARA") in 1994. GARA established a statute of limitations on general aviation manufacturers' product liability, facilitating the availability of insurance to the industry. Due to the large volume of new aircraft manufactured and sold in the 1970s and early 1980s, there is currently a large market for used aircraft, thus pushing the demand for spare parts -- a generally profitable business that provides a continuous source of revenue.
American Capital originally invested in The New Piper Aircraft in May 1998. Since its 1997 IPO, American Capital has invested approximately $1.8 billion to finance growth, acquisitions and recapitalizations of middle market companies and has a growing diversified portfolio of over 75 companies.
For more information about American Capital's portfolio click here.
With more than 60 years in aviation, New Piper has a long, rich heritage and a well-established reputation for manufacturing top-quality aircraft and spare parts for the general aviation industry. Under the leadership of a seasoned CEO, and with loyal, repeat customers, a highly regarded brand name and an extensive and unmatched product offering, Piper is well-positioned for future growth and success.
