Bloomberg News – By Andrea Rothman
Aug. 4 (Bloomberg) — Richard Santulli, who quit as chief of Warren Buffett’s NetJets Inc. unit last year, raised $500 million to return to aviation with a venture that will help provide helicopters for oil companies and police.
Milestone Aviation Group, based in Dublin, aims to become a multibillion-dollar company financing the purchase of rotorcraft for competitors to the four main helicopter operators in North America, Santulli said in an interview today.
“We intend to be the predominant player,” Santulli said from New York. “We’ll be providing capital to a marketplace that really needs it. There are good operators out there who can’t compete with the big four on major contracts.”
Santulli left NetJets last August after the business he founded and sold to Buffett in 1998 slid into losses during the recession. Milestone will focus on helicopters and jets, with 100 percent financing for new, used and sale-and-leaseback deals, he said. Target markets include oil and gas exploration, medical services, law enforcement and construction, he said.
North America’s main helicopter operators are CHC Helicopter Corp. of Canada, the largest provider of flights to offshore oil rigs and platforms and owned by First Reserve Corp.; Houston-based Bristow Group Inc.; and PHI Inc. and Era Helicopters LLC, both based in Louisiana. Milestone said it will also aim to provide financing for those companies.
While still at Columbus, Ohio-based NetJets, Santulli was regarded by analysts as a possible successor to Buffett at Berkshire Hathaway Inc. He said the two remain in touch.
“I just spoke with Warren yesterday,” said Santulli, 65, a one-time head of Goldman Sachs Group Inc.’s equipment-leasing group. “He asked me to send him materials about the company.”
Berkshire’s NetJets allows clients to buy fractional ownership in private jets. Gains at NetJets helped boost the parent company to a $3.6 billion first-quarter profit, Berkshire said May 7.
Milestone is talking with helicopter manufacturers including the Eurocopter unit of European Aeronautic, Defence & Space Co., Finmeccanica Spa’s AgustaWestland division and United Technologies Corp.’s Sikorsky brand, with initial purchases “close to fruition,” Santulli said.
While the military-helicopter market is booming, with sales up more than 30 percent in 2009, civil demand fell 12 percent last year and may decline further in 2010, partly because of difficulties in financing, said Richard Aboulafia, vice president of Teal Group, a Fairfax, Virginia-based consultant.
“To the best of my knowledge, this is the first effort at creating a business of such magnitude in this market,” Aboulafia said. “There’s still a credit crunch for smaller businesses, but demand is high as oil prices drive the need for exploration.”
Santulli said his initial $500 million comes from U.S. private-equity firm Jordan Co. LP, together with Nautic Partners. He and Milestone CEO William Kelly have also contributed funds. Longer term, Santulli said he expects to tap capital markets for debt as the business expands.
Milestone will provide operators with leases that span the same period as their service contracts, and also bear residual risk beyond the immediate operating costs, Santulli said.