Carofin and CFS Announce Successful Redemption of Commercial Airplane Parts Investment
Brevard, NC – February 27, 2023 — Carofin and Carolina Financial Securities are pleased to announce that DSC Trading, LLC has redeemed in full their investors’ capital and coupon in 11% Senior Secured Notes.
Based in Branson, MO, DSC Trading has been a leading supplier of expendable and consumable commercial aircraft parts since 2002.
A major consideration for airlines is the time its aircraft are on the ground (AOG). As each hour out of the air is an hour in which the aircraft is not profitable, it is essential that airlines have constant access to spare parts where and when needed.
Airlines depend upon maintenance, repair and overhaul (MRO) operators to conduct scheduled maintenance on their airplane fleets. Commercial aircraft typically are flown for about 30 years. Required repairs range from more frequent (every 200-300 flights) hangar-based procedures involving 50-70 man-hours, to periodic “heavy maintenance visits” every 6-10 years when the aircraft is dismantled, thoroughly inspected, repaired as needed and rebuilt. Throughout these checks, replacement parts are needed.
MROs are equally dependent upon suppliers such as DSC Trading to have the essential replacement parts on hand, available upon a moment’s notice, so that planes can get back in the air. For the last 15 years, DSC Trading has bought and then resold commercial aircraft parts to the (MRO) industry, specializing in one-time use “expendables.”
Entering 2018, for the first time in airline industry, carriers recorded three consecutive years of record or near record profits. And, so, when COVID arrived in March of 2020, it took the industry by surprise.
Number of scheduled passengers boarded by the global airline industry from 2004 to 2022
Having just raised $5.8mm toward the end of 2019, “I thought our investors were in trouble,” recalled Bruce Roberts, CEO of Carofin. “The passenger and air freight airline industry went into a nosedive and, with it, so did revenues to repay investors’ loans.”
The outlook looked grim that spring and summer. The number of passenger flights, subject to passengers’ realistic disease transmission fears, dramatically plummeted in 2020 by 206% from industry projections at the end of 2019 (see the chart below). And it took 3 years to return to 80% of pre-COVID levels.
CTK Levels2, actual and seasonally adjusted
On the contrary, air freight flights, while initially suffering a steep decline, rapidly returned to normal levels within the year, and these aircraft needed all the parts that DSC stockpiles.
Thanks to some reengineering on Carofin’s part and the collaboration of its sophisticated investors, DSC’s shrewd business tactics and widespread contacts, as well as investors’ belief in DSC (this followed four previously successful investments since 20121), the investment landed safely for the lenders.
Mark Wise, DSC’s CEO and Co-Owner with his wife, Janelle, was glad he was able, yet again, to fulfill his obligations to Carofin investors. “With the MRO market growth projected to rise 1.8% annually in the U.S. from 2018-2028, nobody expected what COVID would do to the MRO industry. I was thankful that our parts continued to be in demand as, month after month, air freight continued to rebound quickly.”
Mark says they will continue to call on Carofin’s investors to support his company’s growth. “Even though we have about 200,000 SKUs in our warehouses, opportunities arise to buy lots at a fraction of the cost. Carofin has always delivered for us, and we’re loyal customers.”
1 Initial raises were conducted by Carolina Financial Securities, LLC, an affiliate of Carofin.
2 Cargo Tonne Kilometers
Photo by Kevin Woblick on Unsplash