The Business - A newly formed SPV, Teardown Funding #2, LLC (“TF2”), will acquire an Airbus A330-200 for $1.95MM in collaboration with Owl Aerospace, Inc. (the “Consignee”), to tear it down, to own the parts, and subsequently sell the parts via consignment by the Consignee.
Market Opportunity – Parts for the A330 are in high demand, with a fleet of 1,492 A330 aircraft currently active which need regular maintenance and parts replacement.
Key Benefits - High demand for parts; SPV will own the parts; Consignee has an established customer base for A330 aircraft parts; management estimates that inventory value, depending on the circumstances of the sale, range from $3.577MM up to $13.555MM. Please see the “Aircraft Valuation” section of this document for additional details surrounding the estimated inventory value.
Distributions – Distributable cash resulting from the sales of parts will be utilized to pay accruing preferred returns and return the initial capital contributions of investors, if and when available.
Teardown Funding #2, LLC, (the “Issuer” or “The Company”) is issuing a minimum of $1,500,000 and up to $1,950,000 in Preferred Membership Units (the “Units,” the “Equity,” or the “Security”) to fund the acquisition of an Airbus A330-200 MSN-358 Commercial Jet Aircraft for teardown and sale via consignment.
Teardown Funding #2, LLC (“TF2”) is a newly formed entity, formed to acquire an Airbus 330 Aircraft and tear down the Aircraft to harvest the Aircraft Parts (defined herein), which will be wholly owned by TF2. These parts will be sold via consignment by Owl Aerospace.
TF2 will be managed by Carolina Financial Group (“CFG”) with assistance from Blu Miles Aviation Services (“BMAS”). TF2 and the Consignee have agreed upon a consignment relationship governing teardown, sales and repayment, in which 75% of Net Sales Proceeds (defined herein) are for the benefit of the issuer, and 25% for the Consignment Agent up to the first $1.5M in Gross Sales. Thereafter, the Consignment split is reduced to 70% of Net Sales Proceeds for the benefit of the Issuer, and 30% for the Consignment Agent.
Subsequent to the tear down, TF2 will own inventory comprising of: (i) landing gear, (ii) nacelles, (iii) an auxiliary power unit, (iv) aircraft structures and flight controls, (v) avionics, and (vi) other related accessories from the Airframe (collectively, the “Aircraft Parts”).
The Consignee has an established customer base for the Aircraft Parts from the A330 aircraft and no competing inventories.
For as long as an Investor has unreturned capital contributions, such Investor shall earn an “Accruing Preferred Return” on such unreturned capital contributions as if it were interest, cumulative but not compounding, in the amount of 14.00% per annum.
The Manager shall make monthly distributions of Distributable Cash (as further defined herein) if the Manager determines, at its sole and absolute discretion, that Distributable Cash is available. Such distributions shall be made in the following order with no category being entitled to distributions until the previous category is fully satisfied:
First, to the Investors holding Preferred Units, on a pari passu and pro-rata basis, until their accrued but unpaid Accruing Preferred Return is reduced to zero;
Second, to the Manager to the extent of the accrued but unpaid Management Fee (as further defined herein) is reduced to zero.
Third, to the Investors holding Preferred Units, on a pari passu and pro-rata basis, until their unreturned capital contributions are reduced to zero;
Thereafter, 80% to the Investors holding Preferred Units, on a pari passu and pro-rata basis, and 20% to the Manager, with the Investors and Manager receiving such distributions on a pari passu basis.
“Distributable Cash” means all cash, revenues, and funds received by TF2 from its operations, less the sum of the following: (i) all cash expenditures incurred incident to the normal operation of TF2’s business, (ii) such amounts of cash that the Manager determines, at its sole and absolute discretion, shall be added to the Operating Reserve (as further defined herein), and (iii) those expenditures related to this Offering.
“Management Fee” means an amount equal to four percent (4.00%) of TF2’s revenues, which shall accrue until paid in connection with the distributions described above.
“Operating Reserve” shall mean those funds held by the Manager, at its sole and absolute discretion, in the Company’s operating bank account for the payment of expenses incurred in the ordinary course of its business.
In the event that the affairs of TF2 are being wound-up, the liquidating distributions shall follow the same order described above.
Net Sales Proceeds from the sales of parts will be split 75%/25% between TF2 and Owl Aerospace, respectively, until such Net Sales Proceeds reach $1.5mm in the aggregate, at which point they are split 70%/30% favoring TF2.
After the payment of expenses and funding of appropriate cash reserves, the Manager will distribute the Distributable Cash (if any) as follows:
Industry Risk: Consignment sales are heavily dependent on the airline industry’s need to repair its aircraft. If a force majeure event occurs, similar to COVID-19’s impact on airlines, the program’s ability to sell its parts may be diminished.
Inflation Risk: The industry is expected to finally reach a profit in 2023 – the first time since the Covid-19 pandemic – but unpredictable factors such as oil costs, war zones and ever-increasingly extreme weather patterns will continue to create more challenges for airlines. Matching capacity to demand, and keeping delays in check, will be the two biggest challenges the aviation ecosystem faces as schedules recover to roughly 92 percent of pre-Covid levels.
Pricing Risk: Pricing for commercial aircraft parts varies significantly depending on whether the certification for a given part has been properly maintained. The maintenance of such documentation is critical to the value of the Parts.
The Airbus A330 fleet is a high demand, long-range, and long fuselage aircraft, utilized widely in dense regional routes and select long-haul destinations.
With an in-service operational efficiency of 99.4%, the A330 is viewed as a reliable, ultra-modern, state-of-the-art airplane, with an impeccable safety record.
The inventory generated from the teardown is compatible with the A330-300, A330-700, A330-800 Neo, and A330-900 Neo used in 1,492 active aircraft. Some parts of the inventory are also compatible with the A320, further expanding the customer base.
The Aircraft has documented commercial trace, linked to 129 international air carriers, and has hours and cycles consistent to the aircraft age on time limited parts.
The Aircraft also has pre- block change structural enhancements and represent a valuable acquisition for $1,500,000.
TF2 will purchase the aircraft from Celerity Asset Management, LLC.
Inventory from the teardown will be prepared and shipped to the Consignee’s warehouse facility located in South Florida.
BMAS will collaborate with the Consignee to ensure the timely execution of variable return consignment program.
TF2 will execute a consignment agreement with the Consignee to manage the program and oversee material integrity.
The Consignee has all the relevant experience to successfully manage the processing and logistics of the material. BMAS has negotiated aircraft disassembly agreements with Jet Yard.
Carolina Financial Group (“CFG” or the “Manager”)), in collaboration with Blu Miles Aviation Service (“BMAS”), is raising a minimum of $1,500,000 and up to $1,950,000 in Preferred Membership Units to acquire an Airbus A330-200 MSN-358 Commercial Jet Aircraft for teardown and sale. CFG and BMAS will coordinate with Owl Aerospace on the effective execution of the program.
Founded in 1996, Owl Aerospace is a Florida Corporation. Owl Aerospace is a leading provider of high-quality aircraft engines, airframe spare parts and aviation services to domestic and international carriers of both passengers and cargo. Owl Aerospace has a history of managing complex parts and distrubtion programs . Owl Aerospace has a large and growing sales force with its office strategically located to provide enhanced customer satisfaction to their commercial and defense customers. Owl Aerospace manages consignment inventories that exceed $20M USD. Owl Aerospace is well positioned to sell, manage and inventory the A330-200 MSN 358.
From 2018 to 2023(Forecast), Owl Aerospace has grown steadily, at an average of 25% growth*.
*Past performance is not a guarantee of future results.
Like most businesses in the aviation industry, revenues contracted during the COVID-19 pandemic, but management has exceeded and recovered revenues in 2021 and is now exceeding pre-pandemic levels of 2019, as the industry and world recovers from the force majeure event.
Performed analysis of the inventory and furnished an acceptable acquisition price.
Negotiated a form of purchase agreement between Celerity, with the specifics of the acquisition to be consummated upon successful funding of TF2.
Visited facility to inspect/examine the quality and condition of Aircraft.
Held discussions with Jet Yard teardown facility.
Completed consignment/purchasing agreement with Consignee and Celerity Asset Management, respectively.
Raise $1,950,000 and consummate executed Purchase Agreement to acquire Aircraft from Celerity Asset Management
Enter into Consignment Agreement with Owl Aerospace as consignment agent for Teardown Funding #2, LLC.
Fund any ongoing expenses of TF2 (teardown, logistics, shipping, legal).
Actively manage implementation of program execution in partnership with the Consignee to maximize return timing.
There will be a two-tier split between TF2 and Owl Aerospace (1) 75%/25% to TF2 and Owl Aerospace, respectively, until $1.5M Net Sales Proceeds have been achieved, and then (2) a 70%/30% split thereafter to TF2 and Owl Aerospace, respectively. The Net Sales proceeds subject to either split are based on the gross sales of the aircraft parts less approved expenses.
The funds received pursuant to the consignment split above represent TF2’s revenue. The tables below present two scenarios pertaining to TF2’s financial metrics; it is expected that no revenues will be received in the first three months following the Initial Closing of the Offering due to the Aircraft teardown timeline. The timelines below refer to the remaining 36 months of the consignment program, following the receipt of the harvested parts.
Table 1
Scenario 1 Assumptions
The model assumes that the inventory can generate $4,600,000 of gross sales in 39 months. (Airplane Parts at the valuations listed on pg. 20.)
The model assumes that the consignee will achieve gross sales equal to 67.75% of the targeted inventory.
The Model reflects a consignment split of 75%/25% for the first $1,500,000 in sales and 70%/30% thereafter.
At the end of the program there would be $1,600,000 of the 39 month target and an additional $2,000,000 of long-term (5 year) material that would support either a program extension or liquidation.
Table 2
Scenario 2 Assumptions
The model assumes that the inventory can generate $5,100,000 of Net Sales Proceeds in 39 months. (Airplane Parts at the valuations listed on pg. 20.)
The model assumes that the consignee will achieve gross sales equal to 82.25% of the targeted inventory.
The Model reflects a consignment split of 75%/25% for the first $1,500,000 in sales and 70%/30% thereafter.
At the end of the program there would be $1,100,000 of the 39 month target and an additional $2,000,000 of long-term (5 year) material that would support either a program extension or liquidation.
The difference between the two scenarios above is the timing of the sale of specific large parts, including the landing gear, APU, flight surfaces and nacelles.
The scenarios above are hypothetical illustrations of mathematical principles based on best estimates of TF2’s financial metrics and cannot be guaranteed to be accurate. Please see guidance regarding forward-looking statements.
A full financial model for this offering is available upon request or on this Offering’s webpage at investments.carofin.com
After the payment of expenses and funding of appropriate cash reserves, the remaining funds, if any, are referred to as “Distributable Cash” and distributed in the following order:
The Airbus A330 is a wide-body aircraft developed and produced by Airbus. Several derivatives of the A300 exist after Airbuses’ first airliner in the mid-1970s. Next came the development of the A330 Twin Jet parallel to the A340 Quad Jet. Both designs were launched with their first orders in June 1987.
The A330-300 was Airbus’ first variant of the A330. It took its maiden flight in November 1992 and entered service with Air Inter in January 1994. The slightly shorter A330-200 variant followed in 1998.
The A330 shares its airframe with the early A340 variants, having two-main landing gear legs instead of three, lower weights, and slightly different lengths. Both airliners have “fly-by-wire” controls and a similar glass cockpit.
Also, the A330 was Airbuses’ first airliner to offer a choice of engines: the General Electric CF6, Pratt & Whitney PW4000, or the Rolls-Royce Trent 700. The A330-300 has a range of 11,750 km or 6,350 nmi with 277 passengers, while the shorter A330-200 can cover 13,450 km or 7,250 nmi with 247 passengers.
Other A330 variants include the A330-200F dedicated freighter, the A330 MRTT military tanker, and the ACJ330 corporate jet. The A330 MRTT was proposed as the EADS/Northrop Grumman KC-45 for the U.S. Air Force's KC-X competition but lost to the Boeing KC-46 in an appeal after an initial win.
In July 2014, Airbus announced the re-engineering of the A330 launching the A330 NEO (New Engine Option) comprising A330-800/900, which entered service with TAP Air Portugal in December 2018. With the exclusive, more efficient Trent 7000 turbofan and improvements including sharklets, the A330-800/900 offers up to 14% better fuel economy per seat. Earlier A330s (200/200F/300) are now called A330 CEO (Current Engine Option).
Turkish Airlines is currently the largest operator of these aircraft with 64 airplanes in its fleet. As of January 2022, A330 orders stood at 1,839, of which 1,527 had been delivered and 1,446 were in service with 131 operators. The global fleet had completed more than 13 million flights over 58 million block hours since its entry into service.
The A330 is the third most delivered wide-body airliner after the Boeing 777 and Boeing 747. It competes with the Boeing 767, smaller variants of the Boeing 777 and the 787. It is complemented by the larger Airbus A350, which succeeded the four-engine A340.
As of August 2022, A330 family aircraft orders stood at 1,759, of which 1,543 had been delivered and 1,456, comprising 596 A330-200s, 38 -200Fs, 743 -300s, 4 -800s and 75 -900s, were in airline service with 134 operators.
The inventory harvested from A330-200 Airframe MSN 358 DOM 2000 will provide ample collateral for the investment. The following table outlines the function level values of the program during the program term.
The inventory has been assessed by Blu Miles Aviation Services* at the following values:
A Copy of the inventory valuation by BMAS is available upon request or in the diligence folder for this Offering at investments.carofin.com.
*Blu Miles Aviation Services has a financial interest in this transaction that is not dependent upon successful completion of the consignment program.
Alon Cohen - President
Alon founded Owl Aerospace in 1996. Previously, Alon served in the Israel Defense Force as a Military Intelligence Officer between 1990-1995. Alon's career has been exclusively dedicated to Owl Aerospace.
Alon started his BA in Accounting and Economics at Tel Aviv University and graduated from Florida International University as a Bachelor Of Accounting with Cum Laude honors. Alon is fluent in English, Spanish and Hebrew.
Katia Katz - CEO
Katia joined Owl Aerospace in 2002. Recently, Katia celebrated 20 years at Owl Aerospace. Previously, Katia worked at First Class Air Services from 2000 to 2002. In addition, Katia worked as a Customer Service Manager for Aerocontinente Airlines from 1991 to 1999.
Katia graduated in 1991 from Cenfotur College in Lima with a Bachelor's Degree in Business Administration.
Andrea Dardano - VP of Sales
Andrea joined Owl Aerospace in 2009. Previously, she was an intern at Iberia Airlines. Andrea has also acquired a Private Pilot license. Since she moved to the USA, Andrea has been working for Owl Aerospace. Andrea Graduated from European University of Madrid (UE) and is Fluent in English and Spanish.
Tatiana Ciaramella - Director of Marketing
Tatiana joined Owl Aerospace in 2015. Previously, she worked for 10 years in Movistar Peru as an Accounting Manager of big businesses Sector in Peru (private and government). In addition she implemented systems in Industrial and Telecommunication companies since 2000.
Tatiana graduated in 2000 as a Systems Engineer in Federico Villarreal University in Peru and has a Master of Science Degree in the same University. Fluent in English and Spanish.
Both a creative entrepreneur and seasoned senior business executive, David Deal possesses a diverse background ranging from Fortune 500 firms to small start-up companies, and a penchant for driving companies to excel.
An innovator with proven abilities in developing and launching new market-leading products and services, and a champion of Lean and Six Sigma principles, Dave has transformed the companies he has consulted with and worked for, guiding them to high growth and market success. Through improved management techniques, solid team building, a commitment to quality and an unwavering devotion to customer care, he has helped complex organizations thrive and prosper, creating a value for customers and shareholders alike.
A former US Marine Corps officer and holder of a Master of Science degree in Integrated Logistics Support, Dave has distinguished himself as a thought-leader and problem-solver in his 30-plus-year career in aviation technology. He has served in strategic leadership roles with some of the aviation industry’s most respected manufacturing and logistics companies, including Thales Aerospace, Pacific Scientific Aerospace (a division of Meggitt), Dassault Systems, Rockwell Collins, VAS Aero Services and other global aviation manufacturing and service organizations.
Dave launched Blu Miles Aviation Service 2014 as an aviation management consulting firm focused on Service Life Cycle Optimization. BMAS will serve as a management consultant to Teardown Funding #2, LLC.
Bruce has been an investment banker and entrepreneur for over 30 years. His professional activity centers around private finance and the broader support of entrepreneurs and private business owners. This has included the creation of Carolina Entrepreneur in 2009, an annual business retreat that brings together experienced entrepreneurs from around the U.S.
Bruce is the Founder and CEO of Carolina Financial Group, LLC (CFG), an investment bank that includes Carolina Financial Securities, LLC, a FINRA registered broker/dealer that has privately placed over $1.1B of financing for young and middle market companies since 1996, and where Bruce leads the banking team. In early 2005 he founded Rehabilitation Support Services, LLC (RSS) which distributes and supports technology solutions for use in addiction treatment and criminal justice applications related to substance abuse. Most recently, Bruce has launched Carofin, LLC, another FINRA member broker/dealer focusing on increasing the accessibility of private investments.
Before founding CFG, Bruce spent eight years with CS First Boston (CSFB), in New York, where he was a Director in the Investment Banking Department and primarily responsible for U.S. capital market financings for Pacific rim-based companies and governments. Prior to CSFB, he started his investment banking career as a corporate finance specialist at Bank of America in San Francisco, working with major U.S. and foreign corporations. Before entering investment banking, Bruce served as a Special Warfare Officer (UDT / SEAL) in the United States Navy.
Bruce graduated in 1979 from Duke University with a B.S.E. in Civil Engineering, completing a second major in Public Policy Studies. He is on the Board of Directors for the North Carolina Aquarium. He and his wife have four children and live in Brevard, North Carolina.
This term sheet summarizes the principal terms of the Preferred Membership Units (the “Preferred”) of Teardown Funding #2, LLC, a North Carolina limited liability company (“TF2” or the “Company”). No legally binding obligations will be created until definitive agreements are executed and delivered by all parties.
Teardown funding #2, LLC is a North Carolina limited liability company recently organized and managed by Carolina Financial Group, LLC (the “Manager”) to raise capital by way of the issuance and sale of preferred membership units (the “Preferred Units”) for the acquisition, teardown, and consignment of the parts harvested (the “Harvested Parts”) from an Airbus A330-200 (the “Aircraft”).
{-text.justify} The Aircraft will be acquired from Celerity Asset Management, LLC (“Celerity”), torn down by Jet Yard Solutions, LLC (“Jet Yard”) and the harvested parts consigned to Owl Aerospace, Inc. (“Owl Aerospace”).
Teardown Funding #2, LLC, a North Carolina limited liability company.
Preferred membership units, with the issuance and sale thereof referred to herein as the “Offering”.
Individuals and entities qualified meeting the definition of “Accredited Investor” under SEC Rule 501 (each an “Investor” and together the “Investors”)
A minimum of $1,500,000 (the “Minimum Offering Amount”) and up to $1,950,000.
Funds raised pursuant to this Offering will be maintained in an escrow account at an FDIC insured banking institution (the “Custodian”) until TF2 has received at such Custodian’s account, through a combination of cash subscriptions for the Preferred Units and/or alternative consideration, such as an Owl Contribution (as further defined herein) the Minimum Offering Amount. At such time as the Minimum Offering Amount is received by the Custodian, the funds will be released to TF2 (the “Initial Closing”).
In the event that the Company fails to receive the Minimum Offering Amount on the Termination Date (as further defined herein), funds held with the Custodian will be returned to Investors with no interest thereon. Funds will not earn the Accruing Preferred Return (as further defined herein) until the Initial Closing.
Each Preferred unit will be priced at $1.00, with the Company’s post-money, fully diluted capitalization valued at $1,950,000 if the Offering is fully subscribed.
A description of how the funds raised in the Offering are likely to be used in available under “Use of Proceeds” following this term sheet. TF2 may utilize the Minimum Offering Amount for the purchase of the Aircraft immediately following the Initial Closing and allocate additional funds received through this Offering to other budget items.
The Preferred Units are available for purchase until the earlier of (i) the full subscription of the Offering, or (ii) June 30th, 2023 (with the earlier thereof being referred to herein as the “Termination Date”)
For as long as an Investor has unreturned capital contributions, such Investor shall earn an “Accruing Preferred Return” on such unreturned capital contributions as if it were interest, cumulative but not compounding, in the amount of 14.00% per annum.
The Manager shall make monthly distributions of Distributable Cash (as further defined herein) if the Manager determines, at its sole and absolute discretion, that Distributable Cash is available. Such distributions shall be made in the following order with no category being entitled to distributions until the previous category is fully satisfied:
First, to the Investors holding Preferred Units, on a pari passu and pro-rata basis, until their accrued but unpaid Accruing Preferred Return is reduced to zero;
Second, to the Manager to the extent of the accrued but unpaid Management Fee (as further defined herein) is reduced to zero.
Third, to the Investors holding Preferred Units, on a pari passu and pro-rata basis, until their unreturned capital contributions are reduced to zero;
Thereafter, 80% to the Investors holding Preferred Units, on a pari passu and pro-rata basis, and 20% to the Manager, with the Investors and Manager receiving such distributions on a pari passu basis.
“Distributable Cash” means all cash, revenues, and funds received by TF2 from its operations, less the sum of the following: (i) all cash expenditures incurred incident to the normal operation of TF2’s business, (ii) such amounts of cash that the Manager determines, at its sole and absolute discretion, shall be added to the Operating Reserve (as further defined herein), and (iii) those expenditures related to this Offering.
“Management Fee” means an amount equal to four percent (4.00%) of TF2’s revenues, which shall accrue until paid in connection with the distributions described above.
“Operating Reserve” shall mean those funds held by the Manager, at its sole and absolute discretion, in the Company’s operating bank account for the payment of expenses incurred in the ordinary course of its business.
In the event that the affairs of TF2 are being wound-up, the liquidating distributions shall follow the same order described above.
The management of TF2 shall rest solely with the Manager, except that the Manager shall not take any of the following actions without the written consent of those Investors holding at least 67% of the Preferred Units issued and outstanding at the time such consent is sought (a “Supermajority”):
Liquidate, dissolve, or wind-up the affairs of TF2 or sell all or substantially all of the Harvested Parts;
Amend, alter, or repeal any provision of TF2’s operating agreement in a manner adverse to the Preferred Units;
Create or authorize the creation of or issue any other security convertible into or exercisable for any equity security unless the same ranks junior to the Preferred Units with respect to its rights, preferences, and privileges, or increase the authorized number of Preferred Units.
Terminate or extend the Consignment Agreement (as further defined herein) with Owl Aerospace
Investors shall receive quarterly and annual income statements, cash flow statements, and balance sheets from TF2 along with an annual capitalization schedule. A Supermajority may request that TF2 have its financial audited by Goldman & Company, CPAs of Marietta, Georgia.
On or before the Initial Closing, TF2 shall enter into a “Consignment Agreement” governing the consignment of the Harvested Parts on terms substantially similar to those described herein.
The Consignment Agreement shall expire on the 39 month anniversary of the Initial Closing, subject to the Extension Option(s) below.
It is expected that no Net Sales Proceeds will be generated during the first three months following the Initial Closing due to the timeline associated with the teardown of the Aircraft, with sales of the harvested parts continuing for 36 months after the receipt of the Harvested Parts by Owl Aerospace.
TF2 shall have the option to terminate the Consignment Agreement upon the achievement of $5,100,000 in Net Sales Proceeds.
At such time as commercially reasonable, the Manager shall seek from a Supermajority a vote on whether to (i) terminate, or (ii) extend for a one year period the Consignment Agreement (the “Extension Option”) for up to two times.
In the alternative to exercising an Extension Option, a Supermajority may choose to sell the remaining Harvested Parts in a competitive auction (the “Liquidating Auction”).
BMAS shall have the option, but not the obligation, to purchase the Harvested Parts for $1.00 above the highest price offered in the Liquidating Auction, provided that BMAs is able to secure at least 3 arms-length bids in the Liquidating Auction.
Owl Aerospace shall make a capital contribution, in cash or in-kind, to TF2 of at least $195,000 in exchange for Preferred Units. In-kind capital contributions may include, but not be limited to, a deposit for the purchase of the Aircraft (each a “Owl Contribution”).
During the term of the Consignment Agreement, the Net Sales Proceeds (as further defined herein) shall be divided between TF2 and Owl Aerospace as follows: 75% to TF2 and 25% to Owl Aerospace until the aggregate Net Sales Proceeds equal $1,500,000, and thereafter 70% to TF2 and 30% to Owl Aerospace.
Notwithstanding the foregoing, Owl Aerospace may retain 100% of the Net Sales Proceeds to the extent that Owl Aerospace wishes to retain such incremental Net Sales Proceeds as reimbursement for the Budgeted Expenses (as further defined herein).
“Net Sales Proceeds” means (a) the amount of the gross sales price for a given Harvested Part as evidenced by the invoiced amount for such Harvested Part including, but not limited to: any restocking fees (without set-off for any repairs) less any expenses which are permitted under the Consignment Agreement and are required in the repair, overhaul, refurbishment, recertification or modification of such Harvested Part as a condition of the sale, including credit card and bank fees, agent fees, duties and shipping and packing costs; and (b) the gross amount of the exchange fees for a given exchanged Harvested Part, less shipping and packing costs and duties, but without any offset for the expenses incurred in connection with the repair, overhaul, refurbishment, recertification or modification of such exchanged Harvested Part.
TF2 shall pay or reimburse Owl Aerospace for the following expenses, up to the actual amount of such incurred expenses but not to exceed the total below (the “Budgeted Expenses”):
In the event that the actual expenses exceed the total Budgeted Expenses, Owl Aerospace shall be solely responsible for such excess.
On or before the tenth (10th) day of each month, Owl Aerospace shall remit to TF2 its share of the Net Sales Proceeds. Net Sales Proceeds shall be remitted following the month in which the earlier the following occurs: (i) the proceeds are collected for the sales of such Harvested Parts, or (ii) 60 days from the last day of the month in which the sale/exchange of the Harvested Part occurred.
If any payment due from Owl Aerospace to TF2 is not received by its due date, such late payment shall incur interest from its original due date until the actual date payment is received at a rate equal to the Wall Street Journal’s Prime Rate plus four percent (4.00%) per annum.
Owl Aerospace shall provide monthly sales reports to TF2 on or before the 10th day of each month along with on-line real time access to its inventory data relating to the Harvested Parts.
Certain Harvested Parts may remain unsold, not be certifiable, or be deemed obsolete and therefore may be disposed for lower or no value.
Certain Harvested Parts may be subject to Owl Aerospace’s Return Material Authorization (“RMA”) which shall be attached as an exhibit to the Consignment Agreement.
Owl Aerospace shall sell the Harvested Parts prior to selling similar parts it has in its own inventory, provided the Harvested Parts and Owl Aerospace’s own parts are equivalent in terms of tag date, tag source, and trace.
TF2 may, at its sole and absolute discretion, sell one or more of the Harvested Parts using its own marketing efforts (each a “Recalled Part”). In the event of a sale of a Recalled Part, TF2 shall pay to Owl Aerospace 15% of the Net Sales Proceeds from such Recalled Part(s).
Owl Aerospace shall be solely responsible for all insurance coverage of the Aircraft and the Harvested Parts from the time of the purchase of the Aircraft until the termination of the Consignment Agreement.
Each of the following (among others) shall be constitute an “Even of Default” under the Consignment Agreement:
Failure by Owl Aerospace to make any payment within 5 business days of such payment’s due date;
Failure by Owl Aerospace to observe or perform any obligation under the Consignment Agreement and continuing such default for a period of 10 business days;
BMAS is a consulting firm specializing in the commercial aircraft, maintenance, repair, and overhaul industry and will provide consulting services to TF2 and the Manager.
For such services, BMAS shall receive (i) a one-time consulting retainer equal to 3.5% of the Aircraft’s acquisition price (including necessary ancillary expenses) of $1,788,500.00, (ii) 50% of any Management Fee, and (iii) 50% of any distributions made to the Manager.
Carolina Financial Securities, LLC (“CFS”), an affiliate of the Manager, is engaged by TF2 to act as the placement agent for this Offering and will receive a placement fee equal to 5.00% of the gross proceeds received by TF2 in the Offering. CFS may share up to 50% of its placement fee with Carofin, LLC, an affiliated broker-dealer, for its assistance in the placement of the Preferred Units.
What is Carofin?
Carofin is a FINRA broker dealer, an investment bank headquartered in Brevard, North Carolina, that specializes in financing smaller businesses. Carofin’s parent company Carolina Financial Group, LLC, was established in 1995 and its affiliates have privately placed over $1.2 billion of debt and equity securities.
Is this security registered with the Securities Exchange Commission (S.E.C.)?
No. It is being privately placed under Rule 506c of Regulation D of the S.E.C.
Must Investors in the Company be Accredited Investors?
Yes. They must have household income of $300,000 (for married couples) OR a net worth of $1,000,000, excluding the value of their primary residence, OR qualify for an institutional category of investor.
Will Investors Continue to Receive Information About the Security After Issuance?
Given its role as the administrative agent, CFG Financial Services is able to keep Investors informed about any unexpected changes in the Issuer's business and general operational updates.
What if I have questions in the future about the Business’s performance?
Carofin will distribute updates to investors at least quarterly, including account statements. You should feel free to also email Carofin at [email protected] or telephone us at 828.393.0088
Company Specific FAQ can be provided upon request.
AN INVESTMENT IN THE SECURITIES IS SPECULATIVE AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL MEANS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT AND HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT. AN INVESTMENT IN THE SECURITIES OFFERED HEREIN SHOULD NOT BE A MAJOR PART OF YOUR INVESTMENT PORTFOLIO. YOU SHOULD REVIEW THE RISKS OF THIS INVESTMENT WITH YOUR LEGAL OR FINANCIAL ADVISORS.
THIS OFFERING INVOLVES SUBSTANTIAL RISKS. THESE RISKS INCLUDE, BY WAY OF ILLUSTRATION AND NOT LIMITATION, THE FOLLOWING: RISKS ASSOCIATED WITH THE FACT THAT THE MEMBERS WILL NOT HAVE THE RIGHT TO VOTE ON OR APPROVE MOST DECISIONS REGARDING THE BUSINESS AND, AS SUCH, WILL NOT BE IN CONTROL OF THEIR INVESTMENTS IN SECURITIES OF THE COMPANY AND THE BUSINESS; AND THE OPERATION OF THE COMPANY INVOLVES TRANSACTIONS BETWEEN THE COMPANY, THE MANAGER, AND THE OWNER WHICH MAY INVOLVE CONFLICTS OF INTEREST.
THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM, AND WITH THE PRIOR CONSENT OF THE MANAGER, WHICH CONSENT MAY BE WITHHELD IN THE MANAGER’S SOLE DISCRETION. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
SOME OF THE INFORMATION IN THIS PRESENTATION MAY CONTAIN “FORWARD-LOOKING” STATEMENTS. YOU CAN IDENTIFY SUCH STATEMENTS BY THE USE OF FORWARD-LOOKING WORDS SUCH AS “MAY,” “ANTICIPATE,” “ESTIMATE,” “COULD,” “SHOULD,” “WOULD,” “EXPECT,” “BELIEVE,” “WILL,” “PLAN,” “INTEND,” “PROJECT,” “PREDICT,” “POTENTIAL” OR OTHER SIMILAR WORDS. THESE TYPES OF STATEMENTS DISCUSS FUTURE EXPECTATIONS OR CONTAIN PROJECTIONS OR ESTIMATES WHICH MAY OR MAY NOT HAPPEN AS PROJECTED HEREIN. WHEN CONSIDERING SUCH FORWARD-LOOKING STATEMENTS, YOU SHOULD KEEP IN MIND THE RISK FACTORS LISTED BELOW, WHICH COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT.
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN CONJUNCTION WITH THE OTHER INFORMATION ABOUT THE SECURITIES BEFORE PARTICIPATING IN THIS OFFERING. THE RISKS DISCUSSED IN THIS PRESENTATION CAN ADVERSELY AFFECT THE COMPANY’S OPERATION, OPERATING RESULTS, FINANCIAL CONDITION AND PROSPECTS FOR SUCCESS. THIS COULD CAUSE THE VALUE OF THE SECURITIES OFFERED HEREIN TO DECLINE AND COULD CAUSE YOU TO LOSE PART OR ALL OF YOU INVESTMENT. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES THE COMPANY FACES BUT DO REPRESENT THOSE RISKS AND UNCERTAINTIES KNOWN TO THE COMPANY AND THAT THE COMPANY BELIEVES ARE MATERIAL TO THE COMPANY’S FUTURE OPERATING PERFORMANCE.
The Securities being offered should be considered a speculative investment. The ability of the Company to achieve its objectives may be determined by factors beyond its control that cannot be predicted at this time. Consequently, there can be no assurance that the Company’s efforts to continue its business operations will prove to be sufficient to enable the Company to generate the funds required to make distributions. Anyone investing in the Securities should do so only if they are financially able to sustain the loss of their entire investment and should recognize that such a possibility exists.
The Issuer’s business is dependent on the airline industry’s need to repair its aircraft. If the airline industry’s need to have its aircraft repaired were greatly diminished, it could affect the Issuer’s ability to sell parts to Airlines , third party maintenance, repair, and overhaul companies.
As this security is a private transaction, there is currently no public market for the securities being offered herein. These Securities are not a publicly registered securities and will have no secondary sale liquidity.
Teardown Funding #2, LLC is an SPV founded for this transaction. While the management team and consignee are well established, there has not yet been a proof of concept for this transaction.
Units may be purchased by the affiliates of the Issuer, or by other persons who will receive fees or other compensation or gain dependent upon the success of the Offering. Such purchases may be made at any time and will be counted in determining whether the required minimum level of purchases has been met for the closing of the Offering. Therefore, Investors should not expect that the sale of sufficient Units to reach the specified minimum, or in excess of that minimum, indicates that such sales have been made to investors who have no financial or other interest in the Offering, or who otherwise are exercising independent investment discretion.
The sale of the specified minimum, while necessary to the business operations of the Issuer, is not designed as a protection to investors, or to indicate that their investment decision is shared by other unaffiliated investors. Because there may be substantial purchases by affiliates of the Issuer, or other persons who will receive fees or other compensation or gain dependent upon the success of the Offering, no individual investor should place any reliance on the sale of the specified minimum as an indication of the merits of the Offering. Each investor must make his own investment decision as to the merits of this Offering.
The rights of the Company to foreclose upon, repossess, and dispose of the Aircraft Parts is likely to be significantly impaired (or at a minimum delayed) by by federal bankruptcy law if bankruptcy proceedings are commenced by or against Consignee . Under the U.S. Bankruptcy Code, a secured creditor, such as TF2 - in its role as Consignor - is prohibited from foreclosing upon or repossessing its security from a debtor in a bankruptcy case without prior bankruptcy court approval.
Any substantial decline in the demand for products sold by the Issuer (such as parts related to specific, older airframes) including, but not limited to, the introduction of new technology or airframe types, may cause a decline in the market value of Issuer’s product and negatively impact the Issuer’s financial performance.
Pricing for commercial aircraft parts varies significantly depending on whether the certification for a given part has been properly maintained. While the consignee has represented that it has verified such certification and that its record systems are adequate regarding parts certifications, the maintenance of such documentation is critical to the value of the Aircraft Parts.
The rapid spread of a contagious illness such as the coronavirus (COVID-19), or fear of such an event, can have a material adverse effect on the demand for worldwide air travel and therefore have a material adverse effect on the Issuer’s business and results of operations. Similarly, travel restrictions or operational issues resulting from the rapid spread of contagious illnesses may have a material adverse effect on the Issuer’s business and results of operations.
Success for the Issuer’s business depends, in part, on the quality and safety of the inventory lot products. If the products are found to be defective or unsafe, or if they otherwise fail to meet consumer’s standards, relationships with customers or consumers could suffer.
The Issuer’s projects are subject to international, federal, and state laws, as well as agencies including, but not limited to, the Department of Transportation and the Federal Aviation Administration. As with all airline-related industries, the Issuer’s projects are expected to have a variety of regulatory oversight as development proceeds. The Issuer and consignee intend to conduct their business activities in a compliant manner and in accordance with all applicable laws but may still be subject to accidents or other unforeseen events which may compromise its performance, and which may have adverse financial implications.
Changes in the laws, regulations and policies including the interpretation or enforcement thereof, that are germane to the Issuer’s industry, can affect its business including changes in accounting standards, tax laws, data privacy as well as anti-corruption laws. Additionally, as the Consignee and issuer continue to sell and expand its international business, it may be subject to laws relating to selective distribution, environmental or climate change laws, trade accords and customs regulations could adversely affect the Issuer’s distribution endeavors.
The Issuer through the Consignee competes with other Aircraft part supply companies in the industry. Competitors include companies that may have greater financial and other resources than the Issuer. Additionally, these competitors may use pricing or other strategies to prevent the Issuer from achieving its business development objectives. This may have a material adverse impact on the financial position and prospects of the Issuer.
As a result of the discretionary nature of air travel, the airline industry has been cyclical and particularly sensitive to changes in economic conditions. During periods of unfavorable or volatile economic conditions in the global economy, demand for air travel can be significantly impacted as business and leisure travelers choose not to travel, seek alternative forms of transportation for short trips or conduct business through videoconferencing.
The Investors will have limited ability to participate in any manner in the management of the Issuer or its day-to-day decisions. Neither the Investors nor the Issuer will have the ability to participate in any manner in the management of the Consignee or its day-to-day decisions.
Due to the nature of this opportunity, the SPV, has a significant reliance on the Consignee, as they are the only distributor and seller of the SPV’s inventory parts.
The Issuer reserves the right to accept or reject any proposed investment in its sole discretion. Subject to this discretion, it intends to accept investments on a “first-come, first-served” basis, with the consequence that Investors will be allocated a portion of the total Offering, based upon the amounts they have committed, in the order in which such commitments have been accepted. The Issuer is not required to accept all commitments tendered to it. There is no assurance, therefore, that your commitment will necessarily be accepted in whole or in part by it should it raise more or less funds than are needed to make its investments.
The financial projections contained in this Offering Summary and any supplements represent the Issuer’s estimated results of operations. The financial projections have been prepared upon the basis of assumptions and estimates which may differ from actual events and/or circumstances.
Potential investors should not rely exclusively on one aspect of the security structure, such as experience of the consignee of the Issuer or the collateral value of its inventory, when making an investment decision in order to participate in this Offering.
The Issuer has not requested and will not request any tax ruling from the IRS regarding the tax consequences of the Issuer’s activities. Accordingly, there is no certainty as to the tax consequences of participating in the Securities. The Issuer has not sought or obtained a legal opinion with respect to the tax treatment of the offering proceeds or issuance of the Securities. Accordingly, Investors are urged to consult your own tax advisor with respect to the federal and state tax consequences arising from participation in this Offering.
There is a possibility that the IRS will audit the Issuer’s income tax returns. If the Issuer’s income tax returns are audited, your return might also be audited.
No assurance can be given that the current Congress or any future Congress will not enact federal income tax legislation that could adversely affect the tax consequences of participating in the Securities.
In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. Prospective investors reviewing this Offering Summary should keep in mind other possible risks that could be important to the success of their investment in the Securities.
Important Disclosures
These securities have not been registered with the Securities and Exchange Commission (the “SEC” or the “Commission”), or with any state securities commission or any other regulatory authority. The securities are being offered in reliance upon an exemption from the registration requirement of federal and state securities laws and cannot be resold unless the securities are subsequently registered under such laws or unless an exemption from registration is available. Neither the SEC nor any other agency has passed on, recommended or endorsed the merits of this offering (this “Offering”) or the accuracy or adequacy of these confidential offering documents (the “Offering Package”). Any representation to the contrary is unlawful.
These securities are offered through Carofin, LLC, Member of FINRA/SIPC. Carolina Financial Securities is an affiliate of Carofin and both Broker-Dealers are affiliates of Carolina Financial Group, LLC. Documents have been prepared by Carolina Financial Securities and have been reviewed and approved by the management of the Company. The information contained herein has not been independently verified and is dependent on information provided by the Company to Carolina Financial Securities, LLC.
Our firms seek to present vital capital with meaningful investment opportunities through the fundamental analysis of the businesses we seek to finance. Such analysis is usually conducted through a First Principles approach.
When we provide you with a recommendation, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the recommendations we provide you. Here are some examples to help you understand what this means:
Proprietary Products: Our firms will often present investments that are only available through them, which may result in a higher placement fee. The Firms will receive the placement fee regardless of your investment performing as expected.
Our firms offer brokerage services to accredited investors, exclusively through the sale of private placements. the offerings we bring to market are carefully selected, and any recommendation you may receive from us will be limited to these offerings. Therefore, we may be unable to adequately compare the risks and benefits of the offerings we bring to offerings presented by other financial professionals. While our firms will often present new investments and discuss such investment’s risks and benefits with you, the ultimate authority to make such investment rests solely with you. Our firms do not hold any investor cash or securities, and securities offered by us often have no easily assessable market value, so our firms will not monitor the market value of your investment on an ongoing basis. The investments we present often require a minimum investment of $5,000 for equity offerings and $10,000 for debt offerings.
Fees and costs may reduce any amount of money you make on your investments over time. Our firms are mostly compensated through placement fees, which are payable by the issuer, meaning that the firms will be compensated by receiving a percentage of the funds raised in an offering, regardless of the investment performing as expected. Such placement fee is usually between 3% and 7% (please find the specific Placement Fee for this offering in the “Placement Agent Fees” section of the “Security Terms”. Given that different investments have different placement fees, we may often have a conflict of interest when presenting these investments to you. The Firms’ bankers are often compensated by receiving a percentage of the placement fee, and may have their own conflict of interest when presenting you with offerings they structure.
The information contained herein is for informational purposes only and is not intended for further distribution. The information does not constitute a complete description of any investment or investment performance. This document is in no way a solicitation nor is it an offer to sell securities nor is it advice or recommendation regarding any investment. The information is not directed to any person who is not believed to qualify under the definition of an Accredited Investor under the rules of Regulation D of the 1933 Securities and Exchange Act. No security listed in this document or otherwise offered through Carolina Financial Securities, LLC or Carofin, LLC may be purchased without prior receipt of a complete Private Placement Memorandum or other official offer to sell.
Due diligence materials related to this Borrower and the Offering are available to you through Carolina Financial Securities’ affiliated marketplace, Carofin. If you have not received your login information to access Carofin.com, please contact your company representative to have access granted.
The Company will not offer, sell or issue any Securities in any jurisdiction where it is unlawful to do so or where laws, rules, regulations or orders would require the Company, in its sole discretion, to incur costs, obligations or time delays disproportionate to the net proceeds the Company will realize from such offers, sales or issuances. Neither this Offering Package nor any subscription agreement shall constitute an offer to sell or a solicitation of an offer to purchase any Securities in any jurisdiction in which such transactions would be unlawful.
Private placements are high risk and illiquid investments. As with other investments, you can lose some or all of your investment. Nothing in this document should be interpreted to state or imply that past results indicate future performance, nor should it be interpreted that FINRA, the SEC or any other securities regulator approves of any of these securities. Additionally, there are no warranties expressed or implied as to accuracy, completeness, or results obtained from any information provided in this document. Investing in private securities transactions bears risk, in part due to the following factors: there is no secondary market for the securities; there is credit risk; where there is collateral as security for the investment, its value may be imped if it is sold. Please see the Private Placement Memorandum (PPM), and the complete list of contents of this Offering Package for a more detailed explanation of the securities Summary of Terms, Investor Suitability Standards, Confidentiality, Securities Matters and Risk Factors.
Caution Regarding Forward-Looking Statements
Certain statements in this Summary Offering Material may be “Forward-looking” in that they do not discuss historical facts but instead note future expectations, projections, intentions, or other items relating to the future. We caution you to be aware of the speculative nature of forward-looking statements as these statements are not guarantees of performance or results.
Forward-looking statements, which are generally prefaced by the words “may,” “anticipate,” “estimate,” “could,” “should,” “would,” “expect,” “believe,” “will,” “plan,” “project,” “intend,” and similar terms, are subject to known and unknown risks, uncertainties and other facts that may cause our actual results or performance to differ materially from those contemplated by the forward-looking statements.
Although these forward-looking statements reflect our good faith belief based on current expectations, estimates and projections about, among other things, the industry and the markets in which we operate, they are not guarantees of future performance. Whether actual results will conform to our expectations and predictions is subject to several known and unknown risks and uncertainties, including risks and uncertainties discussed in this Summary Offering Material.
Consequently, all the forward-looking statements made in this Summary Offering Material are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Risks, uncertainties, and factors that could cause actual results to differ materially from those projected are discussed in the “Risk Factors” section of this Summary Offering Material. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Considering these risks, uncertainties, and assumptions, the forward-looking events discussed in the Summary Offering Material might not occur.
State Securities Laws:
The Company will not offer, sell or issue any securities in any jurisdiction where it is unlawful to do so or where laws, rules, regulations or orders would require the Company, in its sole discretion, to incur costs, obligations or time delays disproportionate to the net proceeds the Company will realize from such offers, sales or issuances. Neither this Offering Package nor any subscription agreement shall constitute an offer to sell or a solicitation of an offer to purchase any securities in any jurisdiction in which such transactions would be unlawful.
PRIVATE PLACEMENTS ARE HIGH RISK AND ILLIQUID INVESTMENTS. AS WITH OTHER INVESTMENTS, YOU CAN LOSE SOME OR ALL OF YOUR INVESTMENT.
Securities offered through Carofin, LLC. Carofin, LLC and Carolina Financial Securities, LLC are affiliated Broker-Dealers, Members of FINRA/SIPC, and subsidiaries of Carolina Financial Group, LLC. For more information on the services we offer and details associated with such services, please see our Customer Relationship Summary.
This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all services referenced on this site are available in every state and through every advisor listed. For additional information, please contact Craig Gilmore at 828.393.0088 x 520 and/or [email protected]
The information contained herein is for informational purposes only and is not intended for further distribution. The information does not constitute a complete description of any investment or investment performance. This webpage is in no way a solicitation nor is it an offer to sell securities nor is it advice or recommendation regarding any investment. The information is not directed to any person who is not believed to qualify under the definition of an Accredited Investor under the rules of Regulation D of the 1933 Securities and Exchange Act. No security listed on this webpage or otherwise offered through Carofin, LLC may be purchased without prior receipt of a complete Private Placement Memorandum or other official offers of sale.
Carolina Financial Securities and Carofin only offer one type of alternative investment, those sold as private placements. Nothing on this website should be interpreted to state or imply that past results are an indication of future performance nor should it be interpreted that FINRA, the SEC or any other securities regulator approves of any of these securities. Additionally, there are no warranties expressed or implied as to accuracy, completeness, or results obtained from any information provided on this website. Investing in private securities transactions bears risk, in part due to the following factors: there is no secondary market for the securities; there is credit risk; where there is collateral as security for the investment, its value may be impaired if it is sold.
© Copyright 2023 Carofin. All Rights Reserved
