In this series we’ll be examining successful SPAC deals from the past both in the terms and circumstances of their de-SPAC processes and how they have weathered the storms that have followed after their public listings with research from SPACInsider contributors Anthony Sozzi and Sam Beattie.

The year was 2019. The volume of SPAC news was still such that SPACInsider could write posts on individual terms changes in SPAC S-1s. It was also a time when a SPAC overfunding its trust was relatively rare.

Monocle was one of just two of the 59 SPACs to IPO in 2019 with more than 100% funding to its trust (for trivia purposes, the other was Hennessy IV, which later combined with Canoo (NASDAQ:GOEV)). As such, it was a time of favorable macro conditions for SPAC teams within the SPAC market, but Monocle, which also included a full warrant in its units, was not done setting some firsts for that SPAC cycle.

For one, Monocle was led by President and CEO Eric Zahler who had several decades of executive experience in the aerospace industry accompanied by Board members that had crossed paths with him at orbital imaging company Maxar (NYSE:MAXR) and telecom satellite operators. This was a rare specialization for SPAC teams at the time.

Only 20 of the 1,170 SPACs that have listed since 2009 have wound up doing deals with companies involved in space, and only 12 have merged with companies in aviation, eVTOLs or air infrastructure. Among those that actually completed deals in the past 12 years, Monocle’s team has only one predecessor – the famous Social Capital Hedosophia I, which announced a combination with Virgin Galactic (NYSE:SPCE) three months before them.

Monocle in the end chose a much more conservative target than an enterprising space tourism venture, however. After a 10-month search, the SPAC announced its combination with AerSale, which provides aircraft maintenance as well as a fleet management tools and a marketplace for used and new aftermarket aviation parts.

It is very much a company doing the grunt work for commercial aviation industry, which, interestingly, forms a neater match with the types of companies SPACs are trying to do business with now than was the case at the beginning of the recent SPAC boom.

In 2019, AerSale generated $56.9 million in EBITDA from $304 million in revenue at an 18% margin, and it would continue to generate steady profitability in the years to come.  But, there was unfortunately turbulence ahead before its SPAC deal could close.

At announcement, the deal was to include $150 million from a senior secured revolving credit facility and later got a $75 million “first-in/last-out” credit facility. Although it was nearing close by the time November 2020 rolled around, Monocle’s 21-month transaction deadline meant that it would need an extension to get the last weeks it needed to dot the final “I”s and cross the last “T”s.

During this stage of the SPAC cycle, extension votes were generally routine drama-free affairs. But, when Monocle asked shareholders for more time, it saw about 93.7% of its trust redeemed. This would not be far out of step with transactions hitting votes in 2022, but, in 2020, SPACs hitting completion had an average of 38.3% of shares redeemed. Only 12 of the 66 SPACs closing that year had redemptions over 90%.

It was not a great mystery why Monocle shareholders balked at the time, however. The deal had initially been announced right as reports of a strange virus in China were reaching the news. By November 2020, the world was already gripped by the second wave of the COVID-19 pandemic and a company tied to the air travel industry seemed a frightening bet.

But, for Monocle, which was already close to closing the deal, this was a problem as it had a $75 million minimum cash condition to meet and only about $11.2 million in its trust post-redemptions.

So, the parties embarked on amending the deal. Monocle added a $60.5 million PIPE at $8 per share a few weeks after the extension vote in December 2020 and the SPAC’s sponsor agreed to forfeit about 80.5% of its promote and subjected 83% of its remaining promote shares to an earnout with a $13.50 price hurdle.

AerSale shareholders were meanwhile already set to get 3,00,000 extra shares in an earnout split across price targets of $13.50 and $15 after a September 2020 amendment. The new changes netted them an extra 100,000 at that same $13.50 hurdle and the minimum cash was reset to $60 million.

Few deals had required such hasty rewrites, but after AerSale then closed a few weeks later, it appeared that it was better for it. With the public SPAC shareholder washout already passed, the stock soared after completion and stayed aloft throughout its first year as a public company.

When it closed on December 22, 2020, Monocle shares were up to $12.20. One month later, they closed at $15. Outside of a few days in March 2021, the combined company never traded below $10 in its first year as a public company and three months after the deal’s lock-ups expired in September 2021 it closed at $14.40.

The company closed Thursday at $15.72, which is especially impressive considering it launched a secondary offering of 4,000,000 shares just three weeks ago. It has also already called all of its warrants on a cashless basis so that potential dilution hump has already passed.

The reasons for all of this are not particularly mysterious as AerSale has had consistently positive financial performance. At a time when the subject of SPAC target projections have been highly scrutinized, AerSale outperformed the key ones post-close with $89.3 million in EBITDA generated in 2021, 40% more than it projected for the year in its announcement presentation.

As a result, the company was valued in its final deal valuation at about 4.2x its 2021 EBITDA and 3.6x its 2022E EBITDA projections. This remains a significant discount to its listed peers like HEICO (NYSE:HEI) and TransDigm (NYSE:TDG), which trade at 8.9x and 9.3x today.

Zahler and his team have not attempted a repeat SPAC foray after their first go with Monocle. But, should the AerSale deal remain as the team’s only legacy in SPACland, it has still left its mark with the example of how successful deals can still be pulled from the teeth of difficult macro circumstances and curveballs in the closing process.