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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 22, 1996
Pegasus Aircraft Partners II, L.P.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-18387 84-1111757
(State or Other Jurisdiction (Commission (IRS Employer
Of Incorporation) File Number) Identification No.)
Four Embarcadero Center, Suite 3550, San Francisco, CA 94111
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (415) 434-3900
N/A
(Former Name or Former Address, if Changed Since Last Report)
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Item 5 Other Events
As of September 30, 1996, Pegasus Aircraft Partners II, L.P.(the "Partnership")
reported an estimated net asset value of $8.69 per limited partnership unit
("Unit") outstanding. The Partnership had 7,255,000 Units outstanding at such
date which were issued at an original offering price of $20.00 per Unit. The
estimated net asset value at September 30, 1996 is based primarily upon an
independent appraisal of the Partnership's aircraft utilizing existing leases
and forecasts of residual values for the aircraft upon the expiration of the
leases, assuming an inflation rate of 3.0% per annum and discounting future cash
flows at 10%. The methodology used is similar to the methodology used to report
estimated net asset value in prior periods. There can be no assurance, however,
that the Partnership would receive the appraised values if the portfolio of
aircraft were liquidated.
To preserve the tax status of the Partnership, the transfer of units resulting
from the sale of units is generally limited to 5% of the total units outstanding
per year. The Partnership has never had to suspend transfers during the year to
remain below this threshold. Recently the partnership industry has seen
increased activity in the purchase and sale of limited partnership units through
tender offers. Based upon the Partnership's transfer methodology, 1996 is closed
with respect to transfers. During 1996 no tender offers were made and the volume
of Units transferred pursuant to sales amounted to 3.15% of those outstanding.
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Pegasus Aircraft Partners II, L.P.
Summary of Appraised Values of Aircraft Portfolio
As of September 30, 1996 (in millions)
<TABLE>
<CAPTION>
Estimated
Estimated + Present Value = Total
Acquisition Residual of Lease Appraised
Aircraft Current Lessee Costs(1) Value(2) Payments(2) Value
<S> <C> <C> <C> <C> <C>
McDonnell Aeromexico
Douglas DC-9 Airlines $ 8.9 $ 2.8 $ 0.7 $ 3.5
McDonnell Aeromexico
Douglas DC-9 Airlines 8.9 2.8 0.7 3.5
McDonnell(7) Continental
Douglas DC-10 Micronesia 18.3 6.8 2.8 9.6
McDonnell
Douglas MD-81(2) USAir, Inc. 10.0 3.7 1.9 5.6
McDonnell Trans World
Douglas MD-82 Airlines, Inc. 21.0 4.0 12.3 16.3
Airbus Industrie(5) Currently
A-300 off lease 28.1 8.1 -- 8.1
Lockheed Trans World(8)
L-1011 Airlines, Inc. 17.7 3.8 3.0 6.8
Boeing 727-200 Kiwi International(5)(6)
Advanced Air Lines, Inc. 11.7 2.2 -- 2.2
Boeing 727-200 Kiwi International(5)(6)
Non-Advanced Air Lines, Inc. 8.9 3.2 -- 3.2
Boeing 727-200(4) Continental
Advanced Airlines, Inc. 4.5 1.7 2.4 4.1
Boeing 727-200(4) Continental
Advanced Airlines, Inc. 4.1 1.9 1.3 3.2
September 30, 1996 Total $ 142.1 $ 41.0 $ 25.1 $ 66.1
December 31, 1995 Total $ 140.2 $ 35.0 $ 35.1 $ 70.1
</TABLE>
(1) Acquisition costs do not include acquisition-related fees of $3.0 million
paid to the General Partners. The amounts shown include additional investments
in the respective aircraft, including the hushkit purchased in 1996 for
approximately $1.9 million for the non-advanced aircraft formerly leased to
Kiwi.
(2) The aircraft is owned 50% by the Partnership. The remaining 50% is held by
an affiliated partnership, Pegasus Aircraft Partners, L.P.
(3) To calculate the present value, a 10% discount was applied to the future
lease payments and to the estimated residual value at the end of the current
lease term.
(4) The Partnership received these aircraft in 1995 as a part of the Airbus
A-300 settlement with Continental. Acquisition costs represent appraised value
at the time the Partnership took title.
(5) Aircraft is off lease. Appraised value represents approximate current market
value unencumbered by lease, which makes certain assumptions regarding its
condition. The General Partners believe that,
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considering related maintenance reserves held or return condition payments
received, this is an appropriate value.
(6) In connection with its bankruptcy, Kiwi filed a motion to reject both leases
on November 15, 1996, and the Partnership has commenced remarketing activities.
The Partnership will likely incur significant costs to re-lease the aircraft and
there could be a significant delay before the aircraft are redeployed.
(7) The original lease, as amended, with Continental was scheduled to expire on
October 31, 1996. The Partnership and Continental have entered into an agreement
in principle, subject to documentation, to extend the lease until mid-1998 at a
lease rate of $150,000 per month. The agreement in principle is reflected in the
table.
(8) In October 1996, TWA and the Partnership terminated the lease and TWA
returned the aircraft and paid the Partnership the October rent of $130,000 plus
$2,846,000, which represented rents due under the remaining term of the lease,
discounted at 5%. In addition, $3,000,000 was paid as an economic settlement for
non-compliance with certain lease return conditions. These amounts are reflected
in the table.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Pegasus Aircraft Partners II, L.P.
(Registrant)
By: Air Transport Leasing, Inc.
Administrative General Partner
Dated: November 26, 1996 By: /s/ Joseph P. Ciavarella
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Joseph P. Ciavarella
Vice President, Treasurer and
Chief Financial and Accounting Officer
