Aviation Finance

Aviation Finance - Vol 1 No. 4 October 27th 2011
Financing

GIC, Singapore's sovereign wealth fund gives major vote of confidence in aviation sector, as it makes a $300 m equity investment in Avolon, boosting the lessor's equity raised to date to $1.4 bn.

Just as storm clouds darken over deleveraging in Europe due to the euro debt crisis, and increased regulatory demands on capital, one of the world's most successful sovereign wealth funds, Singapore's Government Investment Corporation (GIC) has made a major equity injection into Dublin-based Avolon. The deal would see GIC become a major shareholder in Avolon alongside Cinven, CVC Capital Partners and Oak Hill Capital Partners, the private equity groups. The latest fundraising takes the total equity raised by the company since its formation to $1.4 bn.

Risk Management: Special Purpose Vehicles

Best of both worlds: Cayman Islands incorporated, Irish tax resident

The use of both Cayman Islands and Irish off balance sheet and on balance sheet special purpose vehicles (SPVs) in aircraft financings is well established. The SPV's role in the transaction is often to act either as an owner or as an intermediate lessor in a lease chain which passes rent up the lease chain or uses the rent paid by the aircraft operator so that it can be used to repay the borrowings used to acquire the aircraft. The SPV has a role to play in both finance and operating lease structures.

Investment in Aviation

As the aviation sector struggles to reward investors, shown in Q3 returns, not all parts of the complex have done badly

The aviation sector, along with other sectors, has been struggling to reward equity investors during 2011 and the performance of some share prices in the ten months to October has been extremely weak. Airlines, in particular, have been exceptionally poor performers as a mixture of persistent high fuel prices and fears about passenger and cargo demand have grown.

Bank Financing

European banking squeeze brings unintended consequences, such as fears for OEM suppliers' capital access

Continuing stress in the European banking system remains an important backdrop to the debate about aircraft funding. The unwinding of debt exposures, and especially dollar denominated debt, is creating movement in aircraft funding books that create challenges for OEMs, airlines, lessors and financiers.

  
Aviation Finance Vol. 1 No 4

This issue: equity when it is most welcome

Despite the myriad fears arising from the spectre of a double dip recession, we have been able to highlight during this past month the potential opportunities that exist in aviation finance. One example is the potentials of new providers of bank funding mainly from outside Europe, but not excluding it. The signal from the US Exim Bank that it will step into the breach is welcome too, but, perhaps, most welcome of all is the report of a commitment of private equity from Singapore's GIC, one of the world's most respected sovereign wealth funds to the young Irish based lessor Avolon.

Sales Finance

Embraer's mid market strategy, as it surpasses 1,000 sales

JOHN SLATTERY, Head of Sales Finance, Lessor Sales and Asset Management with Embraer, argues the merits of a 100 seat centric airliner in short-haul markets. He details the existing and potential scale of a global market for aircraft in the 70-120 seat range and outlines the strategy and development of Embraer’s E-Jet family of jets. By the end of 2011 China will be the country with the largest fleet of Embraer airplanes, second only to the USA. The OEM has now sold 1000 E-Jets to customers across the globe.

OEM Focus

COMAC builds traction for the C919

The Chinese OEM COMAC continues to build momentum around its narrowbody twin jet C919. Orders from ICBC Leasing and Sichuan Airlines during October have added 65 orders to the backlog and brings the overall order book to 175 units including options. The C919 is scheduled for first flight in 2014 (first commercial delivery planned in 2016) and is the most significant challenge to the strengths of both Airbus and Boeing in the mainstream short-haul marketplace, writes JOE GILL.

Deals

US 'white knights' reported as standing on sidelines ready to support aircraft funding

U.S. banks that could pick up slack or buy any loan portfolios up for sale as a result of the euro funding crisis include J.P. Morgan Chase & Co, Wells Fargo & Co, Bank of America, and Citi. Societe Generale and BNP Paribas have been scaling back their aircraft financing business in the wake of the sovereign-debt crisis and the dollar shortage hitting European banks. "It's bad news given European aircraft manufacturer Airbus and U.S. rival Boeing Co. are funded in dollars and French banks arrange about 30 p.c.of financing", DJ said.