In the Headlines
November/December 2021

Capital Markets Continue to Lead Aircraft Finance

Airfinance Journal

Asset Finance Attorney Richard Sharman spoke to Airfinance Journal in their article detailing how capital markets have proven to remain an attractive financing vehicle for the aircraft finance sector, especially for leasing companies. Specifically, Mr. Sharman tells the publication that "private credit deals can be faster and available for smaller portfolios or individual aircraft and they should be expected to cost a premium versus public ABS deals."

"Public asset-backed securitisations (ABS) provide debt solutions for a specific set of transactions where there is a threshold portfolio size and enough diversification and it has to go through a process including rating agencies, etc…" said Mr. Sharman. "If you have five different lessees, then the ABS market is not open – for ABSs you need at least 15 aircraft and eight, nine or 10 different lessees. Therefore, the portfolio you are able to source will impact your available funding options and, at this time, good-quality assets are not as readily available as they were before the pandemic."

Mr. Sharman also discusses in great detail the bank market, agreeing that there is a strong appetite for capital market transactions and that he sees bank appetite coming back, especially lenders which have active capital markets franchises which will support the transaction with limited recourse warehouse debt to be taken out by a capital markets deal.

"Some banks have focused on relationship transactions with first or high second-tier coveted airline credits, often derisked with an insurance wrapper. The bank market for limited recourse warehouse to support an ABS has come back quite strongly as those banks look to support their capital markets franchises. However, limited recourse lending with no capital markets exit is likely to be the last to come back."

READ: "Capital Markets Continue to Lead Aircraft Finance"

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