44 Vol 23 Issue 8 2019 AVBUYERMAGAZINE http://www.AVBUYER.com
FINANCE AVBUYER.comFactors Impacting Ease of Borrowing
Within this broad overall lending infrastructure, which
as O’Sullivan says comprises “a fairly active funding
market at the moment with lots of new entrants,
each with its own access point”, there are many
other factors that determine how easy it will be to
finance an aircraft.
Age and condition always matter. But jurisdiction
is a key variant. “Some banks have a list of banned
jurisdictions,” says O’Sullivan.
“Even overflight of countries such as Pakistan, Iraq
and Afghanistan can be ruled out, making UK-India a
convoluted trip, for example. “If you are Turkish and
need to get back to Turkey regularly, some banks
would not be interested.”
This is where the higher-margin funds can come
in. They may be more prepared to take on more
problematic jurisdictions where a different legal
system might pose a greater risk of being able to get
control of the asset.
Examples include Kazakhstan, Arab countries –
and even Italy. But it will cost, with extra percentage
points on the loan. Funds are rubbing their hands
together at the prospect of funding loans for jets in
some African countries at 10 points above Libor,
according to one insider.
And as Jebely puts it, “most of my clientele is
international but I also handle deals in the US.Compared with pure domestic US financing
transactions, global transactions are generally
significantly more involved. This is due primarily to
distinctive regulatory regimes, financial transparency
habits and business cultures.”
One big uncertainty is the UK’s pending exit from
the European Union and how it will alter fundamental
issues such as where to base an aircraft. “No one
knows,” says Lodge. “We may not even benefit from
the fundamental nine freedoms of the air, if there is
no deal on withdrawal from the EU.”
But the UK does not have a monopoly on
complications. Even within the US “all states have
different tax rules,” Lodge notes.
All this points in the same direction, Jebely says:
“I represent many ultra-high-net-worth individuals
and corporate owners of aircraft, and my best advice
for any buyer or borrower is ‘be advised’, especially
given the complexity of these transactions and,
frankly, the fact that the business jet market globally
has more than its fair share of miscreants.”Apply to the Right Lender, First Time
Both brokers and lawyers will say that the loan
application must be made to the most appropriate
lender the first time. “One of the biggest mistakes,”
says O’Sullivan, “is to flood the market with your
application. Talk to a broker, talk to us, and then we’ll“Age and condition always matter. But jurisdiction is a key variant.
‘Some banks have a list of banned jurisdictions,’ says O’Sullivan.”
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