F A FINANCE AVBUYER.com
46 Vol 23 Issue 8 2019 AVBUYERMAGAZINE http://www.AVBUYER.comadvise on which lender to approach.”
That should start with a healthy dose of
scepticism. “Be realistic about the value of the
aircraft and the consequent loan-to-value impact,”
advises Jebely. ”Even in this market, it is possible
that you agreed too high a price for your new or
used aircraft.”
It also makes sense to work out the structure you
want early. Jebely says: “Think through your aircraft
ownership and registration structure in advance and,
ideally, have a clean and friendly enough structure in
place that allows a lender to ring-fence its collateral
without a restructure.”
And, he adds, decide early whether you are
willing to give a personal guarantee. “A personal
guarantee, especially on a full recourse basis, should
result in lower cost of funds.”
Clarity is also key, especially if cross-border issues
are already providing a cloud layer of complication.
“Present financial information coherently and
transparently. If there is financial information that you
do not wish to disclose, say so,” Jebely adds.
“Audited financial statements are always best, but
not always available.”
O’Sullivan adds that there are often problems in
demonstrating collateral. “Make sure it’s easy,”
she says.How to Remove the Chance of Problems
And to make sure the financing goes through with noproblems, says O’Sullivan, “improve how the deal
looks by picking a proper operator.” As Jebely says,
“not all operators are created equal – make sure
yours is professional and reputable.”
By the same token, “it is best for both you and
the bank that your aircraft is enrolled in an engine
program,” says Jebely.
Leasing is becoming more popular, says
O’Sullivan, mirroring the commercial aircraft market
where something like 75% of the global airline fleet
is leased.
“I see leases as the future for private aviation,”
she says. But they are not a magic bullet. “If you
think you’re getting around the residual-value issue
then you’re probably not looking hard enough,”
she says.In Summary...
Overall, doing deals across jurisdictions means
getting the best advice from those with expertise in
those areas, whether valuers or lawyers, and making
sure you know the extent of your own liabilities.
O’Sullivan spends a lot of time rewriting contracts
to make sure operators end up with responsibility for
operating issues, rather than owners.
Jebely expects the slowdown to continue “over
the next 12 months at least”. That may mean
relatively keen prices for aircraft. But that’s not much
use if the overall deal fails to tackle some of the
problems that could damage you most... “Think through your aircraft ownership
and registration structure in advance.”
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