Lease Finance Helicopter Transactions: Finding Creative Solutions During Covid-19
The ultimate objective in any aircraft disposal is the outright sale of a helicopter for cash. To make that happen, the buyer either has to have the capital themselves or have access to that capital through a lending facility. Needless to say, a helicopter is a highly capital intensive purchase and therefore self-funded cash buyers are hard to find. Unfortunately, what we're experiencing now with Covid-19 is that banks are either unable or unwilling to take on the risk of financing a helicopter asset even at a deeply discounted price. The results of this situation are obvious.
It is important for the Seller to get creative. The cost of ownership during the remarketing period is very high and sellers must keep perspective of costs associated with interest payments, maintenance, insurance and hangarage as they wait for a buyer to arrive. It may be time for Sellers to consider an alternative solution to an outright sale during a time when banks are stressed. Options available to a Seller include; (1) purchase financing or owner finance, in the form of a loan or a financial lease, (2) an operating lease, or (3) a hybrid of the two - for example, lease to purchase or discounted purchase options.
Through all of the proposed mechanisms, the seller maintains ownership and control of the helicopter through to the end of the term. There are numerous ways to structure these transactions to the benefit of both the Buyer and the Seller.
These structures require expertise in structuring and executing. For non-investment grade customers, many of the most profound risks can be mitigated through security deposits, legal structuring, cash collateral, maintenance reserves, and maintenance programs. In addition, strong relationships with MROs and operators are critical in risk mitigation, as well as understanding the challenges faced with specific airworthiness organizations or countries. Managing the early warning signs and understanding the Buyer’s business is imperative.
Working with someone who understands how to navigate the risks and complexities of these types of structures is key to a successful lease finance transaction. I have done business in nearly half the countries in the world, and dealt with the most complex jurisdictions and airworthiness authorities. My success in offering tip-to-tail helicopter solutions is driven by relationships with the best and most trusted resources in the industry. Covid-19 has certainly tested the helicopter market, but people are still buying and selling aircraft and IAM is up for the challenge of some creative transacting.
Brad Shaen
International Aviation Marketing (IAM)
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Brad Shaen is the Director and Founder of International Aviation Marketing Ltd., a helicopter sales, acquisition and advisory company that provides turnkey solutions to aircraft buyers and sellers across the globe. The company specializes in offshore oil & gas and utility sectors, but is also extremely well versed in the EMS, utility and VIP helicopter markets, along with Turboprop fixed wing aircraft.
This post was originally published on LinkedIn at https://www.linkedin.com/pulse/lease-finance-helicopter-transactions-finding-creative-brad-shaen/