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FINANCING

  
    
 

The ongoing turmoil in global capital markets has led to  a significant liquidity trough that negatively affects conventional lending’s availability. Aircraft transactions are challenged by inflated inventories, low aircraft valuations, increased creditworthiness requirements and stricter approvals.

 

In many instances, individuals or corporations, seeking refinancing for their existing aircraft or the acquisition of one, although enjoying sufficiently strong liquid positions to service a loan, cannot produce current financial statements in line with conventional lending credit risk’s requirements.

 

In other instances, where creditworthiness is not a factor, some buyers prefer considering alternative forms of financing such as Synthetic Leases often referred to as Off-Balance Sheet Loans.

 

Air Capital Partners can provide assistance in obtaining customized financing or leasing packages, including:

 

  
 

U.S. or International Aircraft Registrations

 

Conventional loans

 

Finance Lease (Capital Lease)

  • the lessee (customer or borrower) will select the asset;

  • the lessor (finance company) will purchase that asset;

  • the lessee will have use of that asset during the lease;

  • the lessee will pay a series of rentals or installments for the use of that asset;

  • the lessor will recover a large part or all of the cost of the asset plus earn interest from the rentals paid  by the lessee;

  • the lessee will pay off the loan balance at the end of the term and assume full ownership of the asset.

  • Terms 5- 7 years

  • Loan amortization 5-15 years

 

Asset Based

  • Asset-based lending is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken.

  • This type of lending is usually done when the normal routes of raising funds, such as the capital markets (selling bonds to investors) or normal unsecured or mortgage secured bank lending is not possible. This is usually because the company is in dire financial status. Thus, asset based lending can be compared to subprime lending. It is usually accompanied by higher interest rates.

  • A loan in which the lender cannot claim more than the collateral as repayment in the event that payments on the loan are stopped. Thus, a group of investors may purchase an asset with a down payment and the proceeds from a nonrecourse loan. In the event that the investment turns sour, the investors are not apt to lose more than the down payment and payments already made on the loan. The unpaid balance on the loan will be absorbed by the lender.

Operating Lease

  • An operating lease is a lease whose term is short compared to the useful life of the asset being leased. An operating lease is commonly used to acquire equipment on a relatively short-term basis. Thus, for example, an aircraft which has an economic life of 25 years may be leased to an airline for 5 years on an operating lease.

  • Under an operating lease the lessor leases the asset to the lessee for a fixed monthly amount, and also assumes the residual value risk of the vehicle.

 

 

 

 

 

 

 

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