Bringing you live news and features since 2006 

Comment: Is there value for private equity in aircraft finance?

RELATED TOPICS​

Aircraft finance, a business that was booming before the credit crunch struck, is now reeling, and many financial institutions are looking to sell these businesses.

Aircraft finance, a business that was booming before the credit crunch struck, is now reeling, and many financial institutions are looking to sell these businesses. Among them is stricken US financial conglomerate American International Group, which is seeking a buyer for its International Lease Finance Corporation aircraft leasing business.

ILFC, which has a book value of around USD7bn, is expected to attract bids from private equity groups including Thomas H. Lee Partners, Carlyle Group, Greenbriar Equity Group and Onex in the second round of an auction early next month.

Other institutions anxious to shed their aircraft finance businesses include Royal Bank of Scotland, part of an effort by the UK bank to sell off non-core activities after record losses entailed a massive injection of public funds that brought it into state ownership.

Private equity firms are already well established in the aircraft finance business buyers, since Terra Firma’s aircraft leasing platform, AWAS, acquired Pegasus Aviation Finance from Oaktree Capital in May 2007 for USD5.2bn. But now there are reasons why private equity players might be having second thoughts.

Aviation finance has always been surrounded by complex technical issues and financial uncertainties. While potentially highly expensive, it can be lucrative if conducted properly and if the business cycle is favourable.

With correct financing and security structures, in conjunction with effective tax planning, many of the inherent liabilities can be identified and accounted for. Many international aviation finance firms are headquartered in Ireland to take advantage of low corporation tax rates, an extensive double tax treaty network and well-qualified personnel.

But in the current economic environment, in which the notoriously unprofitable airline industry looks horribly vulnerable, it’s uncertain whether even these factors outweigh the risks. The result of the AIG and RBS sales will give a clue about whether the private equity firms can make the sums add up.

Latest News

News came last night from the US that the SEC has approved CBOE’s proposal to list and trade VanEck’s spot..
Irish domiciled funds surpassed EUR4.3 trillion AuM (Assets under Management) at end-March 2024, a 15 per cent increase in net..
European white label ETF platform, HANetf, has announced its total assets under management (AUM) has now exceeded USD4.31 billion...
New research from European ETF provider Tabula Investment Management shows investors are expecting improvements in ESG from the gold mining..

Related Articles

Timothy Rotolo, Range Funds
In 2023, Timothy Rotolo launched his business, Range Fund Holdings, the parent company for Range Indices and Range ETFs, followed...
Dan Miller, IQ-EQ
With just over a week to go till T+1 settlement begins in North America, Canada and Mexico, time is of...
Emily Spurling, Nasdaq
Last October’s ETF Express US Awards 2023 found Nasdaq winning Best Index Provider – ESG ETFs and Best Index Provider...
Vinit Srivistava, MerQube
Index provider, MerQube, launched in 2019, with the aim of providing a “technology-driven answer to the most complex, rules-based investment...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by