Transportation Finance

Transportation Finance uses the asset either as a security or as an investment. It relies on a broad range of funding tools: senior and junior debts, lease, securitization.

It is essentially a dollar denominated environment though some transactions may be structured in whole or in part in other currencies such as the EUR or the JPY.

It is key to determine who bears the “metal” risk, ie: who will get the asset on its balance sheets (and on the ground) at the end of the transaction. True lessors and operators are generally keen to bear that risk while financiers are adverse to this risk.

The more “junior” a financier is, the heavier metal risk it bears (and thus, the more sophisticated it has to be).

Typical values

A newly built regional aircraft (such as an ATR72-600): below $20m

A newly built narrowbody aircraft (such as an A320): approx. $45m

A newly built widebody aircraft (such as an A330, a B787, a B777 or an A380): ranges from $80m up to $230m

The typical senior loan advance rate ranges from 70% up to 85% of the asset value (depending on asset age and liquidity, loan currency…)