What Ship Finance Can Learn from Aircraft Finance

Transcription

1 What Ship Finance Can Learn from Aircraft Finance Marine Money Ship Finance Forum NYC 2018 Richard Furey November 14, 2018

2 Financing Aircraft vs Financing Vesels Key Similarities» High asset value Capital intensive Key Differences» Greater asset uniformity with Aircraft» Mobile» Differences in Repossession» Regulated (operations, safety)» Subject to law of the flag and financing parties chosen law» Treaties (eg, Cape Town) Stronger protections for aircraft creditors» Highly volatile market environment 2

3 Mortgaged-Backed Loan Example Lenders/ Facility Agent/ Security Trustee Share pledge Security: Loan Debt Service & Fees Mortgage Assignment of earnings Assignment of insurance SPV Owner Trust Ownership Hire SPV/ Borrower Time Charter Charterer Loans; in essence simple: - Lender advances loan to a borrower - Borrower repays with interest - Similar for Vessel Finance and Aircraft Finance 3

4 Aircraft Portfolio Securitizations» Financing option for an aircraft lessor or investors that seek to finance a diversified portfolio of aircraft on lease to various operators» Creation of a bankruptcy-remote SPV» Issues notes or borrows funds» Proceeds used to purchase or finance a diversified pool of aircraft subject to leases» Obligations of the issuer or borrower are collateralized by the underlying aircraft and leases» Lease cash flows are used to service the repayment obligations 4

5 Aircraft Portfolio Securitizations» Credit enhancements: Debt tranching Liquidity support Overcollateralization Accelerated pay-down for failure to meet performance triggers 5

6 Aircraft Portfolio Securitizations Trustee acts for investors Servicer Investors Indenture/ Security Trustee Service Agreement Purchase Price Notes (tranches) & Repayments Security Interests in Assets/Leases (Trust/Security Deed) Originator Assets Purchase Price 100% Ownership SPV/ Buyer/ Issuer Aircraft Owning Entity AOE 2 AOE 3 Leases / Rent Payments Lessee Lessee Lessee 6

7 Harley Marine Service Securitization $455 million transaction - Harley Marine Financing Two tranches of debt: $405 million senior tranche of Class A-2 notes initially rated BBB $50 million subordinate tranche of Class B notes initially rated BB Whole business securitization sale-and-leaseback transaction 122 tugboats and barges sold to a securitization trust trust will pay Harley Marine Services to operate or manage them Harley s charters, contracts of affreightment, towage agreements, ship assist and management contracts, leases relating to the vessels, interests in terminal assets and license to use certain IP contributed to the securitization trust 7

8 Aircraft EETC Financing Enhanced Equipment Trust Certificate (EETC) Ø Publicly (sometimes privately) issued Ø Credit of a single airline Ø Secured by multiple aircraft as collateral Ø Liquidity facility Ø Tranching and other structural enhancements to provide improved LTV ratios for the more senior tranches, of debt securities Ø Certainty of remedies afforded by Section 1110 of the U.S. Bankruptcy Code or, in the case of non-u.s. airlines, comparable rights under Cape Town (or other local law); 8

9 Aircraft EETC Financing Investors Class A PTCs and payments Class B PTCs and payments Class A payments Pass Trough Trustee for Class A Trust Pass Trough Trustee for Class B Trust Class B payments Liquidity Provider Liquidity Facility Series A & B Eq. Notes Subordination Agent Payments A Eq. Notes B Eq. Notes Indenture Trustee Security Security Indenture Owner Trustee Debt payments Trust Agreement Owner Participant Rental payments Airline 9

10 Bankruptcy Code Section 1110 Relief from Automatic Stay» Right of Lessor/Lender to Recover Aircraft 60 days after US Airline Chapter 11 filing unless airline cures defaults Embodied in Cape Town Convention s Alternative A Section 1110 does not practically apply to vessels Cape Town Convention not applicable to vessels 10

11 Vessel Securitization Trustee acts for investors Servicer Investors Indenture/ Security Trustee Service Agreement Purchase Price Notes (tranches) & Repayments Security Interests in Assets/Leases (Trust/Security Deed) SPV/ Buyer/ Issuer 100% Ownership Vessel Owning Entity VOE 2 VOE 3 Sale & Leaseback / Rent Payments Originator Originator Originator 11

12 And finally Questions? Thank you!

13 Richard Furey Richard Furey is a partner in Holland & Knight's New York office. Mr. Furey focuses his practice on international and United States domestic asset and infrastructure finance including significant experience in the aviation and maritime sectors. In the maritime sector, he regularly represents vessel owners, lenders and charterers in a wide range of leasing and finance transactions.» Richard Furey Practice Education Bar Admission» Partner» » New York, NY Structured Finance Maritime Transactions Aircraft Finance Commercial Lending Syracuse University College of Law, J.D. Georgetown University, B.A. New York England and Wales Connecticut Florida 13

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