JETNET

Don’t Bank On It

The following was originally posted by Par Avion Ltd. Re-posted with permission.

The bizav industry has certainly seen its share of troubled loans and losses since the Great Recession and banks portfolios were at one time loaded with bad debt from sour aircraft deals.  To some degree financial institutions that were prolific lenders back in the day are still dealing with non-performing assets and struggling to move them in what remains a somewhat stagnant resale marketplace.  It’s perhaps no surprise that the majority of the distressed jet assets are “classic” aircraft, 20 years or older or relatively new, but less popular models.

What may come as a surprise to some is how differently financial institutions treat a troubled loan and the respective borrower.  Not all things are created equal in aircraft finance land and while the reader may interpret this as a word of warning for the lender, it actually is a word to the wise for the borrower.    Your relationship with the lender on the backend of a deal is as important, if not more so, as it is on the frontend.   While the majority of borrowers work from the premise that their financial situation down the road will improve, what if an unforeseen event changes your fortune or outlook?   What’s that old saying about finding out who your friends are when the going gets tough?

Recently I was involved with an aircraft for which the note had reached maturity.   The owner of the airplane informed the financial institution involved that they were not planning to buy the note out nor “roll it over”.  The owner was in an interesting position to be able to just walk away because the loan was one without recourse and the aircraft was held in a single purpose entity.   One could hardly disagree with this option given that the market value for the airplane was less than what they owed.

The owner further advised the financial institution that a sale of the aircraft, that would make everyone relatively whole, was imminent and requested that the lender work with them in an effort to consummate said transaction.  By work with them the request was for more time to bring the deal to fruition.  Given that the aircraft was well maintained, sheltered and otherwise being cared for, one would think that the lender would embrace this and support their Client’s efforts to achieve a retail sale.   As opposed to having an airplane turned back to them and potentially becoming a devalued asset on their books.   At the very least it would result in a more expeditious sale then if the lender had to start the whole process all over again.

The jet involved while not yet a classic, is a model that has limited appeal and for whom buyers in the best of times are far and few between.  The deal was not without its ups and downs, but what aircraft sale over the last five years hasn’t been challenging?   Ok, that of a G650.  The transaction was not moving at a pace this lender deemed reasonable.   It not only required a bit more nurturing, but as well a bit of lender participation and in the absence of such, started to drag.    While delays and setbacks have been par for the course for purveyors of business aircraft over the last five years, the lender either did not appreciate or understand this.  The lender’s idea of affording the Client time was in the neighborhood of a couple of weeks post maturity date of the loan.   They became totally uncommunicative with the parties to the transaction, moved swiftly to take possession of the asset, canceled the deal and informed the Client they were moving forward with a UCC sale of the plane.   In all fairness, let me say the financial institution was certainly within their right to take this action.   The question though is it the right course of action in all instances?

The UCC requires that disposition of the lender’s collateral be conducted in a “commercially reasonable” manner.    If after giving public notice of the offering and a concentrated effort is made to market it, a qualified buyer is not found then the lender can move to auction the asset.   It seems the definition of “commercially reasonable” and “concentrated effort” are open to interpretation.   How in this particular example, does disrupting the existing marketing effort and the deal on the table better anyone’s position?   The market views an airplane repossessed by a financial institution, regardless of the circumstances surrounding that repossession, as a distressed one.  Preservation of market value of the aircraft should be paramount with an eye towards maximizing the return on investment.   The secondary fallout that occurs as a result of a repossession among a model whose market value is still correcting, is a further facilitation of falling prices and potentially establishing a new benchmark should it sell at a distressed asset price.

The natural reaction by most people upon hearing of a repossession of an asset is to assume that the borrower was a deadbeat and can’t pay their bills.  I’m here to tell you that this is not always the case.  My take away from this experience included:  1. that the bigger the bank/equipment lender/financial institution the less personal the treatment.  2. The loss likely amounts to a rounding error in their world and they are simply following the checklist.   3. It further underscores for me that the smaller lender is likely the more user friendly and certainly more inclined to have a relationship with the borrower.  This is not to suggest that the due diligence process on the front side of the loan is any less stringent.  What you want though is a banker who will listen not just in good times, but as well during the bad.

Think reason prevails when there is a desire to get the aircraft off the books?  Don’t bank on it.

JETNET

JETNET To Exhibit at 2014 Asian Business Aviation Conference & Exhibition

UTICA, NY – JETNET LLC, the world leader in aviation market intelligence, will exhibit at ABACE 2014 in Shanghai, China. JETNET will present their full range of software products and services, including demonstrations of their major new Evolution release, at the Shanghai Hongqiao International Airport at Shanghai Hawker Pacific Business Aviation Service Centre. This year’s ABACE runs April 15th-17th, and JETNET will be in booth P519.

“We’ve put tremendous information and state-of-the-art tools in the hands of professionals in the Asian aviation market,” said Vincent Esposito, JETNET President. “We’re adding to the information every day, and releasing new products to make their jobs easier and more profitable.” JETNET employs a full-time staff of more than 45 research specialists who contact industry professionals around the world each business day. They make real-time updates to the most comprehensive database of its kind.

Among JETNET’s clientele are leading manufacturers, suppliers, and government and advocacy groups for business and commercial aviation worldwide. As of March 2014, JETNET’s database of in-operation fleet was more than 100,000 aircraft, which includes business jets, business turboprops, commercial airliners (both jets and turboprops), and Helicopters (both turbine and piston).

“For twenty five years our reputation has been built on reliable information and exclusive market intelligence,” said Paul Cardarelli, JETNET Vice President of Sales. “Our staff seeks out original information directly from sources who work with or own aircraft. We review and confirm all the data we gather for accuracy and completeness. Only then do we add it to the JETNET database, for instantaneous access by our clientele, a network of aviation professionals around the globe.”

The JETNET database includes comprehensive details on aircraft airframes, engines, avionics and cabin amenities, as well as aircraft owners and operators, lessors and lessees, fractional owners and a host of other entities associated with aircraft. Also included are transaction histories on aircraft dating back more than 25 years, monthly aircraft market summary reports, and a variety of other tools for accessing the global feet and market on aircraft.

At ABACE 2014, JETNET will present the latest enhancements and new features to their popular JETNET Evolution Marketplace service. They include an improved data export module, a new folder management feature, new user analytics functions to gauge how often your aircraft is being viewed on JETNET, and account administrator tools to oversee those with access to your JETNET account. Their flagship Evolution software suite features an intuitive and customizable graphical user interface so subscribers can view charts, tables and selective information, depending on their needs.

The company’s popular JETNET iQ (Intelligence Quarterly) service achieved a major milestone in March 2014, reaching 6,500 total surveys completed from respondents in 115 countries, making it the most comprehensive on-going study of business aircraft owners and operators ever conducted. The 2014 JETNET iQ Summit, an annual gathering of industry thought leaders, will take place on June 3-4, 2014 in New York City. More information is available at JETNETiQ.com.

JETNET also offers a variety of additional services, including the newly enhanced JETNET CRM (Customer Relationship Management) service, the only CRM program designed exclusively for aviation professionals that fully integrates the JETNET database. The program allows users to add and organize their own contact information to develop an exclusive combined database, with tools to manage company sales and marketing efforts.

“There can be no discounting of the growing importance of Asia, particularly China, to business and commercial aviation,” added Esposito. “This is a time of unprecedented opportunity for the aviation professionals we serve. JETNET’s management team is keenly aware of this and will continue to seek ways to improve the service we provide, so our customers can succeed and prosper during this very special time for our industry.”
JETNET is inviting ABACE 2014 attendees to learn more about their products and services at booth P519 at this year’s show.

Since 1988, JETNET has delivered the most comprehensive and reliable business aircraft research to its exclusive clientele of aviation professionals worldwide. JETNET is the ultimate source for information and intelligence on the worldwide business, commercial, and helicopter aircraft fleet and marketplace, comprised of some 100,000 airframes. Headquartered in its state-of-the-art facility in Utica, NY, JETNET offers comprehensive user-friendly aircraft data via real-time internet access or regular updates.

For more information on JETNET LLC log on to jetnet.com or contact Paul Cardarelli, JETNET Vice President of Sales, at 800-553-8638 (USA) or paul@jetnet.com; Josh Pitts, JETNET Director of Sales for the USA, at 1-817-988-0158 or josh@jetnet.com; Rolland Vincent, JETNET iQ Creator/Director at 1-972-439-2069 or rollie@jetnet.com; International inquiries, contact Karim Derbala, JETNET Managing Director of Global Sales, at 41.0.43.243.7056 or karim@jetnet.com.