Banker tells buyers to get back in bizjet market
Sources for financing of corporate aircraft purchases may be harder to find this year than last, but Toennies von Limburg, director of international sales with Bank of America Corporate Aircraft Finance (Booth No. 394), said there is value to be had in what has turned rapidly from a buyers’ to a sellers’ market.
The number of financing sources for corporate aircraft buyers has decreased significantly over the past year, von Limburg said. “Those institutions that are open for business are focusing on existing clients and on targets that fit well into their strategic business model. Non-recourse and limited-recourse asset-based financing driven only by the return on financing while secured only by the aircraft has virtually disappeared,” he added.
At the same time, he said, more restrictive credit policies have resulted in a “flight to quality,” a trend that helps the stronger companies but makes it much more difficult for those that are highly leveraged. “On the asset side,” he explained, “the market values of immediately available new and pre-owned aircraft have rapidly adjusted to the new supply/demand situation, and financing structures have much more conservative loan-to-value ratios.”
Perhaps surprisingly, the economic downturn has actually led to increased demand for the financing of corporate aircraft. The explanation, von Limburg said, lies in two trends: “Companies have less liquidity to allow for the cash purchase of long-life assets. At the same time, there is a reduced number of institutions with a more limited appetite to provide financing solutions.”
Bank of America, he said, “continues to offer its full product range to its clients, including pre-delivery financing, loan financing, tax leases, operating leases and residual value guarantees. We also offer sale-leaseback and refinancing to monetize existing aircraft more effectively. Our bank continues to grow and has significantly increased its coverage area and target markets.”
For corporate aircraft, he noted, “the market dynamics have turned in a very short time from a strong sellers’ to a strong buyers’ market. It is now a very good time to invest in corporate aircraft.” And when considering the effects of the financial markets’ turmoil, he added, the increase in margins has been more than offset by the reduction in market rates. “Therefore both the cost of the aircraft and the cost of financing the aircraft have significantly improved when compared to the situation two years ago.