Case Studies
Case One: Proactive Asset Management
Proactive asset management prevented loss of lease stream and value when a financially struggling airline was trying to delay lease and reserve payments. Based on our more than thirty years of portfolio management we recognized the symptoms well in advance. We were faced with a situation where our investor-client had one aircraft leased to the carrier as well as two major competitors. We planned our exit strategy well in advance recovering the aircraft, achieving a 100% revenue recovery rate, and placing the asset with a new lessee months ahead of our competitor. (For more information on how MAP manages such a situation click here).
Case Two: Getting the purchase price and funding structure right
A B737-300 was offered for sale by a major European airline. Another prominent charter airline had a requirement for the aircraft but only wanted to lease. This particular aircraft's configuration was not in compliance with the lessee’s needs. The transaction called for back to back deliveries. The purchase required the buyer to commit to the purchase prior to agreeing final terms with the lessee. The buyer committed to the transaction by signing a letter of intent to purchase the aircraft and placed a substantial deposit with the seller. The buyer introduced an institutional investor and agreed to resell the aircraft to them subject to a five year operating lease being put in place with the charter carrier. We now set about structuring the transaction to meet the diverse requirement of the four parties involved. Separate and concurrent contract negotiations took place between the seller and the buyer, the buyer and the investor and investor and the lessee. Technical terms and conditions were negotiated between the seller and the lessee that included airframe and engine status, bridging of the maintenance program and interior modifications. A key factor was that all parties to the transaction had a strong working relationship. The seller got the price it required, the lessee got the terms and conditions it required and the investor added a quality asset and lessee to its portfolio in a relationship that lasted more than ten years.
Case Three: Managing a financially weak lessee in a difficult jurisdiction
The lessee was in financial trouble and delinquent on operating and finance lease obligations. The jurisdiction presented challenges because domestic laws favored the lessee. The asset manager focused on a solution that would allow the operator to continue to fly the aircraft, repay amounts past due and suffer substantial penalties in the event of future default. The asset manager and his legal team restructured the lease transaction to include a repayment schedule with interest and voluntary early termination of the leases with substantial termination penalties that included default interest. In the event of future default the aircraft was to be returned meeting all the revised redelivery conditions. All these obligations, including interest were secured by marketable financial instruments. Thereafter the asset manager worked with the lessee to monitor the financial recovery of the carrier. Eventually the airline became profitable again which resulted in the leases being extended a further eighteen months without any reduction in the early termination penalties. The relationship between the lessor and lessee was preserved and lessee became a long-term customer.