Attracting new investment

Victoria
By Victoria December 7, 2011 13:35

Attracting new investment

Capital markets products were described as “holy grail” solution to the aviation funding gap by Kostya Zolotusky, managing director, capital markets, leasing at Boeing Capital, at a media briefing in London yesterday. He predicted that capital market products will be used to finance 10% of the projected $95bn in aircraft funding required next year. Such products accounting for just 5% of the $77bn in funding closed this year. The entire market was expecting the explosion in capital markets funding to occur in 2013 when both Basel III and the new 2011 Aircraft Sector Understanding pricing for export credit guarantees came into full force. However the need for new sources of funding has now been accelerated by the Eurozone sovereign debt crisis, which has severely impacted European commercial bank capacity, and the fact that many banks are already elevating pricing to account for Basel III.

Zolotusky reiterated the fact that aircraft assets were gaining in popularity with investors from new avenues, such as pension funds and insurance companies. However, for new investors, taking a punt on aircraft assets could require complete changes to their portfolios, which some may want to take the trouble to do despite the advantages of investing in stable assets with above average yield.

The tide is turning though for non-US airlines interested in accessing the EETC market. Zolotusky was bullish that EU countries including the UK will ratify the Cape Town Convention (even though the UK is late in issuing its final decision, which was due in November). Once Cape Town is ratified, US investors will have greater confidence in putting their money in airlines located outside of the US. IAG, Lufthansa and Air France-KLM are likely to be the first, while Emirates too has expressed interest in the product but as it is unrated this will take more work to achieve.

The message is clear – in this ultra-low interest rate environment, investors are seeking new opportunities for yield. And the high-risk private equity 20% yield promise is not what many are looking for. Pension funds for example want stable, low-risk investments that are secured on an asset. Even given some of the constraints they may be under regarding their own constitutional agreements, the asset type and proven ROI for aircraft, will prompt many to make that extra effort.

Airline Economics is hosting the first event for investors seeking to take their first steps into the aviation market. Aerospace Investment Conferences 2012 bring together private wealth managers, family office managers, hedge fund managers, institutional investors and pension fund managers with commercial aviation finance houses, airlines, leasing companies, manufacturers and aftermarket service providers.

The first one-day conference is being held in London on February 28 at the Hyatt Regency Churchill Hotel. A second event will take place in Miami on May 15 and the third in Hong Kong in October. All three events provide a unique opportunity to meet investors and for investors to receive clear information about the many exciting opportunities that exist within the commercial aviation sector today.

Please visit www.aerospaceinvestmentconferences.com for more information and updated conferences programs. Delegate places are filling up fast but we have extended the early bird offer for the London conference – book before December 25 and attend for the discounted price of £650. For bookings and speaking opportunities please contact Victoria at Victoria@aviationnews-online.com.

Victoria
By Victoria December 7, 2011 13:35
Write a comment

No Comments

No Comments Yet!

Let me tell You a sad story ! There are no comments yet, but You can be first one to comment this article.

Write a comment

Only <a href="http://www.aviationnews-online.com/wp-login.php?redirect_to=http%3A%2F%2Fwww.aviationnews-online.com%2Ffinance%2Fattracting-new-investment%2F"> registered </a> users can comment.