February/M arch 2018 | Global Transport Finance | 23

A irbus is working on a similarplatform for i ts aircraft.A F IC was developed with

the help of B oeing CapitalCorporation, and is viewed as a B oeingproduct -- although in fact there isnothing in i ts terms that l imits whichmanufacturers can be supported.

In addition, fol lowing the privateplacement of bonds on last year'sN orwegian deal , arrangers are workingon bond offerings in the public capitalmarkets for 2018.

A F IC has establ ished itself evenfaster than anticipated, and aviationfinance banks view it as a structurewith a long-term future, taking itsplace alongside establ ished products.

A lthough A F IC is in some wayscomparable to the E xport-Import B ankof the U nited S tates (E xim) or exportcredit agency (E CA ) support, i t is alsosimilar to the monoline wraps thatused to be common in the asset-backedsecurities (A B S ) market.

F or bank lenders, this means that --instead of the wafer-thin margins thatthey used to get on E xim deals --bankers are taking a mixture of single-A or double-A risk of a group ofinsurance companies (each with aseparate exposure).

T hus from the bank lenderperspective, A F IC deals are similar toinvestment grade loans -- althoughwith three credits to analyse.

"T he insurance is provided on aseveral basis, and this several l iabi l i tygives rise to risk for lenders ornoteholders of a defaulting insurer,"explains James Cameron, L ondon-based partner in the transportation and

space group at law fi rm M ilbank.Cameron is also a member of the

A F IC Working Group that workedclosely with B oeing Capital onlaunching the product in 2017.

T his is one of the key differencesbetween A F IC and triple-A rated E xim,U S E xim B ank, where the bank lenderis effectively taking sovereign risk.

In addition, Cameron notes thatE xim has never had a contestedrepossession of an aircraft, sincegovernments are understandablyreluctant to damage their relationshipswith the agency and can bringpressure to bear on airl ines.

"It wi l l si t alongside E xim as astandalone product," says Cameron,with A F IC deals continuing to getdone even when E xim eventual lyreturns to the aircraft market.

No requirement for exportA nother key difference between

A F IC and E CA financings is that i tdoes not have to involve aircraft beingexported, and is not restricted by anygovernment requirements oragreements among the E CA s.

T hus A F IC could support A irbusequipment as well as B oeing products,although it remains to be seen whetherdeal arrangers prefer to wait for A irbusto set up its own similar platform.

"A fter a busy 2017 we would expectto see increased A F IC volume in2018," says Cameron.

"L ast year we saw bank debt dealsand private placements, and the nextstep is l ikely to be public deals in thecapital markets, and potential ly Jolcoswith A F IC debt.

T here could also be transactionsinitial ly using bank loans forwarehousing, and then converting tocapital markets notes."

A irl ines view it as a new way todiversi fy sources of funding, withinsurance companies col lecting apremium for the risk of loan or leasenon-payment by an airl ine, whichal lows a much broader group of banksto lend into low-risk transactions.

S imilarly the low-risk nature ofbond offerings also wil l broaden theinstitutional investor base.

L ast year there was one dealinvolving the private placement ofbonds for low-cost carrier N orwegian.

F or 2018 the fi rst public capitalmarkets deals are expected.

B ank lenders are looking to the threeinsurers that directly cover the risk ofnon-payment by the borrower, two ofwhich insure 25% of the deal .

A nother insures 50% , and then re-insures a 25% portion with the fourthmember of the consortium.

"E ach is l iable for their own portion,so the bank lender has to assess therisk of a default by one or more of thethree," explains Duncan B atchelor,global head of aviation at law fi rmN orton R ose F ulbright in L ondon.

"S ince the banks are focused on thecredit assessment of the three insurers,they do not need to be special isedaircraft lenders -- so a much broadergroup of banks wi l l be able to getinvolved in A F IC deals."

S imilarly, on bond offeringsinvestors wi l l be looking at the creditof the insurers rather than the airl ineor aircraft assets.

A

F ollowing Aircraft F inance Insurance C onsortium (AF IC ) deals last year for K orean Air Lines , Intrepid/AirB ridge C argo, Norwegian Air S huttle, Turkish Airlines and F lydubai, there are now moves to

expand the reach of the structure. Michael Marray reports

New AF IC structures on the way

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24 | Global Transport Finance | February/M arch 2018

B atchelor notes, however, thattransferabi l i ty is also an importantrequirement on bank loan deals, sothat banks can sel l down into thesecondary market, either to banks orother types of investors -- includinginsurance companies.

"U nder the S olvency I I prudentialregime, insurance companies arelooking at new asset classes on theinvestment side, and A F IC loans andbonds are attractive to many of them,"says B ob H aken, partner in thecorporate and regulatory insuranceteam at N orton R ose F ulbright.

Non-payment insurance platformIn addition, bankers and lawyers

note that, although the non-paymentinsurance platform (N PIP) was set upby insurance giant M arsh with theencouragement of B oeing Capital ,there is nothing that specifies that theaircraft covered have to be exports, orany particular equipment type.

T hus with a few changes i t could beused for A irbus or other equipment.

A nd unl ike E xim or E CA deals,A F IC wil l also be applicable to carriersin the U S , U K , Germany and F rance.

W hile E xim did not support B oeingdeliveries in the U S , and E uropeanE CA s did not support A irbusdel iveries in the U K , Germany orF rance (with the exception of deals fora total of six A 380 aircraft) N PIP hasno such restrictions.

T his opens the product up to agroup of large carriers that may wantto diversi fy their investor base.

"T here is no reason why the absolutetop-tier airl ines cannot use the A F ICstructure, and some of them might doso in order to diversi fy sources offunding, although general ly theywould find it easier to use commercialdebt," says B atchelor.

"T he sweet spot is probably thesizeable group of carriers just belowthat top tier that would benefit fromthe improved credit rating," accordingto B atchelor.

"F or carriers with very low creditratings, A F IC insurers themselveswould probably not be wil l ing toprovide cover."

T hus the structure is expected to bewidely used in 2018, in spite of theexpected return of E xim to the market.

S imilarly, launch of an A irbusproduct is l ikely to press ahead alongwith the return of the E uropean E CA s.

T he initial flurry of activity in 2017shows flexibi l i ty of the product, sinceeach deal is tai lored to individualagreements between B oeing, theairl ine/operating lessor, and banklenders/bond arrangers.

In a recent presentation, B oeingCapital noted that, as part of i ts charterto find the most efficient aircraftfinancing solutions, the B oeing financesubsidiary engaged in new marketdevelopment to bring insurance risk

capital to aircraft finance. B oeing Capital col laborated closely

with M arsh, which runs the platformand effectively acts as broker, withouttaking any of the insurance risk i tself.

A lso involved, and on the A F ICWorking Group, are Citi , Goldman,and M organ S tanley, as well as lawfirms M ilbank, A l len & Overy andCli fford Chance.

Development of the structure alsobenefited from the hiring of formerE xim executives.

L ast year R obert M orin joined A F ICas transaction and businessdevelopment leader, having been atE xim for over 20 years, overseeingexpansion of the agency’s aircraftfinancing programme.

In addition Gabriel Okolski ,previously a senior transportation loanofficer at E xim, was appointed ascredit and financial analyst.

M ore than $1 bi l l ion of new aircraftdel iveries in 2017 were supported byA F IC, and some market playersbel ieve that 2018 wil l be even busier.

"Given the early success of this newmarket, stable growth is projected overthe years to come," B oeing noted in thecompany’s 2018 A ircraft F inanceM arket Outlook.

B oeing added: “ We expect the newlycreated A F IC non-payment insurancemarket to grow in 2018, potential ly tolevels similar to the tax equity andexport credit markets.”

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February/M arch 2018 | Global Transport Finance | 25

Basel IIIF or bank lenders, the A F IC product

has come along at an opportunemoment, since many lenders wi l l haveto phase in higher capitalrequirements for loans on their books,as a result of the B asel I I I agreementfrom the B asel Committee on B ankingS upervision (B CB S ).

M any E uropean aircraft lendingbanks have been using their owninternal risk models to calculate riskweightings on secured aircraft loans.

A bank’s total risk-weighted assets(RWA ) number is used to calculate thebank's overal l capital requirement.

Introduction of so-cal led outputfloors, however, wi l l mean that capitalrequired with the internal ratings-based (IR B ) approach, wi l l not beal lowed to be less than 72.5% of thatcalculated using the so cal ledstandardised approach to RWA .

N egotiations on B asel I I I dragged onal l through 2017.

A proposal for a compromise at 75%was pushed hard by B CB S ChairmanS tefan Ingves, who also serves asgovernor of the R iksbank, S weden’scentral bank.

Germany concerned about impactT here was, however, strong

opposition from Germany, which wasconcerned about the impact onGerman savings banks and co-operative banks.

Germany argued that these bankshave low-risk business models, andwould be hit unnecessari ly hard byhigher capital requirements.

Germany eventual ly agreed to a dealinvolving an output floor at 72.5% .

A s part of the compromise package,banks have plenty of time to prepare.

Given the long-term nature ofaircraft lending, however, often goingout to 12 years, aerospace banks arealready having to change calculationson new loans.

T he output floor wi l l be gradual lyphased in, starting at a level of 50% on1 January 2022, and reaching ful l levelof 72.5% on 1 January 2027.

T his is a chal lenge for manyE uropean banks.

U S banks are not affected, since theydo not use internal models, butalready use the standardised approach.

A lthough the B asel I I I package alsoaims to reduce rel iance on use ofexternal credit ratings, and prodsbanks to do more of their own duedil igence, exposure to large, highlyrated international insurancecompanies is fairly straightforward asfar as bank lenders are concerned.

Flexible structureF rom an airl ine treasury department

point of view, A F IC has the advantageof being a relatively simple structure,while also being much more flexiblethan E CA deals, where the E CAdictates terms.

A fter the new A ircraft S ectorU nderstanding (A S U ) was signed in2011, E uropean E CA s decided that A irF rance, B ritish A irways and L ufthansashould each be al lowed to finance twoaircraft with E CA cover.

T his was unusual since, under theinformal “ home country rule,” thethree E uropean E CA s did not supportA irbus del iveries in the three majormanufacturing countries -- U K , F ranceand Germany -- whi le E xim did notsupport B oeing sales in the U S .

T he three E uropean carriers tookadvantage of the exemption byfinancing two A 380 aircraft each,which were not only the mostexpensive aircraft, but were also lessfavoured by bank lenders.

E ach of those carriers, however,found reception on E CA deals to bevery different from what they wereused to -- which was being regarded asa prized cl ient in the negotiating roomwith lawyers and lenders.

Instead of lenders catering to thecl ient, i t was the airl ine that had tosatisfy the E CA s.

A s one member of an airl ine teamarranging a deal told GT F at the time,"it was painful ."

Four insurers in AFICA F IC currently consists of four

insurers: A l l ianz, A xis Capital , S ompoInternational and F idel is.

T he fi rst three provide guaranteesdirectly to bank lenders, with onetaking 50% exposure, and the othertwo taking 25% each.

T he insurer taking the 50% positionthen lays off 25% of the risk to F idel is.

T hus, the bank credit analysis onlyincludes three insurers.

T he three direct insurers are rated assingle-A or double-A , which is higherthan any airl ine credit.

N early al l airl ines global ly are injunk bond territory.

L ufthansa is one of the few carrierswith investment grade ratings -- triple-B from S &P Global R atings and S copeR atings, as well as B aa3 from M oody'sInvestors S ervice.

Instead of needing asset-basedlending expertise to assess differentaircraft types and l ikely residualvalues, bank lenders are doing asimple calculation on their owninternal assessment of the risk of thethree insurer credits, combined withexternal ratings.

T his means that a broader group ofbanks can lend on A F IC deals.

N ew York-based A pple B ank is agood example.

A pple favours low-risk deals, andwas a regular participant on E xim-backed loans and H ermes cover loansbefore E xim and E uropean E CAbusiness dried up.

ANPI covers multiple risksT he A F IC non-payment insurance

policy (A N PI) covers a lender’s credit,aircraft residual and jurisdiction risks.

M arsh manages the platform, andthus acts as broker to the insurers thatare actual ly taking the risk.

In M arch 2017, Tokyo-based insurerS ompo completed the acquisition of100% of the outstanding ordinaryshares of E ndurance S pecialtyH oldings for $6.3 bi l l ion.

E ndurance has been integrated intoS ompo H oldings through creation ofB ermuda-based S ompo International .

S ompo International is rated assingle-A by S &P and A 1 by M oody's.

A l l ianz R isk Transfer A G (A R T ) isthe centre of competence foralternative risk-transfer businesswithin M unich-based A l l ianz Group.

A R T offers tai lor-made insurance,reinsurance and other non-traditionalrisk-management solutions to financialand industrial and cl ients worldwide.

F ounded in June 1997, the companyis a wholly owned subsidiary ofA l l ianz Global Corporate & S pecialty.

A l l ianz Group is rated as double-Aby S &P and A A 3 by M oody's.

A l l ianz has a global team of pi lots,engineers and lawyers, and serves

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26 | Global Transport Finance | February/M arch 2018

cl ients flying to over 160 countries. A l l ianz has a track record of

managing large aviation risks, and hasan establ ished reputation as a leader incomplex co-insurance placements.

Global head of aviation is L ondon-based M ichael H ansen.

B ermuda-based A xis Capital has aspecial ised unit deal ing in the airl ine,aerospace and general aviation sectors.

A xis is rated as single-A -plus by S &Pand single-A -plus by A M B est.

B ermuda-based F idel is InsuranceH oldings is a new player in theindustry, having been establ ished in2015 as a specialty insurance andreinsurance provider backed by $1.5bi l l ion in equity capital .

F idel is is led by industry veteransR ichard B rindle, group chief executiveofficer (CE O) and chief underwritingofficer, and N ei l M cConachie, groupchief financial officer (CF O).

F ounding investors were fundsmanaged by private equity fi rms PineB rook, Crestview Partners and CV CCapital Partners, with the three puttingin a combined $650 mil l ion.

Principals from al l three fi rmsbacked members of the F idel is team attheir previous companies.

T he remainder of the capitalinvestment came from individualinvestors, family offices andinstitutional investors.

Fidelis pioneers new modelF idel is has introduced a new model

to the insurance industry. T he theory is that, by focusing on

either assets or l iabi l i ties, legacyinsurance models have fai led tooptimise shareholder returns, and lowreturns generated by fixed-incomeinvestments have been chal lenging.

Instead, F idel is fol lows a total returnstrategy by tactical ly shifting capitaland risk between insurance andinvestments to maximise return onequity across market cycles.

Pine B rook was also the backer ofA medeo, an asset manager and aprincipal investor focused onwidebody aircraft leasing, with aninitial investment date as majorityshareholder of F ebruary 2014 --around the time that A medeo fi rmedup an order for 20 A 380 aircraft at theS ingapore A ir S how.

T hat contract had original ly beenannounced at the Paris A ir S how inJune 2013.

In December 2017, A medeoannounced completion of amanagement buyout of majorityshareholder Pine B rook.

F inancial terms of the privatetransaction were not disclosed.

M ark L apidus, CE O of A medeo,maintains that the relationship with

Pine B rook has been a win-winproposition for both parties.

Highly rated bonds F or A F IC bond market investors the

yield wi l l be very low. N onetheless, i t broadens the investor

base, providing investors with easy-to-understand credit risk, as opposed tothe complexities of understandingaircraft types, and assessing metal riskin the event of a repossession.

T hus A F IC is a way to bring in moreinstitutional money -- alongside riskierbut higher-yielding investments.

“ Pricing on high-qual ity aircraftdeals has tightened dramatical ly overthe past few years, but we sti l l seestrong appetite from institutionalinvestors, since return profi les remainattractive compared to traditionalinvestments, such as bonds” , says B i l lB lain, head of capital markets at M intPartners in L ondon.

“ T here is a broad spectrum ofinvestors,” he adds.

“ S ome only take senior debt fromtop-tier airl ines, others l ike mezzaninefrom airl ines with an interestingstrategic story, such as N orwegian,while another group is looking forequity-type returns, and wil l takemetal risk.”

H e adds: “ We are expecting to seecontinued growth in involvement in

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February/M arch 2018 | Global Transport Finance | 27

aircraft from institutional money, buthaving said that, they are beingcautious how they access the market,and want to be alongside a strongleasing company or aircraftmanagement fi rm.”

B lain stresses: “ Investors are alsobeing very selective on aircraft type,and l iquidity is important, meaningthat there is more interest in regionaljets than widebodies - and they areparticularly nervous about the A 380.”

Bonds and loans K orean A ir L ines was the fi rst airl ine

to benefit from A F IC insurance. K orean A ir signed a 10-year, € 143

mil l ion ($176 mil l ion) loan with IN GCapital in M arch 2017 to refinance aB -747-8i passenger aircraft, thecarrier’s fi rst transaction covered bythe newly developed A ircraft N on-Payment Insurance (A N PI).

IN G Capital in N ew York was solelead arranger, lender and agent.

M ilbank and L ee & K o representedK orean A ir; Cl i fford Chance acted forthe A N PI providers; and W hite & Caserepresented IN G Capital .

“ W ith the financing gap left by thecontinued absence of E xim, we haveseen a steady demand for A F ICfinancing,” Gemma B ae, managingdirector and head of structured exportfinance for the A mericas at IN G

Capital told GT F.IN G Capital also has received a

mandate from K orean A ir to arrangeanother A F IC financing as well as amandate from a major A frican carrier,according to B ae.

“ T his structure gives airl ines anattractive cost of financing, but alsoenables us to provide flexible andinnovative financing solutions that aredenominated in currencies, such asthe U S dol lar and the euro.”

T hen in June 2017 S umitomo M itsuiB anking Corporation (S M B C) andDevelopment B ank of Japan (DB J)provided a loan faci l i ty for thepurchase of two B -787-9 aircraft byK orean A ir.

S M B C said that providing A F IC debtis an additional financing solution forthe aviation industry, as the bankcollaborates with affi l iates, such asS M B C Aviation Capital and S umitomoM itsui F inance and L easing Co.

B ack in 2015 DB J and B oeing Capitalentered into a memorandum ofunderstanding (M OU ) to cooperate indeveloping aircraft financing andleasing opportunities.

T he M OU cal led for DB J to “ advise,arrange and supply financing tosupport B oeing new-aircraft sales andused-aircraft remarketing.”

A ccording to DB J, the M OU withB oeing was the basis for the A F IC deal .

In S eptember IN G Capital closed asecond deal , this time with IntrepidAviation completing its fi rst A F ICfinancing for one B -747-8 freighter onlease to A irB ridge Cargo A irl ines.

T he financing was arranged andunderwritten by IN G Capital andA pple B ank.

T his was the fi rst A F IC deal for anoperating lessor, and furtherdiversi fied Intrepid's banking groupwith the addition of IN G Capital .

Intrepid is a privately owned aircraftlessor, headquartered in Connecticutwith offices in Dublin and S ingapore.

Intrepid’s shareholders areCenterbridge Partners and R eservoirCapital Group.

Centerbridge is an investmentmanagement fi rm employing a flexibleapproach across investment classes,from private equity to credit andrelated strategies, and real estate – inan effort to find attractiveopportunities for investors andbusiness partners.

T he fi rm was founded in 2005 and,as of N ovember 2017, hadapproximately $28 bi l l ion in capitalunder management with offices inN ew York and L ondon.

R eservoir Capital Group wasestabl ished in 1998 as a privately heldinvestment fi rm with a flexible,investment approach and has

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28 | Global Transport Finance | February/M arch 2018

approximately $5 bi l l ion in assetsunder management.

In January 2018 Intrepid AviationGroup H oldings received ratings fromF itch R atings and K rol l B ond R atingA gency (K B R A ), both of which cameout with long-term issuer ratings ofdouble-B -minus.

Intrepid was back in late S eptember2017 with another A F IC deal .

T his time L ondon-based Greensi l lCapital arranged a bond placement tofund a B -747-8 freighter leased toA irB ridge Cargo.

“ T his financing also represents thefirst private placement for thecompany, which further diversi fies ourfunding sources,” commented M ichaelL ungariel lo, CF O of Intrepid Aviation.

T he Intrepid deal was the secondA F IC bond placement from Greensi l lCapital , which styles i tself as aspecialty provider of working capital .

Greensi l l founder and CE O L exGreensi l l formerly led the supplychain finance teams at M organ S tanleyand Citi .

T he company has arranged deals insectors, such as construction,telecoms, aircraft, and powergeneration, monetising cashflows,such as leases.

Greensi l l Capital uses a combinationof capital plus risk mitigants -- usual lyinsurance -- to create finance productsfor investors.

L ast year Greensi l l also arranged adeal for A rctic Aviation A ssets, awholly owned subsidiary of low-costoperator N orwegian A ir S huttle.

N orwegian signed up with Greensi l lfor the funding of six B -737max8aircraft that were del ivered betweenJune and A ugust 2017.

L ist price on a B -737max8 aircraft is$117 mil l ion.

Q uick deal executionA ccording to Greensi l l , i t took only

six weeks to arrange the N orwegiandeal , which is significant, sincearrangers that have been trying tobring in new investors -- such asK orean insurance companies -- lamentthat i t can often take many months,particularly for new investors doing aninitial deal .

Turkish A irl ines (T H Y ) closed anA F IC deal in December 2017, whenCrédit A gricole CIB (CA -CIB ) arranged

the fi rst- ever F rench tax leasecombined with A F IC debt, involvingtwo B -777 freighter aircraft.

T he fi rst aircraft with the TurkishCargo l ivery arrived in Istanbul on 7December, with T H Y Chairman I lkerAyci cal l ing the del ivery a "milestoneevent" in the airl ines' fast growingcargo business.

During 2017 T H Y expanded from 55to 73 freighter destinations, and cargotonnage grew by 29% .

Turkish Cargo has another three B -777 freighters on order, which arescheduled to del iver in S eptember,October and December of this year.

T H Y is rated as double-B -minus byS &P and B a3 by M oody's.

FlydubaiDubai-based state-owned low-cost

carrier F lydubai closed a deal inDecember 2017, in what was the fi rstA F IC transaction for the region.

T he financing involved a B -737max8, al lowing F lydubai to furtherdiversi fy funding sources.

S M B C provided debt into the deal . A round the same time, F lydubai

completed its fi rst-ever Jolco, with CA -CIB acting as overal l Jolco arrangerand debt underwriter.

“ W ith more than 70 aircraft to joinour fleet by 2023 this marks the fi rsttime that F lydubai has accessedfinancing models of this kind andreflects our desire to access the mostinnovative financing structuresavai lable in the market,” said GhaithA l Ghaith, CE O of F lydubai .

F lydubai is expanding quickly andis l ikely to be back with more deals.

During 2017 eight new aircraftjoined the fleet, comprising two B -737-800 and six B -737max8 aircraft.

F or the fi rst time since F lydubai waslaunched in 2009, the airl ine retired(four) aircraft, in l ine with a pol icy tomaintain a young and efficient fleet.

In December 2017, F lydubai placedits largest-ever aircraft order, for 175 B -737max aircraft.

I f 50 options are exercised total l istprice of the order would beapproximately $27 bi l l ion.

F lydubai placed its fi rst order -- for75 B -838max aircraft -- in 2013, andthe fi rst five arrived in 2017.

In N ovember 2017, F lydubai beganservices to M oscow S heremetyevo,

and this is one of the routes beingflown by the B -737max.

Exim and ECAs return E xim is widely expected to return to

the aircraft market in 2018, after anabsence of two years.

T he most recent delays haveinvolved the S enate blocking PresidentTrump’s nominee to head up the bank.

T he S enate committee voted 13-10against appointing former N ew JerseyR epublican Congressman S cott Garrettas E xim president.

Garrett helped led a 2015 effort toshut down E xim, referring to theagency’s support for companies, suchas B oeing and General E lectric, as"corporate welfare."

Coincidental ly, the E uropean E CA sceased doing business around thesame time for unrelated reasons.

In M arch 2016 A irbus disclosed thatthere had been inaccuracies relating tohistorical use of overseas agents inapplications to U K E xport F inance(U K E F ) for support.

U K E F referred this information tothe S erious F raud Office and advisedA irbus that i t was unable to supportdel ivery of further A irbus exportspending the outcome of enhanced duedil igence in accordance with therequirements of the Organisation forE conomic Co-operation andDevelopment (OE CD)R ecommendation on B ribery andOfficial ly S upported E xport Credits.

U K E F final ly returned to theaviation market in M arch 2018, withsupport for two A 330 aircraft operatedby R wandA ir.

B oth aircraft were del ivered in 2016,with the second (an A 330-300) beinghanded over to R wandA ir in Toulouseon 30 N ovember; the fi rst aircraft wasan A 330-200.

B oth aircraft are powered by R ol ls-R oyce Trent 772B engines.

A t the time they were ordered in2015 the two aircraft had pre-del iverypayment (PDP loans provided byE astern and S outhern A frica Trade andDevelopment B ank (T DB ), which wasat that time known as PTA B ank priorto rebranding.

B y the time of del ivery the fol lowingyear, however, U K E F had suspendedsigning off on loan guarantees,pending the investigation.

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February/M arch 2018 | Global Transport Finance | 29

U K E F support for the export ofA irbus aircraft is provided alongsidethat of the F rench and German E CA s,with each agency supporting apercentage of the financing cost of theaircraft broadly in proportion to thepercentage of the aircraftmanufactured in each country.

Typical ly one of the three E CA s wil llead a transaction, with the other twoproviding counter-guarantees.

T he U K -made proportion of anA irbus aircraft can be up to 38% ,depending on aircraft type and engine.

I f R ol ls-R oyce engines are fi tted,U K E F support is boosted accordingly.

Parallel structureH aving helped establ ish the A F IC,

the return of E xim support wi l l beused in paral lel by B oeing.

H ermes, U K E F and B pifranceA ssurance E xport (which has takenover from Coface in providing F renchstate guarantees for exports) are alsoexpected to be busy in the comingmonths, but A irbus is also pressingahead with the development of i ts ownA F IC-l ike structure.

A nd there are also other creditenhancement structures beingdeveloped elsewhere in the market.

ACG and Exim step upIn early M arch, Cal i fornia based

Aviation Capital Group (A CG)announced formation of i ts A ircraftF inancing S olutions (A F S ) group.

T he A F S initiative wi l l focus ondevelopment and marketing of credit-enhanced financing structures thatprovide airl ine customers morealternatives and greater access toadditional sources of capital foraircraft purchases, whi le providingimproved risk-adjusted returns forlenders and capital providers.

“ T his initiative provides A CG with acompell ing complement to i ts coreoperating lease services, enabling us tooffer a broader set of fleet financingsolutions to airl ines,” said K hanh TTran, president and CE O of A CG.

“ Our A F S group wil l work closelywith A CG’s marketing team to expandservices we offer to airl ine customerson a wide range of aircraft types.”

To help launch the A F S initiative,three former E xim executives -- R obertR oy, A ndrew F alk and R obertL ewandowski -- wi l l join A CG asmanaging directors to help leadprogramme development, transactionunderwriting and management.

E xim announced in late M arch the

launch of a reinsurance programmethat works with the private sector toshare risk and provide an additional$1 bi l l ion in loss coverage for asignificant portion of the agency’sexisting portfol io of large commercialaircraft financing transactions.

T he programme is described byE xim as the “ largest public-privaterisk-sharing arrangement for a U Sgovernment credit agency.

T his transaction represents themaximum al lowable coveragepermitted under E xim’s charter andfulfi l ls a 2015 congressionalreauthorisation mandate to engage inrisk-sharing with the private sector tominimise the agency’s and taxpayers’l iabi l i ty for potential future losses.

E xim worked with A on B enfield, theglobal reinsurance intermediary ofA on plc, the world’s largest insurancebroker, to complete this $1 bi l l ionreinsurance programme that was ledby X L Catl in, L iberty S pecialtyM arkets and E verest, among a group of10 reinsurers.

T he programme was funded by feesgenerated by the original commercialaircraft transactions and wil l not costU S taxpayers additional funds.