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Avionomics : The New Carry-On Loan A type of aviation financing that doesn’t require you to put up everything you own — What a concept! By: Teri BuhlAugust/Sept 07 , Page 56
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The New Carry-On Loan, pg 2Speed a few years down the runway, and Franco has finally found a bank to buy into his plan — and it’s a good one. This past spring Franco and fellow Guggenheim executive Bob Peart formed an alliance with UBS Real Estate Securities. Dubbed Guggenheim aero Finance Company, the new enterprise specializes in non-recourse loans, placing its emphasis almost entirely on the value of the aircraft (not the customer’s credit) with a streamlined approval process that can be as fast as four weeks. “Once we’d done our due diligence, it didn’t take us long to decide to partner with [Guggenheim],” says Mostafiz Shahmohammed, UBS’s head of credit asset backed products. “Few people were focusing on this area of financing.” Their timing would certainly seem to be impeccable. With double-digit growth in orders and a two-year waitlist for new planes, the potential market for non-recourse loans is in the billions of dollars. There are, of course, some risks. Unlike other self–collateralized assets such as, say, a factory, a defaulted plane can literally fly the coop. But it has to land, and given meticulous registration requirements and advanced tracking technology, historically it has proven difficult to hide an eight-ton aircraft for long. A new initiative known as the Cape Town International Treaty also makes it easier for banks to process security liens in 16 registered countries, including such hot (yet semi-dicey) markets as South Africa, Pakistan and Indonesia. “Management’s strong background in dealing with various emerging jurisdictions gave us confidence that we could mange the risk,” Shahmohammed says. At any rate, that’s their concern. All you need to know is that you now have easier access to financing that doesn’t require to you pledge your three houses and entire stock portfolio to avoid flying commercial.
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