NAFA member, David G. Mayer, Partner with Shackelford, Bowen, McKinley & Norton, LLP, discusses recent bank casualties, tightening credit standards, and market volatility when financing private aircraft.
The global banking crisis may have subsided for money-center banks, but aircraft financiers have not emerged unscathed or free of the turbulence plaguing other U.S. banks.
The current banking crisis started with the collapse of Silicon Valley Bank on March 10, Signature Bank on March 12, the takeover by UBS of Credit Suisse on March 19, and the FDIC takeover of First Republic Bank and sale of its deposits to JPMorgan on May 1. These closed banks, except Signature, actively made private aircraft loans, as do UBS and JPMorgan today.
It is a credit to private aircraft lenders and lessors that have not limited or exited their aircraft lending or leasing businesses amid volatility in banking, including frequently reported deposit outflows from, and credit tightening by, U.S. local and regional banks.
The bank crisis may not materially alter the financier’s pre-crisis credit approval process. However, financiers may reluctantly spool down aircraft financing for reasons such as reduced liquidity, increased regulatory capital, intensified risk management, higher cost of funds, and wider risk-adjusted interest rate spreads.
This article was originally published by AINsight on May 12, 2023.
