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Venue: The Jet Business
NOTE: The below originally appeared as the editorial in our April 8 One Minute Week newsletter. To find out more, and sign up for free, please click here.
One of the big trends at the moment is the rise of non-bank finance. New regulations like Basel III are forcing many banks to re-evaluate. But it is a bumpy ride. Element, one of the most innovative entrants, is not looking for new deals. GE – which dominated the market for many years – sold its portfolio last year. Non-banks can change their focus as quickly as banks.
There have been two positive changes this week. Guggenheim, which has been a consistent lender for more than 10 years is merging with Stonebriar, the new equipment finance company backed by insurance company Security Benefit Corporation. Security Benefit was the largest investor in Guggenheim’s aircraft fund.
Stonebriar’s business aviation team will now be co-headed by Michael Amalfitano and Nicholas Sandler. Amalfitano headed Bank of America’s business jet team for 25 years before joining Stonebriar last year. Sandler has headed Guggenheim’s team for the last five years. He was also investment officer for the Guggenheim Aircraft Opportunity Fund and will continue to be responsible for sourcing funding. Kenn Ricci, founder of Directional Capital – which owns FlexJet, Flight Options and Nextant (and was also an investor in Guggenheim’s aircraft fund) – has also joined Stonebriar’s Board.
Stonebriar has quickly built a 27 aircraft $300 million portfolio since launching in July last year. But both Amalfitano and Sandler stress that they are not looking to grow quickly.
“We are flexible. We have a fresh portfolio so have no concentration risks and are keen to work with owners, operators, OEMs, dealers,” says Amalfitano. “We can do new assets, we can do older aircraft we can do full-recourse and limited recourse. We are agnostic about structures.”
In its first nine months Stonebriar has been focused on US deals. Guggenheim has tended to focus on deals outside the US.
“The market appears to be trending towards the US now because of the economy and foreign exchange risk,” says Sandler. “But – and it sounds trite – we will go where our customers want us to. We want to do all asset classes and offer the capital strategy that is right for our clients.”
Although Stonebriar has grown quickly. They both stress that they are not looking to grow at all costs. “We are not chasing volume,” says Amalfitano. “We want to grow but only by doing prudent deals that make sense for our shareholders and our customers.”
Across the Atlantic, Arc&Co., until now a finance arranger, has also announced two new products. It is working with a private equity firm to offer finance for between one and three years for owners – with the aircraft placed on leases to remove operating costs. It is designed to provide short term capital quickly.
The finance company has also launched Arc&Co. Aircraft Leasing to arrange full operating leases on managed aircraft.
“We believe we can offer the simplest way for a company or individual to discover the benefits of business aviation,” says Leon Batchelor, managing director of Arc&Co. Marine and Aviation. “We want to bring more people into the market and encourage them to buy – and finance – aircraft on longer terms.”
Both companies illustrate the rise of non-bank financiers. But as Element’s exit shows it will not be a simple progression.