Michael Amalfitano is clearly proud of Banc of America Leasing’s position as the largest North American business jet lender/lessor, the team of over 50 people and the $7 billion portfolio of business jets and helicopters they have built over the last 15 years.
But the thing he can perhaps be most proud of is that his bank kept lending throughout the last credit crunch. Whilst other banks were forced to leave the market Bank of America financed $1.3 billion for its clients in 2009 and also syndicated another $300 million to other banks on top of this.
“It is a cyclical business, and we stayed the course through the ups and downs of the cycle,” says Amalfitano. ” “The bank is very supportive.”
Bank of America was prepared to allow the team to keep offering financing for two reasons: first the strength of the business – Amalfitano says that in 2009 the bank did not have a single delinquency in its corporate jet and helicopter business in 2009, though it did have some problem accounts to work through – and the trust that the bank has in the team, many of whom have worked there for the entire time the bank has had a corporate aircraft finance team.
Amalfitano says that they are around for clients in the bad times because they do not get carried away in the good times. While Bank of America finances a large number of aircraft and has one of the biggest portfolios he says that it is conservative.
“We do not stray from our core focus,” says Amalfitano. “We did lose out on deals when the market was frothy but it means we were around when the market fell. Our business model allows us to be there in the good and bad markets.”
The bank lends to both corporates and high net worth individuals and takes a view based on both the asset and the credit. He regards clients paying cash as the bank’s biggest competitor.
Looking abroad for growth
While it has always been active internationally, US clients have historically accounted for 75% to 80% of all deals. In the last two years this has shifted dramatically. In the first six months of 2010 the bank has split its lending equally between the US and international markets.
Part of this growth is the result of Bank of America’s merger with Merrill Lynch, which was more focused on international high net worth individuals and corporates than Bank of America. “The Merrill Lynch merger has been great for our business and opened up new clients to us,” says Amalfitano.
Merrill Lynch was particularly strong in Latin America and Brazil has been the fastest growing market for corporate aircraft finance growth. Amalfitano says they are now the biggest business jet lender by dollar volume in Brazil and South America.
“Asia-Pacific is going to become a big market,” says Amalfitano. “There is a lot of demand for large cabin aircraft.” It has recently closed its first financing of a Hong Kong registered aircraft and has been active in Australia and New Zealand. The bank is also looking at financing aircraft in China.
In March Amalfitano hired Alex Badran from Cessna Finance to grow sales in Europe, the Middle East and Asia. The bank targets international deal sizes to be above $15 million. Overall, the bank’s average corporate aircraft deal size in the $10-12 million range.
Bank of America does finance helicopters and turboprops but they only account for a small part of the portfolio. Although it does not finance aircraft operators – which tend to be riskier credits – it does make an exception for helicopter operators.
Riding the cycle
Amalfitano has been involved in financing business jets for 28 years so has seen a number of downturns. While he thinks the market may have hit the bottom he does not expect to see a sudden upturn. He says that the business jet market is driven by three things: growth in GDP; growth in wealth – both individuals and corporate profits (which is related to GDP); and the number of pre-owned or used aircraft for sale. “While there are signs that GDP or corporate profits may improve, there are 2,700 aircraft for sale – that’s two to three years of aircraft to digest,” says Amalfitano. “The business jet market tends to lag by between six to 18 months so we do not see a substantial upturn until at least the second half of 2012.”
While he does not claim that his forecast will be completely accurate he is happy to forecast one thing: that Banc of America Leasing will be open to finance corporate aircraft whatever happens.