The plane’s Bond
Unless you subscribe to Total Securitization magazine you probably missed Global Jet Capital’s second bond issue BJETS 2018-2. You are probably not that bothered that you did, but it is important to everyone in business aviation.
The aircraft-finance company raised $674 million with a three-note issue. It also closed a new $900 million five-year warehouse facility – which will allow it to finance more aircraft and then securitise them.
Securitisations (in this case, bonds backed by lease or loan payments) may seem a long way away from building, operating, maintaining or flying aircraft, but business aviation needs new investors in order to grow. With bank lending regulations becoming progressively tougher, bond investors – like insurance companies, pension funds, hedge funds and banks — will be needed to finance aircraft.
Stonebriar (which has issued several securitisations with business jets as the biggest asset class) and Global Jet Capital are together educating investors about the industry. They are highlighting the differences between business jets and commercial aircraft (which investors know well) and other types of assets.
“One thing we have been highlighting is that these are productivity tools,” says Shawn Vick, CEO of Global Jet Capital. “We have been demonstrating how strong the customer base is and how these are long-life assets traded across the world.”
The second deal priced more cheaply than the first, but Vick says that the priority is building relationships with investors.
Although business aviation paper still occupies only a tiny niche in the capital markets, this is an important start. In 10 years’ time, when business-jet loans and leases have been issued to the tune of billions of dollars (including by Global Jet Capital), no one will remember BJETS 2018-2. But every time a new investor puts some money into business aviation (and gets paid back on schedule) it is a win for the industry.