Come Fly with me – First American/City National/RBC
Frank Sinatra earning money for his Learjet 23.
In December 1963, Frank Sinatra needed cash. Fast. His 19-year-old son had been kidnapped and he needed to pay a $240,000 ransom. Sinatra had just hours to find the equivalent of $2.5m today, outside of banking hours.
Sinatra’s bank declined to help. In a last-ditch effort, he reached out to Al Hart, the president and founder of City National Bank. City National opened its vault. The bills were marked by the FBI and packed into a suitcase. The cash was left at a Texaco garage in San Fernando Valley. Frank Sinatra Jr. was released a few hours later.
Sinatra was a loyal City National client for the rest of his life. At a fundraiser for a local hospital, he said of Hart: “I owe him and City National Bank everything.”
More than 70 years later, City National is now a subsidiary of the Royal Bank of Canada (RBC), but is still a leading bank for stars from Hollywood, Broadway, music, entertainment and sport. City National also specialises in wealth management and private banking, commercial banking and consumer banking.
In 2012, City National acquired First American Equipment Finance, and First American created a division to serve the equipment finance needs of City National clients.
“When City National acquired First American, I was tasked with determining how equipment finance could play a role to support City National’s entertainment and private banking clients,” says Mark Bearden, senior vice president, First American Equipment Finance. “Very quickly, we found a significant opportunity in private aviation.”
When RBC acquired City National in 2015, it enabled Bearden’s team to reach even more clients. “Today, we serve the private and entertainment banking clients of City National and the capital markets and wealth management clients of RBC with private aircraft needs. That’s been the fuel to the fire in our aviation lending business.” City National’s assets have nearly tripled under RBC’s ownership.
First American also finances aircraft for buyers who are not existing bank clients. “An aircraft is a valuable and prized possession for high-net-worth individuals and we’re talking to them regularly about it,” says Bearden. “This type of transaction is really about establishing trust, and it often becomes a longer-term relationship.”
First American can finance aircraft for owners who choose to charter their planes to help offset costs but does not extend loans to businesses that depend entirely on charter revenue to repay the loan. “Our clients charter their assets frequently because they want to keep the equipment running and help offset ownership costs,” says Bearden.
In the past few months, First American has financed two new Gulfstream G700s and Bearden says they are always looking for more large cabin opportunities. They will consider smaller aircraft for key clients as well but tend to focus on midsize and large cabin aircraft.
First American is one of a few lenders that finance fractional shares. Before the global financial crisis, many banks offered non-recourse fractional share financing, but few continued offering it after incurring losses during the downturn. In 2015, Bearden initiated the practice at First American, requiring guarantees, a down payment, amortization to prevent large final payments and active loan management.
“We were a leader getting back into it, but we made some important changes,” says Bearden. “We take a highly strategic approach, informed by past strategies and their outcomes, to ensure strong, sustainable results. After nearly 10 years in fractional lending, we aim to support clients as they evaluate their private travel needs. This could mean upsizing or downsizing their fractional share purchases, transitioning to whole ownership, or moving to charter.”
Bearden is looking for new deals. “We’re owned by a $90 billion bank, and our ultimate parent company is a CA$2 trillion bank, so we have a relatively small aircraft portfolio for a bank with such deep resources,” says Bearden. “Our disciplined approach ensures we prioritise the right deals while pursuing ambitious growth plans.”
Discipline is the key word there. Bearden wants to grow his portfolio but also wants regrets to be too few to mention.
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