Structured Finance LBOs, Project Finance, Asset Finance and Securitization by Charles-Henri Larreur

Author:Charles-Henri Larreur [Larreur, Charles-Henri]
Language: eng
Format: epub
ISBN: 9781119371281
Publisher: Wiley
Published: 2021-02-04T00:00:00+00:00

Asset finance techniques are mainly used to finance the acquisition of aircraft, ships or trains – and more rarely of some smaller assets like helicopters, containers or cranes. These assets constitute the bulk of the assets being at the same time physical, movable, and expensive. The vast majority of firms that rely on asset finance are, therefore, airlines, or shipping and railway companies. Occasionally, companies that use aircraft or ships in their operating cycle can also benefit from these techniques. A bank can finance an aircraft for Fedex or a supertanker for Shell or Chevron.

The aforementioned physical assets can be used over a long period. The lifespan of a commercial aircraft is between 25 to 30 years, about the same as a container ship or a bulk carrier. Some helicopter types can fly even longer if they are properly maintained. This remarkable lifespan explains why there is an organized secondhand market for these assets. Some clients want to use brand new assets while others are happy to buy less expensive ones.

The demand and the liquidity that exist for these assets make them relatively easy to finance. Lenders can take pledges on them and sell them or find new users in case of default of their clients. In a way, these movable assets have some similarities with real estate: they are long‐term assets that have an intrinsic value independent from their current user.

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