LCI and Waypoint sidestep export credit for now

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Various forms of helicopter funding are widely available; however, certain lessors are shying away from export credit support, for the time being, unlike financiers in the commercial aircraft market.

“There are some things that make it a little bit less desirable than it used to be – one is that it has become much more expensive,” said Michael Platt, chief executive officer of Lease Corporation International at the Corporate Jet Investor conference in London today. “The other thing is that helicopters are a bit different than fixed-wing assets, because they don't depreciate the same way, so to have fully amortising debt on non-depreciating assets is a little bit of a mismatch.”

However, Platt says export credit funding, in time, could make more sense for the lessor. “It could be the best way to finance a large portion of our fleet, so there may be a role down the road.”

Waypoint Leasing is also holding off on export credit financing for the moment.

“I think we will look at it over the next few years, but not in 2014,” said Ed Washecka, chief executive officer of the lessor. “We have a small orderbook and we will look to grow that, so I think export credit financing would be logical for us to consider along with a variety of other alternatives.”

Commercial banks in the fixed-wing market are increasingly moving into the helicopter space.

“We find the bank market to be growing – just look at the number of banks represented here today in this room,” says Platt.

However, he says there is “a lot of other financing available”, such as funding from the insurance and the pension markets.

Platt attributes the growing interest in helicopters to the strong residual value performance of the assets, the solid underlying credits of the users, and the limited supply of equipment.

“I think there really is as much access to debt as there is equity,” he adds.

Although there is plenty of financing on offer, Macquarie Rotorcraft’s chief operating officer, James Clark, says his lessor is not interested in accessing funding at the moment.”

“As we grow, we envision a time when Macquarie would like to us to test the markets to raise some capital, but we don't need it now - maybe in a year or two.”

Used market

Clark calls for greater activity and growth in the secondary market to further enhance the acceptance of helicopters as an asset class with financiers.

“I want to see a very active secondary market, I think that is important for our market to grow well,” he says.

LCI’s Platt has little “doubt” that this will happen with time.

“If you look that amount of lessors, and the amount of money coming to this market, there are only so many new order positions people can take," he explains. “So how do they get into the market? There is the sale and leaseback market and, like the fixed-wing market, there is trading between financial institutions and leasing companies, and I am certain we will see that happen.”

However, Platt believes the manufacturers are cautious about the number of equipment sales they sign with the leasing community.

“I think the OEMs have been open [to lessor sales] for the most part, but I think there is a limited number they want to sell to leasing companies as opposed to their end-users,” he says. “So how wide open will that door continue to be? That is one of the barriers to entry into the new helicopter business.”

Platt says this is also one of the reasons why there are different lessor business models “from those that only do sale and leasebacks, to those that focus on new orders or others that are a mix, as there is a limit."