The Aircraft Finance Insurance Consortium (AFIC) is looking to tap liquidity from the capital markets and Japanese regional banks to expand its funding sources.

Marsh managing director Bob Morin, who acts as AFIC's transaction and business development leader, says the consortium is developing a product that would allow it to tap the capital markets.

"We're working on a rated product, not just having the insurance company's rating. At that point, it really does open up the capital markets for us," he says.

Last year, the consortium was involved in 16 transactions, of which seven were funded through private placements, while the remainder relied on bank debt.

Morin adds that he has recently spoken with some regional Japanese banks and is seeing some interest from the market in providing debt for the AFIC product.

"They want to be involved in aircraft finance, but they are not quite sure about the best way to go about it, and we think AFIC is one of those solutions," he says.

"If we can tap into those two funding sources, AFIC will do what it was intended to – which is attract billions of dollars of incremental funding for this industry."

Morin notes that the planned move to adopt Basel IV banking regulations "would likely be a positive for AFIC" as bank loans backing its deals would be treated as commercial loans.

Banks would not require the additional reserves that aircraft loans would under the stricter regulations, but would still gain exposure to the aircraft finance industry through AFIC transactions.

Source: Cirium Dashboard