Legal survey 2020

An Airfinance Journal special supplement

Guide to aviation lawyers 2020

www.airfinancejournal.com 41 Legal moves 2019/20 Legal moves 2019-20

but specialising in asset finance, project Catanzariti joined the firm in 2009 and Edwards joins CMS finance and structured finance transactions specialises in asset and structured finance, and, in particular, shipping and aviation with a strong focus on the aviation sector. as partner finance, with a focus on aircraft asset- He advises Australian and international based securities transactions. banks, lenders, borrowers, lessees, lessors His appointment comes during a time and arrangers, and was listed as a senior of growth for the firm and follows a large associate. number of strategic appointments across its corporate and litigation practices. Finnigan joins a team with experience in a wide range of corporate and finance matters, including asset and structured finance and fund finance transactions.

Gwen Edwards

Steven Catanzariti MS Cameron McKenna Nabarro COlswang has appointed Gwen Edwards as a partner in the firm’s asset finance team, based in . Edwards joins from Hogan Lovells, where she was in the asset finance team. appoints Cevher She has more than 10 years’ experience in asset finance with a specialism in aircraft Conti debt finance and leasing. This experience includes advising banks, operating lessors, ehtap Cevher Conti has joined law borrowers, airlines, rail and shipping Mfirm Hogan Lovells as a partner in companies and private equity firms on the New York office. She was previously a cross-border asset finance transactions, tax- partner at Arnold & Porter for two years. based structured finance and restructuring Before that, she was in private Finnigan and other general banking work. practice, where she focused on global Her appointment bolsters the firm’s new transportation finance. Cevher Conti has aviation team: Legal Flightpath – CMS Before joining Maples Group, Finnigan more than 15 years’ experience in finance, Aviation. worked in the shipping finance team at particularly in aviation finance. Her broad This team comprises more than 70 Norton Rose for almost four years. He range of experience includes secured partners, providing solutions for airlines, started his career at Eversheds before debt and export credit agency-supported airport operators and service providers, joining Richards Butler (now Reed Smith) in transactions, revolving credit facilities, air traffic control operators, banks, aircraft London. leveraged leases, operating leases, lessors, equipment manufacturers, aircraft portfolio acquisitions, and asset-backed maintenance services and aviation structured financings and securitisations technology businesses. for commercial and investment banks, insurance companies, financial institutions, aircraft operating lessors and airlines. Freehills promotes Cevher Conti’s work in the commercial Finnigan moves to airline space includes secured debt, export Catanzariti credit agency-supported transactions, sale Conyers and leaseback transactions and aircraft erbert Smith Freehills has promoted portfolio acquisitions. onyers continues the expansion of its HSteven Catanzariti to partner within Matthew Cottis, global head of the CCayman Islands corporate practice with its aviation finance team. Catanzariti finance practice at Hogan Lovells, says the the hire of Barnabas Finnigan as counsel. joins John Angus in Australia, and Siva firm has been looking to expand its finance Finnigan arrives from Maples Group where Subramaniam, Kolehmainen, Rex capabilities. He says: “We expect that she he worked for more than eight years as an Rosales and Jahnavi Ramachandran in will work closely with our capital markets associate in the Cayman Islands advising London in supporting the firm’s aviation team in New York, as well as with our on all aspects of Cayman Islands law, finance clients. strong asset finance team in London.”

42 Airfinance Journal July/August 2020 Legal survey 2020

Clifford Chance retains

Airfinance Journal had to sift through 1,520 deals to find its 2019 winner, with ’s Turkish Airlines Balthazar deal scooping the inaugural Legal Transaction of the Year.

irfinance Journal would like to thank all This year’s survey Complexity: the law firms which participated in this A • Ground-breaking pioneer transaction: year’s survey. highlighted the significant 10 points Airfinance Journal’s annual legal survey includes aviation finance deals increase in the capital • Complex transaction, some new parties based on submissions from law firms as markets’ activity. In or jurisdictions: 7 points well as Airfinance Journal’s Deal Tracker 2019, Airfinance Journal • Average complexity, repeat transaction transactions. Those are subsequently with same players and jurisdictions: 5 aggregated to create the winners. This year, points we received submissions from 15 firms, recorded 179 eligible compiling 1,520 deals overall, including transactions compared • Less-complex transaction: 3 points transactions gathered from Deal Tracker. • Low complexity: 1 point This is the fourth year Airfinance Journal with 116 the previous year. has used data transactions from Deal Tracker for our legal survey. It provides a more Role: accurate picture of the 2019 activity because it includes law firms, which were not able to • Drafting counsel for major transaction submit or decided not to submit. The firms product type. The legal survey reviews documents: 10 points that did submit have the most accurate transactions for calendar year 2019 only. • Primary counsel to major transaction representation of their deals in 2019. This is significant because we recognise parties: 7 points This year’s survey highlighted the that markets change, as do law firms; significant increase in the capital markets’ however, we felt this was the only way • Secondary counsel to transaction activity. In 2019, Airfinance Journal to offer an accurate snapshot of aviation parties: 3 points recorded 179 eligible transactions finance legal activity. compared with 116 the previous year. Our aim is to continue being transparent For all Deal Tracker transactions that The survey also highlighted more activity and impartial. All of the deals used to judge were not part of the submitted deals, in the export credit agencies sector. Export the winners are eventually loaded into Airfinance Journal assigned one point credit agency-backed structures have Deal Tracker and can be reviewed by our for the complexity of a transaction and been becoming scarce as a consequence readers. three points for the role played by the of continued liquidity in the air finance In this sense, our survey is unique. Our . This resulted in a total score of sector. As a consequence, there were researchers assess each deal to verify four that was assigned to all Deal Tracker fewer transactions in the commercial loan them and to avoid double counting. The transactions that were not part of the market in 2019 than in 2018. benefit of using Deal Tracker is that we can submitted deals. Today, 37% of the submitted deals offer a granular presentation of law firm originate with European customers versus activity by both product type and region. Overall rankings 40% in the 2016 legal survey. Europe still There are limitations to the survey. Like previous years, the survey records the represents 562 transaction points. Client confidentiality may be an issue overall number of deals for each law firm. A Asia-Pacific is the second region with for law firms when submitting deals and deal, as defined by the survey, represents 410 transactions, or 27%. North America some firms opted not to participate. As one mandate and can include multiple remains third by region with about the a consequence, the survey does not aircraft and law firms. same percentage of transactions as in 2018 represent all of the deals happening In addition to presenting the most (21%, or 320 transactions). in the market, but it remains the most active law firms by product and region, the Activity in Latin America has slightly comprehensive survey of its type and survey also aggregates how law firms have decreased over the past three years. Some crucially offers a real insight into the performed to produce an overall ranking. 5.3% of this year’s total involves clients aviation market. from that region, against 6% two years The survey gives a strong indication Overall winners ago. The activity in Africa remains at the of which law firms are most favoured for Clifford Chance secured the number one previous year’s level, while transactions in certain deal types and for certain regions. spot among the law firms and topped the Middle East are slightly lower than the Airfinance Journal continues to listen the Asia-Pacific, Europe, Middle East, previous year. to its audience. This year we modified the commercial loans, operating lease, and evaluation criteria to reflect the transaction guaranteed financing categories. Methodology complexity as well as the law firm’s role in Like in 2018, K&L Gates and Milbank Aviation law firms were invited to submit a transaction rather than simply count the completed the podium, with Milbank deals to be included in Deal Tracker. The number of deals. being the law firm which progressed the Airfinance Journal data team then reviews As a result, law firms were asked to self- most year-on-year. Pillsbury pipped White the different deals and selects those assess the complexity of each transaction & Case for the fourth spot. Bird & Bird eligible for Deal Tracker. This list is then and their role in the transaction according remained sixth in the overall rankings, used to select the most active law firms, to the following new set of criteria for which while Stephenson Harwood was the most which are then selected by region and the specified points were awarded: improved law firm outside the top six.

www.airfinancejournal.com 43 Legal survey 2020

Legal Transaction of the Year: Turkish Airlines’ 5xA321neo Balthazar-guaranteed commercial financing

irfinance Journal also introduced the provided by BNP Paribas, utilising a French the Capital Requirements Regulation/ ALegal Transaction of the Year award, structured tax lease. Four further A321neo Capital Requirements Directive package, to recognise the strongest deal in the aircraft were financed during the course as an alternative product to export commercial aviation finance market. of the year as part of this transaction. The credit agency support for similar aircraft Law firms were invited to submit one lenders have the benefit of a bespoke financings. Clifford Chance acted as nomination for consideration in terms of Balthazar credit risk insurance (CRI) policy, advisers to the insurers on all five complexity, timing, innovation, overcoming arranged by Marsh (Paris) as a broker, and deliveries and drafted the underlying obstacles and diversity of solutions. provided by a syndicate of leading insurers, Balthazar policy to be used for all such The editorial team selected Turkish for repayment of the loan on a credit risk supported financings going forward. The Airlines Balthazar-guaranteed financing as default of the airline. deal team spent more than a year working the winning submission. Clifford Chance Key features of the policy include closely with Airbus, selected banks and was involved in another first in the aviation 100% cover, negotiated exclusions and a the Balthazar underwriting committee in industry space, with the successful closing framework, which balances the regulatory developing the policy framework and was of a new credit risk insurance product for capital standards of aviation financiers with the sole law firm involved in this process. Airbus aircraft financings. the risk profile of the CRI market. Clyde & Co acted as the borrower The first of five Airbus A320neo-family Notably, the policy has been prepared counsel, was the aircraft, an A321neo, closed in February to take account of EU financial institutions’ lender counsel while Morris James was the 2019 to Turkish Airlines, with financing credit risk mitigation requirements under security trustee counsel in the transaction.

Top 10 law firms by number of deals

197 Total number of eligible deals 1,520

● Score ● Number of deals

113 107

83 83 2,353

1,472 1,345 1,176 43 1,082 31 19 19 473 47 436 309 237 188

Cli ord K&L Gates Milbank Pillsbury White & Case Bird & Bird Stephenson Winston Freshfields Vedder Price Chance Harwood & Strawn Source: law firm submissions and AFJ Deal Tracker

44 Airfinance Journal July/August 2020 Legal survey 2020

49 Total number of eligible deals 410 Asia-Pacific 48

&L Gates closed the gap on Clifford KChance last year in the Asia-Pacific ● Score ● Number of deals region but Clifford Chance ranked first with a larger overall score. 688 19 Clifford Chance was particularly involved 598 20 in lessors’ commercial loan transactions in 16 this market. Simon Briscoe, a partner at the law 279 253 216 firm, says the downward pressure on the commercial debt market continued in 2019, but the competitive market for assets for Cli ord Chance K&L Gates White & Case Bird & Bird Milbank Jol investors was relatively unabated. Source: law firm submissions and AFJ Deal Tracker “The year just gone had seen a continuing swing to the operating lessor market to meet the capital funding requirement arising Asia-Pacific. “Carriers who otherwise were operating leases, retrenching of aircraft from the growth of the Asian carriers. In turn, doing fine before Covid-19, but who are back to the home jurisdiction (Lion Air) or those lessors had turned in ever-increasing now facing insolvency are of keen interest grounding particular sections of their fleet numbers to the international capital markets, to private equity funds,” he comments. (every airline). both the secured ABS [asset-backed Melson observes that the number “Depending upon their pre Covid-19 securities] market and the unsecured bond of structured leases in the Asia-Pacific routes, some airlines will be able to market, to meet their capital requirements,” has decreased dramatically, as debt recommence flights within their domestic says Briscoe. and equity are staying on the sidelines markets to ensure they are able to have The firm was involved in the $300 million until the winners and losers among aircraft in operation (Australia, People’s Ortus Aircraft Leasing II Fund, Novus airlines are determined. “In some cases, Republic of China, India, Indonesia Aviation Capital’s second fund which that determination is being made by and Vietnam). However, for those that was the largest equity commitment for a governments who provide bailouts for one rely significantly on international travel Japanese-funded aircraft leasing fund last or two of their country-based carriers, but (Singapore Airlines and Cathay Pacific year. This was one of the fastest-closing not all of them,” adds Melson. Airways), then it is going to be important funds that Sumitomo Mitsui Trust Bank had James Bradley, a partner at K&L Gates, that the green corridors arrangements are sponsored and invested in as a limited says Asian airlines were the first to be hit by put in place quickly. partner across asset classes. the impact of Covid-19 and, as such, were “It is clear that a multijurisdictional K&L Gates’ global head of aviation, among the first to start putting contingency approach with the support of governments Robert Melson, observes that private plans in place whether that be voluntary and international organisations is required equity funds have been actively looking administration ( Australia and Thai in order to expedite the recovery of the at opportunities for airline investments in Airways), managed early terminations of airlines in this region,” he adds.

Africa 4 6 Total number of eligible deals 55 he African market recorded a similar Tlevel of activity in 2019 as in 2018, with ● Score ● Number of deals 55 deals. 3 K&L Gates topped the rankings followed 69 2 by Clifford Chance and Pillsbury. The US- 64 based law firm closed four transactions last 1 41 year and scored 69 points. 30 K&L Gates was particularly involved 17 in the financing closed by Royal Air Maroc (RAM), which was a new Japanese K&L Gates Cli ord Chance Pillsbury White & Case Hogan Lovells operating lease with call option (Jolco) name within the African market. K&L Gates Source: law firm submissions and AFJ Deal Tracker represented the Japanese equity in the first Jolco to RAM’s Boeing 737 Max delivery. there is considerable appetite for Japanese 737 Max delivery. Ethiopian Airlines was “Year on year, the Jolco market continues equity in the North African market, as well a big issuer of debt in 2019 in Africa and to evolve as lenders and lessors welcome as for airlines from the region to explore financed several Airbus A350 deliveries new airlines from fresh jurisdictions. RAM new financing structures,” says Misha through the Jolco and the export credit are the second African-based airline to Kovacevic, counsel at K&L Gates. market. utilise the Jolco structure,” says K&L Gates RAM was a big issuer in Africa last year. Air Mauritius also financed a pair of partner Amanda Darling. Its activity was on the back of using Aircraft A350-900s through the Jolco market. The firm also advised a different Finance Insurance Consortium (AFIC)- Tunisair financed an ATR72-600 delivery Japanese lessor on a Japanese operating supported financing structures for the first in the structured operating lease market lease (Jol) sale/leaseback transaction for time in 2018. through an Ijarah lease. four 737-800 aircraft with RAM, two of In 2019, the carrier returned to this Operating leases were the bulk of which were closed without debt financing. market through a French tax lease with the activity in the region in 2019 with an “The volume of transactions indicate that AFIC financing for three 787-9s and a estimated 33 transaction points.

www.airfinancejournal.com 45 Legal survey 2020

77 Europe Total number of eligible deals 562

ome 37% of the submitted deals Soriginate with European customers but ● Score ● Number of deals its share has slightly reduced. In the 2016 34 legal survey, Europe accounted for 40% of 922 30 37 the deals. 21 Europe still represents 562 transaction 456 373 points, up from 539 eligible deals 346 268 submitted in 2018. Commercial loans account for 84 Cli ord Chance K&L Gates White & Case Milbank Pillsbury transaction points, of which 70 are secured. Among the unsecured activity in 2019, Source: law firm submissions and AFJ Deal Tracker operating lessors represented more than half of the transactions with notably Aercap, This private placement was a further step “Twenty-nineteen was a challenging Goshawk, and for NAC to migrate to unsecured financing. year for the European airline market, one SMBC Aviation Capital issuing debt. The lessor returned to the private which saw further consolidation – whether The lessor companies continued to tap placement market this year with an $858 consolidation by elimination (several the capital markets, as a way of financing million issuance, again being the largest airlines failed in 2019, including Thomas their growth, using the unsecured market private placement issue by an aircraft Cook Airlines, Germania, Wow Air and Aigle in 2019. lessor in the history of the market. Azur), or active M&A activity (including IAG’s Some, such as Nordic Aviation Capital Clifford Chance acted as counsel for the proposed acquisition of Air Europa),” says (NAC), issued debt in the private placement Danish aircraft lessor. The firm came first Clifford Chance partner Oliver Hipperson. market. with 77 transactions in 2019 with a score “Last year also saw the implementation of In March 2019, NAC sold a $786.3 million of 922 points, followed by K&L Gates (34 the first step of the United Nation’s CORSIA US private placement with Citi, Deutsche transactions and 456 points) and White & scheme, which aims to make all growth Bank, Goldman Sachs and RBC Capital Case (30 transactions and 373 score). in international flights after 2020 carbon Markets, which the borrower claimed was The predominant structure in Europe neutral (though the scheme remains optional the largest senior unsecured US private continues to be operating leases with currently)”, he adds. In a similar vein, the placement ever issued by an aircraft 279 transaction points last year, or just flygskam movement continued to gather leasing company. The issuance launched under 50% of all structures. The number of momentum, which – together with the various at $250 million and was substantially operating leases also reflects the changes airline failures – may have contributed to oversubscribed, allowing NAC to raise in European carrier fleets after some 2019 seeing the lowest European seat $786.3 million. ceased operations. growth numbers since 2013.”

21 Middle East Total number of eligible deals 92

lifford Chance ranked first in the Middle ● ● CEast region with 21 transaction points Score Number of deals and a score of 256. K&L Gates came 9 7 256 second with nine transactions and 130 6 points, closely followed by Milbank with 9 seven transactions and a score of 124. 130 124 100 “The Middle East remains an important 73 region for the global aviation industry. Over 2019, we saw continued growth from the Cli ord Chance K&L Gates Milbank Pillsbury Bird & Bird major players in the region, as well as an increase in funds activity and establishment Source: law firm submissions and AFJ Deal Tracker of new leasing companies on the ground,” says Clifford Chance partner Antony Single. One of the main transactions in the avenues to increase their liquidity. We have “As with the rest of the world, Covid-19 Middle East was Aercap’s sale of a second- acted for lessors assisting the airlines with is having an impact on the Middle East, but hand aircraft portfolio to NCB Capital. sale and leaseback transactions to increase we are starting to see some green shoots The innovative Shariah-compliant $500 their liquidity,” says Rajagopal. in the recovery. The Middle East continues million five-year portfolio financing for Dara Capital market deals accounted for five to see a wide mix of different financing Aviation Finance involved both Clifford transactions with the notable DAE Capital and leasing structures but we have seen Chance and Milbank as law firms. sponsoring Falcon 2019-1 ABS transaction. a definite increase in the structuring of Milbank was again active with another Commercial loan structures were popular transactions through the DIFC and ADGM groundbreaking transaction in the region in the Middle East in 2019 notably with on both UAE and also regional transactions. – the AFIC-supported financings for El Al leasing companies. The 17 transaction We have also seen some exciting initiatives Israeli Airlines with Japanese equity. points included Alafco raising more than in the green and sustainable development K&L Gates’ partner Sidanth Rajagopal says $1.5 billion through the Murabaha financing goals space with Etihad Airways becoming the region has been one of the hardest-hit structure. DAE Capital raised $600 million the first airline to raise funds tied to United areas, because the entire aviation model through the commercial loan market and Nations sustainable development goals,” was based on a hub-and-spoke model. also amended its revolving credit facilities he adds. “This has led to most airlines looking for during the year.

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www.airfinancejournal.com 47 Legal survey 2020

9 Latin America Total number of eligible deals 81

our law firms were very active in the 9 FLatin America market and, based on ● Score ● Number of deals Airfinance Journal’s newly introduced 8 points system recognising the role and 146 10 complexity of transaction, Winston & Strawn ranked first, followed by Milbank and White 101 5 & Case. 87 Mark Moody of Winston & Strawn notes 76 that airlines in Latin America continued to 46 attract diverse sources of financings last year, with Jolcos, in particular, being very prevalent for some of the leading airlines in the region. Winston & Strawn Milbank White & Case Cli ord Chance Pillsbury The data shows that almost $1.5 billion- Source: law firm submissions and AFJ Deal Tracker worth of Jolco transactions closed last year with Latin American carriers, notably Copa its $550 million 8.375% senior unsecured airlines acquired about 20 aircraft under Airlines and LATAM Airlines. notes due in May 2020 for new senior purchase contracts. The assets financed include 737 Max 9 secured notes due 2023, and a $325 Capital markets activity included 11 aircraft, A320neo and 787-9s. But LATAM million convertible term loan facility transactions with Avianca and Volaris also managed to refinance six used A320s provided by United Airlines, Kingsland issuing secured notes. LATAM Airlines, Viva in the Jolco market in a $224 million International Group and certain Latin Aerobus, Azul, Gol and Avianca issued transaction. American investors. unsecured bonds. Winston & Strawn was involved in three The firm also represented Brazilian Looking ahead, Moody says that, transactions, representing $939 million. carrier Gol in a spare parts engine because of Covid-19, “2020 is of course Milbank partner Drew Fine says the firm financing-related transaction, another US a different story, with both Avianca and was particularly active in Latin America Ex-Im financing and a predelivery financing. LATAM having now filed for Chapter 11 representing Avianca in its debt and Milbank also represented the lenders in in the USA. This will undoubtedly have lease restructuring transaction. Avianca connection with a US Ex-Im financing for an impact on the availability of future renegotiated more than $4.5 billion of Aeromexico. financings for airlines in the region, with , debt and other obligations Operating leases in Latin America such airlines likely having to turn towards as part of its 2021 strategic plan. The represented about half of the transactions supported financings such as those transaction included an offer to exchange last year, according to the data, while involving the ECAs”.

38 North America 34 Total number of eligible deals 320

ilbank and Pillsbury were neck and Mneck in North America, representing more than 70 transactions during 2019, or ● Score ● Number of deals 23% of the overall deals in the market. “The North American aircraft finance 31 market had another incredible year in 2019. 558 The capital markets were particularly hot, 517 16 with aircraft ABS having another record year and plenty of unsecured offerings 14 and EETCs [enhanced equipment trust 293 certificates],” says Milbank’s Fine. 204 The abundance of liquidity in the capital 168 markets was translated in a total of 57 transactions last year in North America. Airfinance Journal recorded 17 transactions Milbank Pillsbury Cli ord Chance White & Case K&L Gates worth $8.8 billion in 2019 in the ABS market, Source: law firm submissions and AFJ Deal Tracker up from $7.3 billion the previous year. There was a vague air of optimism in Also, there was $5.25 billion-worth of acquisition finance facilities. Milbank was January this year when the commercial EETC issuances in the US market but 2019 delighted to be involved in the vast majority aircraft ABS market was predicted to also marked a year with many commercial of major US financings in 2019. Overall, surpass 2019 volumes. Indeed, in the first loan deals in North America. The data shows a banner year in the US aircraft finance two months of the year, ABS transactions almost 80 transaction points closing in 2019 market,” adds Fine. The structured lease across five issuances totalled $2.26 billion with the majority being secured transactions. market activity was minimal in North America – and sources told Airfinance Journal in The lessor community, along with issuing last year with six transactions recorded in early March that another 10 deals were in unsecured debt, tapped the secured market the Jol market. Aircraft acquisitions and the pipeline for the first half. However, the through term loans, portfolio finance and portfolio acquisitions represented about initial momentum has stalled because of the revolving credit facilities. “There were also one-third of the total eligible transactions in Covid-19 pandemic. plenty of warehouse, term loan and other North America with 118 deals recorded.

48 Airfinance Journal July/August 2020 Legal survey 2020

30 Capital markets Total number of eligible deals 179 20 orth America leads with a third of the ● Score ● Number of deals Ncapital markets transactions, especially in the ABS and EETC markets. 424 19 Airfinance Journal recorded a total of 21 301 ABS transactions in 2019, 12 of which were 14 182 3 issued by US-based sponsors. Milbank’s Fine says: “Following a new 56 51 record 15 aircraft ABS transactions closed Milbank Pillsbury Cli ord Chance Maples & Calder Para laws in 2018, a new record 18 aircraft ABS Source: law firm submissions and AFJ Deal Tracker transactions closed in 2019. This included 11 ABS with 144A “tradeable” equity and the Jetblue Airways, American Airlines, United Overall, a stellar year in the capital markets first aircraft ABS with Japanese equity. The plus Delta Air Lines, which returned to the in 2019 and Milbank was the market ABS market continued red-hot with five market after a five-year absence. leader,” says Fine. aircraft ABS deals closing in January and DAL 2019-1 was a very interesting deal Non-US carrier issuers included two February 2020 until Covid-19 closed down because both AA and A certificates were members of the IAG group. British Airways the market.” structured with a five-year bullet maturity. issued a $1.12 billion transaction that The appetite for the unsecured bond The bullet structure is unusual for an EETC combines senior secured EETCs and market last year increased with a total of transaction, most of which are amortising Jolco equity in relation to six A350-1000 106 transaction points recorded overall, of structures featuring about 12-year tenors and two A320neo deliveries. Iberia issued which a quarter was in North America. and approximately nine-year weighted an EETC transaction in the private market Milbank maintained its lead in the capital average lives for senior tranches. The for two A320neo and two A350-900 markets category. The firm was involved collateral pool included six Airbus A321s, deliveries. as counsel in 30 transactions, three more two A350-900s, four 737-900ERs and two Another milestone transaction included than the previous year. Pillsbury was A220-100s, all of which were delivered to American issuing $650 million of debt in second with 20 transactions in 2019 closely Delta in 2018. the private market secured by 79 engines. followed by Clifford Chance with 19. “Delta, United, American and Jetblue The transaction represented the first The EETC market had a better year continued to issue EETCs in 2019, and the broadly distributed private placement in 2019 than in 2018 with almost $4.6 rated aircraft leasing companies and the engine EETC for the issuer, with 18 billion-worth of transactions. Last year, the major US airlines turned out unsecured investors ultimately participating in the EETC issuers included US carriers such as note offerings at attractive interest rates. transaction.

40 Structured leases Total number of eligible deals 107 36 arrowbodies continue to account for Nthe bulk of Jolco deals, particularly the A320neo-family as Boeing’s competing 737 ● Score ● Number of deals Max series remains grounded. 587 17 The past year has seen a number of 482 12 notable developments in the Jol/Jolco 8 space, including the proliferation of more 255 149 Jolco deals with lessors as a natural 120 adjustment to the shift in aircraft ownership from airlines to lessors. There were also K&L Gates Cli ord Chance White & Case Freshfields Stephenson Harwood more refinancings of vintage aircraft and Source: law firm submissions and AFJ Deal Tracker more innovative debt structures emerging, combining the traditional Jolco with because there was a moment where supply the Jolco transactions, including many instruments including ABS, EETCs and exceeded demand. This forced arrangers to that involved new airline credits for the AFIC-guaranteed debt. sell down their inventories at a discount. We product,” he says. K&L Gates’ Darling Jolco financings represented about had hoped this would correct itself back but, says the firm was able to guide clients two-thirds of the structured lease market unfortunately, this does not look to be the through structured lease transactions last year. The overall funding volumes case for 2020,” Tokyo Century joint general with longstanding counterparties and also have increased, reflecting the confidence manager and global head of marketing, helped them institute new relationships, in the product and the credits, but also Marito Takamasa, tells Airfinance Journal. such as welcoming Royal Air Maroc to the as a consequence of larger transactions K&L Gates maintained its lead position Jolco market. requiring bigger Japanese equity in this market, although Clifford Chance “Representing Japanese lessors on Jol underwriting capabilities. significantly reduced the gap. and Jolco structures is an area where the Last year saw the first Jolco transactions K&L Gates’s Melson says 2019 was a K&L Gates team excel. Our expertise in for El Al Airlines, Royal Air Maroc, Air big year for the firm. It advised on the structured lease transactions spans the Mauritius, while LATAM tapped the JOL-Air 2019-1 ABS, the first ABS to feature globe, we establish knowledgeable teams market for new and used assets, as Jolco securitised debt with equity sourced from across various jurisdictions and time zones underwriters became more open minded the Jol market. to provide around the clock client care and on the risk. “In 2019, we’ve seen the market “On the structured lease front, we encourage transaction momentum,” adds expand, maybe even a bit too much continued to advise on a majority of Darling.

www.airfinancejournal.com 49 Legal survey 2020

Commercial loan Total number of eligible deals 277 82 he aircraft commercial loan market has Tbeen resilient in recent years, despite the abundance of liquidity and structures that have pushed airlines and lessors to opt as alternatives. In recent years and until the Covid-19 crisis, airlines had never had it so good, as they benefited from aggressive pricing and a wide appetite for financings from ● Score ● Number of deals traditional banks, new participants and banks which re-entered the sector after long 36 absences. 940 Furthermore, new asset financing structures have been developed over the past few years, notably the emergence 21 of insurance-backed structures that 20 440 benefited from the withdrawal of the ECAs. 14 At the same time, a growing list of carriers succeeded in tapping the US capital 244 231 markets for the first time. 173 In 2019, Airfinance Journal recorded 277 eligible deals in the commercial loan market. Cli ord Chance Milbank Pillsbury White & Case K&L Gates However, this was about 100 transactions

down from the previous year and, as Source: law firm submissions and AFJ Deal Tracker such, the percentage of commercial loans dropped to 18% of the total transactions from 24% in 2019. Castlelake was particularly active last Solutions, Apollo Navigator, the KKR/Altavair This pattern can be seen among the year with two transactions: an $835 million joint venture, Airborne/Tailwind, TrueNoord top three law firms ranked in this category. non-recourse term loan facility to support and the Napier Park/AAR joint venture. Clifford Chance came first with 82 the acquisition of an aircraft operating lease Milbank’s Fine says the commercial loan transaction points in 2019 (20 fewer than portfolio of 22 aircraft from CMIG Aviation, market was very strong, whether it involved the previous year), Milbank was second with and an almost $600 million financing to term loan facilities, revolving credit facilities 36 transactions (10 fewer than in 2019) and purchase a 24 Airbus A320-aircraft portfolio or warehouses. Pillsbury was third with 21 transactions (11 from Air Aviation Capital. “Large term loan facilities and warehouses fewer than in 2019). Airborne Capital secured a $693 million were made available with the goal of Some landmark transactions in 2019 warehouse facility agreement with three eventually being taken out by ABS or long- included lessors. European lenders. term financing facilities,” he says. Altavair and KKR secured a $750 million DAE Capital secured a four-year $440 The firm also represented the borrower blind warehouse facility for their joint million revolving credit facility syndicated in on one of the largest financings of the venture after KKR invested $1 billion. The the Asia-Pacific region and subscribed by 10 year – a collateralised loan obligation-like facility has a three-year availability period Asian banks. Milbank worked on warehouse financing of the acquisition by Athene and and four-year term. financings for, among others, Aerocapital Apollo from GE Capital of PK Airfinance.

Sales & purchases 33 Total number of eligible deals 300 24 ● Score ● Number of deals &L Gates was the most active law firm 30 Klast year in the sale and purchase 23 market, ahead of Pillsbury and Clifford Chance. The firm racked up 33 transaction points and scored 408 points. 18 However, there were 300 transactions recorded last year, or about 45 transactions 408 363 343 less than the previous year. 315 “Aircraft sale transactions continue to have a bit of a mixed approach from the 207 market but is one area where there will be a reasonable amount of activity as airlines will look to access the sale and leaseback market or sell aircraft (including for part-out) to increase their cash position,” comments K&L Gates Pillsbury Cli ord Chance White & Case Milbank K&L Gates’ Rajagopal. Source: law firm submissions and AFJ Deal Tracker

50 Airfinance Journal July/August 2020 Legal survey 2020

Legal opinion, clearly expressed

The award-winning Stephenson Harwood aviation team has expertise across all areas of the aviation industry, including financing and leasing transactions, portfolio management activities, aircraft acquisitions and disposals, and dispute resolution.

Offices | Dubai | Hong Kong | London | Paris | Piraeus | Seoul | Shanghai | Singapore | Yangon Associated offices | Athens | Bucharest | Guangzhou | Jakarta www.shlegal.com www.airfinancejournal.com 51 Legal survey 2020

Operating leases 25 Total number of eligible deals 634 25 lifford Chance and K&L Gates were ● Score ● Number of deals Cneck and neck in the operating lease 20 market, while Bird & Bird came third. It was 18 a big change from the previous year when Clifford Chance had closed 40% more 12 transactions than K&L Gates. Operating leases continue to be the 328 most popular financing solutions in the 300 market of new aircraft deliveries. 249 241 In this year’s legal survey, they 181 represented about 42% of all transaction points, with a total of 634 deals versus 584 in 2019. Europe continues to lead this category with 279 transactions in 2019. Sale and Cli ord Chance K&L Gates Bird & Bird White & Case Pillsbury leaseback deals in Europe accounted for 23 deals of one or more aircraft. Source: law firm submissions and AFJ Deal Tracker The expectations in 2020 are not that optimistic, despite some airlines “The global market for operating leases year. This is due to both Covid-19 and the increasingly looking at unencumbered (sale and leaseback transactions or pure Max issue together with low oil prices, assets as a way of raising liquidity to offset operating leases) for new or old aircraft which will see most carriers continuing to the drop in revenues because of the (except those owned by airlines) will take use older technology for a bit longer,” says Covid-19 crisis. a bit of a hit until at least the end of the Rajagopal.

Guaranteed financing Total number of eligible deals 23

he number of guaranteed financing 5 Ttransactions in 2019 – 23 – more than doubled compared with the previous year. Clifford Chance, Bird & Bird, 4 and Winston & Strawn were the main participants in this market in 2019, with a total of 19 transactions. However, Clifford Chance and Winston & Strawn ranked first and second, respectively, when scores were added. ● Score ● Number of deals Winston & Strawn worked on export credit agency (ECA) deals for Aviation 78 Capital Group and LATAM last year. 2 5 “ECA-supported financing has historically 68 been counter cyclical and was a lifeline to airlines during the last downturn, when 5 access to the commercial bank market 1 became difficult,” says Winston & Strawn’s Moody. 34 30 “As a result of the current Covid-19 crisis, 20 20 I would very much expect ECA financing to start to play a major role once again in aircraft financing during the next few years,” he adds. Cli ord Chance Winston & Strawn Stephenson Bird & Bird Pillsbury Dentons Clifford Chance was mainly involved in Harwood the development and implementation of Source: law firm submissions and AFJ Deal Tracker insurance-guaranteed deals with French tax lease under the Balthazar product for Turkish Airlines and Ethiopian Airlines. risk insurance market to step in to provide loans provided by Santander as sole “Changes to the Basel capital rules are 100% non-payment insurance products,” mandated lead arranger. It was the largest accelerating trends for banks to seek to de- says William Glaister, partner and head aviation transaction since the European risk on balance sheet assets through credit of Clifford Chance’s global asset finance ECAs returned to cover Airbus products. insurance products. At the same time for group. Avianca, LATAM, Malaysia Airlines, Sun various reasons, export credit insurance/ The main transaction in the market last Express Airlines and Air Senegal were also guarantee coverage became less available, year involved Emirates Airline’s financing active last year in the ECA market, some which prompted the commercial credit four Airbus A380s under Bpifrance-covered with refinancing deals.

52 Airfinance Journal July/August 2020 Rising stars

Rising stars Airfinance Journal recognises six of the most promising legal associates for 2019.

Russell Green Over the past two years, Green is intelligent, hardworking and very has advised on a number of complex, responsive under pressure”. He is also Senior associate, Hogan Lovells high-profile matters including advising recommended in The Legal 500, 2020 London Norwegian on the establishment of a joint for UK Transport Finance and Leasing, venture with CCB Leasing (International) with a client noting he is “always able to Corporation to finance, own and lease keep the client happy” and an “excellent 27 Airbus A320neo-family aircraft that communicator and deal manager”. Norwegian has on order. Robert Fugard, Hogan Lovells’ head of He also advised Norwegian on its asset finance, says: “Russell is a highly recapitalisation. This project involved versatile, intellectually rigorous lawyer with the restructuring of the majority of the an amazing ability to get to the heart of company’s aircraft operating leases, the important issues in a deal quickly.” including the conversion of $912 million of rental obligations into shares or bonds, the adjustment of lease rates, the conversion of rentals until March 2021 into a “power- by-the-hour” arrangement (matching Evgenia Erakhtina rentals paid to actual utilisation of aircraft) Senior associate, Allen & Overy and the early redelivery of certain aircraft. London The recapitalisation enabled Norwegian to achieve an 8% equity ratio and qualified vgenia Erakhtina is a senior associate in it to receive state aid from the Norwegian Ethe structured and asset finance group government in the form of a $301 million of Allen & Overy. term loan facility. Green also worked with She advises on some of the most Russell is a highly the Scandinavian carrier on PDP financing innovative, complex and high-profile with Aercap covering five A320neo structured and asset finance transactions. versatile, intellectually aircraft. Her experience includes Covid-19 rigorous lawyer with an Other lead roles in Europe include debt finance and debt restructuring, advising Icelandair on its PDP financing AFIC-supported finance, Islamic amazing ability to get to and sale and leaseback transaction with finance, operating leasing, joint- BOC Aviation for 11 737 Max aircraft, venture establishment, debt finance, the heart of the important advising Deutsche Bank on the financing export finance, PDP finance, sovereign issues in a deal quickly. of three ATR72-600 aircraft for debt, portfolio transfers, portfolio and on lease to Braathens. The transaction warehouse financing, tax leasing products Robert Fugard, head of asset finance, marked the first “green financing” and a range of corporate and commercial Hogan Lovell involving aircraft. matters. Green also plays a leading role in the One of Erakhtina’s strengths is her firm’s Africa finance practice. Over the past expertise in Islamic-based financing ussell Green is a senior associate in year, he has acted for African financial transactions. She regularly acts for Rthe Hogan Lovells asset finance team institutions such as Eastern and Southern borrowers and Islamic banks on a variety with a particular focus on aviation finance. African Trade and Development Bank as of aircraft transactions. Recent transactions His aviation clients include airlines, leasing mezzanine lender in connection with the include advising a syndicate of Islamic companies, funds and banks and he has Balthazar insurance-backed financing lenders on the Ijara financing of five A330 acted on a wide range of aviation finance with French tax lease of two A350-900 aircraft on lease to Kuwait Airways, and products, including operating leases, sale aircraft for Ethiopian Airlines. He also DAE Capital on multiple Ijara and Murabaha and leasebacks, enhanced equipment trust advised African Export-Import Bank on the transactions with regional Islamic banks. certificates (EETC), Japanese operating repossession, settlement arrangements She has also advised DAE Capital on lease with call options (Jolco), capital and subsequent sale of two ATR72-500s the PDP and post-delivery financing and markets issuances, US and European previously operated by airlines in Angola leasing of five 787-9s on lease to Gulf Air, export credit agency-supported financing and Ghana. First Abu Dhabi Bank on the financing of and predelivery payment (PDP) financing. His range of expertise enabled him to one 787-10 aircraft and one 777F aircraft for Green has been particularly active in advise engine manufacturer Rolls-Royce Etihad Airways. transactions involving groundbreaking on arrangements arising out of Avianca’s Erakhtina’s largest transaction is the five insurance-backed aircraft financing out-of-court restructuring plan, as well as different syndicated financing facilities, solutions developed and launched to engine lessor Shannon Engine Support on totalling $3.5 billion, to International market in the past couple of years. He arrangements with airlines including China Airfinance. acted for Norwegian on a series of AFIC Southern Airlines and Sunwing. She recently completed a secondment financings for Boeing 737 Max and 787-9 Green is ranked as an ‘Associate to with a top-tier aircraft lessor in Dublin, models, and for the mezzanine lender on Watch’ for Aviation Finance in Chambers which has provided her with a first-hand one of the first Balthazar financings issued and Partners’ Chambers UK 2020 perspective on how operating lessor clients in the market. rankings, with a client commenting “he operate and their needs.

www.airfinancejournal.com 53 Rising stars

She has also had several adviser roles for AFIC insurer groups: for a French Overseas LODEOM tax lease of two 787-9s for Air Tahiti Nui; a BNP Paribas-arranged and BNP Paribas/KfW and CaixaBank- funded AFIC-supported French lease of two new 787-9 aircraft delivered to Royal Air Maroc; and a French tax lease financing of one 787-9 aircraft and one 737 Max 8 aircraft for Royal Air Maroc. This was the first AFIC-supported financing for Royal Air Maroc and the first AFIC transaction involving KfW and CaixaBank. Her work with Royal Air Maroc extended to the Jolco financing of two 737 Max 8 aircraft provided by SMBC. In the lessor segment, Erakhtina has worked with BNP Paribas, Credit Agricole, ING Bank, National Australia Bank, Natixis, Societe Generale, SMTB and Westpac on a $700 million financing of a portfolio of 19 aircraft for CDB Aviation, as well as with Evgenia is an expert PFA Asset Management on Nordic Aviation at advising on complex Capital’s largest unsecured facility. cross-border transactions and her intelligence and calmness under pressure Pete Buckley Pete has a broad Senior associate, Clifford Chance have allowed her to build London experience and has been strong client relationships the lead associate on ete Buckley is a senior associate in across the market. PClifford Chance’s global asset finance a significant number of group. He advises a wide range of clients Paul Nelson, partner and global head of across the aviation sector, including complex and first-of-their- aviation, Allen & Overy financiers, arrangers, insurance companies, kind transactions within manufacturers, export credit agencies, leasing companies and operators. the sector. Clients like his Her fluent Russian has helped her to Buckley has worked on a wide range develop strong client relationships with of financing structures including secured commercial approach operating lessors and airlines across the operating lease financings (full and limited and his ability to close CIS region. She has advised VEB-Leasing recourse), direct airline financings, Balthazar on the PDP and export credit agency- insurance-backed financings, export transactions efficiently backed delivery financing of 20 new finance transactions, Jolco financings, PDP A320-family aircraft for UTair Aviation, financings and structured capital market and smoothly. VEB-Leasing in connection with the $1.1 transactions, as well as acting for a wide William Glaister, head of global asset billion US Eximbank-supported financing variety of leasing companies on numerous finance group, Clifford Chance of 10 777-300ERs on lease to Aeroflot- aircraft portfolio sales. Russian Airlines, as well as VTB Leasing on He has also worked on M&A transactions US Eximbank-supported financing of 50 in the aviation sector and has experience 737-800/900 aircraft for Aeroflot-Russian advising operating lessors and financiers “Pete has a broad experience and has Airlines. in relation to distressed airlines and their been the lead associate on a significant Erakhtina has also supported Russian restructurings. number of complex and first-of-their-kind and international operating lessors with Notably, he advised Airbus, Marsh transactions within the sector. Clients like restructurings and repossessions involving Paris, a number of selected banks and his commercial approach and his ability to Russian airlines. various insurance companies on the close transactions efficiently and smoothly; Paul Nelson, Allen & Overy partner and development of the Balthazar credit risk he is pragmatic and steady in negotiations global head of aviation, says: “Evgenia is an insurance product for new Airbus aircraft with the opposite side,” says William expert at advising on complex cross-border financings. He has also advised the Insurer Glaister, head of Clifford Chance’s global transactions and her intelligence and Underwriting Committee on all Balthazar asset finance group. calmness under pressure have allowed her financing transactions completed as Buckley’s deal highlights include to build strong client relationships across Airfinance Journal went to press. acting as lead associate for the syndicate the market.” Buckley has spent time on secondment of insurers on the first-ever Balthazar Her experiences include being the lead with Standard Chartered Bank where he insurance-backed financing, for five associate advising financiers in a recent worked with their global aviation finance A321neo aircraft for Turkish Airlines with £400 million ($500.3 million) financing for team in Dublin, gaining valuable insights financing provided by BNP Paribas utilising Easyjet (Covid-19). from the operating lessor perspective. a French structured tax lease.

54 Airfinance Journal July/August 2020 Rising stars

He recently advised on a Jolco Airlines after the acquisition. Two of the Leung notably advised Vietjet Air on two refinancing for BNP Paribas for one 787 aircraft were acquired from ICBC Aviation landmark transactions: the purchase of 50 aircraft for KLM Royal Dutch Airlines. The Leasing entities, with the other acquired A321neos worth up to $6.5 billion and 100 transaction was completed in a matter from a GECAS entity. 737 Max aircraft valued at $12.7 billion. of weeks during the Covid-19 crisis. MUL He has also worked on various Before joining Stephenson Harwood, acted as equity arranger with junior innovative deals in the Korean market, Leung worked for one of Australia’s leading financing provided by NTT Finance. including advising Meritz Securities on the energy companies where he advised on a Buckley has had leading roles in $147 million acquisition and financing of variety of derivatives and trading matters. transactions with financiers for the one 777 aircraft, on lease to Qatar Airways. Consequently, he is able to provide restructuring of certain Jolco transactions The aircraft was purchased by a Cayman bespoke solutions to clients on their for Avianca and its subsequent (and Islands-incorporated special purpose interest rate and foreign exchange risk. ongoing) Chapter 11 proceedings, on vehicle, established by Meritz Securities Leung’s significant transactions include Chorus Aviation’s first warehouse facility from an Irish leasing company. advising Transportation Partners on a (provided by Deutsche Bank, Barclays refinancing of a total of 21 737-900ERs. and Royal Bank of Canada) to finance The aircraft are on lease to Lion Air and the acquisition of regional aircraft, and other related operating airlines including financiers on a number of full recourse Batik Air, Thai Lion and Malindo Airways. secured operating lease portfolio US-based global private investment financings for Aercap and DAE Capital. firm Castlelake provided the financing. Last year, he advised SMBC Aviation The transaction was executed within two Capital on the aircraft purchases of its months, involved seven jurisdictions, Global Aircraft Equipment Leasing (GAEL) staggered closings and multiple fund. This followed work with the lessor on drawdowns. three separate portfolio sales to Aircastle of He has led on a Malaysian carrier in 40 leased aircraft in aggregate. restructuring its leasing portfolio from His lessor’s expertise spans to in a lessor-owned Labuan vehicle to an connection with each of its 2018 Sapphire airline-owned Labuan vehicle, as well I and 2020 Sapphire II operating lease as a Philippine airline on the Japanese asset-backed securities (ABS) portfolio operating leases with call option financing transactions, negotiation of a purchase of four new A321 aircraft. agreement with Boeing for 10 737-800 Leung has also advised a French bank aircraft for Standard Chartered, and the on the financing for a new A321 aircraft financing of two A380 aircraft operated with Vietjet Air and two new A320s with by Etihad Airways for Amedeo. The first Indigo as the operating lessee; a syndicate A380 was financed with senior and junior of banks on the financing of two new A321 financing from NBAD and the second was aircraft to be operated by a Vietnamese financed through an Islamic Ijara structure airline; and a German bank on the with Dubai Islamic Bank. Japanese operating lease (Jol) financing of an A320 aircraft and an A319 aircraft operated by a Spanish carrier. Clement Leung Senior associate, Stephenson Harwood Hong Kong Laura Lewis Of particular value is Senior associate, Holland & Knight lement Leung is an experienced Leung’s ability to advise New York Cstructured finance lawyer in the aviation sector. He has advised banks, on, negotiate and execute aura Lewis is a senior level associate in lessors and airlines on various aspects of Lthe New York office of Holland & Knight aircraft financing and leasing transactions the hedging aspects and plays an essential role in the firm’s involving multiple jurisdictions. He has of aviation finance aviation finance practice. more than a decade’s experience advising Lewis grew up in a small town in Finland on derivative agreements, including ISDA transactions, which is just above the Arctic Circle and discovered master agreements, catering to a wide her passion for the aviation world working variety of products, including interest rates, unique to the industry. at the Finnish Civil Aviation Authority (now foreign exchange, equities, credit and Finnish Transport and Communications commodities. Agency) as a summer intern during law Of particular value is Leung’s ability school. to advise on, negotiate and execute The deal was financed using a She regularly counsels clients on some the hedging aspects of aviation finance combination of senior, mezzanine and of the most complex transactions in the transactions, which is unique to the junior funding. DVB Bank SE Singapore industry. industry. He recently advised on hedging Branch and Australia and New Zealand Lewis advises leasing companies and issues in Mirae Asset Securities (HK)’s $450 Banking Group provided senior financing financial institutions, as well as airlines, million acquisition and financing of three for the aircraft, while the mezzanine and on the purchase, sale, lease, novation, 777 aircraft, on lease to China Airlines. The junior financing were provided by Korean interchanges, secured and unsecured aircraft were purchased by three Cayman institutional investors. The transaction was financing (including PDP financing) and Islands-incorporated special purpose the first arranged by Stellwagen’s office in securitisation of commercial and business vehicles and remain on lease to China South Korea. aircraft, engines and parts.

www.airfinancejournal.com 55 Rising stars

Phillip Durham, practice group leader advice which is instrumental in executing Airlines, Air Canada, Jetblue Airways and of Holland & Knight’s asset finance group, commercial transactions.” other airlines including initial issuance of says: “Laura is an immensely talented She regularly advises aircraft leasing senior tranches as well as subsequent lawyer. Her intellect, service orientation and companies such as GECAS, BBAM Aircraft issuance of super C tranches. He has calm-under-fire approach have led her to Management and Aircastle, among others, worked on several cutting-edge aircraft become a key advisor for many of our most on all aspects of commercial, regulatory ABS transactions, including deals for valued clients. We’re extremely fortunate to and aviation law. GECAS, BBAM, DAE Capital, Sky Leasing, have her on our team.” Lewis has had leading roles in Avolon and Stratos/JP Lease. transactions for BBAM’s sponsoring in Jensen worked on START 2018-1 (with the $612 million Horizon I asset-backed GECAS as servicer), which was the first ABS securitisation of 29 aircraft on lease to 21 with 144A tradeable equity (as well as the airlines in 19 jurisdictions. This was BBAM’s follow-up START 2019-1 and START 2019-2 first securitisation since the $1.2 billion transactions). He also worked on the Jol-Air ECAF-1 Ltd transaction in 2015. 2019-1 for Stratos and JP Lease, which was She also advised BBAM on the lease, the first ABS with Japanese equity. portfolio financing and acquisition of 14 engines from Air Asia. This transaction is part of the $1.18 billion acquisition by BBAM of the Air Asia Capital portfolio and involved the establishment of two separate loan facilities and the lease of 14 engines to five different Air Asia-affiliated airlines. Lewis also advised Aircastle in the portfolio financing by the National Australia Bank of five A320 aircraft on lease to American Airlines, and SMBC Aviation Capital in the lease of five A320neo aircraft to the newly formed Jetsmart. She advised Jackson Square Aviation in a $500 million facility agreement, which Laura is an immensely provided financing for more than 10 new talented lawyer. Her sale and leaseback deliveries of Boeing and Airbus narrowbody aircraft with intellect, service orientation Vivaerobus and Indigo Airlines, among others. Niels is a huge and calm-under-fire Lewis also advised GECAS in the $381 approach have led her to million aggregate sale of a portfolio of 21 contributor to the success engines on lease with 16 different lessees become a key advisor for with lease servicing provided by GECAS of Milbank’s clients. He after the sale and the novation of all engine has worked on many first- many of our most valued leases. clients. We’re extremely She also serves as a member of the of their-kind transactions aeronautics committee of the New York fortunate to have her on City Bar and the forum on air and space and is also at the forefront our team. law of the American Bar Association. in developing solutions to complex issues. Phillip Durham, practice group leader asset finance group, Holland & Knight Niels Jensen Drew Fine, global head of transportation Senior associate, Milbank practice, Milbank New York Lewis undertook a 15-month secondment with the Norwalk, Connecticut, office of ew York-based senior associate Niels He has also worked on some of the most GECAS between January 2019 and March NJensen is a longstanding member of innovative and largest bank financings, 2020, where she advised on a range Milbank’s aviation finance practice and has including warehouse facilities for Sky of aviation matters including operating provided invaluable advice and service to Leasing, Aero Capital Solutions, Castlelake leases, deliveries and original equipment the firm’s clients. and Stellwagen. manufacturer purchase agreements. He graduated from Vanderbilt University Jensen is known for his deep knowledge She worked with marketing, technical, law school. of aircraft financing, his problem-solving insurance, tax and risk functions gaining Jensen has extensive experience skills, his calm demeanour and his ability to a deeper knowledge of aviation and the working with the firm’s lender, underwriters get deals done successfully. commercial side of the industry. and issuer clients. He has particular Milbank’s global head of transportation Esposito, senior vice-president experience working on capital markets practice, Drew Fine, says: “Niels is a huge and associate general counsel of GECAS, transactions, including EETCs and asset- contributor to the success of Milbank’s says: “Laura Lewis is an exceptionally gifted backed securities transactions. clients. He has worked on many first- attorney who is keenly responsive to her Over the past few years, Jensen has of their-kind transactions and is also at clients. She has great technical, legal skills represented underwriters of EETCs for the forefront in developing solutions to and also provides strategic, practical legal American Airlines, Delta Air Lines, United complex issues.”

56 Airfinance Journal July/August 2020 Sponsored editorial

Guide to cross-border restructuring Marie O’Brien, A&L Goodbody partner and head of aviation and transport finance, Dublin, and Maria McElhinney, A&L Goodbody partner, New York, look at key issues affecting lenders and lessors in Irish law arising from the Covid-19 crisis.

he aviation finance industry has Tencountered unprecedented and challenging changes over the past months. The grounding of the global fleet because of Covid-19 triggered numerous rent deferral requests from lessees and, in some cases, bankruptcies. This has led to existing financing structures being examined for flexibility and/or restructure. Ireland’s dominant position as a hub for aircraft leasing means that a large percentage of the global fleet are owned Marie O’Brien Maria McElhinney and leased by Irish companies which are the borrowers under these financing structures. These challenges have resulted in a number If the existing security is inadequate of any new security would constitute the of lenders and lessors seeking clarification to secure the obligations arising in a granting of financial assistance pursuant with regard to the refinancing and refinancing, each chargor should enter into to Section 82 of the Irish Companies Act, restructuring of existing debt obligations. new security in favour of the lender(s) to 2014. In such circumstances, in order for We have compiled a list of some secure the obligations arising under the the company to grant such new security, a frequently asked questions addressing refinancing arrangements. summary approval procedure under the act Irish law aspects connected with proposed In the event additional assets are is required to be carried out. This requires refinancings and restructurings. required to be provided as security as part all or a majority of the directors of the of the refinancing, we would advise that company making a declaration of solvency Can existing security provided by an Irish new security documents are put in place in that the company is able to pay its debts company be relied on in the refinancing respect of such additional assets in favour as they fall due. This is a 12-month ‘look- of a loan with the same lender group? of the lender(s). forward’ analysis whereby the directors There are certain factors to consider in should assess the company’s current and determining whether existing security will What key considerations should a director projected financial position in order to make be sufficient to secure the refinancing of an consider prior to entering into any new such an opinion. existing loan. A key factor relates to how security documents? In the event that a declaration of solvency the existing security documents are drafted. Before granting any new security, it is critical is made and the company is wound up The obligations secured under the existing for the directors to determine that the within a 12-month period of making such security documents (typically defined as the company providing the security is solvent. declaration, and it is unable to pay its debts ‘secured obligations’ or ‘secured liabilities’) Under Irish laws, solvency is determined by in full, it is presumed until shown to the must be drafted in such a manner, whereby the ability of the company to pay its debts as contrary, that the relevant director(s) did not the obligations secured would include any they fall due taking into account its current, have reasonable grounds for making such additional obligations arising under the contingent and perspective liabilities. a declaration. Where a director makes a refinancing arrangements. When solvent, an Irish company’s declaration of solvency without reasonable For example, in the event additional directors owe their fiduciary duties to the grounds for doing so, they could face both monies are provided or there is an increase company. Where uncertainty arises as to civil and/or criminal sanctions pursuant to in the interest rate applicable under the whether a company can trade through the act. refinancing, such an increase of obligations financial difficulties, directors continue to must be captured within the existing owe their duties to the company, but must What key factors should lenders be security in order for a lender(s) to continue take the interests of creditors into account. cognisant of where new security is to rely on such security documents. Typically, this means considering the required? Where existing security is sufficient impact of material decisions, on creditors New security granted by an Irish company to secure the obligations arising in a such as granting new security. Although will be subject to the risk of being refinancing, we would advise that a a creditor does not have a direct right of challenged by a liquidator appointed confirmation be provided by each chargor action against a director for a breach, where to such company, and rendered confirming to the lender(s) that the existing a liquidator is appointed to the company, unenforceable if it is granted in risk periods security continues in full force and effect, the liquidator could take an action against a (known as the ‘hardening periods’) on and continues to secure the obligations director if they believed a breach occurred. or before insolvency. The length of the of such chargor notwithstanding that the The solvency of the company is of risk period varies according to the type refinancing has taken place. particular relevance, where the granting of challenge raised by the liquidator. The

www.airfinancejournal.com 57 Sponsored editorial

solvency of the Irish chargor when granting be entitled to enforce its security. On court – in particular, if disgruntled creditors new security will therefore be of critical enforcement, the chargee will be authorised sought to relitigate before the Irish courts concern to any lender and it is prudent that to date the ancillary documents thereby issues that had already been determined representations as to solvency are obtained allowing it to transfer the shares of the by a US bankruptcy court. The challenge for prior to the entry into any new security. borrower into its own name or to a nominee an Irish court is where there is a disconnect In a winding up of an Irish company, and as a result take control of the borrower between Irish company law and the actions a liquidator or creditor may seek to set and its underlying subsidiaries. or orders made in the US bankruptcy aside any security entered into, where the The enforcement of a share charge over process. effect of such arrangement is to prefer the shares in the borrower is an attractive one creditor over the others and such option for lenders to take control over the How will Alternative A of the Cape agreement will be rendered invalid as an borrower group and the secured assets. Town Convention impact a potential ‘unfair preference’. This right may only be The ease and timeliness of enforcement restructuring? exercised where the company entered may be a more straightforward and One area that is harmonised to a large into the security within six months before strategic option than repossession of each extent across a number of jurisdictions the commencement of a winding up (or underlying aircraft. is the availability of remedies relating within two years for a transaction with a to aircraft assets under the Cape ‘connected person’ (broadly meaning a Which jurisdiction is the most appropriate Town Convention. Ireland is one of the director or shadow director or associate to make a bankruptcy filing? contracting states to the Cape Town of the company which includes a group There are a number of factors to consider Convention and applies the Alternative A company). There is a presumption that it in this decision, including the location of the insolvency remedy. This means a regime was made with a view to giving that person debtor, the location of the principal creditors substantially similar to the long established a preference over the other creditors, and the governing law of the documents. Chapter 1110 insolvency remedy in the US and hence is presumed to be an unfair In an EU context, one of the most applies to aircraft assets the subject of a preference. The onus is on the creditor to important factors in assessing the lease, a security agreement or a conditional provide that the arrangement was not an jurisdiction in which to file is where the sale agreement registered on the unfair practice. debtor’s centre of main interests is located international registry applies in Ireland. If the new security granted contains a and the prospects of a court accepting The key aspect of this remedy is that floating charge, the risk period is two years jurisdiction of the proceedings. This will within 60 days of an insolvency-related if granted to a connected person. In respect also be important in assessing the risk of event of a lessee, mortgagor or conditional of any other person, the period is one year creditor challenge. purchaser, the lessor, financier or conditional but only if the company was unable to pay Other factors such as the location of the seller will either get the aircraft asset its debts at the time such floating charge significant creditors, their familiarity with back or all defaults (other than the default was granted, or became unable to pay the available restructuring tools and court occasioned by the insolvency itself) will them as a result of the granting of such processes will also be influencing factors in have been cured and an undertaking given floating charge. Any floating charge granted any decision as to the jurisdiction of making as to future obligations. During the 60-day in the risk period will automatically be a bankruptcy filing. period, the aircraft value must be preserved invalid, except to the extent the company Careful consideration is also required in by the insolvency practitioner or debtor. received valuable consideration for granting considering the prospects of a successful The adoption of Alternative A is an the floating charge. restructuring, which will be a priority of exception to the Irish examinership process both the creditors and the underlying because it reduces the usual 100-day How can I enforce a share charge over an debtor group. In order for a restructure to waiting period to 60 days for qualifying Irish company? be successful, access to sufficient funding aircraft leasing and security arrangements. It is typical in aircraft financing transactions is a requirement. Unless the debtor group The remedy is very much focused on the that a share charge is provided over the has sufficient liquidity to trade through aircraft assets rather than the company and shares in the borrower and each of its the restructuring, the ability to raise funds assumes the aircraft are either located in underlying subsidiaries. For structuring to provide a sufficient liquidity buffer is Ireland or in the possession of the debtor – purposes these entities are usually essential. eg, lessee in question. special purpose vehicles and will have no employees. The share charge security is Will a US bankruptcy process be Conclusion drafted to enable it to be enforced as a recognised in an Irish court? Ireland’s stable rule of law and clear self-help remedy and a court order is not Ireland does not automatically recognise principles on financing and security are necessary for enforcement. Share charges the US bankruptcy code or orders important reasons lenders and investors do not create rights under the Cape Town made by US bankruptcy courts. In fact, are comfortable to finance high value Convention therefore no registrations are outside of the EU, there is therefore no assets in Ireland and this benefits lessors required on the international registry. automatic recognition of foreign insolvency in raising the debt needed to expand their Under the terms of a share charge, the proceedings. This can present practical business. These principles continue to be chargee (usually the lender entitled to the challenges in the context of global of importance in both the refinancing and security) will receive ancillary deliverable restructurings in which companies in a restructure of existing debt obligations. documents such as letters of resignation of number of different states are brought Lessors, financiers and investors can rely on the directors and company secretary and under the umbrella of a US bankruptcy Ireland’s creditor-friendly measures under a share transfer form. These documents process. the Cape Town Convention and domestic will be signed but left undated. On the Against this challenge, we would expect law to protect their interests in the current occurrence of an event of default under an Irish court to respect both the process challenging and ever-changing economic the share charge, the chargee should and orders made by a US bankruptcy landscape.

If you have any questions contact Marie, Maria or another partner in our Aviation and Transport Finance group (www.algoodbody.com); Marie O’Brien ([email protected]); Maria McElhinney ([email protected]).

58 Airfinance Journal July/August 2020 Legal survey 2020

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L-R: Berkery, Maireadh Dale, Catherine Duffy, Séamus Ó Cróinín, Marie O’Brien, Maria McElhinney

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