Owner Finance - A New Way to Sell Aircraft
Corporate aircraft owners conduct the cost-benefit analysis of selling versus keeping their aircraft on a regular basis. This analysis is quite simply the consideration of how the capital, which is currently tied up in the aircraft, can be invested among the owner’s various opportunities.
What is often overlooked in these considerations is the possibility of making the aircraft itself an investment. By offering owner financing, the aircraft seller can often command a higher purchase price, and, enjoy a healthy return on that price.
While a standard institution or bank can often struggle with this kind of transaction, specialty finance companies backed by private wealth sources can facilitate owner financing for the individual looking to sell their aircraft within a matter of weeks.
Shearwater Aero Capital, a specialty asset financing company, can provide exactly such a service. From structuring the transaction to protect the owner’s interest to seamlessly handling paperwork, loan documentation and payments and transferring money between the buyer and seller with ease.
Greatest Opportunity Lies Overseas
Corporate aircraft buyers in the US and other mature markets have many options for the financing their aircraft purchases. These can range from full recourse loans based on the credit of the borrower with extremely low interest rates to asset-based loans (for certain newer aircraft) with slightly higher interest rates. However, for many corporate aircraft buyers outside of these mature markets financing options are very limited to non-existent.
It is in these emerging markets that Shearwater focuses their efforts in providing these corporate aircraft buyers with tailored private aircraft finance solutions. We are not a finance broker but act as a direct lender acting on behalf of our network of Family Offices and HNWI in originating, structuring and managing risk adjusted investments in the form of asset-based loans on corporate aircraft
Recent Transaction Serves as an Example
We were recently asked to assist an aircraft owner in the USA looking to sell their aircraft to an Asian buyer who was requesting owner financing. Our US seller brought us in early to the process and a purchase price at the top of the retail market was agreed to along with the terms of the owner financing. Shearwater handled the entire process in the same manner as if the financing was an investment for one of our Family Offices or HNWI investors.
Our US seller was trying to sell their aircraft for 4 months with only a small handful of low-ball offers in the $13 million range. The negotiated purchase price with the Asian buyer was $15 million with the following financing Terms:
Purchase Price - $15 million
Down Payment - $5 million
Terms – 36 months
Interest Rate – 10%
Amortization – Fully amortizing
Average Monthly Payment – $323,346
Finance Lease – Our US Seller retains title to the aircraft during the term and it will transfer to the borrower/purchaser upon the final payment.
Aircraft Manager – Borrower required to utilize an aircraft management company approved by Shearwater and our Seller
Registration – Remained US
Total anticipated cash flow to owner at end of 36-month term - $16,640,444
This owner financing was put in place just over a year ago and Shearwater managed the legal documentation and due diligence on the borrower in addition to managing the invoicing and collection of monthly lease payments and monitoring the aircraft utilization and maintenance activities. If for any reason the borrower/purchaser were to default on the terms of the Finance Lease our client would have the option to cancel the Lease and reposes the aircraft.
With regard to cost and fees for our owner client all the legal and transactional costs involved in putting the financing in place were paid by the borrower/purchaser and Shearwater takes their fee in the form of a small spread of the monthly interest payments.
Please reach out If you would like to learn more or discuss regarding a particular aircraft or client situation.