Ms Rose Lereece, Director Customer Finance, Boeing Commercial Airplanes has said that security structure is crucial in obtaining aircraft lease.
Lereece made the assertion at the Airline Economics Growth Frontiers Global in Dublin, Ireland, on Wednesday.
The Airline Economics Growth Frontiers Global event commenced on Jan. 12 to end on Jan. 15.
The director described the security structure as a “Stand-by Letter of Credit (SBLC),’’ serving as a security provided by a commercial bank and covered by a confirming Banking and an Insurer.
According to her, SBLC provides a short-term guarantee (immediate and irrevocable) which allows the lender or lessor to cash-in an amount to the value of six to 36 months of payments ( in USD).
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Lereece said that the payments were envisioned to include both rentals and maintenance reserves.
She listed SBLC Security features to include, immediate availability and irrevocable funds, US Dollar settlement and further security in the form of confirming and or third-party insurance.
She said that others were more entities that implied more security and fees, giving lessor or lender the ability to cure and continue or severe and repossess.
“`Collateteralisation by the airline of a fraction of the agreed SBLC value may be required by the commercial banks, “ she added.
According to her, airline pays commercial banks a single rate that embeds all fees including insurance where applicable while commercial banks pay lessor in the event of an issue.
The director explained that commercial banks obtained SBLC insurance support from the confirming bank while the confirming bank obtained SBLC insurance support from the insurance provider.
She further explained that the insurer provided insurance for the confirming bank or the commercial bank.
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Contributing, Mr Moor Ibekwe, Boeing Sales Director Africa Region Commercial Airplanes, said that the value of the SBLC, measured in payments due, could be six to 36 months for both rental and maintenance reserves.
He explained “playout term“ as one-off or monthly according to the severity of the underlying issue.
“Continued utilisation or restoration would be at the behest of the lessor or the lender, confirming bank support needed for the lease or loan traction.
“Insurance support needed for the lease/ loan transaction while tenor is the period for which the SBLC must be available to the lessor or lender in the first five years of a 12-year lease“ he added.
