The aviation financing industry has undergone a monumental shift in the past decade. As traditional bank lenders have come under increasing regulatory pressure, by virtue of their systemic importance in a decade of low interest rates and a search for yield, private capital (private equity, hedge funds, distressed debt funds, etc.) has been attracted to the relative stability of cash flows and value retention of aviation assets. It is no secret that private equity and other alternative funds have long been accumulating capital, waiting for the opportune moment.
The COVID-19 Pandemic (the “Pandemic”) has wreaked havoc on the aviation and travel sectors. As difficult as this has been to be involved in, distress is attractive to private equity. As airlines restructure and revisit their global fleet compositions, the market reprices distressed assets to reflect evolving operating conditions. In this relatively illiquid market, therefore, there are unprecedented opportunities for longer term investors with experience in distressed assets.
Continue Reading 2020 hindsight: Finding opportunity in distress