AMS financial Risks Team have a thorough understanding of the issues that govern and drive structured finance on movable assets such as aircraft, ships and transportable equipment.

Structured finance at times requires third part support to underwrite asset values at the end of a lease term and Residual Value Insurance or Third Party ‘Put Options’ can provide the necessary support to fully secure a funded asset finance.

When structuring a medium or long term lease to a lessee with an acceptable credit profile, the investor whose equity is driving the structure (or airline wishing to take assets off the balance sheet) is often confident of their remarketing skills or of the general positive future prospects for the equipment. Below the equity the debt provider has a different motivation from that of the investor, as they are required to show prudent lending patterns in line with their fiduciary responsibilities and in accordance with BIS rules or their own capital adequacy constraints.

The return to the lender tends to be fixed by the lender's margin and fees, whilst the equity's return is determined by macro-economic considerations and the investor's own actions or inactions at the time the lease terminates. These separate and distinct motivations create an environment around the transaction, which is determined by:

• The investor's requirement to maintain the lowest possible net equity investment or risk capital in a lease
• The requirement for the debt to have recourse to a rated entity at the lease end, in order that the asset risk can be assumed by a third party
• The benefits of pricing asset risk where it is transferred away from the lender
• The overall benefits of applying a rated wrap on a complete transaction so that all facets of the exposure can be upgraded to the prevailing rating of the insurer or guarantor.

The AMS team is highly experienced in creating third party structures which can:

• Enhance the investor's earnings throughout the lease term
• Provide all the benefits of a sale and leaseback transaction to an airline, with the retention of upside benefit at the end of the lease term
• Reduce the asset risk exposure of the debt provider

For more information please contact broker@amspitman.com  for more details on the way insurance can enhance you’re the security on your finance structure.