Earlier this week I attended the 16th Annual Aircraft Registry Forum here at the Ritz-Carlton in Naples, FL. The conference was well attended, especially given our turbulent economic times. While apparently the past few years have been “All Capetown All The Time”, the panels this year consisted of a good mix of aircraft attorneys, bankers, and representatives from charter and fractional program providers. A brief summary:
The “Three Layer Cake” of title and closing – Closing aircraft deals post-Capetown requires all parties to pay careful attention to FAA registration issues, the UCC (or its state law equivalents), and the rules and regulations of the International Registry and international law. The theme here is that the procedures one follows for FAA registration purposes may not necessarily correspond to IR defintions and proceudres for preserving one’s “international interests”. Some key tips in this area included the suggestion that you re-register on the IR lease agreements that expire and are renewed. Although this may be cumbersome, especially for short-term leases, re-registering a lease agreement avoids any ambiguity as to the validity of the lessor’s (or lessee’s rights) after the initial lease term.
Change in Lending Practices – As one would expect, lenders have become much more cautious in originating new aircraft loans, and are relying more on structured finance, sale-and-leaseback, and other solutions to get deals done. Aircraft buyers should expect to have to disclose much more information about their revenues and financial health, as lenders are unable as in the past to rely on the aircraft holding its value as security for the loan. Distressed owners will be asked to “open their books” when it comes to loan modifications. The distressed borrower should be cautious in such cases, however, to restrict the use of sensitive financial information to reviewing the borrower’s ability to pay. Contact an experienced aviation attorney in order to preserve your rights.
Changes to the International Registry – New guidance, regulations and a software update. Special kudos to Rob Cowan, Managing Director of Aviareto Limited, the organization responsible for administering the International Registry, for coming all the way from Ireland to speak to his customers in person. ICAO recently issued the third edition of regulations and procedures for the IR. Some highlights include changes that make changing entity names easier, and an expansion in the scope of “controlled entities”, an important consideration for companies with aircraft-owning subsidiaries. Aviareto has responded to survey data in making changes to the software, including an improved search function for looking up entities registered on the system. This is a welcome development for the parties to a deal that need verification that a party to the deal is set up as a TUE and ready to go.
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