Aircraft repossession in regions of conflict - AeroPodium repossession in regions of conflict Yves Lavigne, President, World Assets Transition (WAT) May 31 st, 2013 – London, UK

Aircraft repossession in regions of conflict

Yves Lavigne, President,World Assets Transition (WAT)

May 31st, 2013 – London, UK

SummarySummary

1 –Regions of conflict

2 - The Fundamentals of repossession

3 - A repo in Sudan : practical case

1 – Regions of conflict

Regions of conflict Regions of conflict

What do we mean by “regions of conflict” ?

It can either be a country …

Regions of conflict Regions of conflict

Today …

Major Wars, 1,000+ deaths per year

Minor wars and conflicts, fewer than 1,000 deaths per year

Countries under embargo

2 – The Fundamentals of repossession

The Fundamentals of repossessionThe Fundamentals of repossession

• When does repossession become a

necessity ? => In case of default


A mix of structural and cyclical causes

• Airlines and air transport operators face major structural and cyclical risks

+

• Mobility of assets => physical risks

• Cases of default and damaged assets

Repossession and/or recovery


• Aircraft repossession : main issues


51 contracting states

•Two parts : the convention and three protocols

•Convention => general clauses

•Protocols => integrate the sectors’ specifics

•Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment => for aircraft, helicopters and engines

the Cape Town convention The main text behind repossession


The main clauses

⇒To register ownership and interests on mobile equipment

Conditions of registration :

• First-in-time registration

• Possibility to register the interests if the asset is registered or the debtor located in a contracting state


Set up of an international registry


The main clauses

• In case of default, creditors can (among others)⇒Deregister the asset

⇒ Take possession of the aircraft

⇒Receive any benefit from the asset

⇒Go to court to enforce their rights

Improved security for the creditors


Definition of debtors’ and creditors’ rights


The objectives

Registration of international interests => less risks and uncertainties for the investors => cheaper and easier access to capital

But…

Some weaknesses => only 51 contracting states, difficulty to enforce the creditors’ rights in the local jurisdictions



• Access to the region

• Importance of political environment

• Unreliable communication and deficient information

• Logistical and consular issues

=> The main driver remains the political situation

…in a region of conflict

2 – A repo in Sudan : practical case

• Political situation :� Access, embargo, visa, security

Behind the repossessionBehind the repossession

• Risk :� staff and asset

• Selection of providers => take into account political context / can be local or foreign

What needs to be analyzed to prepare

repossession ?

DECISIONDECISION

AIRLINES LESSOR

� Defaulting

� finance

� technical

� legal

� EXPOSURE

� Preservation

� Asset

� Financing

� Remarketing

� Redelivery & Export

COMPROMISE or CONFLICT

REPO DECISIONREPO DECISION

Overview

Operator / Sub Lessee: Lebanese

Owner: Non EU Company

Lessee: EU Company 100% subsidiary of the owner

The Aircraft: A320

State of Registration: France

Aircraft Value

1. The Context: Ownership and Operation

A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE

Overview

Wet Lease provider

To whom: Sudanese operator

Airline close from backruptcy

Default on lease rent and reserves

Default on Maintenance & Airworthiness Payments

• Debt Restructuring

• Redelivery & Lease Termination;

• Repossession

Solutions:

1. The Context: the airline and its activities


Overview

Operator reaction: Offer asset to Sudanese partywithout notification

Sudanese party: Accept to pay deposit

• Purchase Agreement;

• Aircraft to be put on its AOC;

• Contracts with part 145 & part M organizations.

Lessee: EU Company 100% subsidiary of the Owner requests:

• Not informed;

• Asset out of control.

The Owner:

State of Registration: Not informed

1. The Context: the clash


CONTEXT

UN EMBARGOEU BLACK LISTED

COUNTRY

THREE AUTHORITIES:

- France;

- Sudan;

- Lebanon.

NINE PARTIES:

Owner;

Lessee;

Operator;

Part M;

Part145;

Manufacturer;

Customs;

Airports;

Fuel Suppliers.

1. The Context: Summary


The Owner enters Repossession processTwo Levels:

� Legal;

� Operational.

3 Authorities / 9 Parties

REPO REPOSSESSION / RETURN TO SERVICE / FERRY

RISK

FINANCIAL TECHNICAL

TAILORED PROCESS


Overview

• France;

• Sudan;

• Lebanon.

CAA & Customs:

• Common Law.

Lease Governing Law:

• Mortgage of the Owner

Registration:

• EU Ops: Operations;

• Part145: Maintenance;

• Part M: Airworthiness

Regulations:

2. The Process: Regulatory implications


Overview

• France: Registration; Maintenance; Airworthiness & Flight Permit.

• Sudan: Aircraft on its territory and out of control.

• Lebanon: No more implication. Carrier bankrupt and ceasedoperations.

CAAs:

• No Maintenance;

• No Airworthiness;

• No storage.

Aircraft Situation:

• DGAC Approval;

• Return to Service Work Package;

• Manufacturer Support: Flight Condition Deviation (FCD);

• Maintenance: Deported Certificate

Recovery requires

2. The Process: Practical Aspects


Overview

• Flight Permit;

French DGAC:

• Work Package compliance;• Flight Conditions Deviation• Maintenance Deported Certificate

Requirements:

2. The Process: The Authorities


Overview

• Aircraft Status;

• Overdue Tasks as per MPD revision;

• Aircraft Situation and location(Aircraft inspection).

Approve return to ServiceWork Package based upon:

• Airworthiness & Ops: Flight Permit;

• Maintenance: Deported Certificate

Use of FCD:

2. The Process: Manufacturer and FCD


Overview

• Request Deported Certificate based upon FCD;• Request Approval from the local Authority to perform

third party services in Sudan on the designatedAirport;

• Perform Customs application to imports toolings andparts.

Authorities:

• Limited to return to Service WP as set up bycontracted CAMO and based upon FCD;

• Issue the CRS.

Services:

Maintenance + Airworthiness: FLIGHTPERMIT

2. The Process: Maintenance Provider


Overview

WP from approved CAMO.

CRS from Part145.

FCD issued by Aircraft manufacturerpart 21.

2. The Process: Flight Permit

FLIGHT PERMIT

Part M/G Part 145 Part 21


FLIGHT PERMIT / FERRY BACK TO SECURED LOCATION

THE MECANISM : FLIGHT PERMITTHE MECANISM : FLIGHT PERMIT

Authority

Part M

Part 145

Part 21

Outsourcing

ShadowManagement

Repossession Coordination

Airworthiness Management

Maintenance

Relations with Authorities

Relations with Lessee

Relations with Airports

REPO : KEYSREPO : KEYS

ENSURE

Assets

Confidentiality

Legally CompliantProcess

Experienced Partners


VALUE

Constraints

Time

Costs

Asset Depreciation


Lessee

Supervision

Financial

SecuritiesCape Town

First Rank

Registry

SecurizedAsset

Conclusion : How to securize assets ?Conclusion : How to securize assets ?

TO REPOSSESS IN A REGION OF CONFLICTTO REPOSSESS IN A REGION OF CONFLICT

Ensure:

•cooperation & support with government(s)

and the related agencies

•Neutrality towards the local context

•Compliance with the international decisions

•Adapted Team and Tailored Set Up

Documents

Aircraft repossession in regions of conflict - AeroPodium repossession in regions of conflict Yves Lavigne, President, World Assets Transition (WAT) May 31 st, 2013 – London, UK