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Only a handful of lenders are willing to fund them, but aircraft lessors, and increasingly the capital markets, are financing pre-delivery payments for airlines. Dickon Harris reports.
"No bank does standalone PDP financing anymore," admits a banker as I asked her about the health of the pre-delivery payment market. Lenders may be stricter on how they offer the product but anecdotal evidence suggests that PDP liquidity is returning, albeit slowly to the air finance market.
Pre-delivery payment financing (PDP) has always been a curious niche within aircraft financing. Only a handful of institutions are willing to offer airlines this type of financing. Historically this has been because of the asset expertise required. Sources state that the most active PDP lenders include just a handful of experienced aviation banks such as: DVB, CA CIB, Citi, ING Bank, Natixis, and Standard Chartered. Nearly all of these banks have restrictions on how they offer PDP lending. Many state that they offer PDP financing only to core clients or to win larger mandates for the take-out financing.
The good news is that...