Post on 11-Mar-2018
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
The Fundamentals of repossessionThe Fundamentals of repossession
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
The Fundamentals of repossessionThe Fundamentals of repossession
• Aircraft repossession : main issues
The Fundamentals of repossessionThe Fundamentals of repossession
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 Fundamentals of repossessionThe Fundamentals of 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
the Cape Town convention The main text behind repossession
Set up of an international registry
The Fundamentals of repossessionThe Fundamentals of repossession
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
the Cape Town convention The main text behind repossession
Definition of debtors’ and creditors’ rights
The Fundamentals of repossessionThe Fundamentals of repossession
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
the Cape Town convention The main text behind repossession
The Fundamentals of repossessionThe Fundamentals of repossession
• 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
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
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
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
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
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
The Owner enters Repossession processTwo Levels:
� Legal;
� Operational.
3 Authorities / 9 Parties
REPO REPOSSESSION / RETURN TO SERVICE / FERRY
RISK
FINANCIAL TECHNICAL
TAILORED PROCESS
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
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
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
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
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
Overview
• Flight Permit;
French DGAC:
• Work Package compliance;• Flight Conditions Deviation• Maintenance Deported Certificate
Requirements:
2. The Process: The Authorities
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
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
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
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
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
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
A REPO IN SUDAN: PRACTICAL CASEA REPO IN SUDAN: PRACTICAL CASE
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
REPO : KEYSREPO : KEYS
VALUE
Constraints
Time
Costs
Asset Depreciation
REPO : KEYSREPO : KEYS
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