Lloyds Banking Group: Understanding aircraft and helicopters

Alasdair Whyte
By Alasdair Whyte April 6, 2010 20:46

Our guide

Philip Roberts is a rare financier who truly understands how aircraft and helicopters work. Now head of aerospace and defence for the Corporate Asset Finance division at Lloyds Banking Group, he is an aeronautical engineer by training and started his career in the UK’s Royal Air Force. Specialising in ground operations and maintenance, he later worked for BAE Systems in the Middle East, before joining another bank’s asset finance team and eventually moving to Lloyds in 2008.

Roberts is responsible for managing both the Lloyd’s portfolio and, following the merger in 2009, a number of aircraft originated and funded by Halifax Bank of Scotland.

While much of his time is spent arranging business jet transactions, the bank is also very active in helicopter finance and has arranged deals for HEMS (helicopter emergency medical services), operators supporting the activities of energy companies and also military flying trainers. Few banks offer this combination of aerospace and defence expertise in one department and Roberts is proud of their commitment to the whole aerospace and defence sector.

Lloyds offers three main products: traditional mortgage backed loans; true operating leases; and an innovative structured or hybrid operating lease. The hybrid operating lease gives aircraft buyers all the benefits of traditional operating leases: it can be off -balance sheet and at the end of the lease the aircraft is owned by the bank, who therefore take the market value and re-sale risk in a down market. However, if the market is buoyant and the aircraft’s value is higher at the end of the lease the lessee has the option to act as the banks sales agent and sell the aircraft or acquire it at market value. Any upside achieved above the residual value position taken by the bank is equitably distributed between the lessee and the bank.

Roberts has seen increased interest in operating leases and structured leases in the last few years as corporates have been keen to move aircraft off-balance sheet where possible. While high net worth individuals that do not have any particular leaning when it comes to balance sheet treatment find the structured product is attractive to them as it allows them to limit their exposure to future aircraft values and market fluctuations.

Lloyds is one of the UK’s largest banks and many of Roberts’s customers are existing private banking or corporate clients. Roberts also works closely with manufacturers and a few select brokers. “The enquiry level has more than tripled since 2008 and our message is that we are open for business,” he says.

Lloyds prefers corporate jet and helicopter transactions where the lending is over $10 million so tend to focus on larger international aircraft and offshore helicopters but will consider smaller well structured deals for customers. “We have seen that values for larger aircraft have suffered less,” says Roberts. Lloyds is proud of its reputation in the UK for being a methodical lender and the bank does not tend to finance very light jets or highly specialist converted commercial aircraft such as an Airbus A380 corporate airliner for instance – although it can accommodate Airbus Corporate Jets and Boeing Business Jets on realistic structures for the right type of client. The bank also has a policy of not financing corporate aircraft built before 2000 and prefers deals to have matured before a corporate aircraft is more than 15-years-old.

While the bank has been active all over the world it has traditionally focused on UK, Western European and North American customers. Lloyds also has a team in Australia that is looking to finance more aircraft in its local and Asian markets.
Roberts has personally been involved in buying, selling and financing over 200 aircraft since leaving the air force and he is optimistic that the business jet market is picking up. “This is a resilient market and we are upbeat about it. Our message is that we do have set criteria but if a client fits our model they are likely to get a good deal.”

Alasdair Whyte
By Alasdair Whyte April 6, 2010 20:46

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