In October 2014 Global Jet Capital launched at NBAA, with the express aim of helping prospective jet owners finance new and pre-owned large-cabin, long-range jets. Occupying a space formerly inhabited by big international banks, Global Jet Capital is a unique and massive new entrant to the business jet financing market. It is backed by three global investment firms, GSO Capital Partners (a Blackstone company), The Carlyle Group, and AE Industrial Partners.
Together, these three have provided a funding capability in excess of $2 billion. This has enabled Global Jet Capital to hit the ground running and Executive Board Chairman, Shawn Vick, reckons that the company is well on the way to building a very significant book of business.
Vick, who also holds the position of General Partner at AE Industrial Partners, says that Global Jet Capital is already involved in advanced funding discussions on a number of projects. The aircraft under discussion include Gulfstream G650s, Challenger 605s, an ACJ and a Falcon 7x.
The company’s management team has an impressive pedigree in the business aviation space. Vick has had leadership roles in three airframe OEMs, most recently – along with fellow executive board member, Bill Boisture – at Hawker Beechcraft, where Boisture was the CEO. David Rowe, the third executive board member, is a former Gulfstream vice president and the founder and managing partner of AE Industrial Partners, which specialises in investing in aerospace and power generation companies.
Vick is very satisified with the progress made since the launch. “We’ve seen very positive results across maybe three or four different dimensions. The brand awareness that we have been able to generate in the market since NBAA 2014 has been very pleasing. Aimee Talbert Nardini joined our team as Director of Marketing and has done a great job in getting our brand out there on a global scale. We are way ahead of what we expected as far as visits to our web site are concerned. Our teams have travelled to every continent, pursuing business, and we have a number of very significant deals in the process of being underwritten and in the pipeline,” he confirms.
Turning to the thinking that inspired the launch of Global Jet Capital, Vick explains that the original concept for the company’s business model came out of four-way conversations between Global Jet Capital managing director Claude Franco, and the three executive board members, around the time of the 2008 financial crisis. “We started evaluating the possibility of launching an aircraft financing business that would specialise in operating and finance leases for large -cabin private aircraft. The idea, from the outset, was not just to provide leasing solutions but also lending products such as progress payment financing and senior and junior loans for private aircraft. We saw an opportunity to move into lines of business that the traditional global banks, under pressure from the regulators, were moving out of as they sought to shrink their loan books.” By 2014, with demand for private aircraft showing modest recovery, the timing seemed right.
“If you take away the unusual peak in demand private aviation saw just before the financial crash of 2008, and you also remove the steep drop in demand caused by the crash, and then look at the way global sales of new aircraft have progressed over the last decade and a half, we are pretty much back on track. We are nowhere near the peak of 2007 but on a normalised curve; sales are back to normal or near normal and there is plenty of business out there to be done. We will continue to be prudent with our sponsors’ capital but the quality of our interaction with the market has been excellent,” Vick comments.
There are some adverse geopolitical factors at present, including turmoil in parts of the Middle East and the slowdown in the Chinese economy, along with the anti-corruption drive by the Chinese government. But North America, Europe and Latin America are generating strong sales opportunities, Vick says. Africa, too, has potential. Vick points out that Global Jet Capital recently signed a Memorandum of Understanding (MoU) with the African Business Aviation Association (AfBAA), in terms of which the company becomes a preferred provider of financing solutions for AfBAA members looking to finance the purchase of private jets. The financing that Vick and his team could make available to purchasers in Africa could well have a significant impact on private aviation across a number of African states.
“One of the defining features of our market is that the tremendous burden of oversight and compliance, along with the capital charges imposed by the regulatory regime on traditional banks, has made them take a step back from various forms of lending, including aircraft financing. That reality has created ideal conditions for us, and added to this is the fact that we have a small and highly agile team, able to pursue deals on every continent. Plus, unlike the banks, we have an investment committee that is solely focused on this particular line of business so we can make decisions very rapidly,” he explains.
A typical deal would be where a buyer has purchased a pre-owned aircraft that is now just six months away from being delivered and is in pre-purchase. The buyer’s need for acquisition finance has now crystalised and they want a rapid decision. “Provided we get the information we require on the asset and the creditworthiness of the buyer, we can evaluate both sets of information and have a decision for the buyer in less than 10 days. Plus, we can fund the deal after signing within 10 to 15 days,” Vick says. That kind of speed on big ticket asset financing puts Global Jet Capital in a unique position to win business.
“A key part of this process is to get a face-to-face meeting with the principal and his/her advisors as fast as possible. That is the surest way to understand their requirements,” Vick adds. Sometimes the need is for progress payment financing. Or the client might be buying an interim pre-owned aircraft, having placed an order for a new jet that will not be ready for delivery for four to five years, and therefore requires financing for the ‘stepping-stone’ aircraft that is going to get them to that new jet.
The availability of finance from an active provider is also a huge boost to OEMs. “It means that they can sell a pre-owned aircraft today, for which we provide operating lease financing and secure the order for a new jet in their pipeline, knowing that we have agreed the future funding requirement with the owner, subject to them meeting our credit requirements when that payment becomes due,” he notes. That line of reasoning is highly attractive to OEMs and Vick and his team have already had some very fruitful discussions with OEMs. “This whole process of dealing with the OEMs is greatly facilitated by the fact that a number of my team have had years working for OEMs. I have been involved in managing the front end of the business for three OEMs, so as a team we really understand the process of introducing active buyers – along with the absolute requirement for confidentiality throughout the negotiations,” he notes.
“The process starts with detailed support for our field team when an information request about financing is initiated, and no one outside that sales relationship needs to know about the prospective sale. If the project is of interest and looks as if it will meet our criteria, we move forward at a pace that seeks to match any urgency in the buyer’s requirements,” Vick comments.
Given that the buyers of mid- to large-size private jets are, by definition, very wealthy individuals or large corporations, it might be thought that many prospective purchasers would want to fund the purchase out of their own pocket or, in the case of corporations, off their own balance sheets. However, Vick points out that buyers are highly sophisticated when it comes to finance. They know that they can secure funding at highly competitive rates, well below the level that they could earn on those millions of dollars if they put that money to work in their businesses or through investments, instead of sinking it all into an aircraft. “The reality is that all these aircraft in the $40 million to $60 million range are bought on financing and we intend to make sure that we get our fair share of that business,” he says.