Ireland: Aviation Financing And Legal Developments: What Lies Ahead In 2014

1. Ireland's Dedicated Exchange for Aviation Finance (announced in January 2014)

On 20 January 2014, the Irish Stock Exchange ("ISE") announced plans to create a dedicated exchange for aviation related debt and other instruments. ISE Chief Executive Deirdre Somers said:

"Ireland is a world leader in aviation finance and the Irish Stock Exchange is a world leader in debt listings, we want to combine these skills to make Ireland even more attractive for aviation issuers and investors."

In a Press Release [1], the ISE states that it will offer a highly efficient, low cost platform delivering better visibility, greater investor reach and improved market intelligence for the aviation industry. The ISE worked with Enterprise Ireland's Aviation Forum and many other industry participants to advance plans for the dedicated exchange, and the initiative has been welcomed by the global aviation industry.

Financing of aircraft deliveries is sourced from commercial banks, debt and equity (including private equity) investors. It has been internationally recognised that the capital markets are a growing source of funding for aircrafts and accounted for $15bn or 15% of the total requirement in 2013 [2].

Current listings on the ISE include (nonexhaustive list):

  • $927M EETC from International Airlines Group (the parent of BA and Iberia);
  • $636M ABS from Avolon (a global leasing company);
  • Debt instruments with a total value of $12.7bn; and
  • Equity listing for Aer Lingus and Ryanair.

The new dedicated platform aims to be an international hub for aviation finance assets creating a market in Ireland and the first of its kind worldwide that will be supported and enhanced by specialist knowledge of the industry in Irish based leasing, broking, corporate finance, legal and tax professional firms.

2. Joint Committee on Transport and Communication – Report on the General Scheme of the Shannon Aviation Services and Miscellaneous Provisions Bill 2013

In late Summer 2013, the Minister for Transport, Tourism and Sport, Mr Leo Varakar TD referred the General Scheme of the Shannon Aviation Services and Miscellaneous Provisions Bill 2013 (the "Aviation Bill") to the joint committee on transport and communication and requested a report on the Scheme and Bill. The Report deals with a number of very important issues relating to aviation and the airports in the Shannon region. Shannon is located in the west of Ireland which is the birth place of many of the international aviation leasing businesses and original university for many professionals now working in this arena. Amongst the matters considered by the committee in the Report are:

  • International Aviation Services Centre ("IASC")

The Government of Ireland [3] has outlined its intention to create and develop a globally recognised and competitive IASC in the Shannon Region. The plan anticipates the creation of up to 3,000 jobs, excluding construction, within 3-5 years, by building upon the existing aviation cluster of over 40 companies in the region.

  • Amendments to the International Interests in Mobile Equipment (Cape Town Convention) Act, 2005 and in particular a declaration by Ireland on insolvency remedies (more below).

3. Cape Town Convention - Insolvency Declaration for Ireland

While Ireland was one of the first countries to ratify the Convention on International Interests in Mobile Equipment and Protocol thereto on matters specific to Aircraft Equipment (the "Cape Town Convention" or "CTC"), we did not make a declaration on insolvency remedies at that time 4.A list of declarations as at 1 January 2014 is set out in the table below.

The intention in the Aviation Bill is to provide the necessary legal mechanism to allow Ireland to adopt the Cape Town insolvency regime in relation to aircraft assets so as to sustain Ireland's current position. This will, in turn, give international investors and participants the security and comfort required in relation to the application of the international insolvency process and regime advocated in the Convention, which applies in a number of ratifying States at present.

The headings and general scheme of the Bill was published in July 2013, and it contains the new provisions in Part 6 (headings 30- 34). As only headings have been published to date, it is expected that further amendments and changes may occur prior to presentation to parliament in 2014. The general effect of the amendment is to introduce the insolvency provisions by way of amendment to the International Interests in Mobile Equipment (Cape Town Convention) Act 2005 which shall become part of domestic law as well as international treaty upon making the required Declaration.

Footnotes

1. Press Release ISE 20 January 2014

2. As above

3. Department of Transport (2013)"Govt approves drafting of Bill to establish Shannon Group plc to take over Shannon Development & Shannon Airport Authority". 23 July 2013

4. Table of Ratification and implementation of the Cape Town Convention - click here for more information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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