Watch for an upcoming dogfight over who will bring the first aircraft fractional lease deal to market.
First, there were rumors Bombardier Aerospace's Business Jet Solutions could trot out a $1 billion deal soon. Now it's Wichita-based Raytheon Travel Air's turn, the business jet leasing division of aircraft maker Raytheon. Rumors have "a big Wall Street firm" involved on a private placement in the $100 million range.
Sources said the deal will likely be in the market early next year to avoid the Y2K malaise in the last quarter.
Raytheon Travel Air's vice president and comptroller Bill Wallisch said that while his firm's leasing operations are in their "embryonic stage," these assets are prime for the securitization market.
He said through the firm's credit arm, Raytheon Aircraft Credit Corp., and a new program just begun with Fleet Bank's Fleet Capital Leasing, the firm has about $50 million in lease assets on the books. The aircraft involved are Raytheon's own Beechcraft and Hawker planes.
With FAA liens filed against the share of the aircraft and not on the plane itself, this makes the assets more palatable for the ABS market, he added. Clients normally take on a one-quarter, one-eighth or one-sixteenth share of the plane.
The Bombardier deal is also expected early in 2000.
But another smaller player in the fractional lease business said he didn't think the asset class would take off any time soon. The source, an ABS veteran from a Wall Street house, admitted the leases would make great deals, but much of the business in fractional leases is done in cash.
"I could see it happening, it would be an easy thing to do," he said of securitizing the assets. "But there's very little financing involved. Even if it's a $400,000 or $500,000 lease, these guys pay in cash."
He estimated 85% of his deals are cash. Wallisch also said a significant amount of his business is financed elsewhere, often through a client's existing line of credit.
- TC
