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01 November 2005
While manufacturer financings are never easy, Bombardier's Raspro 2005 succeeded in making more than a billion dollars of finance. Alexandra Cain examines the deal.
People either love or hate manufacturer finance. Airlines
love it because it gives them certainty that they can finance
orders. Aircraft sales people also love it because it helps
them sell aircraft to airlines. But finance managers at
manufacturers hate it.
Having to provide back-up finance and residual guarantees
means that manufacturers have less cash to invest in building
aircraft or developing new models. They also have to manage
This includes the risk of lessees defaulting, which is
especially important because airlines that need manufacturer
support tend to be weaker credits, and large amounts of asset
risk, that is made worse by the lack of diversity in the
portfolio. At one point BAE Systems' finance team worked out
that the amount of risk in its regional aircraft portfolio,
which was just a small part of the defence company's business,
could bankrupt the entire company.
While they cannot stop...
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