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Are banks right to be wary of PDP financing?
23 October 2009
Banks may be being too cautious with PDP financing, writes Alasdair Whyte.
Read more:
[PDP loans]
[claw-back]
[BNP Paribas]
[Calyon]
[Deutsche Bank]
[Natixis Transport Finance]
[Base II]
[Spectrum Capital]
[Norwegian Air Shuttle]
Shut. Closed. Grim. Bleak. Dead. Whatever word manufacturers, bankers and airlines use to describe the pre-delivery payment (PDP) financing market it is not cheery. Two years ago airlines would send out a mandate and get a dozen or so banks competing to provide PDP loans. Today they are often lucky to receive one or two credible offers. Just when airlines need PDP cash the most, lenders are not available.
“We just sent out a proposal and got rejected by every single bank,” says one arranger. “The annoying thing is that the banks’ reluctance to lend had nothing whatsoever to do with the airline credit risk or the underlying aircraft but, rather, because they were handcuffed by a lack of liquidity and under pressure from their HOs [head offices] to focus on relationship deals.”
Airlines tell similar stories. PDP loans are becoming a niche product again. The few banks that are...
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