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Feature: Ripple Effect

23 November 2011

Patrick Winters investigates how far aviation's liquidity crisis has spread outside of France.

Tags: liquidity  |  debt markets  |  DVB  |  Helaba  |  NordLB  |  Commerzbank  |  Deka  |  KfW-IPEX Bank

Aviation's credit supply has been hit as the cost of funding at European banks has skyrocketed. The funding problems started in 2008 and got worse over time. Bertrand Grabowski, managing director, DVB Bank, says funding costs for European banks have risen five, six or seven times since 2008.

Banks that relied on cheap short-term dollar funding are finding it difficult to raise long-term funds to finance aviation assets.

According to a September 21 report by Barclays Capital Equity Research - Societe General and BNP Paribas used short-term loans with a tenor of three months or less for 55% to 60% of their wholesale funding in 2010. Those at the less risky end of the scale - Deutsche Bank, JP Morgan and Intesa Sao Paolo secured between 30% and 40% of their wholesale funding with loans of under three months.

But banks with minimal long-term funding to fall back on are finding...

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