INVICTA FINANCE • PAID FOR CONTENT

How to finance your next business jet

Answering five questions before financing your next business jet will help investors close more efficient deals. Martin Hofacker (left) and Christian Certa (right), Invicta Finance explain the questions to ask.

INVICTA FINANCE

How to finance your next business jet

Shutterstock

PAID FOR CONTENT

JUST FIVE questions will help investors plan and complete more efficiently the acquisition and the financing of a private jet, according to business jet and superyacht finance firm Invicta Finance.

The questions to ask are:

What factors to consider when planning the acquisition and financing of assets
How to choose the right asset
What to consider when planning the finance structure
What are ways to mitigate red tape
How to sidestep common pitfalls?

“Start on the right foot by asking the relevant questions about the nature of your planned investment,” said Martin Hofacker, MD, Invicta Finance. “Identifying answers to broad topics such as mission profile, your financial position, finance options and engaging specialist advice early will help the deal to complete as efficiently, quickly and cost effectively as possible without unneccesary delays.”

When deciding what factors to consider, a good first step is to define the mission profile of the jet you need and to decide if you want to go into full ownership or if another form of using an aircraft would be a better fit to your requirements. Guiding that decision will be the required range, frequency of missions, destinations and whether the flights will be predominantly private or commercial. A key point, sometimes overlooked, is to plan the total cost of ownership. This extends beyond simply the purchase price or monthly payments to include items such as running costs – such as fuel, hangarage and aircrew – maintenance reserves, insurance costs, tax liabilities and resale value.

In parallel to these asset-related aspects, it is indispensable to have transparency at day one on the financial situation of the borrower.

“When financing an aircraft the main focus is, of course, on the quality and marketabiity of the assets. But there is still a need to understand the overall financial situation of the borrower. So prepare information on the ownership structure and aircraft-related documentation including some financials to understand the big picture of such a transaction,“ said Hofacker.

Choosing the right asset should mainly be guided by considering what your actual use looks like and how future needs are likely to evolve, said Christian Certa, head of Sales and Origination at the company. In the case of an aircraft, within the category come potential changes in travel patterns, fleet growth, or resale strategy. When deciding between new or pre-owned aircraft, factors to consider are lead times, slot availability and whether the pre-owned market can affect price and delivery schedules. And finally, to choose an aircraft means choosing a manufacturer. It’s prudent to review technical support and resale strength – OEM service network, parts availability, and historical resale performance matter for long-term value.

Select the right asset based on your mission.

“When it comes to planning the finance structure, take into account the long-term financial impact of your preferred financing option,” said Certa. “The structure you choose will influence cash flow, liquidity, tax exposure and your private or corporate balance-sheet strength for a longer period of time,” he added. Choosing the wrong financing structure can spell disaster for aircraft financing deals. Common problems are mismatched loan terms or lease conditions that strain cash flow or limit future flexibility in the use of the aircraft.

“Informed decisions upfront help to avoid delays later …”

Compare financing options, decide between fixed rates versus floating rates and the amortisation profiles to match these options with your overall cash-flow strategy. The financing structure is additionally influenced by non-financial elements such as regulatory and tax aspects. Making the right decisions up front also speeds the transaction process and makes a favourable outcome more likely. “Making informed decisions upfront helps avoid delays, renegotiations, or failed closings,” said Hofacker.

Red tape and aircraft financing are intrinsically linked, which is due to the complexity of such transactions and the number of parties involved. But that does not mean that investors must suffer a rising tide of red tape.

Invicta Finance’s solution to battling red tape surrounding the acquisition and financing of such an asset is to hand over the responsibility to run the overall process to a senior person with both industry and financing knowledge. “A value-adding financing partner not only arranges a facility but also oversees the acquisition of the aircraft and all asset-related agreements,” he said. “The appetite of a lender to finance an aircraft is directly determined by operational aspects such as country of registration and robustness of the legal system in the jurisdictions where the operator and the borrower are located.”

Aviation finance expertise. (L to R) John O'Reilly (legal & compliance), Christian Certa (Sales), Léo Jankowski (accounting and operations manager), Nicolo Messina (CFO), Mehdi Ben Ahmed (marketing and portfolio management), Felipe Ribeiro (managing principal) and Martin Hofacker (managing director). A key part of Invicta Finance’s success is the wide industry experience and financial acumen of its senior management team.

Besides the people aspect, the other key element to battle red tape is to run the whole financing process based on a complete and reliable documentation package from day one. This should include full financial details, corporate structure charts, Know Your Customer (KYC) and Anti-Money Laundering (AML) details and aircraft details as early as possible. Having a robust information deck at hand promises to cut weeks off approval times.

The right profile of the person in charge of running this process is essential. Allocating the responsibility to an expert in this field always pays off.

That leads neatly on to the final question to answer: How to sidestep the common pitfalls that can bedevil the process of becoming the owner of a financed business jet. The most common problems surround underestimating costs and time, but also the importance of having top experts who coordinate the whole process.A skilled and experienced financing partner oversees the whole project and is of great value in making the acquisition and financing of such assets a positive experience.”

With regards to costs, buyers often focus on the purchase price of the aircraft while ignoring all the other (very long list of) relevant aspects to consider. To assess the purchase price in the overall context is key to a finally successful acquisition. Underestimating the timeline is a common trap to mention for the unwary. “To buy and finance a jet is a complex matter with many unknown elements through the whole process, from the delivery of the aircraft to the draw-down of the lease,” said Hofacker. Assuming the aircraft will deliver on time is also fraught with dangers. Delays in aircraft production, refurbishment or importation can often disrupt planned financing timelines and, at worst, trigger penalty payments.

Different jets: different financing options. It pays to consider the best package for your needs.

“Consider the long-term financial impact of your preferred financing option …”

And last, but not least, the third pitfall is related to the quality and seniority of the person managing the whole acquisition and financing process. Poor coordination among advisers, missing decision power of the person in charge or ineffective communication between the parties might jeopardise the success of a transaction or make this once-a-lifetime event for a future aircraft owner an unsatisfactory incident.

Thinking about these five questions before entering a transaction will help prospective buyers avoid potentially expensive, time-consuming and frustrating mistakes, explained Hofacker.

“Choose partners with knowledge in the aircraft industry,” he said. “Decide on the project organisation and the role of internal/external consultants. A skilled and experienced financing partner oversees the whole project and is of great value in making the acquisition and financing of such assets a positive experience.”

‘Where insight meets opportunity’

Invicta Finance was born from the need to bridge the gap between rigid banking procedures and the appetite for flexible, speedy and bespoke solutions for clients.

BUSINESS JET and superyacht financial specialist Invicta Finance made its way to a leading financer for private jets and yachts. Before creating Invicta Finance, founder and managing principal Felipe Ribeiro spent two decades in banking and finance, of which nearly 15 years were devoted to aircraft lending. During that time, he spotted a gap in the market for a boutique financing firm, dedicated to helping clients plan and execute financing deals for high value aviation and maritime assets.

“Before founding Invicta Finance, I noticed the limited appetite of banks in lending to aviation borrowers,” said Ribeiro. “This coupled with the increasing complexity in getting credit requests approved offered new opportunities for private debt lenders.”

The growing mismatch between rigid banking procedures and the need for flexibility, speed and bespoke solutions to cope with the changing dynamics of the aircraft market led Ribeiro to launch the company in 2016. “Our vision is to create superior value to customers through a privately owned aircraft lending company that delivers top quality solutions and an agile consumer-centric approach aircraft financing. We offer a one-stop solution for business jet, helicopter and superyacht financing, leasing and acquisition.”

During its early years, the company started as a financing arranger and financing broker – closing its first financing deal over its own balance sheet after two years.

Since then, Invicta Finance has evolved into a new business model to become a direct lender, by constantly enlarging its offering and regional reach and moving from standard to bespoke financing solutions. It has added on an ongoing base new operators and aircraft registries as partners in the Invicta structures, said Martin Hofacker, MD, Invicta Finance. “In parallel we continued to strengthen the operating model and lift the bar when it comes to regulatory and compliance standards – such as KYC [Know Your Customer] and AML [Anti-Money Laundering] in line with increasing requirements in the financing industry. Over the years we have achieved a set-up and the capabilities which allows us to lend globally” he added.

Based on long experience of arranging complex cross-border finance for ultra-high-net-worth individuals and corporate clients, Invicta Finance is today positioned as an institutional aircraft and maritime lender focusing on private and corporate jets. The company provides at the core bespoke financing solutions (including finance and lease options), offering operating and finance leases, senior loans and pre-delivery financing with amortisation schedules tailored to client cash flows. With the aim of serving the clients along their journey as aircraft owner, it also offers services in the areas of advisory support, transaction support and consults on aviation investments. The latter gives clients access to independent industry information related to the business aviation market.

As a boutique lender, the company is funded by a global network of professional private debt investors and financial institutions. They want to leverage the knowledge and track record of Invicta Finance.

Today and after having reached a cumulated value of closed aviation and yacht financings in the region of $1bn since 2017, Ribeiro summed up Invicta’s client proposition like this: “We finance, pilot the selection of assets and/or finance partners, negotiate on client’s behalf, coordinate and drive the process until closing and manage our clients’ long-term financial commitments. It’s our role to remove the complexity associated with transactions of this type for our clients.”

Invicta Finance has closed finance deals worth about $1bn since 2017.

“Our mission is to strengthen visibility in the private debt market …”

What separates Invicta Finance from its competitors are its experience in realising bespoke solutions, strong relationships with banks/investors, aircraft owners and partners from the aviation and yacht sector, as well as the asset-related knowledge of private and corporate jets, according to Hofacker. “The company has an industry DNA combined with asset-based financing knowledge. The seniority of our people enables us to make sound decisions on non-standard structures in the pace the market requires and at a quality our investors expect from us,” said Hofacker. Key words in the owner-led company are “trust” and “people”.

“Trustful people with multi-year experience in aircraft and yacht financing, acting as dedicated relationship managers help to ensure quick issue resolution and post-delivery support to create a superior client experience. Senior decision-takers in the company are the point of contact of the clients.”

The company delivers high-quality customised solutions at the speed the market requires due to its streamlined underlying credit processes. Also key are the seniority of its decision-takers and standards with pre-approved structures and templates acting as the back-bone of individualised solutions. These deliver fast outcomes at a reasonable cost in a business where flexibility is the new standard.

For the future, Invicta Finance is focusing on extending its footprint further into untapped regions and strengthening its brand in the private debt market. “Our mission to strengthen visibility in the private debt market and to be considered as a prime investment partner for private- and institutional investors,” said Riberio. “We strive to deliver the highest quality of customer service in business aviation where insight meets opportunity,” concludes Riberio.

For more information the company’s services, visit invicta-finance.com.

FELIPE RIBEIRO

At the helm of Invicta Finance

Founder and managing principal, Invicta Finance, Felipe Ribeiro has long experience of planning and executing complex, international cross-border financing agreements for ultra-high-net-worth-individuals and corporate clients.

Before founding Invicta, Riberio spent 17 years at global bank Credit Suisse Group where he helped to position the bank as a leading player in aircraft financing.

In addition to closing hundreds of deals covering luxury assets – including business jets and superyachts – Riberio speaks French, English, Portuguese and German. He holds an Executive MBA Degree from Business School Lausanne.