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Preventing Aircraft Leases From Being Clawed Back in Bankruptcy


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Structuring and Practice for Aircraft Leases to Prevent Lease Payments From Being Clawed Back in a Lessee Bankruptcy
Friday, April 9, 2021
Key Points
The risk that prepetition lease payments made by a lessee that is a debtor in a US bankruptcy will be clawed back from an aircraft lessor can be reduced if:
the lease is a true lease rather than a disguised secured loan or finance lease
one or both of basic rent and maintenance reserves are payable in advance (i.e., at the beginning of a rent period rather than at the end)
basic rent and maintenance reserves are payable monthly rather than quarterly or semiannually ....

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Lender Protection in PDP Loans From Airline Bankruptcies


Friday, February 19, 2021
The purchase agreement between an aircraft manufacturer and its customer will call for the customer to pay installments of the purchase price between the time the agreement is entered into and the delivery of the aircraft. These installments are called progress payments or predelivery payments ( PDPs ) and can be significant, especially in regard to a fleet purchase over many years. Normally the aircaft buyer pays the PDPs with its own funds. It may finance the PDPs, particularly if it also wishes to conclude a longer-term debt or sale-leaseback financing for the ultimate purchase of the aircraft at delivery. ....

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Cause & Circumstance: A (Bad) Landing Surprise | Aviation Week Network


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A Global Express that was operated by Zetta Jet USA
Credit: Transportation Safety Board of Canada
When a Bombardier Global Express struck objects on the runway while landing at a Montreal airport, no one was more surprised than the business jet’s captain. The fact that half the runway was closed longitudinally and that temporary runway edge lights were installed along the centerline of the full-width runway was unknown to him. How that came to happen is a tale of serial miscommunication involving the NOTAMs (Notice to Airmen), the ATIS (Automated Terminal Information Service) and the unquestioning acceptance of an unusual landing clearance by both pilots. I think it is also an example of how the dysfunctional NOTAM system can start a chain of errors that results in an accident. ....

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Protecting a Lessor Against the Recharacterization in Bankruptcy of a Full Payout Aircraft Lease as a Disguised Security Agreement | Katten Muchin Rosenman LLP


Overview
Often an aircraft financer will structure a secured aircraft loan as a full payout lease in order to facilitate the exercise of remedies in the case of a default by the borrower airline. Specifying that the lease is governed by English law facilitates this structure because English law recognizes the lessor as the absolute owner of the aircraft. The legal systems of many foreign airlines home countries may well take the same view. By contrast, in the United States, under Uniform Commercial Code (UCC) principles, courts may take the position that because a full payout lease is economically a secured loan despite the lease structure, the lessor should have the remedies of a secured lender rather than that of a true lessor. ....

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