Aviation Financing & Leasing

1 General and Contractual

1.1 What are the typical structures available for financing the purchase of an aircraft?

Bermuda vehicles are regularly used in both ‘off-balance sheet' financing structures, where the owner of the aircraft is an ‘orphan' and ‘on-balance sheet' structures where the owner will own the aircraft directly in its own name. 

Off-balance sheet structures are often used for asset-backed securitisations (ABS). Although many ABS transactions involve a special purpose vehicle (SPV) that is directly owned by a parent, often a transaction will require an ‘orphan' SPV, meaning that it is not part of the originator's corporate group. By selling the asset to the orphan SPV, the asset is removed from the originator's balance sheet. When an orphan structure is required, the SPV is incorporated with all the shares issued to a trustee (also offshore) pursuant to a charitable or purpose trust. A Bermuda purpose trust is of particular benefit in an