Special Purpose Company Aircraft Financing Structures

THE OFFSHORE ARRANGEMENTS

This paper deals with the offshore arrangements put in place in the typical aircraft financing transaction involving the establishment of a special purpose offshore company ("SPC") in the Cayman Islands.

WHY OFFSHORE

This paper does not propose to examine in detail all considerations which may lead to the inclusion of an offshore element in any given financing transaction. These considerations will vary on a deal-by-deal basis.

The structure on which we will concentrate in this paper is the typical offshore leasing structure where ownership of the Aircraft vests with an SPC, is acquired through funding by way of loan from the Lender and is leased by way of operating lease to the Airline. This basic structure is illustrated in Appendix A. The SPC will typically be established as an "off-balance sheet vehicle" with its issued share capital held by an offshore bank or trust company on charitable trusts. The Lender will typically take security over