Aviation advisory on the asset recovery of $600m in non-performing loans
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Overview
The 2008 financial crisis wreaked havoc on financial institutions across the globe. The private financing institutions of a leading African economy were also highly affected – and in combination with other local stresses, were on the verge of collapse.
To support them, the government established a wholly owned financial institution with a mandate to acquire non-performing loans from the then distressed banking / financial sector. The bank subsequently acquired a portfolio of aviation-related debt worth several hundred million dollars – comprising security in over 50 aircraft assets and significant exposure to the country’s leading airlines.
Challenge
Following the stabilisation of the local banking sector, the bank’s mandate was to monetise and exit such assets to maximise the recoverability of the non-performing loans. Given the nature and the circumstances in which these assets were acquired and uncertainty regarding the debtor airlines and asset values, recoverability posed a significant challenge.
Furthermore, the bank’s mandate was to balance social impact and recoverability. The bank had exposure to airlines controlling roughly 90% of the domestic air capacity. Therefore, the bank had to take a more balanced approach – finding a suitable middle ground between total value recovery and preserving the country’s domestic air capacity.
ACC Aviation was engaged to advise the bank on how best to recover value whilst preserving social benefit and to support the implementation of the recommendations.
Our solution
The complexity of the assignment required significant analysis to inform our proposed strategy and recommendations and to advise the bank in a manner that would achieve its mandate.
The project was structured into an iterative discovery, strategy, and implementation cycle, allowing us to advise on the overall process and then address subsets as their own independent implementation projects.
This assignment involved ACC Aviation advising on and implementing the following projects:
- Overall portfolio strategy and segmentation of the portfolio into specific action categories
- Performing technical, valuation, and financial due diligence on aircraft assets and operational debtor airlines; and recommending suitable recovery strategies – repossess, restructure, hold
- Performing technical and valuation due diligence on non-operational assets and advising on suitable recovery strategies – outright disposal or lease placement
- Assessing the impact of the overall strategy and recommendations on the local aviation sector, particularly the impact that execution would have on domestic air capacity.
- Leading the execution of several approved recovery strategies, including
- Remarketing of non-operational aircraft assets
- Advising the bank and practitioners on debtors placed into business rescue
Several of these projects were undertaken in collaboration with a consortium of legal and financial advisors to the bank.
Client outcomes
ACC Aviation successfully delivered on Its mandate, supporting the bank to:
- Develop a holistic strategy for value recovery across its aviation portfolio
- Understand the technical condition and value of its security or collateral
- Understand the impact that strategy execution would have on the local aviation market
- Confidently act on strategic initiatives, including repossession and disposal of assets, placing debtors into business recovery, and restructuring debts.
As an outcome, ACC Aviation supported the bank in exiting its non-operational assets and taking steps to ensure that its debtor airlines continued operating – maintaining critical commercial air infrastructure in the African nation.
Key achievements
Experience counts.
Our achievements prove it.
- Facilitated successful exit of all non-operational assets for a bank
- Brought forward a solution which ensured that debtor airlines could continue operating and maintain critical commercial air infrastructure in the African nation.
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