Kevin O'Toole/LONDON
British Aerospace is understood to have drawn up plans for an innovative insurance scheme that would help clear regional aircraft liabilities from its balance sheet.
The group, which directly manages a portfolio of more than 90 British Aerospace 146s and a further 400 turboprops through its BAe Asset Management (BAeAM) arm, has been looking at ways of reducing the risk which still remains on its books.
Initial plans centred on an aircraft securitisation deal that would have bundled up leased BAe 146s for sale as a package to investors. That appears to have been put on the backburner, however, with the new proposals for insuring against recourse liabilities.
No decision has yet been taken on whether to go ahead with such a deal, but proposals are understood to be in place. Headline liability stands at more than £2.5 billion ($4 billion), of which around £1.5 billion comes from guarantees given to aircraft buyers, largely over residual values, with the remainder from commitments on long-term head-leases taken out with financial institutions.
It is understood that the insurance would effectively act as a form of catastrophe cover to indemnify the company against the potential of a large number of aircraft being returned or residual values collapsing. BAe hints, however, that the pressure to address the core liabilities has eased, given the healthy state of airline demand and BAeAM's success in rehabilitating the 146 fleet.
With a stream of steady sublease income accruing from the aircraft portfolio, and residual aircraft values looking more stable, the aerospace company assesses the actual net recourse provision showing on its balance sheet as running at a total of £500 million.
Source: Flight International
