Partner Michael Mulitz Weighs in on Private Equity Investments in Aviation in Airfinance Journal
Airfinance Journal reports that financing is becoming easier for the aviation industry to access as the global economy continues to improve. This has resulted in lower interest rates and capital costs, as well as lower yields to be secured by private equity firms looking to invest in aviation leasing assets. Aviation continues to attract private equity, but tough competition is pushing investors towards more niche markets. In order to still meet their high-yield targets, some private equity firms are choosing investments with longer terms than the seven years that has been considered traditional in the industry, as such yields are being compressed. There are still attractive returns to be found for private equity firms which are opportunistic and understand the market and are willing to invest in different structures, such as securitizations, as lenders directly or in mezzanine structures, as well as to make revisions to traditional private equity investment strategies.
According to Kaye Scholer Partner Michael Mulitz, head of the firm’s Aviation Finance & Leasing Practice, “Investors need to understand that they’re not going to get as high returns as they used to pre-recession. In chasing a lot of these transactions they may need to invest for a little bit of a longer term, and through that they get a return through the lease rentals coming in, as well as the tax advantages of ownership they get passed through.”