Junior and mezzanine debt ‘underserved’: Novus | News | Airfinance Journal

Junior and mezzanine debt ‘underserved’: Novus

Given record numbers of new aircraft deliveries, junior and mezzanine debt markets are “underserved” by the financial community, the managing director of Novus Aviation has said.

“We believe the junior and mezzanine financing segment of the market remains underserved by the financial community at a time when the OEMs are delivering a record number of aircraft,” Mounir Kuzbari says in an interview with Airfinance Journal.

In September the Dubai-based lessor came to market with Cedar Aviation Finance (CAF), a new junior debt fund designed to provide airlines and lessors with higher loan-to-value financing for the acquisition of Boeing-manufactured aircraft.

Novus will manage the fund, providing junior and mezzanine loans to bridge the gap between equity and senior debt.

CAF comes off the back of similar platforms like Tamweel Aviation Finance (TAF), which was launched in 2013 by Novus, DBJ and Airbus. The first CAF transaction is expected to take place by the end of the third quarter this year, says Novus.

Kuzbari adds: “The initial thesis of our first junior debt initiative back in 2013 was to plug the gap left by the changes in the ECA market and the retrenchment of the traditional aviation banks. Liquidity has been back across the capital structure but when listening to our customers, the offer of attractive junior loan products remains relatively limited. This combined with new regulatory changes for banks and raising interest rate will put stress on some of the legacy players and new entrants.”

Fellow managing director Hani Kuzbari says: “The target size and ambitions for the fund are big but we cannot disclose the details. The ramp up will be done gradually over time. The product is pretty much available for all airlines and leasing companies with Boeing deliveries. Few transactions may be announced this year.”

Commenting further on the fund, Mounir Kuzbari says: “It’s largely beneficial to our airline customers who typically like to see multiple financing options, including on- and off-balance sheet, through one platform. It's also kind of a natural hedge to changes in accounting treatments whereby we might see more airline shifting their strategy from sale and leasebacks to finance leases.”

Transaction SnapshotNovus Aviation Capital | 07-08 | A/c Purchase | 1x737-800

Financial Close:
01/07/2008
Full Details

Transaction SnapshotNovus Aviation Capital | A/c secured loan | 05-08 | 3xA340 + 1x767-300ER

Financial Close:
01/05/2008
Value:
$150.00m USD
Full Details

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