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Aircraft Pre-Delivery Payment Financing Transactions—Updated for 2018

Cameron A. Gee
The Journal of Structured Finance Spring 2018, 24 (1) 61-71; DOI: https://doi.org/10.3905/jsf.2018.1.064
Cameron A. Gee
is a shareholder and member of the Global Transportation Finance team at Vedder Price PC in New York, NY.
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Abstract

The article discusses pre-delivery payment, or PDP, financing transactions for aircraft. PDPs are progress payments that a purchaser makes to a manufacturer while new aircraft are being built. They represent a significant cash expense for purchasers which, on average, amount to as much as 30% of the purchase price of a finished aircraft. The high cost of PDPs, particularly for purchasers of large numbers of aircraft, has led to the widespread use of PDP financing.

The article explains how PDP financing transactions work. It discusses the key provisions typically included in documentation; in particular, the terms offered by manufacturers in “manufacturer’s consents” or “step-in agreements.” The article also discusses bankruptcy and “claw-back” risk, explaining what it is and how it can be managed, and finally discusses unique intercreditor issues for lenders in PDP financing transactions. The article updates and expands upon an article that was originally published in the Fall 2009 edition of The Journal of Structured Finance.

TOPICS: Fixed income and structured finance, legal/regulatory/public policy

  • Copyright © Vedder Price PC. All rights reserved. Not to be reproduced or redistributed without permission.
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The Journal of Structured Finance: 24 (1)
The Journal of Structured Finance
Vol. 24, Issue 1
Spring 2018
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Aircraft Pre-Delivery Payment Financing Transactions—Updated for 2018
Cameron A. Gee
The Journal of Structured Finance Apr 2018, 24 (1) 61-71; DOI: 10.3905/jsf.2018.1.064

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Aircraft Pre-Delivery Payment Financing Transactions—Updated for 2018
Cameron A. Gee
The Journal of Structured Finance Apr 2018, 24 (1) 61-71; DOI: 10.3905/jsf.2018.1.064
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