The following Banking & Finance guidance note Produced in partnership with Norton Rose Fulbright provides comprehensive and up to date legal information covering:
Pre-Delivery Payment (PDP) financing, and the protection available to any lender, is very different to the situation that exists under other types of aviation finance. Funding is provided whilst the asset itself is under construction and security cannot be obtained in the same manner as for a completed aircraft. As a result, the provisions setting out the steps that will be taken in the event of enforcement are extremely important for the manufacturer, purchaser and lender.
For more information on PDP financing generally, see Practice Note: Aviation finance—PDP financing—purchase agreements, finance facility and security.
The primary security for a PDP financing is an assignment of the aircraft purchase agreement (and possibly an engine general terms agreement). An important item of legal due diligence to carry out is therefore to analyse the effect of the assignment in an insolvency of the purchaser. This will mean taking legal advice in the jurisdiction of incorporation (or the centre of main interests) of the purchaser.
In some countries, there may be a bankruptcy protection regime (such as Chapter 11 in the US, administration in England & Wales, or examinership in Ireland) which may slow down or prevent enforcement action, for example by imposing a temporary moratorium on enforcement. This will need to be factored in to any time
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