airline receivables and aircraft leases

[kr]

no, and, no

re the 'put', situation is a bit like mortgages, counterparty risk is relatively high

[djanklod]

would be quite interested in getting some hints on which aspect of the business I'm missing.



that was actually my initial question: on the face of it the activity makes no sense to me, but I'm not senior enough to have concluded that what makes no sense to me is entirely nonsensical...

[nnja]

Along with what has already been said, one of the interesting dynamics of this market is capital providers who exist just to sell the stuff (e.g. GE, Boeing) that do not want the value of old planes to depreciate too much, or else it will reduce demand for the latest and greatest models. Upon (imminent) default, they are more willing to take a loss in deals which can be renegotiated bilaterally if doing so will prevent a fire sale which in turn supports the value of the collateral within a structure. That should help subsidize recovery values for the right kind of collateral - however, I don't think you would get the same kick from, say, Embraer, so selection counts.

[PlasticSaber]

A veteran ABS guy told me that airline receivable/ aircraft lease along with manufactured housing were the darlings (and culprits) in the last round of securitization. Many fixed income investors were scared away. The investment guideline of many funds explicitly banned owning these assets to lure the investors back. Ironically, this accelerated the flock to subprime backed mortgage bonds... Maybe that's about time for the cycle to restart.