Trust Structures for Aviation Transactions
Orphan Trusts And Charitable Trusts for Aviation Finance and Leasing
For many structured finance and capital markets transactions related to aviation, the use of orphan trusts and Special Purpose Vehicles (SPVs) are well-established structures throughout many Common Law jurisdictions, including Ireland.
For Aviation Leasing and Financing transactions, Waystone can set up a Charitable Trust (which is an irrevocable trust). The shares of the SPV are vested as the property of the Charitable Trust and, while Waystone will be recognised as the legal holder of the shares of the SPV, the beneficial owner will be regarded as the charity as set out in the Charitable Trust Deed.
These types of structures for aviation transactions are known as an ‘orphan company’ whose shares are held on trust for either a charitable purpose or for a special purpose, for example, the benefit of the transaction.
Waystone, as trustee of the trust, will ensure any funds remaining after the transaction has run its course and has been liquidated, go to the Charitable Trust as beneficiary which, in turn, will be distributed to registered charities.
Our Corporate Services Solutions team has many years of experience in managing transactions that are placed in orphan or charitable trusts. These transactions include CLOs, ABSs, ABCPs, lending platforms and real asset transactions.
Owner trusts as an AOE alternative
Owner Trusts are used in aviation transactions as an alternative to Aircraft Owning Entities (‘AOEs’). The Trust is established to hold the title of the the aircraft and to act as the named lessor in the aviation transaction. The beneficial owner will, unlike orphan or charitable trusts, be the arranging lessor or owner who will manage the asset and the relationship with the airline.
Waystone is authorised to act as the Trustee on these Aircraft Owner Trusts and to provide aircraft trust services throughout the lifecycle of the aircraft through its TCSP licence. If the aircraft is sold at a future date the Aircraft Owning Trust can be transferred to the new owner, saving time and costs as there is no change to the lease arrangements.
How can Waystone help?
The Waystone Aviation Transaction Services team has many years of experience working with lessors and lessees around the world and is experienced in all matters of aviation law and registrations. We can provide all the necessary trust services to these structures and coordinate all matters as required with the relevant parties such as legal advisors, registries, lenders and other stakeholders.
To find out more trust structures for aviation transactions please contact your usual Waystone representative.
FAQs
There are several types of trusts used in aviation transactions including owner trusts, orphan trusts, and charitable trusts. Each type of trust has its own unique features and advantages, depending on the specific circumstances of the transaction.
Aircraft Owner Trusts are an agreement that allows an aircraft owner to appoint a third party to hold the title of the aircraft. They are used in aviation transactions as an alternative to Aircraft Owning Entities (AOEs). Unlike orphan or charitable trusts, the beneficial owner of an owner trust manages the asset and relationship with the airline.
As it relates to aviation, an orphan trust is a type of trust that is often used to hold shares in a Special Purpose Vehicle (SPV). This type of structure for aviation transactions is commonly known as an orphan company. This means that the shares of the company are held on trust for either a charitable or special purpose.
These are trusts that are set up for charitable purposes. As it related to aviation transactions, the shares of the SPV are vested as the property of the charitable trust, which is specified in the Charitable Trust Deed.