The Oklahoma Bar Journal October 2024

A viation L aw

Aircraft-Backed Securitization: Lending Money Using Aircraft Collateral By Jack P. Gilchrist and Tony Morales H OW MUCH DO YOU KNOW ABOUT BANKS or other lenders loaning money where aircraft equipment is being offered as collateral for a loan? If you were not aware that the Federal Aviation Administration Mike Monroney Aeronautical Center, located in Oklahoma City, is home to the FAA Aircraft Registry, you are among the majority of law yers in the U.S., not to mention our colleagues right here at home. You’re not alone if you did not know that the FAA Aircraft Registry is where all mortgages, leases, liens and title documents are filed any time aircraft, engines or spare aircraft parts are accepted as collat eral to perfect the security interests of a lender. In this article, our objective is to provide the reader with basic information that should be thought about anytime aviation assets are being considered as collateral for a loan.

Any lender considering a loan that includes aircraft as collateral will want to obtain a current legal opinion, title report or title memo randum regarding the FAA records relating to the aircraft equipment that confirms at least the follow ing: 1) an accurate description of the aircraft equipment, 2) the current registry status of the air craft with the FAA, 3) the current registered owner of the aircraft and 4) a description of any instru ment or document that serves as an open and outstanding lien or encumbrance in the FAA regis try’s records covering the aircraft equipment.

1) the aircraft is registered with the FAA in the name of the debtor at the time the mortgage is entered; 2) if the debtor is purchasing the aircraft at the same time as they’re entering the mortgage, the mort gage must be accompanied by the Aircraft Registration Application (FAA Form AC 8050-1) and an acceptable form of evidence of ownership of the debtor; or 3) if the debtor has since sold the aircraft on to a third party and if they were the owner of the aircraft at the time the aircraft mortgage was entered, that mortgage can be filed for recording with the FAA after the fact.

MORTGAGE AND LEASE INTERESTS IN AIRCRAFT EQUIPMENT: THE FAA PERSPECTIVE Initial Considerations of the Aircraft Lender Aircraft in the U.S. are reg istered with the FAA Aircraft Registry in the name of the owner. 1 Generally speaking, the U.S. Transportation Code only allows U.S. citizens to own and register aircraft; however, there are legal procedures to provide for bene ficial ownership by noncitizens. 2 Any lender will need to consider that its security interest in an air craft is dependent on whether

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

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THE OKLAHOMA BAR JOURNAL