The Transport Finance Law Review: Editor's Preface

The Transport Finance Law Review is intended to provide the industry with a guide to transport finance today in each of the key jurisdictions globally in which aircraft, rolling stock and ships are financed.

The covid-19 crisis of 2020 has provided an unprecedented level of turmoil to each of these vitally important industries, the full impact of which may not be known for a number of years. Each of the aviation and cruise and passenger ferry sectors have suffered an extraordinary reduction in demand due to lockdown and the closure of borders, while in the UK, there has been extensive government intervention that may result in transformative changes in the future.

The crisis has caused a dramatic decline in new orders for aircraft, with consequential effects on the financial position of Airbus and Boeing, the leading aviation manufacturers in 2020, and a number of insolvencies and restructurings, but the demand for capital has not in any way diminished. All airlines that have managed to retain access to capital have been engaged in significant finance transactions during the past year, many by way of sale and leaseback of aircraft. Similarly, in the cruise industry, each of Carnival Corporation and Royal Caribbean Cruise Lines have made regular forays into the debt and equity capital markets to repair their affected balance sheets. We can only hope that the introduction of covid-19 vaccines in 2021 will lead the way out of this crisis and a return to a level of normality for these sectors.

Beyond covid, the transport industries continue to face challenges, including increased financial regulation such as Basel IV and IBOR reform and environmental regulation. The first quarter of 2020 brought in the IMO's sulphur cap in shipping, and this will inevitably be followed with further regulation on CO2 emissions, probably with the shipping industry's entry into the European emissions trading area.

These challenges mean that asset finance in its traditional form is now available from relatively few banks, which in turn are prepared to lend to relatively few names – which are usually leaders in their relevant sectors that have green credentials and that satisfy new environmental standards set out in, for example, the Equator Principles or the Poseidon Principles. Tenors tend to be shorter, and borrowing more expensive. It is clear that debt finance alone is no longer sufficient to meet the needs of the global aviation, rail and shipping industries. Other financiers and investors have recognised this and have identified significant opportunities to secure returns using innovative new funding structures, and often in collaboration with traditional lenders who have remained in the market.

Against this evolving financing landscape, new environmental regulation and disruptive technology are bringing about further changes. Artificial intelligence, distributed ledger technology such as blockchain and low carbon technology are creating new funding requirements, as well as bringing new participants into the transport sector with new ideas for raising finance.

These developments have meant that legal advisers to the transport finance sector are now required to provide a far broader set of legal skills and market knowledge than has previously been required.

The aviation, rail and shipping industries each have their own unique characteristics and need lawyers with a deep understanding of how each of these complex industries operates. A detailed knowledge of the principles of asset finance is now also required, combined with the ability to advise on new capital markets, leasing and corporate structures. In addition, while the majority of asset financings in the transport sector tend to be governed by English or New York law, an understanding of the principles of local law in the key jurisdictions in which transport assets are registered is also of great importance.

We have sought contributions from jurisdictions that play a leading role in the financing of transport assets. Each chapter provides an overview of the transport finance industry in these jurisdictions, with an analysis of how key lenders have changed over the past six years and how the financing of assets has developed as a result. Contributors have provided an overview of the legislative framework for transport finance and financial regulation affecting lenders to the transport sector. Authors have also been asked to review any significant innovations and notable recent and pending financings and cases, and to provide assessments of how the transport sector is likely to continue to develop in their markets.

I would like to thank the contributors to this volume. Their efforts are deeply appreciated and represent a substantial contribution to the transport law library as the sector continues its transformation.

Each contribution reflects the significance of the transport sector today, and the need for readily available funding for industries that underpin the global economy by transporting people and commodities around the world every day.

Lawyers have had to become increasingly nimble as clients require advice on developing intricate joint-venture agreements and complex capital market products, and increasingly on the opportunities and threats presented by environmental challenges and disruptive change throughout the transport sector. It is an incredibly exciting time to be a lawyer in this field, as our contributors demonstrate in the following chapters.

Finally, I would like to take this opportunity of thanking my predecessor as editor of The Transport Finance Law Review, Harry Theochari, for his sterling work in bringing this publication to life. Harry has been a shipping finance stalwart for more than 35 years and has, throughout his career, volubly championed the transport industries as a force for good and brought a unique and informed perspective on the industries (and shipping, in particular) to all those who have encountered him.

Richard Howley
Norton Rose Fulbright
April 2021

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