AIRCRAFT FINANCE REVIEW 2018/19
Aircraft Mortgage and security under Brazilian Law
BRAZIL IS A DEVELOPING COUNTRY that, despite its vast territory, does not have an efficient transportation system connecting its cities and its 26 states (and one district) – other than by air, there are very limited options.
Given the strength of this industry in that region, it is understandable that Brazil catches the attention of financiers that want to invest in civil aviation.
Whether their objectives are stated explicitly or implicitly, their utmost concern is to minimise risks and costs.
The country of domicile of the operator is one of the most important factors taken into consideration by financiers, as whether a good deal is viable and in order to rate the financing capacity of the borrower. Having investigated and identified potential risks, financiers seek protection of their interests and, as creditors, the debtor’s insolvency represents one of the biggest issues that may jeopardise the
success of a project.
This is usually met by security, which rationale is aimed to safeguard the financier’s interests as a defensive resource, especially for asset-based finance. When allied to enforcement rights and coupled with rigorous covenants and events of default clauses, security gives the creditor the chance to control the debtor’s affairs at critical moments or to monitor how the company has been carried out.
In common law jurisdictions security is an undefined term that can cover any arrangement that makes it more likely that a creditor will be paid.
In Brazil, however, the characteristics that a security interest must have are provided by law.
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