Bank survey: Lessors push banks to refinance 2023 and 2024 deals

Banks say some lessors are asking some lenders to refinance relatively recent aircraft portfolio financings or revolving facilities with cheaper terms.

“Some lessors are watching the ABS market and then asking their warehouse banks for an amendment request,” explains one experienced aviation financers.“There's this cascading effect among the lessors, who have warehouses outstanding to seek improved pricing on their existing warehouses. Some shave off quite a bit, while with others its death by a 1,000 cuts.”

The requests are controversial as banks are not contractually obliged to offer any reduction in pricing on existing deals, until they are refinanced.  In practice, lender borrower relationships are highly commercial, and banks will often try to work with customers. “Are you going to abandon the relationship? Are you going to cut the client? Maybe somebody will, but most people won't. And so, they just go along with it,” reflects one financier.

It is better to negotiate pricing, explains one banker rather than see the lessor choose to repay early, or refinance with a competitor. One financier shares that he has seen around four or five lessor aircraft deals reprice in the last six months.

Another financier says it is it's a “short sighted” approach by lessors arguing that banks have supported lessors during difficult periods like Covid.  When the next downturn happens, banks can reasonably ask: “Why should we support you if that's how you're going to treat us?”
 

Margins remain pressured

Lenders confirm that margins remain pressured at the end of 2025 with risk-adjusted spreads plateauing, albeit with downward pressure across all types of secured aircraft debt facilities.  Ishka’s quarterly banking survey, which only focuses on new aircraft deliveries, reflects that trend. Flat to stable interest rates for last six months of 2025 led to stable bank funding costs for many lenders and has also helped to stabilise spreads. However, that is in the context of a tight market in which spreads have steadily declined over the last three years.

(Please note that due to a demand from readers Ishka has included banks spreads for “weaker” tier 2 airlines to capture more airlines.)

The Ishka View

Banks confide margins have remains broadly flat for Q4 2025 compared to the previous quarter, but admit there has been steady downward pressure on both spreads and terms across the year. Last quarter Ishka reported on LTVs rising for many new secured financings.  Looking ahead to 2026, Ishka hears of continued competition among lenders for new financing mandates, and banks have refreshed budgets. The outlook for aviation borrowers looks fairly rosy. With the assumption that interest rates will keep steady for the next few months, bank funding costs should remain fairly stable.

It is important to stress that repricing is only happening for some aircraft financings. Given how opaque this market is, it is hard to know how widespread this practice has been but several lenders have confirmed that this is occuring to Ishka.  Separately, it is hard to fault borrowers from wanting to secure cheaper financing terms, but this is a cyclical industry and lessors who do prioritise transactionalism over relationships run the risk that banks may not necessarily have the same level of appetite to help their clients if, and when, the good times finish.

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