Jurisdiction(s):
United Kingdom

Key definition

Credit risk definition

What does Credit risk mean? The risk that a borrower, issuer or other obligor fails to perform payment obligations when due, causing loss to the lender, bondholder or counterparty. In practice, it assesses the likelihood and severity of default (creditworthiness and recovery), influenced by financial strength, security, guarantees, subordination, covenants, and sector or sovereign factors. It is a descriptive term used across banking, capital markets and derivatives rather than a term defined by general contract law; prudential regulation in the UK and Ireland (for example, PRA/FCA/CBI and CRR rules) applies technical measures of credit risk for capital adequacy. Government bonds of developed...

Aviation finance: leasing structures, security and enforcement, insurance and tax, cross-border issues, and funding via banks, ECAs, operating lessors and capital markets

Published by a LexisNexis Banking & Finance expert

Practice notes

The core of aviation finance is a lender advancing funds to a borrower to finance, or refinance, the purchase of an aircraft. If the borrower defaults under the loan, the contractual documents and transaction structure are designed to give the lender prioritised access to the aircraft, or its sale proceeds, to recover outstanding sums...

This is a classic asset finance model (see Practice Note: Introductory guide to asset finance): the lender accepts the borrower’s Credit risk, supported by security over the aircraft. Yet aviation finance has evolved distinct legal and structural features that differentiate it from other financing techniques...

Specificities of aviation finance

These can be summarised as follows...

Future value

Aircraft are generally regarded as retaining future value better than many other asset classes. While much turns on the specific aircraft type and the engines fitted, lenders can usually forecast an aircraft’s likely Market Value over the life of the financing with a reasonable degree of confidence...

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Web page updated on 21/05/2026

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