Alt Finance Week ended 2nd October 2020



1. S&P downgrades bonds in 23 aircraft lease/engine securitizations.

Why this matters:  The Covid 19 pandemic has affected many industries but the tourist and travel sectors are surely among the hardest hit. As a direct result the Aircraft and aircraft engine leasing sector is in crisis. The virus has lasted much longer than expected and the impact on underlying bonds is increasingly negative. Debt service coverage ratios are being breached creating technical defaults which need to be dealt with. This will only be solved when over capacity is eliminated but there is a fundamental here which is blindingly obvious. If the passengers do not return to commercial aviation what is going to happen to theses aircraft and aircraft engines? Aerospace technology is still advancing and it is not at all clear whether these previously valuable assets will ever be viable again. Aircraft leasing is more prominent in developed western markets. It looks like these entities are going to bear a goodly amount of the depreciation of these assets. Some smaller economies  like Ireland look particularly exposed.


2. What Investors are looking for in new Fintechs

Why this matters: The suggestion is that investors are getting pickier with Fintech investment based on data and heading towards safer bets. I wouldn’t be surprised. Having been personally involved in a number of Fintech start ups I can vouch for the fact that sentiment  among  VC providers is quite naturally fickle. Partly this is due to an inability of  providers of capital to fully understand what they are investing in. A Start up lender utilising technology looks a lot safer because it is fundamentally providing a service that people need and use and is widely understood.  But is it really a Fintech in the same way that a company providing security around say Java Virtual Machine technology is .  Be bold or keep out is probably a good slogan. This is certainly not a good time to pile in if you are not sure of your subject and no time for faint hearts. There’s no such thing as a safe bet.

3. Government is being tested and it’s coming up short – Didn’t we do well

Why this matters: I just had to share this one. A new study from the National Bureau of Economic Research have read some 54 various studies  produced by both pure academics and  Central Bank economists since the world’s central bank started printing money. The most interesting observation is that those studies produced by the Central Bankers consistently ascribed bigger QE effects on growth and inflation than those academics without anything other than academic interest in outcomes? The authors of the study found that those economists talking up the impact of unconventional monetary policy “ experience more favourable career outcomes” . The only exception was the Deutsche Bundesbank who fought against it for years.  The conclusion was that central Bank economists report larger QE effects “ because they are incentivised to do so”. Their utterances are not to be trusted.

Howard Tolman is a well-known banker, technologist and entrepreneur in London, We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.

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