Ministry of defence

This is the first UK military aircraft securitisation and is believed to be the first time the UK Government has turned directly to the asset-backed capital markets to raise the purchase price for capital assets.

Orrick scooped one of its first instructions from Chase Manhattan Trustees in Europe because the borrower for the deal was the Government and there was no need for a rating agency. Normally the rating agency carries out a thorough review of the borrower and the trustee takes comfort from that and, as a result, uses the same law firm as the lead arranger.

Chase Manhattan decided it wanted different firms on this deal and instructed Orrick for the trustee because it knows the firm in the US, while Clifford Chance worked for the lead arranger.

The securitisation by special purpose vehicle C17 Leasing is of lease payments made by the Secretary of State for Defence to McDonnell Douglas Corporation.

The deal involved spreading the £434m cost of four Boeing C17 military aircrafts during a seven-year period, and is one of the first aircraft securitisations to be governed by English law. The Ministry of Defence created a leasing arrangement to stagger payments and then securitise the payments to create the upfront lump sum required by seller McDonnell Douglas.