Aercap is pursuing a US$45.8 million claim against Unicredit after the Italian bank rejected the world's biggest aircraft lessor's payment requests in respect of certain letters of credit (L/Cs) related to failed lease agreements with lessees in Russia.

Regulations imposed by the EU in response to Russia's invasion of Ukraine require lessors operating in the union, including Ireland where Aercap is based, to terminate aircraft leases entered into with Russian lessees.

Moscow retaliated by passing a law re-registering foreign-owned aircraft in Russia, thus triggering a string of payment defaults for lessors.

Russian exposure

Aercap has L/Cs related to its aircraft and engines leased to Russian airlines that it says can be drawn upon in the event of a default.

UniCredit had provided L/Cs guaranteeing aircraft leasing payments on behalf of Russia's largest lender, Sberbank.

Sberbank is subject to sanctions following Russia's invasion of Ukraine and has said it will pull out of Europe.

Some L/Cs settled

When Russia began its military invasion of Ukraine, Aercap says it had L/Cs related to its Russian leases of approximately US$260 million, all confirmed by financial institutions in western Europe.

It has presented requests for payment to all of these institutions and by the end of March had received payments of approximately US$175 million related to these L/Cs.

Legal claims

The Irish lessor says it will continue to work with other financial institutions toward receiving payments on the remaining L/Cs.

It has also warned that it intends to pursue all available legal claims concerning these L/Cs, but the timing and amount of any payments under these credit are uncertain.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.