Hudson Transport focuses on mezzanine level risk within transportation equipment finance, a sector that is supported by hard assets generating consistent cash flow streams. We favor equipment types that serve basic economic needs and have industry and regulatory frameworks that are creditor-friendly.
The transportation equipment industry is a large and growing sector with over $250 billion of new financing needs every year. Traditional capital providers in transportation finance are heavily concentrated in the senior layers of the capital structure. In contrast, mezzanine finance is an underserved market. Moreover, the ability of banks to finance mezzanine loan to value levels will become more constrained as a result of tightening regulatory capital rules. In addition, lessors are seeking mezzanine partners to boost returns by reducing asset intensity. For these reasons, the demand for mezzanine capital is likely to grow and should present attractive investment opportunities.
Domain knowledge and connectivity is key to generating compelling returns and capital preservation.
Our broad industry opportunity set allows for tactical positioning across global commercial transportation sectors. Within transportation, aircraft finance has the most attractive subsector attributes including assets critical to issuers operations, disciplined supply, regulatory protections and the most creditor-friendly bankruptcy law of any asset class. As such, aviation finance is expected to be a core focus for Hudson Transport. In other transport finance subsectors, our focus will be more opportunistic based on upcoming trends, cycles, and returns.
Our team of industry specialists is well-positioned to identify the best relative value within each subsector. Our investment committee process is rigorous and thorough. We draw on the deep experience of our Managing Partners and senior transport team members with backgrounds in structuring transactions. In addition, our Advisory Board members, who have held senior positions at major financial institutions in the industry, provide invaluable insights into risks and opportunities in the sector.
Superior industry relationships and domain knowledge provide better access to transport opportunities both in the public and private markets. Our size works to our advantage through nimbleness and flexibility.