GECAS latest issuer in strong aircraft ABS market
In what is proving to be a reasonably busy year for aircraft securitisation GECAS has launched its 11th aircraft ABS, comprised almost exclusively of highly liquid narrowbodies from Airbus and Boeing.
GE Capital Aviation Services (GECAS) launched its 11th aviation asset backed securitisation, START 2018-1. The $586.9 million ABS covers 23 narrowbody aircraft (87.7 per cent by value) and one A330-300 widebody aircraft (12.3 per cent by value). Twenty two of aircraft are A320-200 and 737-800 types. GECAS will retain a small minority percentage of the equity.
The portfolio has an initial value of $695.6 million, an initial weighted average aircraft age of 7.7 years and a weighted average remaining lease term of 4.5 years. The three largest lessees by value are Jet Airways, Travel Service and Volaris, representing 35.3 per cent in total.
KBRA has assigned ratings of A to the $430 million Class A notes, BBB to the $120 million Class B notes and BB to the $36.9 million C notes.
Deutsche Bank is the lead structuring agent and lead bookrunner on the deal with Natixis providing senior and junior liquidity facilities, Wells Fargo as security trustee, operating bank and trustee and Phoenix American Financial Services as managing agent.
KBRA notes that while the initial portfolio is diverse, the portfolio may migrate to a more concentrated pool due to re-leasing and disposition activity. It also notes that compared to recently issued aircraft ABS transaction the transaction allows a migration to higher lessee and emerging market concentration limits.
Start 2018-1 is backed by a portfolio of 22 narrowbody aircraft (Boeing 737s and Airbus A320s) and 1 widebody (an Airbus A330).
'As of December 31, 2017, the three largest lessees comprise approximately 35.3 per cent of the portfolio (by value). The concentration limits permit up to 70 per cent of the portfolio (by value) to be comprised of the three largest lessees,' the agency says in its pre-sale note.
Furthermore, 10 of the 16 lessees (approximately 65 per cent by value) are from emerging market countries and the transaction has an 85 per cent limit on lessees located in such jurisdictions, which again is higher than most other recent aircraft ABS transactions.
However, 'given the strength of GECAS’s servicing capabilities, KBRA views the higher concentration limits as less of a risk than in similar transactions as GECAS has a larger global presence and longstanding historical relationships with lessees across many regions.'
The portfolio has an initial weighted average age of approximately 7.7 years, which is younger than recent mid-life to end-of-life aircraft ABS transactions, but older than the recent new-vintage aircraft transactions. KBRA says that although the portfolio’s age is slightly younger than most mid-life aircraft ABS transactions, the risks associated with mid-life to end-of-life aircraft are present within the transaction, but are offset by the proportion of highly liquid aircraft in the portfolio.
Some other significant issuance in 2018 to date include those from Apollo, Avolon, Castlelake and first-timer Merx Aviation Servicing.
Apollo Aviation Management's $532.9 million AASET 2018-1 Trust transaction is a portfolio of 24 aircraft, of which 19 are narrowbodies, on lease to 16 lessees in 14 countries, with a weighted average life of 14.1 years and an outstanding average lease term of 4.1 years.
Avolon Aerospace Leasing's $962.4 million SAPA 2018-1 transaction is a portfolio of 41 aircraft, of which 33 are narrowbodies, on lease to 30 lessees in 19 countries, with a weighted average life of 12.0 years and an outstanding average lease term of 4.4 years.
Castlelake's $1,091.3 million CLAS 2018-1 transaction is a portfolio of 36 aircraft, of which 31 are narrowbodies, on lease to 18 lessees in 15 countries, and with a weighted average life of 9.7 years and an outstanding average lease term of 4.0 years.
Merx Aviation Servicing's $610.5 million MAPS 2018-1 transaction is a portfolio of 25 narrowbody aircraft on lease to 16 lessees in 11 countries, and with a weighted average life of 9.0 years and an outstanding average lease term of 4.4 years.