There has been a wave of aviation asset-backed securitisations these past few weeks. Air Lease Corp. (ALC) has launched its third ABS under the Thunderbolt designation.
Mizuho is left lead on the deal as joint lead structuring agent and joint lead bookrunner with Bank of America and Goldman Sachs. As with previous Thunderbolt deals, ALC remains as the servicer. Citi is trustee, with Wells Fargo providing the nine-month liquidity facility.
The $437 million TBOLT III 2019-1 ABS deal comprises two series of notes: $370 million A rated by KBRA, has an initial loan-to-value (LTV) ratio of 66.5%; and $67 million BBB-rated B notes with a 78.5% initial LTV. Both notes have a 20 year maturity to 2039.
The A and B notes both amortise on a 14-year straight-line schedule for the first five years and on a 13-year straight-line schedule thereafter.
ALC is retaining an equity interest in the notes but the remaining e note will be issued to investors an per other Thunderbolt ABS transactions. ALC will be acting as the initial portfolio manager for TBOLT III.
At closing, the secured portfolio is expected to consist of 19 aircraft on lease to 18 airlines located in 15 countries. As of 31 August 31, the initial weighted average aircraft age of the Portfolio is approximately 9.7 years with a weighted average remaining lease term of approximately 3.8 years. The composition of the Portfolio consists of 17 narrowbody aircraft (83.1% by value) and two widebody aircraft (16.9% by value) with an initial value of approximately $556.4 million.
Notably the portfolio comprises one A330-300 on lease to Alitalia and one 737-800 on lease to Aerolineas Argentinas. As Alitalia is currently operating under bankruptcy protection and Aerolineas Argentinas is suffering some financial hardship, both airlines have been called out by the rating agency as a possible source of increase risk to the portfolio. In the case of Aerolineas Argentinas, the KBRA pre-sale reports notes that the airline was 45 days to 60 days past due on its lease payments with respect to the aircraft in the transaction. For the Alitalia aircraft, the pre-sale notes that restrictions placed on other aircraft ABS transactions that prevent an aircraft subject to a lease with a bankrupt airline to enter into the securitisation portfolio does not apply in this case.
It notes: “ALC believes the A330-200 aircraft is core to Alitalia’s fleet strategy. KBRA was informed that as of August 31, 2019, Alitalia was current on its lease payments with respect to the aircraft in the transaction. In addition, ALC has five other aircraft on lease to Alitalia which continue to operate as usual and ALC does not plan to repossess them at this time.”
It will be very interesting to see what happens with the pricing in this particular case due to the issues noted above but also as the portfolio has a slightly lower average remaining lease term – at 3.7 years – than other ABS issued recently. ALC has reassured investors that the short-term outlook for these assets is very positive and that it is in the process of extending some leases for in-demand narrowbody aircraft at this time of constrained capacity.
Also notable from the pre-sale report is the reference to the inconsistency between the half-life base values between each of the three arrangers.
Meanwhile, Horizon 2019-2 priced last week – this is the second ABS transaction brought to the market by BBAM this year, and its third using the Horizon name. Horizon II (2019-1) is notable since it is the first of the aviation ABS transactions to issue tradable equity certificates without using an anchor investor. For Horizon III (2019-2), BBAM will be retaining 10% of the e notes that are subject to a seven-year lock-up agreement.
Mizuho is left lead on the deal with joint lead structuring agent Citi, and joint lead bookrunners Credit Suisse, Goldman Sachs and MUFG. UMB Bank is security trustee, operating bank and trustee, while MUFG is providing the liquidity facility and Mapes is the managing agent.
The $440 million transaction comprises three tranches of notes: $343 million A notes, rated A by KBRA and Fitch, with a weighted average life (WAL) of 4.9 years, carry a 3.425% coupon and 3.450% yield; $61 million BBB-rated B notes, with a 5 year WAL, priced with a 4.458% coupon and 4.50% yield; and $36 million C notes, rated BB by Fitch and BB- by KBRA, with a WAL of 3.5 years, priced at 6.90% coupon and 7% yield.
The notes are secured on a portfolio of 18 narrowbody aircraft – 11 737-800s and seven A32-200s – which are on lease to 15 lessees located in 12 countries, and have an initial weighted average age of 8.4 years with a weighted average remaining lease term of approximately 5.1 years.