Avolon is in the market with Sapphire Aviation Finance II 2020-1 (SAPA II) aviation asset-backed securitisation (ABS).
Proceeds from the sale of the initial notes will acquire a pool of 21 midlife aircraft from Avolon Aerospace Leasing Limited (AALL), a wholly owned indirect subsidiary of Avolon Holdings.The pool will continue to be serviced by Avolon via AALL.
This is the second aircraft ABS serviced by AALL, following SAPA I’s issuance in 2018 and the third ABS serviced by Avolon.
The pool of 21 aircraft comprises mostly of in-demand narrowbody aircraft including current generation A320 and B737 family aircraft, with a weighted average age of 7.5 years, which is significantly younger than in SAPA I (12.0 years). There are also two young A320-200neos (10.4%) with a weighted average age of 2.1 years. Three aircraft totalling 31.7% are widebody aircraft: two A330-300s, which are aged less than five years with remaining lease terms of six-eight years.
There are 19 airline lessees in SAPA II with the top three totalling 35.5%, up from 30.0% in SAPA I.
The $620million ABS comprises three tranches of notes: $490 million A-rated A notes with an initial loan-to-value (LTV) ratio of 65.6%; $86 million BBB-rated B notes, with an LTV of 77.1%; a $44 million BB-rated C notes with a 83% LTV.
Fitch Ratings notes in a pre-sale report that asset concentrations and structural features in SAPA II have shifted from SAPA I, but “are more aligned with other recent aircraft ABS transactions”. SAPA II reincorporates a series C interest reserve account (initially sized at $1.0 million) and an expense reserve account (initially sized at $0.75 million), while removing certain partial rapid amortisation features found in SAPA I.
Joint lead structuring agents and joint lead bookrunners are Mizuho and Deutsche Bank. Credit Agricole-CIB and MUFG are joint lead bookrunners. CA-CIB is providing the liquidity facility. Canyon Financial Services is the managing agent, while UMB is acting as trustee, administrator and operating bank.