Castlelake has priced its $614.8 million aviation asset backed securities (ABS) transaction – its second ABS deal of the year.
Castlelake’s CLAS 2025-2 comprises of three tranches: A, B, and C notes. The A and B notes have a seven year maturity and the C notes have a 6.7 years maturity.
The transaction is priced at a blended coupon of around 5.6%-5.7%, with a spread of around US Treasuries plus 175-185 basis points through 79% to 85% loan to value (LTV) ratio.
Goldman Sachs is the lead structuring agent and left lead bookrunner. UMB Bank is acting as trustee and Natixis — through its New York branch — is acting as liquidity facility provider.
The $499.6 million A notes have a 5.465% coupon with a spread of US Treasuries plus 165 basis points, as well as an LTV of 69.4%. The tranche has a weighted average life (WAL) of 3.8 years and was rated A by both Fitch and KBRA.
The $71.9 million B notes have a 6.303% coupon with a spread of US Treasuries plus 250 basis points, as well as an LTV of 79.4%. The tranche has a WAL of 3.9 years and was rated A- by Fitch and BBB by KBRA.
The $43.25 million C notes have a 7.250% coupon with a spread of US Treasuries plus 350 basis points, and an LTV of 85.4%. The tranche has a WAL of 2.6 years and was rated BB+ by Fitch and BB by KBRA.
Proceeds from all three tranches will be used to acquire a portfolio of 26 assets, consisting of 23 narrowbodies (76.1% by value) – mostly A320-200s and 737-800s – and three widebody freighter jets (23.9% by value).
These assets are on lease to 21 lessees in 16 jurisdictions. The portfolio’s weighted average age is around 12 years and the weighted average remaining term of the initial lease contracts is around 4.8 years. As of March 31, 2025, the portfolio has an initial value of around $719.6 million.
The portfolio marks one of the oldest aircraft ABS deals this year so far.
New technology aircraft make up 18% of the portfolio by value, consisting of two A321neo at 13.1% of the portfolio and one 737 MAX 8 with 4.9% of the portfolio.
The remaining portfolio consists of nine A320-200s, one A321-200, six 737-800, one 737-900ER, one 747-400ERF, one 777-200LRF, and one A330-200P2F.
The transaction structure includes key features such as a minimum number of assets test, requiring the issuers to own at least eight assets after delivery, or pay down the notes using excess cash. The debt service coverage ratio (DSCR) is calculated using a three-month lookback, with triggers set at 1.20x for a cash trap event and 1.15x or 75% portfolio utilisation for early amortization. The deal includes a liquidity facility sized to nine months of interest due on the Series A notes. The Series C notes interest reserve account will be funded at closing with $1 million. This account will be used for any interest or principal shortfall on the Series C notes.
“At closing, one 777-200LRF on lease to Korean Air (14.4% by value) is subject to a sale agreement at lease expiration with a third-party purchaser with investment grade credit characteristics,” KBRA read in its report. “The aircraft has a lease expiration in October 2027, and will be subject to a 20-year scheduled amortization.”
The report added that one aircraft is on finance lease – a A321-200neo with VietJet – which KBRA said “differs from other aircraft ABS deals that are comprised entirely of aircraft on operating lease”.
The portfolio’s top three lessees are Korean Air at 17%, easyJet at 9.1%, and SunExpress at 7.8%. In total, these airlines represent around 33.9% of the portfolio by value. The top three countries for the portfolio make up 37% of the transaction, including South Korea at 17%, Mexico at 10.9% and the United Kingdom at 9.1%.
KBRA noted there was “no exposure” to geographies with ongoing conflict. However, the agency did note that the capital market volatility escalated by US-led tariff policies is still ongoing.
The company’s first issuance of the year – CLAS 2025-1 – comprised of A, B, and C tranches totalling $819.75 million and marked its return to the ABS market for the firs time since 2021. All three notes were used to acquire a portfolio of 36 assets – consisting of 33 narrowbodies and three widebodies on lease to 28 lessees in 19 jurisdictions.
The A notes of this first transaction were priced at $669.79 million with a coupon of 5.783% and a yield of 5.854%. The tranche has a spread of US Treasuries plus 155 basis points and a loan-to-value (LTV) ratio of 67%. The B notes were priced at $109.97 million with a coupon of 6.417% and a yield of 6.504%. The tranche has a spread of US Treasuries plus 220 basis points and an LTV of 78%. The C notes came at a smaller $39.99 million with a coupon of 7.750% and a yield of 8.500%. The tranche has a spread of US Treasuries plus 428 basis points and LTV of 82%. The A and B notes had been oversubscribed.
The only other aviation ABS deal to include a C tranche this year so far has been PK AirFinance’s PKAIR 2025-1, which also included a D tranche.