Castlelake has priced its $819.75 million aircraft asset backed securities (ABS) on February 7, 2025. The issuance consists of A, B, and C notes. The transaction marks Castlelake’s return to the market for the first time since 2021.
A person familiar with the matter confirmed that the class A and B notes were oversubscribed.
The A notes are 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 are 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 come 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 notes have an expected maturity of six years, while the B and C notes have an expected maturity of 5.5 years. The A notes have a weighted average life (WAL) of 3.1 years; the B notes have WAL of 3.0 years; and the C notes have a WAL of 2.6 years.
The notes’ anticipated repayment date is February 2032.
The A tranche has an expected rating of A by both Fitch and KBRA. The B notes are expected to be rated BBB by both rating agencies, while the C notes are expected to have a rating of BB.
Proceeds from the notes will be used to acquire a portfolio of 36 aircraft, consisting of 33 narrowbodies and three widebodies, or 85.7% narrowbodies and 14.3% widebodies, on lease to 28 lessees in 19 jurisdictions, according to KBRA’s pre-sale report. The weighted average age of the portfolio is approximately 12.6 years and the weighted average remaining term of the initial lease contracts is around 4.6 years. The portfolio had an initial value of around $999.7 million.
American Airlines takes the highest share of the portfolio at 8.1%, followed by Avianca and Air Canada, both with 7%, then IndiGo with 6.5%, and then Vietjet with 6.2%. Canada makes up the largest jurisdiction at 12.4%, followed by the US at 11.5% and then India with 8.9% - altogether totalling 32.8% of the portfolio.
The portfolio comprises of five new technology aircraft, making up 20.2% of the portfolio by value. The new technology aircraft includes three A320neo, one A321neo, and one 737 MAX 8. Of the five aircraft, two have remaining lease terms that extend beyond the anticipated repayment date.
The remainder of the portfolio consists of 16 A320-200, 12 737-800, two A330-200, one A321-200, one 777-300ER, and one 737-900.
Deutsche Bank and Goldman Sachs acted as lead structuring agent and lead bookrunner, while BNP Paribas and MUFG participated in a passive role.
Castlelake was a prolific ABS issuer but had evolved its strategy to expand services to customers for leasing and financing.
In an interview with Airline Economics and KPMG in October 2024 for the Aviation Global Leaders Report 2025, Castlelake partner and deputy co-chief investment officer Joe McConnell said the company is “likely going to be back in the ABS markets” with the reopening of the market last year.
“It's a great tool to have for us to finance midlife aircraft,” he continued. “One of the challenges that people are facing today is that interest rates are higher, amortization is a little bit higher, and lease rate factors for young aircraft aren't high enough. So, there's a limit in terms of the debt capacity within those structures, given that debt service is higher and the cash flows aren't high enough."
Since the interview, the Federal Reserve had cut interest rates by 25 basis points.
McConnell added: "We are really focused on making sure that we're buying high quality assets at good prices, but then we want to make sure we have enough cash flow from those assets to service the right amount of debt.”
Carlyle priced its $518.3 million AASET 2025-1 ABS issuance, consisting of an A-1 tranche and a B-2 tranche earlier in the year — marking the first aircraft ABS transaction of the year. The A-1 notes are priced at $464.45 million with a coupon of 5.943% and a spread of US Treasuries plus 170 basis points. The tranche has a loan-to-value (LTV) ratio of 69%. The B-1 notes are priced at $53.85 million with a coupon of 6.576% and a spread of US Treasuries plus 235 basis points. The tranche has an LTV ratio of 77%.
The Carlyle ABS proceeds will be used to acquire a portfolio of 23 assets, consisting of 21 narrowbody aircraft and two widebody aircraft — 85% narrowbody and 15% widebody — on lease to 17 lessees in 13 countries.