Castlelake to launch second ABS

Castlelake is preparing to launch its second asset-backed securitisation (ABS). Castlelake Aircraft Securitization Trust 2015-1 totals $713.213 million and is offered in three tranches.

The $529million Class A notes, with an initial loan-to-value of between 60.2-66.02%, are rated A by both Standard & Poor’s and Kroll Ratings. The $105.713 million B notes have an initial LTV of between 72.2-79.21% and are rated BBB by S&P and Kroll. The 78.5million C notes have an initial LTV between 81.2-89.01% and are rated B by S&P and B+ by Kroll.

The Class A Notes will initially amortize for the first two years based on a 10-year straight-line basis. Commencing in the third year of the transaction, the Class A Notes will amortize based on a 13-year straight-line basis. The Class B Notes will initially amortize for the first two years based on an 11-year straight-line basis. Commencing in the third year of the transaction, the Class B Notes will amortize based on a 13-year straight-line basis.

Commencing in the sixth year of the transaction, there will be a cash sweep to accelerate the repayment of the Class A Notes and the Class B Notes, sequentially, equal to 50% of all remaining available collections after payments of expenses, interest for the Class A Notes and the Class B Notes, replenishment of the liquidity facility reserve account and the maintenance support account, and scheduled principal for the Class A Notes and the Class B Notes. The cash sweep will increase to 75% at the beginning of the seventh year of the transaction. If the Class A Notes or the Class B Notes remain outstanding after year 7 (the expected final payment date), a rapid amortization event shall occur, resulting in a full cash sweep to fully pay down the Class A Notes and then the Class B Notes, sequentially, that would otherwise be payable to the Class C Notes and the E Certificates.

The Class C Notes will initially amortize for the first two years based on a 54-month straight-line basis. Commencing in the third year of the transaction, the Class C Notes will amortize based on a 7-year straight-line basis. Commencing in the fourth year of the transaction, there will be a cash sweep to accelerate the repayment of the Class C Notes equal to 30% of all remaining available collections after payments of expenses, interest for all three classes of Notes, replenishment of the liquidity facility reserve account and the maintenance support account, and scheduled principal for all three classes of Notes. The cash sweep will increase to 100% starting in month 58 of the transaction.

Proceeds from the sale of the notes will be used to purchase a fleet of 54 aircraft and six aircraft engines. This portfolio is currently on lease to 23 lessees located in 18 countries and one of the assets is off-lease but due to be leased to Boliviana in December 2015.

The 54 aircraft included in the portfolio represents approximately 37.5% of Castlelake’s owned and managed fleet (by number of aircraft), as of September 30, 2015.

The average age of the portfolio is approximately 15 years and it also contains some out-of-production aircraft. The portfolio includes early generation A320 family, A330-200, A340-300, B737-700, B757-200, B757-200F, B757-200PCF, B767-300ER, ERJ-170LR, DHC8, and ATR 42-500. One of the six stand-alone engines powers B747-400, which is being phased out. Many of the aircraft in this portfolio are approaching the end of their economically useful lives and are expected to be sold or parted-out rather than re-leased after the existing lease expires. S&P points out in its pre-sale document that one aircraft leased to Collings Aircraft Holding Trust is damaged. “It has not determined whether such damage is a total loss or not. If this damaged aircraft is not deemed as a total loss, then this aircraft will still be transferred into the transaction; otherwise, the insurance proceeds from a total loss will be used to pay down this aircraft's allocable notes,” says the report.

The portfolio is also very concentrated in terms of the initial lessees, says S&P. The largest three lessees (by asset value) composed of 48% of the portfolio. There are 10 assets leased to Air Canada and six assets leased to Condor under the initial leases.

Castlelake will act as the servicer, which is viewed as a positive given its experience in managing older aircraft.

Goldman Sachs is global coordinator and sole structuring agent, as well as a joint bookrunner with Citi, Deutsche Bank and Credit Agricole Securities. Wells Fargo is the Trustee and Security Trustee, with Credit Agricole-CIB as liquidity facility provider.
The deal has an expected close date of November 30, 2015.

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