Dubai Aerospace Enterprise (DAE) has marketed its $610 million aviation asset backed securities (ABS) transaction Navigator 2025-1.
The deal has an anticipated repayment date of October 2032 and a legal maturity date of October 2050. The transaction comprises of two tranches: A and B notes.
The A notes total $500 million and have an initial loan to value (LTV) ratio of 69.6%. The tranche is expected to be rated A by KBRA and Fitch.
The B notes total $110 million and have an initial LTV ratio of 84.9%. The tranche is expected to be rated BBB by KBRA and Fitch.
Navigator 2025-1 represents the eighth aviation ABS transaction serviced by DAE. The deal is also the third aircraft operating lease ABS transaction issued by the Navigator platform, which is a co-investment between DAE and certain funds managed by PIMCO. The transaction is expected to be priced on Friday.
Proceeds will be used to acquire a portfolio of 23 assets. The portfolio consists of 22 narrowbodies and one widebody, representing 89.5% and 10.5% of the portfolio’s value, respectively. The aircraft are on lease to 16 lessees in 13 jurisdictions. As of the end of June, the portfolio’s weighted average age is around 8.2 years and a weighted average remaining term of the initial lease contracts of around 5.5 years. The portfolio has an initial value of around $718.2 million, based on three third-party appraisers, which were then adjusted for actual maintenance conditions and specifications.
The deal’s structure includes early cash flow protections, including a minimum of at least eight assets owned or excess cash will begin to be used to pay down notes, accelerated three-month DSCR triggers, and utilised tests. The structure includes security deposit used to cover senior expenses and shortfalls in interest and principal on the note, as well as a nine-month liquidity facility.
The assets in the portfolio will be transferred to the Navigator Group upon closing and there is no delivery period in the current transaction as a result.
“Typical aviation lease ABS transactions have delivery periods which can extend up to one year from the closing date,” KBRA read in its report. “The delivery period introduces risk that the composition of the Portfolio could change post-closing since the issuer is still in the process of finalising the purchase of the aircraft and/or engine. KBRA views the Navigator Groups’ expectation that the Navigator Group will acquire 100% of the portfolio at closing as a credit positive relative to other aviation ABS lease transactions as it reduces the risk that the complete Portfolio will not be fully transferred to the transaction.”
The portfolio is comprised of nine new generation aircraft, including five 737 MAX 8, two A321neo, an A320neo, and an A330neo. The weighted average age of these new technology aircraft are 4.9 years and the remaining lease term is around 6.9 years.
The remaining aircraft in the portfolio includes six 737-800s and eight A320-200s.
The top three lessees make up 37.1% of the portfolio by value. AeroMexico are at the top with 17.9%, followed by TAP Air Portugal at 10.5%, and Xiamen Airlines with 8.7%. KBRA said this concentration is lower than other transactions it has rated. The top three countries make up 44.4% of the transaction, including Mexico at 21.3%, UAE at 12.1%, and China at 12.1%. The lessees all pay in US dollars.
Citibank acted as trustee. Credit Agricole and Investment Bank acted as liquidity facility provider. Lead structuring agent and joint lead bookrunner was Mizuho Securities USA. Co-structuring agents and joint lead bookrunner were BNP Paribas Securities and Citigroup Global Markets.