Falko Regional Aircraft – the regional aircraft leasing specialist – has priced its inaugural asset-backed securitisation (ABS) transaction: Regional 2021-1, which seeks to raise up to $255.0 million in loans secured on a portfolio of 39 regional jets.
Falko has described the deal as “the core element” to a refinancing package for an aircraft leasing portfolio funded by the Falko Regional Aircraft Opportunities Fund.
Regional 2021-1 comprises $225m series A loans, rated BBB+, with an initial loan-to-value ratio of 48.1% with a final maturity in 2041, carrying an interest rate of 5.75%.
Falko remains as the servicer for the 39 aircraft portfolio – which comprises E190/195s, ATR 72s and Dash-8 Q400s with a weighted average age of 10.7 years – and notes that its funds or affiliates will retain at least 25% equity in the transaction for a period of two years following the closing date.
Citi is the lead structuring agent. Sun Life provides the liquidity facility. Canyon Financial Services is the managing agent.
As in prior downturns, this structure utilises loans rather than notes, which also have a faster amortisation schedule and lower LTV. The transaction also includes a number of new features – a collections test, a minimum number of aircraft test, full and partial cash sweeps, more favourable security deposit changes, an LTV test and a 12 month liquidity facility. (Access KBRA report here for more details).
Jeremy Barnes, CEO of Falko, commented: “We have worked with Citi and institutional investors to structure a transaction that helps address some of the market concerns resulting from the adverse impact COVID-19 has had on the aviation sector and airlines in particular.”
Citi’s Matt Simonetti states: “We have partnered with Falko for some time on an investor education effort surrounding both Falko and regional aircraft assets. Falko’s expertise extends beyond regional aircraft leasing into spare engine leasing, part-outs and in-house MRO experience. This provides investors with confidence in their investment decision.”
Barnes stresses the resilience of the regional aircraft segment over the past year, which has “grabbed the attention of investors”, adding that this sector is recovering first in the domestic and short-haul segments. “We feel this deal reflects positively on the regional aircraft sector and Falko in particular as a proven servicer with a track record through a number of aviation cycles.”
Allen & Overy acted as lead counsel to Falko with Maples group and Alston & Bird providing local advice. PwC provided tax advice. The investors were advised by Milbank as lead counsel.