AerGen’s debut $324.7million asset backed securitization (ABS) transaction, Habor Aircraft Investments Series 2016-1 (HAIL) has been a resounding success. The three tranched ABS, which priced on June 22 and is due to settle this week, was oversubscribed on all tranches.
The $246.7 million A loans, which have an initial loan-to-value of 63.7% and were rated A by Standard & Poor’s and Kroll Bond Rating Agency, yielded 4.750% and was 1.2 times oversubscribed. The $47 million B loans, rated BBB by S&P and Kroll, with an initial LTV of 75.9%, yield 6.5% and were 1.75 times oversubscribed. The $31 million C loans tranche, rated B by both agencies, with a LTV of 83.9%, yield 10.5% and were reported to be three times oversubscribed.
The loans are secured on a portfolio of 15 aircraft, which has an initial weighted average age of approximately 12.7 years. Over 90% of the portfolio consists of liquid A320/321-200s and 737-800s, with one A319 and one 737-700. The three largest lessees by value are Virgin America, SAA/Mango and SAS, which represent approximately 22.7%, 10.5% and 8.1%, respectively.
AerGen is the servicer for the portfolio. Maples is the managing agent, Wells Fargo is the trustee, while DVB is providing the nine-month liquidity facility. Deutsche Bank is the sole structuring agent and lead left joint arranger with Goldman Sachs. Advisors on the deal with Clifford Chance and Hughes Hubbard.
Although as a leasing company AerGen is a relative newcomer being officially launched in January 2015, its management have decades of experience in the aircraft leasing industry. Chief Executive Officer Robert J. Genise, previously served as CEO of both DAE Capital and Boullion Aviation Services. He is supported by colleagues from both DAE and Boullion, including chief financial officer, Heinz Westen, who has over 25 years of aircraft leasing experience, as well as Michael Barry as chief marketing officer and Tom Kaluza as senior vice president.
Since AerGen’s focus is on mid-life aircraft and engines, the acquisition of Avioserv, the aircraft engine parts management company based in San Diego, in March 2015 was part of the strategy to provide the full range services to its clients. Avioserv specializes in the sale, lease and trading of engine parts, engine components and whole engines to airlines, repair facilities and parts distributors. AerGen leverages the technical analysis and expertise of Avioserv to manage its fleet of mid-late stage narrowbody aircraft as well as offering third-party engine solutions for other operators.
All of this plus the equity backing from Greenbriar Equity Group secured investor interest in the ABS transaction, which is secured on AerGen’s entire fleet. The structure of the deal in loan format also contributed to investor interest since it was able to attract banks as well as the more mature ABS investors.
The Series A loans and Series B loans will initially amortize during the first and second years based on an approximated 11-year straight-line amortization schedule and during the third and fourth years based on an approximated 14-year straight-line amortization schedule. Commencing in the fifth year of the transaction and thereafter, the Series A loans and Series B loans will amortize based on a 13-year straight-line amortization schedule. There is a cash sweep in the fifth year of the transaction, to accelerate the repayment of the Series A loans and Series B loans.
The Series C loans will initially amortize during the first year based on an approximated five-year straight-line amortization schedule. In year two, the Series C loans will amortize based on a five-year straight-line amortization schedule and in the third year and thereafter, a seven-year straight-line amortization schedule.
Commencing in the second year of the transaction, there will be a cash sweep to accelerate the repayment of the Series C Loans equal to 30% of all remaining available collections.
Although this was small deal relative to those closed earlier this year and in 2015, the loan structure and the new issuer name as well as the issuer’s small fleet, makes this deal repeatable as AerGen’s continues to increase its aircraft portfolio.
In the weeks to come, a number of large $500 million-plus ABS transactions are expected to launch – two which feature turboprops for the first time.