KBRA has released a review of the aviation loan aircraft asset-securitisation (ABS) market yesterday (January 22).
The review highlighted the loan ABS market's growth, credit considerations, and evolving role within aviation structured finance.
“Since the inaugural aviation loan issuances in 2021, the aviation loan asset-backed securities (ABS) sector has experienced continued growth, reaching $4.8bn in total notional volume through 2025,” said KBRA.
Aviation loan ABS are typically backed by loans made directly to airlines or to aircraft lessors that then lease aircraft to airlines.
KBRA said limited-recourse loan structures typically benefit aviation loan ABS from additional credit enhancement compared to traditional aviation lease ABS, as borrowers generally retain equity in the aircraft, encouraging repayment even if lease payments are disrupted.
“Compared to aviation lease ABS, which may feature pools of 15 or more assets, aviation loan ABS portfolios are often composed of 15 or more cross-collateralized facilities with more than 100 assets, offering additional diversification,” said KBRA.
Last year, Ashland Place, the aviation asset financing platform backed by Davidson Kempner Capital Management (DKCM), successfully priced its second aviation loan ABS transaction, APL Finance 2025-1 (APL 2025-1).
The $414.4 million ABS transaction is substantially oversubscribed on all four tranches, with initial price talk (IPTs) on the senior A notes at 150 to 160 basis points (bps), tightening substantially to a spread of 125bps at final pricing.