PK Airfinance launches aviation loan ABS

PK Airfinance has launched the third ever aviation loan asset backed securitisation (ABS) serviced by its affiliate Apollo PK Air Management. PK ALIFT Loan Funding 3 (PKAIR 2024-1) securitises a portfolio of aviation loans with five tranches of notes totalling $622.25 million, maturing in September 2039: $122million AAA-rated A-F notes, with an initial loan-to-value ratio (LTV) of the loan balance of 62.9% and 41.2% LTV based on the collateral balance, which are priced at SOFR plus a spread. The $290million A-1 notes have the same rating and LTVs as the A-F notes but will be priced at a fixed rate, which is still to be disclosed. The $43.5 million Class B notes are rated AA, have a loan balance LTV of 69.6% and a collateral balance LTV of 45.5%, while the $102 million Class C notes are rated A with a loan balance LTV of 85.1% and a collateral balance LTV of 55.7%. The $64.75 million D notes are not rated and carry an loan balance LTV of 95% and a collateral balance LTV of 62.2%. The pricing on the B, C and D notes has not yet been determined. PK Airfinance will retain 100% of the equity at closing. According to the pre-sale document from KBRA, proceeds from the notes will be used to acquire a portfolio of 27 loan facilities comprised of 122 loans. The 27 Facilities are limited recourse (81.2% by loan balance) and full recourse (18.8% by loan balance). As of June 2024, the portfolio has an initial aggregate loan balance of approximately $654.8 million, an average Collateral Obligation balance of $5.4 million, and a weighted average remaining loan term of approximately 5.1 years. The portfolio has a weighted average seasoning of 61 months. The assets pledged as collateral are 70 narrowbody aircraft (68.4%), six widebody aircraft (22.8%), 30 freighter aircraft (5.9%), seven engines (2.7%) and nine regional jet aircraft (0.1%) on lease to 52 lessees located in 32 jurisdictions. As of June 2024, the assets have a weighted average age of 8.1 years (excluding the engines) and the Issuer’s applicable percentage of the appraised value of the portfolio is approximately $1.0 billion based on the average of half-life base values, which does not include cash or letters of credit pledged to a facility. The applicable value of the aircraft represents the percentage of the total aircraft value pledged to the transaction as collateral. All loans in the subject transaction were originated under the PK AirFinance platform are first lien senior secured loans and have a weighted average LTV at origination of approximately 70.2%. Some 116 of the 122 Collateral Obligations (97.0%) in the facilities originated under the PK AirFinance platform according to their guidelines, which takes into consideration the aircraft or engine and the obligor credit quality amongst other factors. The remaining six collateral obligations (3.0%) were originated by a third-party and later acquired by PK AirFinance. Credit enhancement is comprised of overcollateralization, a cash reserve for the first five months to address potential loan settlement and initial transfer issues and subordination (except for the Class D Notes), according to the KBRA pre-sale document. Apollo Global Securities is the sole lead arranger, with Redding Ridge Asset Management as the structuring agent. Joint bookrunners are: BNP Paribas, Mizuho, and RBC. US Bank Trust is the collateral agent and trustee. Perseus Aviation Servicing is a special servicer and has engaged Merx Aviation Finance (Merx) through a sub-servicing agreement.