Apollo PK AirFinance has launched its third aviation loan asset backed securitisation (ABS) with the $633 million PK AIRLIFT Loan Funding 4 (PKAIR 2024-2).
PKAIR 2024-2 – the second loan ABS from PK AirFinance this year – is comprised of five tranches of loans. $103 million A-F notes, with an initial LTV of 65.6% based on loan balance and 38.7% based on collateral balance, are triple-A rated and will be priced with an interest rate based on SOFR plus a spread. The $334 million A notes, also rated triple-A and with the same LTV ratios as the A-F notes, will be priced at a fixed rate. The B notes, totalling $34 million, have a loan balance LTV of 70.7% and collateral balance LTV of 41.7%. There is an unrated $115 million C tranche with a loan balance LTV of 88% and collateral balance of 51.9%, as well as an unrated $47 million D tranche with a loan balance LTV of 95% and collateral balance LTV of 56.1%. All of the notes have a final maturity date of October 2039. Credit enhancement is comprised of overcollateralisation, a cash reserve for the first three months to address potential loan settlement and initial transfer issues, and a principal liquidity account, and subordination (except for the Class D Notes). PK AirFinance will retain 100% of the equity of the subject transaction at closing.
KBRA notes in its pre-sale report that this transaction is similar to PK AIR 2024-1 it that its capital structure exhibits higher leverage based on the appraised value of the aircraft and outstanding loan balance at each rating category relative to prior KBRA-rated aviation loan ABS transactions. KBRA states that the “higher leverage is mitigated, to some extent, by the company’s experience”.
Proceeds from the sale of the notes will acquire of portfolio of 32 loan facilities comprised of 129 loans. According to a pre-ale report from KBRA, the 32 facilities are limited recourse (67.8% by loan balance) and full recourse (32.2% by loan balance). As of September 2024, the portfolio has an initial aggregate loan balance of approximately $666.2 million, an average collateral obligation balance of $5.2 million, and a weighted average remaining loan term of approximately 5.3 years. The portfolio has a weighted average seasoning of approximately nine months, says the KBRA report.
The collateral obligations are secured by 73 narrowbody aircraft, eight widebody aircraft, 32 freighter aircraft, six engines and 10 regional jet aircraft on lease to 51 lessees located in 30 jurisdictions.
Redding Ridge Asset Management and Mizuho are structuring agents. Mizuho, BNP Paribas, RBC and Apollo Global are joint bookrunners. Apollo PK Air Management is the servicer, with Perseus Aviation – via Merx Aviation – as the special servicer. US Bank Trust Company is the trustee, with Avitas, mba and IBA as the appraisers.