PK AirFinance has marketed its second aviation asset backed securities (ABS) issuance of the year PKAIR 2025-2). The $827 million deal marks the fifth aviation ABS serviced by PK Apollo PK Air Management – a PK AirFinance affiliate.
The issuance consists of A, B, C, and D tranches, with a legal final maturity date of March 2043.
The A tranche has an initial loan-to-value (LTV) ratio based on loan balance of 66.4% and an initial LTV based on collateral balance of 42.9%, with a preliminary KBRA rating of AAA. The A tranche is split into the main fixed rate A tranche has an amount of $451 million and a variable interest rate $130 million tranche.
The $50 million B tranche has an initial LTV ratio of 72.1% based on loan balance and an initial LTV of 46.6% based on collateral balance. The tranche has a preliminary AA rating from KBRA.
The $136 million C tranche has an initial LTV based on loan balance of 87.7% and an initial LTV based on collateral balance of 56.6%, with an A rating from KBRA.
The $60 million D tranche is unrated and has an initial LTV based on loan balance on 94.5% and LTV based on collateral of 61%.
Proceeds from the notes will be used to acquire a portfolio of 35 loan facilities, comprised of 107 loans. The 35 facilities are limited recourse – 78.87% by loan balance – and full recourse – 21.2% by loan balance.
The deal is secured by 37 narrowbodies, 29 freighters, nine widebodies, six regional jets, and 26 engines. The assets are on lease to 42 lessees in 27 jurisdictions. As of August 2025, the underlying assets have a weighted average of 9.9 years – excluding engine assets.
Credit enhancements for the transactions include overcollateralisation, a cash reserve available until at least February 2026, a principal liquidity account, and tranche subordination, except for the D tranche.
The three largest lessees by loan balance are DHL, Philippine Airlines, and LATAM Airlines – which comprise 23% in total of the portfolio value. The US, Philippines, and Chile represent the three largest geographies of the portfolio value, totalling 35.9% overall. Other lessees include Avianca, Volaris, Ethiopian Airlines, Malindo Air Leasing, TUI, Breeze Airways, Cebu Pacific, amongst others.
The key changes from the previous issuance PKAIR 2025-1 include a reinvestment period where up to 15% of initial loan balance may be reinvested if prepaid, as opposed to 10% in the previous issuance. Additionally, one facility that represents around 6.6% of the portfolio is held via participation interest, with a 10% cap and threshold rating requirements applied.
Nearly 17% of the portfolio by asset type is made up of 737-800s, along with the PW1133G-JM engines at 12.7%, 777-200LRF at 10.9%, A321-200N at 7.6%, 737 MAX 8 at 7%, and A320-200s at 6.9%. Other assets include the 787-9 with 6.6% of the portfolio, A321neos making up 5%, 787-8 at 4.4%, CFM56-7B at 4.1%, A350-900s at 3.9%, A321LR at 2.3%, along with the A330-200s, additional A321-200s, 737 and 767 freighters, amongst other engines.
Joint bookrunners are BNP Paribas, Mizuho Securities (USA), Apollo Global Securities, RBC Capital Markets, and SMBC Nikko. Redding Ridge Asset Management, BNP Paribas, and Mizuho Securities acted as structuring agents. US Bank Trust Company, National Association acted as trustee.
The firm priced its first aviation ABS deal of 2025 in May, with the transaction totalling $728.9 million. The deal consisted of similar A, B, C, and D tranches, with the A tranche also having a floating rate tranche.
