PK AirFinance has priced 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 notes are secured by 35 aircraft loan facilities backed by 107 aviation assets, consisting of 37 narrowbodies, 29 freighters, nine widebodies, six regional jets, and 26 engines. The assets are on lease to 42 lessees in 27 jurisdictions. The portfolio has a weighted average age of 8.8 years and weighted average remaining term loan of 5.5 years.
The A tranche has a loan-to-value (LTV) ratio based on loan balance of 66.4% and an LTV based on collateral balance of 41.8%. The tranche was rated AAA by Fitch, KBRA, and DBRS.
The A tranche is split into the main fixed rate A tranche, which has an amount of $451 million, and a variable interest rate $130 million tranche.
The fixed rate A tranche has a coupon of 4.750% and a yield of 4.797%, with a spread of 130 basis points. The floating rate tranche has a spread of 130 basis points over 1-month SOFR, which is also its coupon at issuance. The A Class spread tightened by 20 basis points from initial pricing targets. This also marks a spread that is 30 basis points tighter than PK 2025-1’s A tranche.
The B, C, and D tranches were pre-placed.
The $50 million B tranche has an LTV ratio of 72.1% based on loan balance and an initial LTV of 45.4% based on collateral balance. The tranche was rated AA by the three rating agencies. The tranche has a spread of 155 basis points with a coupon of 5.028% and a 5.081% yield.
The $136 million C tranche has an LTV based on loan balance of 87.7% and an LTV based on collateral balance of 55.2%. The tranche was rated A by DBRS and KBRA. The tranche has a spread of 185 basis points, a yield of 5.401% and a yield of5.342%.
The $60 million D tranche is rated BBB by DBRS and has an LTV based on loan balance of 94.5% and an LTV based on collateral of 59.5%. The tranche has a spread of 245 basis points, with a 6.012% coupon and a 6.087% yield.
The deal marks PK AirFinance’s tightest AAA spread to date, with the AAA rated notes being 10x oversubscribed. The orderbook featured a number of first time investors, made of mostly non-traditional aviation investors. This largely reflects the success of PK Air marketing the aircraft loan space.
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.
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.
The firm priced its first aviation ABS deal of 2025 in May, with the transaction totalling $728.9 million.