Volofin, the aviation specialty finance and alternative asset manager, has made its debut in the aviation asset backed securitisation (ABS) market with a inaugural loan securitisation.
volofin Finance (Ireland) DAC and volofin Finance US, collectively vFIN 2024-1, is a $533.9 million aviation loan transaction secured on a portfolio of 22 loan facilities comprised of 107 loans.
vFIN 2024-1 is offered in four classes of notes: $387.08 million Class A notes, rated AAA by DBRS and AA by KBRA, with an initial loan-to-value (LTV) ratio based on the loan balance of 72.5% and collateral balance of 41.6%; $56.06 million B notes, rated AA by DBRS and A by KBRA, with a loan LTV of 83.0% and collateral LTV of 47.7%; $480.51 million C notes rated A by DBRS, have a loan LTV of 92.0% and collateral LTV of 52.8%; and a D tranche of notes totalling $16.017 million, rated triple-B by DBRS, with a loan LTV of 95% and collateral LTV of 54.6%. All of the tranches have a final maturity date of June 2037. There is also an unrated residual interest tranche totalling $26.7 million, which matures in June 2034.
According to KBRA’s pre-sale report, credit enhancement is comprised of overcollateralization, an expense reserve account, a cash reserve account of $900,000 for the first 48 months to cover shortfalls in senior expenses and Class A note and Class B note interest, and subordination (except for the Class D notes).
The transaction is backed by 22 aviation loan facilities – 21 limited recourse facilities and one full recourse facility – secured on a highly diversified pool of aircraft, engines and parts (APUs) with the issuer having senior first liens on the assets, explains DBRS in its pre-sale report on the deal. The underlying collateral consists of 48 narrowbody passenger aircraft aged from nine to 15 years old and 12 widebody aircraft. The aircraft portfolio comprises 16 A320-family aircraft, 13 A319s and 12 737-800s, as well as 12 A330 and 777 family aircraft, 85 engines and 62 auxiliary power units (APUs).
The portfolio has an initial aggregate loan balance of approximately $533.9 million, an average loan balance of $4.9 million, and a weighted average facility LTV of 64.5%. It has a weighted average remaining loan term of approximately 4.6 years and weighted average age of 15.6 years, excluding the engines and APUs.
The weighted average LTV measured at the collateral level for the vFIN 2024-1 is 64.5%, which KBRA’s states is 5.7 points and 3.6 points lower than PKAIR 2024-1 and PKAIR 2024-2, respectively. Of the four KBRA-rated aviation loan ABS transactions, one transaction, Ashland 2023-1, had a lower weighted average facility LTV (57.3%).
The three largest lessees by loan balance are ASL Aviation, Porter Airlines, and Turkish Airlines which represent 9.3%, 9.0%, and 6.7% (25.0% in total) of the portfolio value, respectively, notes KBRA. The three largest geographic concentrations by loan balance are Canada, the United States, and Turkey, which represent 15.4%, 12.2%, and 9.4% (37.0% in total) of the portfolio value, respectively. KBRA notes that the vFin 2024-1 portfolio is less concentrated compared to other KBRA-rated aviation lease and loan ABS transactions.
Delaware Life Insurance Company is the seller of the assets. Volofin Capital Management is the investment advisor and servicer of VFIN 2024-1. The loan administrator is Maples Fiduciary Services (Ireland).
BNP Paribas Securities and Volofin Capital Management Ltd are co-structuring agents. UMB Bank is trustee, custodian, bank, and paying agent. BK Associates, IBA Group, and mba Aviation are appraisers.