Willis Lease Finance Corporation (WLFC) has priced its $596 million aviation asset backed securities (ABS) deal WEST VIII — the company's ninth ABS transaction.
The deal contains two tranches consisting of A and B notes. Both tranches have a weighted average life (WAL) of 5.05 years, with expected final maturity date of June 15, 2031, and legal final maturity date of June 15, 2050.
The $524 million A tranche, with an initial loan to value (LTV) ratio of 72.1%, has been priced at US Treasuries plus 165 basis points. This tightened from guidance of plus 175-180 basis points. The tranche has a 5.648% coupon.
The $72 million B tranche, with an initial LTV ratio of 82%, has been priced at US Treasuries plus 215 basis points. This was tightened from guidance of plus 230-240 basis points. The B notes have a coupon of 6.070%.
The series A and B notes will be issued at a price of 99.99721% and 99.99711% of par, respectively.
A portion of the proceeds from the notes will be used to refinance the existing WEST IV transaction and acquire a portfolio of 64 assets: 62 engines and two airframes.
More specifically, the portfolio includes two narrowbody airframes, four widebody engines, six turboprop engines, and the majority share of the portfolio including 52 narrowbody engines. All are on lease two 24 lessees located in 18 jurisdictions. There are five narrowbody and one turboprop engines currently off lease. The weighted average remaining term of the initial lease contracts, excluding the off-lease assets, is around 1.9 years.
Next generation assets comprise of 76% of the portfolio, or 31 engines. Of the portfolio, 18 were the Pratt & Whitney geared turbofan (GTF) PW1100 engine family, which continue to be impacted by inspections regarding the powdered metal contamination. “However, 12 were manufactured in 2024 and are unaffected by the recall,” read KBRA in its report. “The related issues require payment should additional recalls occur and during periodic inspections.”
The top three lessees are International Aero Engines (IAE) at 23.9%, JetBlue at 9.4%, and Delta at 7.1%. These three lessees represent 40.5% of the portfolio by value. The top three countries are the US at 46.7%, Ireland at 6.4%, and Spain at 4.7% — representing 57.9% of the transaction. KBRA said both the lessee and jurisdiction concentration are higher than other comparable transaction it has observed.
Five engines, equating to 4.4% by value, are on lease to Air India.
“On May 10, 2025, India and Pakistan agreed to a cease fire following the most intense period of violence between the two countries in two decades,” said KBRA. “The assets in question are covered by insurance and reinsurance arrangements (including war risk insurance) with counterparties that each have credit characteristics commensurate with investment grade rated entities, providing protection in the event of asset damage or loss.”
The portfolio does not have exposure to Israel, Russia, or Ukraine and the transaction's concentration limits do not allow for future lessees in the latter two jurisdictions.
The portfolio of engines totals 15 PW1100G, 12 V2500-A5, eight CFM56-5B, seven CFM56-7B, four LEAP-1A, four PW127, three GEnx-1B, one PW1500G, one PW1900G, one CF34-10, one LEAP-1B, and one Trent 700. The airframes are two A319s.
The transaction is expected to close on June 18, 2025. A $6 million security deposit will be funded at closing and ongoing targeted amounts will be based on the amount of leases expiring within four months, according to KBRA's report.
Other structure features include a liquidity facility sized to nine-months of interest due on both series of notes, and a minimum number of eight assets owned by the issuer otherwise the transaction will begin to use any excess cash to fully pay down the notes.
Willis Lease's previous and eighth ABS issuance was launched in October 2023, which contained a single $410 million tranche with a fixed rate coupon of 8.000%, maturing in 2029.
MUFG Bank is the liquidity facility provider. Joint structuring agents and joint lead bookrunners are MUFG and Wells Fargo Securities.