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Air Lease's third aircraft lease ABS finances a younger fleet

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Air Lease Corp. is conducting its third aircraft lease securitization, this time financing a younger fleet contracted out to 16 airlines in 15 countries.

The $450 million Thunderbolt II Aircraft Lease Ltd. will issue two tranches of notes secured by the value of 18 aircraft with an average age of eight years – well below the 12.5-year average of the planes included in its prior securitization in April 2017.

The proceeds will be used to finance and acquire the aircraft that are part of its $13.6 billion portfolio of 253 owned and 49 managed aircraft, according to a presale report from Kroll Bond Rating Agency.

The capital stack features $350 million of Series A notes with a preliminary AAA rating from Kroll Bond Rating Agency and $75 million of Series B notes with a preliminary triple-B rating. All of the notes amortize on a straight 14-year schedule.

Seventeen of the aircraft are narrowbody jets, which are less expensive to maintain and easier to reconfigure and remarket when the come off lease. The initial collective value of the aircraft is $575.7 million, based on half-life base values from three appraisers. The portfolio has an aggregate maintenance-adjusted current market value of about $567.3 million.

The average remaining lease term on the contracts is 4.7 years, “which is longer than other recent mid-life to end-of-life aircraft ABS transactions,” according to Kroll.

Investor protections in the deal include a cash trap trigger if the DSCR falls less than 1.2x, and early amortization if it falls below 1.15x or the portfolio is less than 75% utilized.

The new deal also includes a single-payment waterfall that incorporates the funds from portfolio asset sales or end-of-lease payments into the Class A principal payment stream. (In traditional aircraft lease ABS deals, those funds were paid separately from lease proceeds in a pre-determined step across note classes.)

Air Lease only needed to size its liquidity facility (provided by Citibank) to nine months of interest vs. 17 months on its previous TBOLT 2017 transaction.

The largest lessees are Garuda Indonesia (19.1% of the pool valuation), Air China (14.3%), and Thomas Cook Airlines in the U.K. (7.3%).

Air Lease was founded in 2010 by Steven F. Udvar Hazy, who previously had co-founded International Lease Finance Corp. in the 1970s that grew into the second-largest aircraft lessor in the business.

Air Lease’s first securitization, Blackbird Capital Aircraft Lease Securitization 2016-1 deal from November 2016, involved aircraft valued at more than $1 billion that Air Lease managed in a joint venture with Napier Park Global Capital.

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Aircraft lease securitization Esoteric ABS