Global aircraft lessor ALC is making a trip to the securitization market to refinance 19 aircraft on lease to 16 airlines located in 13 countries.
The aircraft are currently owned by Blackbird Capital I, a joint venture between ALC and Napier Park Global Capital, according to Kroll Bond Rating Agency. They are valued at approximately $1.049 billion, after adjusting for expected maintenance conditions. As of June 30, the 19 aircraft represent approximately 6.8% (by number of aircraft) of ALC’s owned and managed fleet and substantially all of Blackbird’s owned fleet.
The $800 million transaction, dubbed Blackbird Capital Aircraft Lease Securitization Limited 2016-1, will issue three tranches of fixed-rate notes with preliminary ratings from KBRA: $200 million of eight-year senior notes are rated AA; $540 million of 16-year subordinate notes are rated A; and another $60 million of 16-year subordinate notes are rated BBB. All of the notes have a final maturity of December 2041.
Air Lease Corp. and ALC Aircraft Ltd are the servicers; Bank of America Merrill Lynch, BNP Paribas Securities, and Mizuho Securities USA are the joint lead structuring agents and joint lead book runners.
Among the strengths of the deal, according to KBRA, is the fact that portfolio is younger than other recent aircraft ABS transactions, with an initial weighted average age of approximately 3.3 years. “All of the aircraft in the transaction are in-production and, as a result, represent one of the most liquid securitized aircraft fleets,” the presale report states. The fleet also has a broad user base and strong marketability for re-leasing to other operators beyond the expiration of the initial leases.
Another plus: the initial weighted average remaining lease term of approximately 7.3 years is longer than most other KBRA-rated aircraft ABS transactions. This modestly reduces reliance on re-leasing activities to repay the principal of the notes.
Among the deal’s negatives, four of the 19 aircraft, representing nearly 50% of the portfolio by value, are widebody aircraft, which can have higher expenses associated with fuel, maintenance and transition costs than narrowbody aircraft. They can also be harder to re-lease. However, two of the four widebody aircraft will be less than one year old as of the closing date. They will be placed on lease to KLM and Air Canada and will have remaining lease terms of approximately 6.5 years and 12 years, respectively
ALC was founded in 2010 by Steven F. Udvar-Házy, who also co-founded International Lease Finance Corp. in 1973, growing it to the second largest aircraft lessor in the world.