American Airlines is planning a second offering of enhanced equipment trust certificates (EETC) under a public rule 415 shelf registration, according to a regulatory filing. 

The $828.6 million American Airlines Series 2016-2 trust certificates will be secured by 22 recently or soon-to-be delivered, newly manufactured Airbus and Boeing passenger jets, American reported in a filing with the Securities and Exchange Commission. The deliveries are part of AA’s continuing efforts to modernize and improve the fuel efficiency of its fleet after last year’s merger with U.S. Airways.

It is the largest number of aircraft included in an EETC collateral pool by American since March 2015, when it completed a $1.2 billion EETC offering.

The latest deal follows on the heels of $822.9 million Series-1 EETC deal completed in January.  The Dallas-based carrier sold more than $2 billion in equipment trust certificate notes in 2015.

Standard & Poor’s has assigned a preliminary ‘AA’ rating to the $567.36 million tranche of class AA bonds, and an ‘A’ to the $261.3 million tranche of subordinate class A notes. The offering does not include class B notes, unlike in American’s previous EETC transactions. However the airline stated in the filing that it might issue Class B notes under a separate prospectus to back further plane purchases or financing.

Deutsche Bank, Morgan Stanley, JPMorgan and Credit Agricole are the lead bookrunners on the transaction.

American Airlines is using the proceeds to finance or refinance a mix of widebody and narrowbody aircraft:  two Boeing B777-300ER (or extended range) aircraft, 11 Airbus A321-200 jets, seven Boeing B737-800s and two Boeing B787-8 aircraft.

The planes in Series 2016-2 have an aggregate appraised value of $1.4 billion, with an initial loan-to-aircraft value ratio of 38.6% for the AA notes and 56.4% for the A notes. (S&P notes that the planes in the new series, unlike Series 2016-1, are being financed in advance of their delivery to American.) 

S&P, however, provides higher LTV rates of 41% and 60% for the two classes of notes, based on a more conservative (or faster) expected depreciation rate as well as the recognition that a planned full draw of liquidity facilities with the notes would have senior claims over the certificates.

In American’s previous 2015-1 series, the LTV on the AA tranche was 41%, which Moody’s Investors Service in January reported was 16% below the median LTV average of senior EETC tranches since 2007.

The Airbus A321-200 planes comprise 40% of the collateral pool value, and are an increasingly popular family of passenger jets Airbus sells to carriers seeking larger planes for air traffic growth amid constrained airport capacity. 

Boeing’s B373-800 narrowbody aircraft and its B777-300ER widebody each make up 22% of the pool. S&P notes that both the Airbus A321 and Boing B373 will soon be succeeded by new models later this year, but with an order backlog of those popular planes, “we do not expect there to be material downward pressure on the value of these planes until the next decade.”

The remaining 16% of the pool is with Boeing’s B787-8, a smaller version of the company’s long-range, midsize widebody aircraft. The model being purchased by American is two models behind the current B787-10 version, but that model is not to be introduced until 2018 and already has 1,000 back-orders from 60 airline operators.

Standard & Poor’s has applied a 6.5% annual depreciation for the A321-200, the B777-300ER and the B787-8 aircraft; the B737-800 lineup has its depreciation set at a slower 5% rate.

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