Apollo Aviation is making its second trip of the year to the securitization market to finance aircraft leases.
The $613 million AASET 2018-2 will be secured by lease payments and disposition proceeds on a pool of 35 mid- to end-of-life aircraft, according to Fitch Ratings. The pool has a weighted average age of 13.9 years and contains 66.6% good quality A320 and B737 family current-generation aircraft, consistent with Apollo’s previous transaction, completed in January. Further, the pool has an improved mix of widebody aircraft versus 2018-1. The weighted average remaining lease term is 3.6 years, and 55.6% is on lease until at least 2022, a positive for future cash flow generation.
Most of the 30 lessees in the pool are either unrated or speculative-grade credits, typical of aircraft ABS. Fitch assumed unrated lessees would perform consistent with either a B or CCC Issuer Default Rating to reflect default risk in the pool.
Three classes of notes will be issued in the transaction: The $488.3 million senior tranche is provisionally rated A, the level at which Fitch caps aircraft lease ABS ratings due to the cyclicality of the aviation markets and volatility of aircraft valuations, among other factors; there are also two subordinate tranches of notes, one rated BBB and the other BB.
Credit enhancement comprises overcollateralization, a liquidity facility and a cash reserve. The initial loan to value ratios for the class A, B and C notes are 66.5%, 76.5% and 83.5%, respectively, based on the average of maintenance-adjusted base value. These levels are in line with the 2018-1 transaction.
Goldman Sachs is the structuring agent and lead bookrunner.
