Apollo Selling $612.2M in Aircraft Lease Bonds

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Apollo Aviation Group is seling $612.2 million of bonds backed by aircraft leases, its fourth securitization.  

Three series of notes will be issued in the transaction, AASET 2017-1:  $467.5 million senior note Class A tranche with a preliminary A rating from Kroll Bond Rating Agency and Fitch ratings; $88.5 million of Class B notes rated BBB by both agencies; and $44.3 million of Class C notes rated BB.

Proceeds from the notes will go toward the purchase of 32 aircraft on lease to 23 airlines globally, according to Kroll. The mid-life to end-of-life aircraft in the portfolio – Apollo’s target vintage – has a maintenance-adjusted market value of $729.3 million, a weighted average age of 12.2 years and a remaining lease term of about 4.6 years.

The planes in AASET 2017-1 represent 22.2% of Apollo’s managed lease fleet, which totals about $3.7 billion in assets covering 140 narrow-body and wide-body aircraft on lease to 63 airlines.

Apollo’s previous deal was its November 2016 transaction involving 35 planes on lease to 22 firms with an adjusted value of $792.2 million. Whereas that deal has its highest concentration with U.S. airlines (including American) at 17.8%, this transaction is more diverse in both geography and concentration levels – Spain is the top market with 11.8% of the pool’s assets.

With older aircraft, Apollo’s deals carry a higher risk of volatility in values, limited re-leasing prospects and technological obsolescence, cautioned KBRA. But the agency, which has rated all of Apollo’s deals, states in its presale report published Monday that the prior asset-backed transactions have performed in line within pre-sale expectations and with other securitizations of aging aircraft.

Apollo structures its deals with lower initial leverage levels, increasing cash sweeps for the A and B notes (25% in year five, growing to 75% in year seven, 100% thereafter) performance triggers as well as a faster amortization schedules than ABS transactions involving newer aircraft.

(The Class A and B notes each amortize on an 11-year schedule in year one, followed by a 12-year straight-line schedule through year 7 followed by a seven-year schedule through maturity).  

Goldman Sachs is the sole structuring agent and lead bookrunner.

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