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BBAM Aviation Services markets first aircraft lease ABS in three years

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BBAM Aviation Services is making its first trip the securitization market in three years to finance aircraft leasing, according to presale reports.

The $612 million Horizon Aircraft Finance 1 is backed by a portfolio of 29 narrow-body aircraft – with an initial assessed value of $737.7 million – on lease primarily to international lessors. The deal is the sponsor's first since the $1.2 billion ECAF 1 Ltd. transaction in 2015.

Three tranches of notes will be issued in the transaction. The $476 million Series A notes carry preliminary single-A ratings from both Fitch Ratings and Kroll Bond Rating Agency. (That's on par with the senior tranche of the previous deal.) The $91 million Series B notes are rated triple-B ratings and $45 million in Series C notes carrying double-B ratings.

The Series A and B notes will amortize on a 13-year straight-line schedule, while the Series C notes will be on a seven-year straight-line schedule.

The proceeds from the note sale, along with equity proceeds from minority equity purchases in their company by affiliates of BBAM, will be used to acquire the aircraft on lease to 21 airlines in 19 countries. The aircraft have a weighted average aircraft age of 9.8 years with a remaining lease term of about 3.4 years. Kroll said the WA remaining lease terms is shorter than most other recent aircraft lease deals with mid-life to end-of-life aircraft assets.

All of the aircraft in the pool are under binding purchase agreements or letters of intent to purchase, meaning that BBAM-managed companies will own none of the aircraft. More than 87% of the pool consists of both Airbus A320-200 and Boeing 737-800 models that Kroll considers strong leasing assets with lower reconfiguration costs compared to widebody commercial airline jets.

The San Francisco-based leasing firm is among the largest managers in the sector, with more than 500 aircraft under management.

The three largest lessees are Travel Service, Eastar Jet and Ryanair, and the largest concentrations of jets (by value) are in Czech Republic, South Korea and Ireland. Kroll said the transaction “represents a less concentrated initial portfolio (by lessee and country) compared to other recent mid-life aircraft transactions.”

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Aircraft lease securitization Esoteric ABS