BOC Aviation, a leading Asia-based global aircraft leasing company, plans to issue $807.9 million of bonds backed by aircraft leases.
The notes issued from Shenton Aircraft Investment I Ltd (SAIL) will be backed primarily by lease payments on a $1 billion portfolio of 24 commercial aircraft. BOC Aviation will be servicer of the assets.
Citigroup is the lead arranger.
Fitch Ratings assigned preliminary ratings of ‘A’ to $747 million of class A notes and ‘BBB’ ratings to $60 million of ‘BBB’ rated class B notes. The bonds are structured with a 12-year weighted average life.
Leases backing the class A notes have a combined loan-to-value ratio of 71% and leases backed the class B notes have a combine LTV of 76.75%. The level of borrower equity is within the range of aircraft lease deals sold in the securitization market over the past two years.
There are 21 initial lessees in the portfolio. Iberia, the flag carrier of Spain, is the largest lessee within the pool totaling 9.9%. Air Canada, the flag carrier of Canada and rated ‘B+’ by Fitch, is the second largest totaling 9.7%. Within the SAIL pool, 48.3% of lessees are flagship airlines for their respective jurisdictions.
The average aircraft age of the leased aircraft is 4.6 years, younger in comparison to recent Fitch-rated transactions.
Notwithstanding the relative younger age of the aircraft, there is a risk that some of the collateral could become obsolete before the bonds mature. “The pool is largely comprised of aircraft that face replacement programs, such as A320neo or B737 MAX, scheduled for implementation in the latter half of this decade,” stated Fitch.
However, since most replacement programs have a long lead time,Fitch doesn’t expect material pressure from programs like the neo or MAX to affect existing fleets until well into the next decade.
BOC Aviation owns a portfolio of 251 owned and managed aircraft operated by 60 airlines worldwide in 30 countries, with commitments to acquire 196 aircraft, as of 31 March 2015. The Company has one of the youngest fleets in the industry with an average owned aircraft age of less than four years. The sponsor is a subsidiary of the Bank of China.
