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Bulked up DAE returns with $379 million aircraft lease ABS

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Dubai Aerospace Enterprise is tapping the securitization market for another $379.4 million to finance a fleet of 18 primarily mid-life narrowbody jets on lease to airlines in Asia, “emerging” Europe, Africa, the Middle East and Central and South America.

The lessor hasn’t bundled leases into collateral for bonds in nearly two years, since February 2017. Since then, it has acquired Dublin-based AWAS, quadrupling - and significantly diversifying - its fleet. As of Sept. 30, it owned, managed or committed 365 aircraft on lease to over 110 customers in over 55 countries with a value of approximately $15 billion.

(In addition to the February 2017 deal, DAE took over servicing of AWAS’ 2015 transaction, Diamond Head.)

The new transaction, dubbed Kestrel, will issue two tranches of notes: $319.8 million of senior notes are provisionally rated single A by both Fitch Ratings and Kroll Bond Rating Agency and $59.6 billion of subordinate notes are rated triple B. All of the rated notes have a final legal maturity of December 2038.

The senior notes amortize on a 12.8-year straight-line schedule and the subordinate notes amortize on a 12.9-year straight-line schedule until the anticipated repayment date; after than they amortize on a four-year, straight -line schedule.

Mizuho Securities is the sole structuring agent and joint bookrunner; Credit Agricole Securities is also joint bookrunner.

Proceeds will be used to acquire the aircraft and to fund a maintenance reserve account as well as a security deposit account to pay certain other expenses.

The notes are secured by each aircraft’s future lease payments and residual value.

Among the rating agencies’ primary rating considerations are the fact that the fleet consists of mostly (82%) Tier 1 aircraft for which there is a ready market with a weighted average life of 8.9 years, which Fitch says is similar to collateral for recent aircraft ABS it has rated. Sixty-nine percent are current generation A319, A320, A321 and B737; 24$ are two less-marketable widebody A330-200/300s and two are ATR72-600 turbo-props (6.9%).

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Aircraft lease securitization