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Carlyle Aviation issues first aircraft ABS deal since Apollo acquisition

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Carlyle Aviation Management Ltd., formerly Apollo Aviation Group, has priced its first securitization of airline lease receivables of mid-to-end-life aircraft since the firm was acquired and renamed last fall by The Carlyle Group.

AASET 2018-3 Note Issuer DAC is a $384 million bond offering secured by the lease income as well as the resale value of 26 commercial passenger jets that will be acquired from the note proceeds.

The aircraft are already on lease to 20 airlines in 16 countries, consisting of narrowbody and three widebody planes. Carlyle Aviation Management will acquire the aircraft in the deal, and will handling lease servicing and aircraft maintenance of the fleet.

Like Apollo’s previous asset-backed transactions, the collateral aircraft are mainly older models with an average age of 14.9 years, on lease terms of approximately 4.2 years. The aircraft age is higher than comparable mid/end-life aircraft lease securitizations by Zephyrus Aviation Capital (12.9 years), Avolon Aerospace Leasing (12 years) and Castelake L.P. (13 years).

The portfolio of planes has an appraised initial value of $470.8 million, according to a presale report form Kroll Bond Rating Agency.

Kroll has assigned final ratings to three classes of notes in the transaction. The $305 million in Class A notes, paying a 4.46% coupon, have a single-A rating – similar to Kroll’s rating of the previous aircraft securitization the firm sponsored while still independently operated (AASET 2018-2). The $55 million Class B notes are rated BBB and have an interest rate of 5.685%, and the $24 million in Class C notes are rated BB with a coupon of 6.9%.

Both the Class B and C notes are priced slightly wider than the counterpart Class B and C tranches in AASET 2018-02.

The Class A and B notes amortize on a 12-year straight-line schedule and the Class C notes on a seven-year schedule. That is unchanged from previous Apollo securitizations last year.

The largest airlines with leased aircraft in the pool include the former Virgin America (10.7% of the pool’s assets by value), which in 2016 was sold to Alaska Air in a $2.6 billion transaction. The transition from the signature red-and-white, Virgin-branded planes was reportedly completed this month, with all former Virgin planes now bearing Alaska Air insignia.

AirAsiaX from Malaysia (9.5%) and Russian carrier iFly 8.3%. Virgin America was sold to Alaska Air in April in a $2.6 billion transaction,

Kroll noted that as of April 30, leases on five planes representing 19.3% of the portfolio, were delinquent beyond 30 days at the time of closing. One aircraft on a delinquent lease at the time of Carlyle’s acquisition last October has since been taken off-lease and is expected to be sold.

Carlyle Group acquired Apollo Aviation, a longtime aircraft lease management firm, in a deal announced October 2018 and closed in early 2019. Apollo has long specialized in leasing, re-leasing, re-marketing and trading mid-life to end-of-life aircraft that it acquires in the secondary market and typically on-lease at the time of purchase.

As of September 2018, Carlyle/Apollo managed 240 aircraft with about $5.6 billion of assets under management.

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Aircraft lease securitization Carlyle Group Apollo Aviation