Carlyle Aviation Management has launched its second aviation asset-backed security (ABS) this year from a long-standing shelf, with new protection designed to help the securitization navigate the coronavirus’s impact on the industry.
Apollo Aviation Securitization Equity Trust (AASET) 2021-2 priced well under guidance, for coupons of 2.80% on the $541 million ‘A’ rated tranche, and $3.54% on the $79 million, ‘BBB’ rated tranche, according to Kroll Bond Rating Agency’s Nov. 18 pre-sale report.
The $818 million AASET 2021-1, priced earlier in November, included somewhat larger ‘A’ and ‘BBB’ rated tranches as well as a $73 million piece rated ‘B’. The investment grade tranches on the current deal are equivalently rated by Moody’s Investors service. The earlier deal was rated by S&P Global Ratings, which gave the lower investment -grade, class B tranche a rating of ‘BBB-‘, a notch below the current deal, according to Finsight.
KBRA noted several new features in AASET 2021-2 Trust that the rating agency had not observed prior to 2021 that should help mitigate the uncertainty stemming from the COVID-19 pandemic and improve the resiliency of cash flow available to the notes. They include a two minimum number of aircraft tests as well as enhanced structural features, including more reactive debt-service coverage ratio (DSCR) tests, a higher utilization test percentage, and a more favorable security deposit account, which can be used for additional liquidity.
Proceeds from the notes will be used to acquire 15 aircraft on lease to seven lessees in six different places, KBRA said.
Carlyle Aviation Management, a regular in the aviation ABS transactions market, is sponsoring and servicing the deal. Carlyle has sponsored numerous aviation transactions from 2014 through 2021 and three of them have been repaid, the report said. Carlyle has $8.3 billion of assets under management and manages 311 aircraft (as of September) leased to 106 lessees in 56 countries.
Fitch says Carlyle's next $408.9 million aircraft lease ABS has more than 60% of the asset value tied to airlines with credit profiles equivalent to lower junk-rated corporates.
Goldman Sachs is the structuring agent, global coordinator and joint lead bookrunner, and Citibank is the trustee.
The portfolio has one of the lowest number of aircraft for an initial portfolio aircraft ABS transaction rated by the agency, with 14 narrow-body aircraft and one 787-8 wide-body aircraft on lease to Ethiopian Airlines.
ASSET 2021-2’s largest jurisdiction is India (34.7%), followed by Brazil (20%), and US (18.75%). Indigo, GOL and American Airlines are the top lessees, and Ethiopian, SAS, Southwest and Air Senegal are also included.
