Castlelake L.P. is looking to complete its third esoteric securitization of leased aircraft.
The specialty aircraft asset management firm, which leases mid- to end-life aircraft to airlines globally, has pieced together a $916 million portfolio of leases to 20 airlines in 17 countries, according to Kroll Bond Rating Agency.
The fixed-rate notes in Castlelake Aircraft Securitization Trust 2016-1 are split among three classes, topped by a Class A tranche totaling $715 million, with an initial loan-to-value ratio of 64%. Kroll has assigned a preliminary ‘A’ rating to those notes, as well as an early ‘BBB’ to a subordinate Class B series totaling $130 million and a ‘BB’ to a Class C tranche sized at $71million.
The notes carry a 2041 maturity, but the Class A and B loans amortize on a 12-year straight-line schedule, according to Kroll. In the sixth year after the transaction closes, a 50% cash sweep will go into effect to accelerate a sequential repayment of the Class A and B loans. The cash sweep increases to 75% in the seventh year, and is fully 100% by year eight and beyond.
The Class C notes will amortize on a five-year schedule during the first two years, switching to a seven-year amortization schedule for the next two years. After four years, a cash sweep equaling 30% of remaining available collections will accelerate Class C notes repayment, according to Kroll.
Castlelake does not yet all the aircraft in the pool, but by closing is expected to have completed purchase of 17 of the remaining non-owned aircraft from third-party sellers.
The largest lessees in the pool are Qatar Airways, Alitalia and United Airlines, representing 55.4% of the portfolio – a greater amount from previous Castlelake transactions.
The loans are serviced by Castlelake, which was formed in 2005 to acquire and maintain older aircraft it obtains at “significantly” depreciated values, according to Kroll. The weighted average life of aircraft in the portfolio is 12.1 years. The company has invested over $2.5 billion in aircraft assets since it was founded, and as of March had approximately $7.6 billion in assets under management.
The proceeds from the notes are to purchase a fleet of 52 aircraft and one aircraft engine. Kroll reports that three appraisers have estimated the maintenance adjusted value of the aircraft in the portfolio valued at $1.05 billion – representing 21.8% of Castlelake’s entire owned and managed fleet as of March 31.
Deutsche Bank and Goldman Sachs are joint structuring agents on the deal.
Castlelake’s two prior aircraft securitizations took place in 2014 and 2015.