DVB Bank, a Frankfurt-based bank that specializes in transport finance, plans to join the growing number of aircraft lessors tapping the securitization market. It is prepping a $667 million deal backed by a portfolio of 20 mostly narrow-body and wide-body commercial aircraft.
The aircraft seller is Deucalion Ltd., a Cayman Islands company managed and advised by DVB Bank SE, London Branch (DVB). The Aviation Asset Management (AAM) section within DVB, which was set up in 2007 to provide remarketing, lease management and technical services to owners and lessors of aircraft, will be the servicer of this transaction. BNP Paribas Securities is the lead manager.
DVB AAM has leased and/or sold 132 aircraft since its inception and currently manages a fleet of 155 aircraft, including 72 on operating lease, 32 on remarketing contracts and 51 on technical management contracts.
Standard & Poor’s and Kroll Bond Ratings plan to rate the AIM Aviation Finance, Series 2015-A1, A’; the B1 notes BBB’ and C1 notes BB’. The notes are due February 2040.
The class A-1 notes have an LTV of 68% and the B-1 notes of 78%. By comparison, Emerald Aviation, a deal issued in September 2013 by Avolon that was backed by Boeing and Airbus aircraft had LTVs of 66% and 77% for the class A and B notes, respectively. Last December Goldman Sachs and Deutsche Bank Securities led the Aldus Aviation transaction, which had a 78% LTV.
The Series A-1 and B-1 notes amortize based on a 14-year straight-line schedule. The Series C-1 notes uses a seven-year schedule.
Leases on Airbus and Boeing planes back the deal. The portfolio is primarily comprised of in-production and widely used aircraft in the aviation market, with a relatively low weighted average age of approximately 5.6 years. The 20 aircrafts include 15 narrow-body planes (11 A320 family, three B737NG, and one B737 classic) and five wide-body planes (two A330-200 and three A330-300), with a 5.7-year weighted average age.
Lessor-owned aircraft has been steadily growing. Operating leases currently account for around 40% of the global commercial fleet and could grow to around 50% over the next five to 10 years, according to S&P. “Aircraft leasing is attractive to airlines because of lower capital outlay requirements, fleet planning flexibility, delivery position availability, and residual value risk avoidance,” explained analysts in the presale report.
Aircraft lessors that face barriers to tapping the senior unsecured bond market have found that securitization offers attractive capital markets financing. “The recent European sovereign debt crisis has forced some banks to reduce their involvement in traditional aircraft bank lending, which had been a major source of funding for the aircraft lessors and the aviation industry,” stated the S&P presale report. “As a result, many aircraft lessors have turned to the capital markets to raise secured and unsecured debt to fund new aircraft.”