GE Capital Aviation Services Ltd. has structured a $169.5 million securitization backed by aircraft engine leases dubbed Fan Engine Securitization Series 2013-1.
The transaction refinances an existing, unrated transaction that closed in 2008 of the same name. The deal has been assigned preliminary ratings by Standard & Poor’s. The class 1X notes are rated ‘AA’ and the class 1A notes are rated ‘A’.
The portfolio is backed by that have a weighted average remaining term of 21 months.
S&P explained in the presale report that airlines commonly use spare engines because they can be installed quickly to replace one that needs repair or scheduled maintenance and they allow airlines to avoid grounding the plane.
Spare engines are estimated to represent 15%-20% of the total engines globally. Although airlines own most of the spare engines, 35%-40% of them are leased.
“The engine leasing business first developed with small airlines, but now even larger airlines lease spare engines,” said S&P. “Large airlines see the engine leasing alternative as a way of increasing liquidity (they do not have to invest as much in an inventory of spare engines).”