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Global Jet Capital's $522M deal thaws moribund aircraft ABS issuance

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Global Jet Capital this week closed the first aircraft-lease receivables securitization in nearly nine months, following the completion of its $522 million asset-backed bond sale supported by loans, leases and collateral value of a 55 corporate-jet fleet portfolio.

It was the first aircraft ABS deal (led by BofA Securities) since the onset of the U.S. coronavirus outbreak this spring that shattered the global travel industry – and in turn much of the commercial aviation ABS market – this year.

The Business Jet Securities Series 2020-1 transaction priced with a senior-note fixed-rate coupon of 2.98%, tightened from the 3.475% coupon originally expected for the deal. The offering was oversubscribed 30 times by ABS investors, according to Global Jet.

The $426.4 million Class A senior notes has final ratings of A- by Kroll Bond Rating Agency and A by S&P Global Ratings.

While the COVID-19 pandemic has curtailed business travel in the commercial airliner space, Kroll stated that Global Jet Capital has maintained low levels of delinquency in its managed portfolio and limited payment deferrals to obligors.

A company press release said the new deal “builds off the strong performance of the company’s previous ABS transactions, which have demonstrated remarkable resilience throughout the COVID-19 pandemic – in stark contract to a wide variety of other ABS asset classes, including commercial aviation.”

Kroll “believes that the diversification of the pool with respect to industries is a mitigant against certain kinds of economic downturns and business cycles,” with Global Jet spreading the BJETS 2020-1 lessee pool among 30 distinct industries. The 55 jets more than double the number included in Global Capital’s previously sponsored deal (27) in 2019.

The 2020-1 transaction also has a lower weighted average remaining term of 65 months, vs. 89 months in BJETS 2019-1, and a higher percentage of loan contracts (30%). The jet aircraft included in the deal have an estimated combined value of $636.4 million.

This week, Deutsche Bank analysts reported that while TSA checkpoint data showed modest improvement in travel numbers at the end of October, nearly all traffic remains leisure-based rather than business-related. International traffic remains “severely depressed and is only likely to get worse with additional restrictions being imposed in Europe,” Deutsche’s weekly Outlook report noted.

Depressed travel numbers have prompted airlines relying on leased aircraft to fill out fleets (primarily in developing economies) to seek payment deferments from leasing operators, which is leading to growing numbers of parked aircraft and shrinking debt-service ratios in aircraft lease ABS deals.

Deutsche reports only 5 of 48 outstanding rated ABS transactions it tracks as of October have not breached cash-trap or rapid-amortization triggers due to falling rental income.

One transaction – the Aergo Capital-sponsored Metal 2017-1 series – was backed by just $858,000 in monthly rental income last month compared to as much as $5.7 million in October 2018. According to Deutsche, Metal 2017-1’s collateral woes include four planes going off off lease and most of the remaining aircraft tied up with insolvent airlines or in deferred payment status.

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Aircraft lease securitization Esoteric ABS ABS Coronavirus