Global Jet Capital, an aircraft lessor backed by the Carlyle Group and the Blackstone Group, is planning to securitize a portfolio of 181 business jets it acquired two years ago from GE Capital Corp.
The transaction, Business Jets Securities 2017-1, is structured as a master trust that will issue two classes of notes totaling $1.48 billion. There are three tranches of Class A notes with an initial A rating from Kroll Bond Rating agency and anticipated repayment dates of September 2019, September 2020, and September 2022.
Kroll expects to assign a BBB rating to three tranches of Class B notes that also mature in two, three and five years.
The individual tranches have yet to be sized, according to Kroll.
The notes pay no principal for the initial two years of the transaction, unless the value of the jets used as collateral (as determined by a third-party appraiser) fall below a specified level. In that event, the trust is required to make monthly “parity” payments. The aircraft will be appraised twice a year.
The notes may also start amortizing early if the delinquency ratio exceeds 5% for any given period or if the net loss ratio exceeds 4% for any period.
The portfolio consists of 181 business jets, representing 154 unique obligors with an aggregate appraised value of approximately $1.7 billion and a remaining term of approximately 62.1 months.
According to KBRA, the overall quality and composition of the initial portfolio is “strong” relative to transactions supported by commercial airlines or large ticket equipment leasing transactions. In its presale report, it noted that a majority of the obligors are either high net worth individuals or corporate entities that exhibit investment grade credit quality characteristics.
Also, no single industry group represents more than 12.9% of the initial portfolio.
Another strength, according to Kroll, is the experience of Global Jet Capital’s management team; several members were employed previously by GE Capital Corp. and have significant experience in the management, servicing and origination of leases and loans of business jet aircraft.
CEO Shawn Vick has held senior leadership positions at Gulfstream Aerospace, Bombardier Aerospace, British Aerospace, Hawker Beechcraft, Landmark Aviation, and AE Industrial Partners. Chief financial officer Ed Barnes was formerly CFO of JetBlue Airways and has also served on the board of Jetscape, an aircraft leasing company. Chairman Bill Boisture has held senior leadership positions with Hawker Beechcraft, Gulfstream Aerospace, NetJets and Butler Aviation.
Global Jet Capital can use proceeds prepayments, liquidation of aircraft and balloon payments to purchase new assets equal to up to 10% of the initial Master Funding Value based on the prior 12 months and up to 25 in the aggregate since the last issuance of any series of Notes.
At closing, approximately $15.1 million from recent prepayments and early lease terminations will be available to purchase new assets.
Among the risks to the deal, according to Kroll, is the fact that business jet values have been volatility in recent years. And since business jets are not used as frequently as commercial aircraft, their user base is unique and the remarketing and reconfiguration of such aircraft may require additional time and costs due to a limited number of users and a large supply base.
Global Jet Capital, founded in 2014, is backed by GSO Capital Partners (part of Blackstone), Franklin Square Capital Partners, The Carlyle Group and AE Industrial Partners.