Global Jet, a 4-year-old company founded by several veterans of GE Capital Corp., is returning to the securitization market to refinance the remainder of business jet leases it purchased from GECC in 2015.
The new transaction, Business Jet Securities 2018-2, is backed by 76 midsize and larger jets including Gulfstream, Bombardier, Dassault (Falcon); Embraer, Cessna (Textron), HondaJet and Pilatus, with an aggregate value of approximately $821.5 million, according to Kroll Bond Rating Agency.
Global Jet originally tried to securitize the entire portfolio of 181 jets in a single transaction, in late 2017, but that deal was scuttled after an unfavorable review from Fitch Ratings apparently prompted investors to scrutinize it more carefully.
The sponsor subsequently issued a deal roughly half the size (67 jets) and with a faster amortization schedule, among other structural differences, that closed in January. It was rated by Kroll alone.
It appears that Kroll alone is rating the new deal as well; the rating agency expects to assign the same A to the senior tranche of Class A notes, which have a loan-to-value ratio of 67%, on par with the comparable tranche of the previous transaction. Likewise, the Class B notes have an LTV of 77% and are rated BBB and the Class C notes have an LTV of 82% and are rated BB.
In addition to a slightly higher number of assets, Business Jet Securities 2018-2 has a higher weighted average remaining term ((76 months vs. 63 months) than the February deal and a lower percentage of loan contracts (8% vs. 35.2%).
There are some slight differences in the structure of the deal as well. The Class A notes and Class B notes amortize more slowly. Although all three tranches of notes are expected to be repaid in five years, the principal of the Class A and Class B note is repaid as if they matured in 12 years; that compares with an 11.5-year amortization profile for the same tranches of the February deal.
Also, there are looser restrictions on extending the terms of leases and loans. The aggregate asset value of all extended leases and loans cannot exceed 35% of the initial aggregate asset value, compared with 25% in BJETS 2018-1. None of the assets in either deal can be re-leased to new obligors, something that Kroll views positively as releasing to a weaker obligor could introduce new risk. Instead, assets coming off lease are to be sold by the securitization trust.
The latest transaction has a new feature e that Kroll also views positively: Each asset must be appraised twice a year by a third party. “This provision, in conjunction with a LTV test, provides additional protection to noteholders in the event of sustained value declines across the portfolio,” the presale report states. The initial appraisers are: BBC Aviation Enterprises, AC-U-KWIK Appraisers and Mente Group.
Deutsche Bank Securities is the deal’s lead structuring agent and lead bookrunner.
Global Jet is backed by heavyweights such as the Carlyle Group and the Blackstone Group. It has approximately $2.5 billion in assets under management, according to information posted on its website.