Like the global economy, worldwide air travel continues to recover, slowly, from the withering effects of the COVID-19 pandemic. MAPS 2021-1 Trust, an aircraft lease asset-backed securities (ABS) trust, is preparing to issue $540 million in notes.
Cashflows from payments on initial and future leases, aircraft dispositions, and end-of-lease payments attached to aircraft in the MAPS 2021-1 portfolio will secure the notes. As of May 15, 2021, the securitization pool consisted of 20 commercial aircraft under contract to 12 lessees based in 10 countries, according to Moody’s Investors Service.
The trust will consist of two underlying asset ownership entities that will ultimately, within 270 days of the transaction close date, purchase ownership interests that directly or indirectly own the 20 aircraft, according to Moody’s. The notes from the trust will have a legal final maturity of 25 years.
Among the transactions credit strengths are a portfolio of young and highly liquid narrowbody aircraft. Among that group 48 percent are new technology A220s, A320neos and a B7373MAX, which are less than three years old. Also, 35 percent of the portfolio are current technology A320-200s and B737-800s that are six to nine years old.
Together, the younger and highly liquid aircraft represent about 83 percent of Moody’s assumed value on the portfolio. Compared with widebody aircraft, narrowbody models generally have lower maintenance, transition and reconfiguration expenses.
Because the aircraft are younger, they have an assumed weighted average remaining economic useful life of about 16 years, which sets them up to deliver strong cashflows to repay the notes and allow the transaction more time to recover from a decline in cashflows due to temporary market disruptions.
Moody’s expects that the contractual lease rent from the initial leases will generate enough cashflow to pay all the full amount of the principal and interest on the rated notes through 2024. After that year, the lease rent is expected to meet 85 percent of principal and interest obligations through the anticipated repayment date.
In another plus, according to Moody’s, the vast majority of the aircraft in the portfolio are subject to leases that will expire after 2023, when demand for global air travel is expected to approach 2019 levels again.
Yet the MAPS Trust 2021-1 has the potential for credit issues. Among these challenges is the fact that global air travel is still depressed. Despite the growth that air travel is experiencing, 48 percent of the portfolio is leased to carriers based in Europe, where the pace of recovery is expected to be slower.
Also, while the pool to be securitized is fairly diverse, in Moody’s opinion, Merx Aviation, the servicer, might re-lease or sell aircraft, which could increase aircraft and lessee concentrations over time and potentially weaken the quality of the portfolio.
Moody’s expects to give an ‘A1’ rating on the class A notes; a ‘Baa1’ rating on the class B notes and a ‘Ba1’ rating on the class C notes.
