Navigator Aircraft returns to raise $497 million in aircraft ABS

After a three-year hiatus, and in its first transaction for 2024, Dubai Aerospace Enterprises is preparing to issue $497 million in asset-backed securities through the Navigator Aircraft ABS.

Notes will be repaid from a pool of leases on 22 refinanced assets. Almost all the assets in the pool are narrowbody aircraft, representing 87.9% of the pool by value. One widebody aircraft accounts for 12.1% of the assets' value, according to ratings analysts from Kroll Bond Rating Agency.

According to KBRA analysts, the trust will issue notes through two class A and B tranches, both of which have a legal final maturity date of August 2049 and August 2031. The class A and class B notes have loan-to-value (LTV) ratios of 68.0% and 78.0%, respectively.

DAE is the servicer, while Fexco Aviation Services is on the deal as the managing agent, KBRA said. The rating agency also notes that Navigator Aircraft ABS gets credit enhancement from several sources, including overcollateralization and a senior/subordinate repayment structure. There is a minimum number of assets test. The Navigator Group must own at least eight assets, or the transaction will begin to use excess cash to pay down the series A notes and B notes whenever they qualify in the waterfall.

Also, the notes have a debt service coverage ratio (DSCR). This was calculated off a three-month lookback window of cash flows, which is shorter than the six-month lookback window used in pre-COVID-19 aviation ABS deals. KBRA says this timing will determine DSCR triggers and cures, which will occur earlier in the deal, relative to deals that were done before March 2020.

Citigroup Global Markets and Mizuho Securities are joint structuring agents, KBRA said. The two banks are also managers on the deal, along with Credit Agricole Securities, Deutsche Bank Securities, RBC Capital Markets, Société Générale and SunTrust, according to Asset Securitization Report's deal database.

ASR's deal database estimates that the notes, slated for a September 30 close, will yield 5.47% on the class A notes, rated A by Fitch Ratings and KBRS. Yields on the class B notes are estimated to yield 6.17%, with ratings of A- and BBB from Fitch and KBRA, respectively. All the tranches are benchmarked to the three-month interpolated yield curve, the database said.

Navigator 2024-1 represents the second securitization with assets originated by the Navigator platform, KBRA said.