A portfolio of leases on 23 narrowbody and widebody aircraft will secure $610 million in asset-backed securities (ABS) coming to market from the Navigator Aviation platform.
The deal will offer investors two series of fixed-rate notes, A and B, through the Navigator 2025-1 Aviation Limited and Navigator Aviator II, a warehouse line, according to Kroll Bond Rating Agency. Both series of notes have a legal final maturity date of October 2050, the rating agency said.
The deal will purchase the portfolio from Navigator Aviation II DAC and its affiliates, an aircraft acquisition vehicle indirectly owned by certain private funds that the Pacific Investment Management Company (PIMCO) and Dubai Aerospace Enterprise manages, KBRA said.
Mizuho Securities is the lead structuring agent and joint lead bookrunner, while BNP Paribas Securities and
Asset Securitization Report's deal database notes that the deal is slated to close on October 31.
KBRA assigns ratings of A and BBB to the series A and B notes, respectively, which get credit enhancement from overcollateralization and a senior-subordinate payment structure. The database notes that Fitch assigns A and BBB to the A and B series, respectively.
Navigator Aviation includes several structural features that bolster the notes' credit, according to KBRA. The deal must own at least eight assets, otherwise it will begin to use any excess cash to fully pay down the notes.
Also, the deal includes a debt service coverage ratio that looks back three months. The three-month calculation is used to determine DSCR triggers and cures, KBRA. Which is shorter than the six-month lookback pre-COVID-19.
If the DSCR falls below 1.20x on any payment date after the third payment date, then a cash trap event will occur. If that ratio falls below 1.15x, within three months after the third payment date, that will set off an early amortization event.
The deal includes a security deposit that will be used to cover senior expenses and any principal and interest shortfalls on both series of notes, KBRA said. Also, the aircraft equity holder has discretion on whether amounts on deposit can be used to pay scheduled principal, the rating agency said.
There is one aspect of the deal that could have positive or negative credit implications for the deal, KBRA said. Interest payments to the series B notes is subordinated to interest and principal on the series A notes. If Navigator Aviation's payment performance deteriorates and results in an interest shortfall to the series B notes, it will be capitalized.
