Apollo PK Air Management, an affiliate of PK AirFinance, is preparing to issue $622.2 million in securitized notes, secured by revenues from financings for aircraft and aircraft engine leases.
This is Apollo's inaugural aircraft loan asset-backed securitization, the company said, and the second aviation loan ABS transaction that Apollo PK Air Management LP has serviced, according to ratings analysts at Kroll Bond Rating Agency. KBRA noted that a portfolio of leases on 70 narrowbody aircraft, six widebody aircraft, 30 freighter aircraft, seven engines and nine regional jet aircraft on lease to 52 lessees will secure the issued notes.
PK ALIFT Loan Funding 3 LP will issue the notes to investors and repay them through five tranches of classes A, B, C and D notes. As of June 2024, the underlying assets had a weighted average (WA) age of 8.1 years, although this excludes the engines, the rating agency said. The trust will repay on a pro rata basis each month until the collateral's aggregate principal value is 50% of the aggregate principal value of the collateral obligations at closing, the rating agency said.
Known as PKAIR 2024-1, the trust will pay interest on the class A and class B notes, and current interest on the subordinate notes sequentially, the rating agency said.
Any remaining principal proceeds relating to the collateral obligations are applied sequentially, and principal payments cannot flow to the equity holders while the notes are outstanding, ratings analysts said.
Several credit enhancement mechanisms are in place to ensure that the notes repay investors on time. Overcollateralization is one, said the rating agency. There is also a cash reserve account for the first five months to address potential loan settlement and initial transfer issues, KBRA said. Also, all of the ones, except for the class D notes, benefit from subordination.
BNP Paribas Securities, Mizuho Securities USA and RBC Capital Markets are joint bookrunners on the project, while Redding Ridge Asset Management is the structuring agent, and Apollo Global Securities is the sole lead arranger, KBRA said.
KBRA assigns AAA to the AF and A1 notes; AA to the class B notes and A to the class C notes, all of which have a September 2039 legal final maturity date.
