SKY entities set out to raise $503 million from aircraft leases

SKY Aero Management and SKY Leasing are sponsoring a $503 million securitization of leases on widebody and narrowbody aircraft through the

SLAM 2025-1 Limited and SLAM 2025-1 LLC.

Together the trusts are known as SLAM 2025-1, or the Issuers, and the deal will issue just one tranche of fixed-rate notes, a class A piece with an anticipated repayment date of May 2032, according to Kroll Bond Rating Agency.

MUFG Securities America, Citigroup Global Markets, and BNP Paribas Securities are on the deal as joint lead structuring agents and joint lead bookrunners, KBRA said. The rating agency assigns an A to the class A notes.

Also, the notes have a legal final maturity date of May 2050, KBRA said. Sponsors will use the proceeds from the note sale to buy a portfolio of 19 assets, consisting of 18 narrowbody aircraft and one widebody aircraft. The narrowbody models will account for 88.5% of the portfolio by value, KBRA added.

As of March 31, the deal's cutoff date, the portfolio had a weighted average (WA) age of about 5.3 years, and an initial value of about $688.8 million, based on appraiser estimations of the airplanes' half-life base values, KBRA said.

SLAM has several structural features that help maintain cashflow to the deal and support credit to the notes. There is a test for a minimum number of assets, which requires issuers to own at least six sets, or the transaction will begin to use any excess cash to fully amortize the notes, KBRA said.

There are also debt service coverage ratio (DSCR) triggers and a utilization test in the structure, KBRA said. If the DSCR falls below 1.20x on any payment date after the third payment date, that will trigger a cash trap event. Also, if the DSCR is below 1.15x within a three-month period, or if the utilization period is less than 75% on any payment date, the deal will go into an early amortization event, the rating agency said.