Two sponsors added $920.5 million of bonds backed by aircraft leases to the new issue pipeline this week.
Jetscape Aviation is making its debut in the securitization market with $380.5 million of bonds backed by a small portfolio of aircraft leases. The portfolio is comprised of leases on 21 Embraer E-Jets, which are a series of single-aisle medium-range twin-engine commercial jet aircraft produced by the Brazilian aerospace conglomerate.
At closing, all the aircrafts are on lease to 10 airlines worldwide that have a weighted average lease maturity of 4.6 years.
Standard & Poor’s has assigned ratings to the deal; it is the first time the agency has rates a deal backed entirely by Embraer E-Jets. The transaction will offer $268.5 million of A’ rates class A notes, $67.2 million of BBB’ rated class B notes and $44.7 million of BB’ rated class C notes.
The notes issued under the trust have much faster amortization schedules —four years for the series A-1 notes, 13 years for series A-2, 16 years for series B, and seven years for series C —than the typical 16-year amortization schedule in recently rated aircraft securitization transactions.
Most recent aircraft lease deals have been backed primarily by Airbus- and Boeing-manufactured new technology aircraft and serviced by larger aircraft lessors.
Another unusual aspect of this deal is that the loan-to-value ratios of the tranches. The series A notes have an LTV of 53.97%, the series B notes have LTV at 67.49% and the series C notes have LTV at 76.49%.
S&P said that these high levels of equity did not entirely offset the risk of the concentrated collateral and counterparty risk: the servicer, Jetscape Commercial Jets Malta , is a very small aircraft lessor that focuses on the E-Jets niche market.
Bank of America Merrill Lynch is the sole structuring agent and lead manager on the deal. DVB Capital Markets and Guggenheim Securities are joint bookrunners.
Aldus Aviation is also debuting this week with a $540 million aircraft lease securitization backed entirely by Embraer jets. The deal, called ATLAS Series 2014-1, will be rated by Kroll Bond Ratings and is backed by leases on 30 commercial aircraft leased to 10 airlines.
The notes are structured with more leverage, yet achieve similar ratings as the Eagle I Ltd Series. At the A’ level, the class A notes have LTV at 63%; at BBB’ the class B notes have LTV at 74% ad at BB’ the class C notes have LTV at 78%.
Kroll gave the notes credit for the expected standby servicer (ECC Leasing Company, the leasing arm of Embraer), which is a unique structural feature to this deal. Aircraft-lease securitizations typically do not benefit from a back-up servicer, and the rating agency viewed this “as a strong credit positive unique to this transaction.”
All three loan classes amortize on a straight-line basis over 16 years.