With the $114.5 million WRAPS series 2004-1 transaction in the market last week, Wachovia Securities became the second bank to take distressed outstanding aircraft ABS, buttress it with safer cashflows and repackage it into a new, higher-rated security. The deal, expected to price mid to late this week, is a re-securitization of the A-9 tranche of Airplanes Passthrough Trust 2001-1, which has also been repackaged by rival and original transaction underwriter Morgan Stanley.

WRAPS series 2004-1 is backed by the cashflows from an undisclosed portion of distressed ARPT bonds, combined with zero coupon IO strips, bringing the rating up to investment grade. The single-tranche Rule 144A transaction, with an 8.75-year average life, was being offered late last week with price guidance in the 145 basis point area over one-month Libor. Moody's Investors Service is expected to rate WRAPS 2004-1 A1' with Standard & Poor's assigning a A+' rating.

The deal is expected to mature in February 2019, with a legal final maturity of March 15, 2019.

In a similar fashion to Morgan Stanley's CRABS II issuance from last year (see ASR 12/15/03) and its ARTS vehicle introduced this year, the added cashflows allow the speculative-rated bonds to achieve an investment-grade rating. Rated double-A at issue, ARPT has been one of the lagging performers in the aircraft lease sector and has had its ratings cut numerous times to the current single-B rating.

Until now, Morgan Stanley had been the only bank to lead repackaged aircraft ABS deals. Upon completion, Wachovia's offering will mark the fourth such repackaged aircraft transaction ever. In a similar vein, Credit Suisse First Boston has repackaged outstanding manufactured housing ABS twice this year off its ABSMH shelf.

AIRPT, backed by leases originated by GPA Group, is currently serviced by GE Capital Corp., which acquired the servicing rights from GPA in 1993. AIRPT 2001-1, totaling $750 million, priced in March 2001 via Morgan Stanley and pays a 55 basis point coupon over one-month Libor.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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