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WorldStar, Aergen flying by with another $1.16B of aircraft lease ABS

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Two more aircraft least securitizations hit the market this week.

A joint venture between Oaktree Capital Management and World Star is tapping the securitization market to finance a portfolio of 21 primarily narrowbody aircraft on lease to 15 lessees in 12 countries, or approximately one-third of World Star’s fleet.

The $585 million transaction, dubbed Sprite 2017-1, consists of three series of notes: $457 million Series A notes are provisionally rated A by Kroll Bond Rating Agency; $88 million Series B notes are rated BBB, and $40 million of Series C notes are rated BB-.

All of the notes have a legal, final maturity of 2037.

Mizuho Securities is the global coordinator, left lead structuring agent and bookrunner; Morgan Stanley is the right lead structuring agent and bookrunner.

As of October 15, 2017, the initial weighted average aircraft age of the portfolio is approximately 8.9 years with a remaining lease term of approximately 3.8 years. The portfolio has an initial value of approximately $694.0 million, based on the average of the half-life base values provided by three appraisers as of June 2017 and adjusted for maintenance conditions as determined by Alton Aviation Consultancy.

World Star, founded in 2003, is a full service aircraft management company with expertise in mid-to-late life model, high quality, used commercial aircraft. The Company is fully owned by its principals.

Among Kroll’s rating considerations is the fact that the portfolio will include an A320-200 aircraft, which is currently off-lease but is subject to a letter of intent for a 6-year lease with Get Jet Airlines.

Also, the transaction includes higher lessee and emerging market concentrations as compared to recently issued aircraft ABS transactions: As of November 30, 2017, the three largest lessees comprise approximately 40.5% of the portfolio (by value), and this could rise to 65%.

Also, three of the 21 aircraft are widebody, which are more expensive to maintain than narrowbody aircraft.

The second deal is from Aergen Aviation, which is refinancing an aircraft lease securitization it completed just last year.

The new transaction, Harbour Aircraft Investments Limited, Series 2017, is for $579.8 million, significantly larger than the original deal, which raised $324.7 million in July 2016.

Three series of loans will be issued: $445.2 million Series A loans are provisionally rated A by Kroll Bond Rating Agency; $68.3 million Series B loans are rated BBB; and $66.3 million Series C loans are rated B.

Deutsche Bank Securities is the sole structuring agent and sole lead arranger.

Some $479 million of proceeds will be used to finance or acquire Aergen’s entire portfolio of 30 aircraft on lease to 18 lessees in 16 countries from the 2016 securitization trust. The transaction includes a delayed draw feature; $100 million of the Class A loans will be advanced to Aergen at a later date.

Three A321-200 aircraft (ranging in age from 9 to 18 years) in the portfolio or approximately 10.7% (by value) will be off-lease on the closing date. Aergen has identified possible lessees for the three aircraft; however no executed lease agreements are in place

The three largest lessees by value are Virgin America, Gulf Air and VietJet, which represent approximately 13.3%, 10.2% and 7.9%, respectively (31.4% in total). United States, South Korea and Bahrain are the three largest country concentrations by value, which represent approximately 13.3%, 12.9% and 10.2%, respectively (36.4% in total).

As of Sept. 30, 2017, the initial weighted average aircraft age of the portfolio was approximately 12.3 years with a remaining lease term of approximately 3.4 years (which assumes the management case for three aircraft which are currently off-lease).

Aergen, founded in 2014, is an aircraft leasing company focused on providing leasing and asset management solutions for owners and operators of mid-life and end-of-life aircraft and engines. Aergen is led by Chief Executive Officer Robert J. Genise, who previously served as CEO of both DAE Capital and Boullioun Aviation Services.

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Aircraft lease securitization Oaktree Capital