Thunderbolt $344.7m ABS closes

Eleanor Steed
By Eleanor Steed May 5, 2017 13:29

Thunderbolt $344.7m ABS closes

Air Lease Corporation (ALC) has closed its Thunderbolt Aircraft Lease $344,700,000 fixed rate notes offering, which is comprised of $253.4million 4.212% A notes rated A by Standard & Poor’s Rating Agency (S&P) and A by Kroll Bond Rating Agency (KBRA), $69.3million B notes, rated BBB- and BBB at 5.750%, and $22million of 4.500% C notes rated BB / BB-. The issuers also offered Series E notes representing the equity interest in Thunderbolt Cayman, which were purchased by third parties.

The notes are backed by a portfolio of 19 aircraft – a mix of narrowbody and widebody jet aircraft that, as of February 28, 2017, had an average age of 12.46 years and were leased to 17 lessees based in 13 countries. Air Lease Corporation and its Irish affiliate, ALC Aircraft Limited, will act as servicers for the aircraft.

“With the closing of this transaction, Air Lease launched the Thunderbolt platform, which provides a strategic tool and capital solution for ALC to maintain our existing airline customer relationships into the midlife aircraft space,” said Ryan McKenna, Head of Strategic Planning of Air Lease Corporation. “We developed an innovative earnout structure that aligns us with both the equity and bond investors to facilitate the sale and subsequent management of aircraft from ALC’s fleet in a repeatable structure. The credit structure used for the issuance of the notes was consistent with the BBIRD issuance and is a continuation of a new benchmark standard for this market. The reception from the market was overwhelming and the A bonds were issued at the tightest spread ever for a post crisis aircraft ABS.”

BofA Merrill Lynch acted as global coordinator and BofA Merrill Lynch and Mizuho Securities acted as joint lead structuring agents and joint lead bookrunners of the transaction. BNP Paribas and Citigroup also acted as a joint lead bookrunners.

Hughes Hubbard & Reed advised Air Lease Corporation and the issuers, and Milbank, Tweed, Hadley & McCloy acted as counsel to the joint lead structuring agents.

Important Notice Regarding the Issue

Also yesterday, ALC announced its first quarter results, where revenue rose to 360.2million for the quarter – an increase of 4.9% compared to the year-ago quarter. Net income was down by 8.5% to $84.9million for the first quarter of 2017. Diluted earnings per share was $0.78 for the three months ended March 31, 2017 ($1.33 on an adjusted basis).

ALC’s pre-tax margin for the quarter was 37.2% (40.7% on an adjusted basis), while the lessor’s pre-tax return on equity was 17.4% for the trailing twelve months ended March 31, 2017 (18.8% on an adjusted basis).

During the quarter, ALC added 11 aircraft to its fleet at a cost of $825.0 million to end the quarter with $12.6 billion in aircraft with a weighted average age of 3.7 years and a weighted average lease term remaining of 6.9 years. The lessor signed 34 lease agreements and 19 letters of intent adding five additional airlines to its customer base. ALC has placed 91% of its order book on long-term leases for aircraft delivering through 2019

Besides Thunderbolt, ALC also completed a senior unsecured notes offering in March 2017, issuing $500 million at 3.625%, maturing in 2027. In May 2017, it completed an amendment to its syndicated unsecured revolving credit facility, increasing the capacity to $3.7 billion and extending the final maturity to May 2021 with an interest rate of LIBOR plus 1.05%. The lessor also declared a quarterly cash dividend of $0.075 per share on its outstanding common stock for the first quarter of 2017. The dividend will be paid on July 11, 2017.

“Our forward lease placements and leasing business continued to perform well with consistently high margins. During the first quarter, we successfully focused on a strategic opportunity to sell and manage a portfolio of 19 mid-life aircraft. We took advantage of favourable market conditions by issuing a 10-year bond and upsized our bank revolver. Looking forward, we are continuing to capitalize on incremental aircraft acquisition opportunities to help offset further delays on Airbus deliveries,” said John L. Plueger, Chief Executive Officer and President.

“Our team did an excellent job executing on our goals for the business during the first quarter of 2017. Throughout the quarter, we saw solid lease demand under attractive terms including robust placements of both our new generation single-aisle and twin-aisle aircraft. We also continue to see demand from buyers of our used Boeing and Airbus aircraft. We view the slowing of new aircraft orders as healthy for the industry in the face of record backlogs and ongoing strain in the global supply chain,” said Steven F. Udvar-Házy, Executive Chairman of the Board.

Meanwhile, as everyone considers the possible effects of Alitalia on the leasing market, we have statements of minimal impact from Air Lease and AerCap but what about NAC? NAC purchased Aldus Aviation and Jetscape, which both have aircraft placed at Alitalia and both wrapped those aircraft up in ABS deals in 2014 under: The $380.5 million Series 2014-1 notes issued by Eagle I – Jetscape Aviation Group’s inaugural securitization, and the $540 million Non-Recourse Asset-Backed Secured Term Loan Facility, ATLAS Series 2014-1, from Aldus Aviation. So, this is a good test of these bonds and one should keep an eye out.

Either way NAC could lose a key Embraer client and that would pile further pressure on the Embraer leasing market, which is already under pressure and has been for some time. Airline Economics Growth Frontiers London will have dedicated sessions to the Embraer market and what lessors can do and expect in the mid-term. Airline Economics Growth Frontiers London takes place at the Bankers Hall, 14 Cornhill, City of London, on the 5th and 6th December 2017, with the Aviation 100 European Awards on the evening of the 5th December 2017, details are being added daily at

Eleanor Steed
By Eleanor Steed May 5, 2017 13:29