SKY Leasing has marketed its $503 million aviation asset backed securitisation (ABS) transaction.
The deal consists of one A note tranche. The notes have an anticipated repayment date of May 2032 and a legal final maturity date of May 2050. The tranche has an initial loan to value (LTV) ratio of 73% and is expected to be given an A rating A by KBRA.
The transaction marks the fourth aviation ABS issued by SKY Leasing.
Proceeds from the notes will be used to acquire a portfolio of 19 assets, consisting of 18 narrowbodies and one widebody on lease to 10 lessees located in 10 jurisdictions. As of the end of March, the weighted average age of the portfolio is around 5.3 years and the weighted average remaining term of the initial lease contracts is around 7.2 years.
The narrowbodies consist of five A321neos, one 737 MAX 8, two A321-200s, six A320-200s, three A319-100s, and one 737-800. The widebody is a 787-9 on lease to AeroMexico.
New technology aircraft make up 64.8% of the portfolio by value. The weighted average age of these aircraft are around 2.4 years with an average remaining lease term of 7.6 years.
The top three lessees are Wizz Air, IndiGo, and LATAM, which make up 21.1%, 18.1%, and 11.6% of the portfolio by value, respectively. Collectively, the top three lessees represent 50.8% of the portfolio, which is higher than other recent aviation ABS transactions. In terms of geographic concentration, the top three jurisdictions— Hungary, India and Chile — align with the top three lessee concentration.
The portfolio includes one 737 MAX 8 on lease to GOL, which makes up around 8.4% by value, which filed for bankruptcy in 2024. Additionally, two A321-200s are on lease to Spirit Airlines, which emerged from bankruptcy at the start of the year.
KBRA said the notes' leverage is approximately 4-6% higher than recently issued aircraft ABS transactions.
“Although the transaction cash flows were sufficient to support timely interest payments and ultimate payment of principal through the term of the notes in an ‘A’ rating scenario, the higher leverage presents additional credit risk relative to lower leverage securities,” said KBRA in its report. “However, the transaction employs a fully sequential structure whereby all payments to the series B notes or series C notes, should they be issued, are subordinate to the series A notes.”
MUFG Securities America, Citigroup Global Markets, and BNP Paribas Securities acted as joint lead structuring agents and joint lead bookrunners. Societe Generale was the liquidity facility provider.