Stonepeak Partners and Bellinger Asset Management on Monday raised US$893.477m with the biggest US aviation securitization seen since the start of the Covid pandemic.
The SALT Trust 2021-1 deal financed a US$971m aviation debt portfolio acquired by the investment firms from the National Australia Bank in May. The portfolio consists of 17 loan facilities secured by 159 aircraft.
Most plane asset-backed bond offerings are used to fund existing and future leases, not loans. So for the Stonepeak-Bellinger deal, banks adopted a format akin to a collateralized loan obligation rather than a traditional lease structure. It was the first time CLO technology had been used for a broadly sold deal in the sector, according to a source familiar with the deal.
"It worked well," the source said. "They had done a lot of preliminary work with (investor) accounts, and the buyer-base was larger than a traditional lease trade."
Goldman Sachs and Deutsche Bank were the co-lead structurers and joint lead bookrunners. Citigroup and Mizuho were the other book managers. Kroll was the sole rating agency on the deal. The banks structured five notes, which is more than the three in a typical aviation lease deal. They also created a Double A rated note which is rarely seen in a plane lease securitization.
SALT 2021-1's US$364.188m Class "AA" note with an expected AA rating from Kroll and a weighted-average life of 3.1 years cleared at a spread of swaps plus 140bp for a yield of 2.313%.
Its US$339.909m Class A paper which carried an A rating from Kroll and a 3.3-year WAL priced at 175bp over swaps to yield 2.69%. This compared with a 170bp and 2.535% yield on a US$417.65m Class A tranche in a US$540.123m lease securitization from plane leasing company Merx Aviation that priced in June. The MAPSL 2021-1 paper was rated A1 by Moody's and A by S&P and had a 4.99-year WAL. The weighted-average age of the 20 planes was 5.8 years, which is comparable to the planes in the Stonepeak-Bellinger deal.
Aircraft
Year-to-date, aviation ABS issuance has reached nearly US$5.4bn, which is more than twice the US$2.6bn total in 2020, according to IFR.
The weighted-average age of the planes in the SALT 2021-1 deal is 5.6 years and they are leased to 45 operators, according to marketing materials. The planes, which were valued at US$1.4bn, are prized right now because they are relatively young and leased to a diverse group of international carriers.
However, 53% of the collateral in the deal comprises wide-body jets, which is higher than most aviation deals that have come to market since October. Because of Covid, investors have been hesitant to fund older wide-body planes in the light of the gradual recovery in international air travel. The longer it takes for flight volumes to return to pre-pandemic levels, the harder it will be to find demand for older aircraft, analysts said.
"Global traffic is not expected to recover fully until the end of 2023 or early 2024," Deutsche Bank's head of aviation debt research Douglas Runte wrote in a research note on Tuesday.
