We arrived at one or more of the credit ratings in this article by deviating from S&P Global Ratings' published criteria (see the AOG Times section in "Various Actions Taken On 28 Ratings From Seven Aircraft ABS Transactions; Off CreditWatch Negative," published June 13, 2022).
Earlier today, S&P Global Ratings took various rating actions on 28 ratings from seven aircraft ABS transactions that were placed on CreditWatch with negative implications on March 15, 2022, due to the Russia-Ukraine conflict (see "Various Actions Taken On 28 Ratings From Seven Aircraft ABS Transactions; Off CreditWatch Negative," published June 13, 2022). We are providing additional details on those rating actions on a transaction-by-transaction basis.
Deal-By-Deal Breakdown
Credit considerations
For each of the seven aircraft ABS transactions, we considered the results of our cash flow analysis as well as collateral characteristics and performance trends. Our rating actions primarily reflect our cash flow results, peer comparisons, and other credit considerations. Tables 1 and 2 show the portfolio characteristics and liabilities of the six aircraft lease securitizations.
In certain cases, the presence of collateral or structural characteristics or other credit considerations for a given transaction resulted in a lower or higher rating than indicated by our cash flow results. These characteristics include:
- Any accrued and unpaid interest on the class C notes, which could further increase the class' loan-to-value (LTV) ratio and likely result in a lower rating than indicated by our cash flow result; and
- The classes' ability to withstand any additional haircuts to the payout amounts (based on the break-even analysis and our depreciation and value haircut assumptions).
Table 1
| Portfolio Characteristics(i) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AASET 2021-1 Trust | Castlelake Aircraft Structured Trust 2017-1R | MAPS 2019-1 Ltd. | MAPS 2021-1 Trust | S-JETS 2017-1 Ltd. | Thunderbolt Aircraft Lease Ltd. | |||||||||
| Servicer | Carlyle Aviation Management Ltd. | Castlelake Aviation Holding Ireland Ltd. | Merx Aviation Servicing Ltd. | Merx Aviation Servicing Ltd. | Goshawk Aviation Ltd. | Air Lease Corp. | ||||||||
| No. of aircraft | 34 | 21 | 17 | 20 | 20 | 14 | ||||||||
| No. of engines | 0 | 5 | 0 | 0 | 0 | 0 | ||||||||
| Russian exposure (no.) | 2 | 7 | 4 | 2 | 1 | 0 | ||||||||
| Russian exposure (%) | 7.21 | 21.84 | 15.45 | 16.03 | 7.12 | 0.00 | ||||||||
| Off-lease, including Russia (no.) | 6 | 7 aircraft, 5 engines | 6 | 2 | 2 | 0 | ||||||||
| Off-lease, excluding Russia (no.) | 4 | 5 engines | 2 | 0 | 1 | 0 | ||||||||
| WA age, excluding Russia (years)(ii) | 11.24 | 15.93 | 11.47 | 7.47 | 8.03 | 17.58 | ||||||||
| WA lease term, excluding Russia and off-lease aircraft (years)(ii) | 4.57 | 3.36 | 5.61 | 7.37 | 4.06 | 2.93 | ||||||||
| Adjusted base value, including Russia (mil. $) | 941.21 | 419.53 | 302.77 | 573.21 | 591.72 | 255.71 | ||||||||
| DSCR (x) | 1.22 | 1.35 | 0.27 | 1.70 | 1.09 | 0.67 | ||||||||
| ICR (x)(iii) | 5.19 | 6.13 | 1.91 | 6.92 | 6.44 | 4.68 | ||||||||
| (i)As of the May 2022 payment date. (ii)Calculated as of April 30, 2022, based on the adjusted base value. (iii)Calculated excluding the scheduled principal amounts in the denominator. WA--Weighted average. LMM--Lesser of mean and median. DSCR--Debt service coverage ratio. ICR--Interest coverage ratio. | ||||||||||||||
Table 2
| Liabilities(i) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AASET 2021-1 Trust | Castlelake Aircraft Structured Trust 2017-1R | MAPS 2019-1 Ltd. | MAPS 2021-1 Trust | S-JETS 2017-1 Ltd. | Thunderbolt Aircraft Lease Ltd. | |||||||||
| Class A | ||||||||||||||
| Scheduled principal due (mil. $) | 4.95 | 2.06 | 5.41 | 2.67 | 13.27 | N/A | ||||||||
| Scheduled principal paid (mil. $) | 4.95 | 2.06 | 0.71 | 2.67 | 13.27 | N/A | ||||||||
| Unpaid scheduled principal (mil. $) | 0.00 | 0.00 | 4.70 | 0.00 | 0.00 | N/A | ||||||||
| Current balance (mil. $) | 583.65 | 225.34 | 188.02 | 388.21 | 432.08 | 141.12 | ||||||||
| Class B | ||||||||||||||
| Scheduled principal due (mil. $) | 1.04 | 0.49 | 25.84 | 0.46 | 10.39 | N/A | ||||||||
| Scheduled principal paid (mil. $) | 1.04 | 0.49 | 0.00 | 0.46 | 10.39 | N/A | ||||||||
| Unpaid scheduled principal (mil. $) | 0.00 | 0.00 | 25.84 | 0.00 | 0.00 | N/A | ||||||||
| Current balance (mil. $) | 116.52 | 53.65 | 64.38 | 67.14 | 53.21 | 44.74 | ||||||||
| Class C | ||||||||||||||
| Scheduled principal due (mil. $) | 0.87 | 0.59 | 18.09 | 0.60 | 15.13 | N/A | ||||||||
| Scheduled principal paid (mil. $) | 0.87 | 0.59 | 0.00 | 0.60 | 0.00 | N/A | ||||||||
| Unpaid scheduled principal (mil. $) | 0.00 | 0.00 | 18.09 | 0.00 | 15.13 | N/A | ||||||||
| Interest deferred | No | No | Yes | No | Yes | Yes | ||||||||
| Current balance (mil. $) | 66.18 | 40.63 | 28.64 | 43.66 | 31.70 | 10.72 | ||||||||
| LTV (%)(ii) | ||||||||||||||
| Class A | 62.01 | 53.71 | 62.10 | 67.73 | 73.02 | 55.19 | ||||||||
| Class B | 74.39 | 66.50 | 83.36 | 79.44 | 82.01 | 72.68 | ||||||||
| Class C | 81.42 | 76.19 | 92.82 | 87.05 | 87.37 | 76.88 | ||||||||
| Last payment sequence in waterfall | Servicer incentive fee | Class C scheduled principal | Class A scheduled principal | Equity | Junior maintenance top-up | Class A early amortization | ||||||||
| (i)As of the May 2022 payment date. (ii)Calculated as the note balance as of the May 2022 payment date divided by the adjusted base value reported in table 1 above. LTV--Loan to value. N/A--Not applicable. | ||||||||||||||
Additional considerations
AASET 2021-1 Trust. At closing, the portfolio had five aircraft previously on lease to Russian airlines. However, three of those aircraft were not novated to the trust and the related note proceeds remain in the aircraft acquisition account. According to the transaction documents, the issuer can either substitute the aircraft, subject to certain eligibility requirements within 270 days from closing; or redeem the notes, based on the mechanics defined in the documents.
Castlelake Aircraft Structured Trust 2017-1R. The class A notes passed our default scenario at a higher rating level when we assume the insurance payout equals the affected aircraft's most recent half-life appraisal values. However, we also considered the magnitude of the exposure (21.8%), the uncertainty regarding the timing and economics of the insurance process, and the results of our cash flow runs with additional haircut to the payout amounts.
S-JETS 2017-1 Ltd. An aircraft that was previously on lease to a Russian airline is under the servicer's control and is being prepared for delivery to the next lessee. A lease was signed for the aircraft in May 2022 and delivery is expected to occur in the third quarter of 2022.
Thunderbolt Aircraft Lease Ltd. The single aircraft in the transaction that was previously on lease to a Russian airline has been considered a total loss and is not included in the current portfolio. The aircraft's last adjusted base value was approximately 11% of the portfolio, prior to it being considered a total loss. As with other aircraft ABS transactions, we forecasted the impact on cash flows from insurance payouts related to this aircraft under various scenarios.
PK AIR 1 L.P. The transaction is backed by a portfolio of first-lien senior secured loans. The assets and liabilities are denominated in U.S. dollars and euros (see table 3), and the current loan portfolio is collateralized by 237 aircraft and 51 aircraft engines. The transaction's exposure to Russian entities has decreased since the time we placed the ratings on CreditWatch negative. As of May 2022, defaulted obligations were approximately 4% of the portfolio, and all the coverage tests (overcollateralization and interest coverage) were at the required levels. The portfolio characteristics haven't changed significantly since our initial rating in January 2021. The transaction's U.S. dollar structure has a revolving period that ends in December 2022, while the euro structure is amortizing.
In addition, the results of our cash flow runs for the class C-F notes indicated a lower rating. However, we considered the transaction's current stable performance, with minimal defaults and compliance with all performance triggers.
Table 3
| PK Air 1 L.P. Summary (i) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Class | Currency | Current funded balance (mil. $/€) | LTV by loan balance (ii) | LTV by asset value (iii) | O/C ratio threshold | O/C ratio current | ||||||||
| A-F | U.S. dollar | 1,194.66 | 59.10 | 41.83 | 154.60 | 165.63 | ||||||||
| A-R | U.S. dollar | 749.30 | 59.10 | 41.83 | 154.60 | 165.63 | ||||||||
| A-E | Euro | 152.61 | 46.03 | 32.18 | 154.66 | 229.11 | ||||||||
| B1-F | U.S. dollar | 465.03 | 73.24 | 51.84 | 109.39 | 116.27 | ||||||||
| B2-F | U.S. dollar | 405.68 | 85.57 | 60.57 | 109.39 | 116.27 | ||||||||
| B-E | Euro | 22.00 | 52.66 | 36.82 | 149.07 | 200.24 | ||||||||
| C-F | U.S. dollar | 239.16 | 92.84 | 65.72 | N/A | 107.47 | ||||||||
| C-E | Euro | 62.00 | 71.36 | 49.89 | N/A | 147.77 | ||||||||
| D1-F | U.S. dollar | 40.75 | 94.08 | 66.59 | 105.01 | 106.10 | ||||||||
| D-E | Euro | 84.50 | 96.85 | 67.71 | 106.00 | 108.88 | ||||||||
| (i)As of May 2022. (ii)Calculated as the current funded note balance divided by the lower of mean and median of four appraisers' half-life base and the market values (adjusted by PK Air 1 L.P.'s ownership) for the respective currency. (iii)Calculated as the current funded note balance divided by the current outstanding loan balance and the principal cash for the respective currency. LTV--loan to value. O/C--Overcollateralization. N/A--Not applicable. | ||||||||||||||
See our macroeconomic and credit updates here: Russia-Ukraine Macro, Market, & Credit Risks.
This report does not constitute a rating action.
| Primary Credit Analyst: | Rajesh Subramanian, Toronto + 1 (416) 507 3232; rajesh.subramanian@spglobal.com |
| Secondary Contacts: | Ryan Kuhl, Washington D.C. + 1 (240) 517 6246; ryan.kuhl@spglobal.com |
| Steven Margetis, New York + 2124388091; steven.margetis@spglobal.com | |
| Ze Chen, New York + 1 (212) 438 8694; ze.chen@spglobal.com | |
| Michael S Gleeson, New York 212-438-3902; michael.gleeson@spglobal.com | |
| Gerhard van der Poel, New York +1 2124380309; gerhard.van.der.poel@spglobal.com | |
| Sector Lead: | Deborah L Newman, New York + 1 (212) 438 4451; deborah.newman@spglobal.com |
| Analytical Manager: | Ildiko Szilank, New York + 1 (212) 438 2614; ildiko.szilank@spglobal.com |
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