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Avolon to raise US$636m in 20 aircraft securitization through Fixed Rate Asset Backed Notes in first such ABS deal since 2007 Back
September 26th: Avolon Aerospace Leasing Limited, the international aircraft lessor, announced that Emerald Aviation Finance Limited (the ’Issuer’), a newly established special purpose company, priced a total of US$636, 210,000 of Fixed Rate Asset Backed Notes (the ‘Issue’), the proceeds of which will be used by the Issuer to acquire a fleet of 20 aircraft (the ‘Initial Aircraft’) from Avolon or certain affiliates.
Avolon expects to use the net proceeds of the sale of the Initial aircraft to refinance existing debt. The deal is groundbreaking in that it is the first aircraft securitization structured through the issuance of notes since May 2007.

The deal is similar in many ways to AABS' asset-backed secured term loan facility, (of $557.01 million of Series A loans and $93.335 million of Series B loans), which closed in January of this year, except that it is structured through notes. The AABS securitization (by AABS Limited, a bankruptcy remote limited liability company organized under the laws of Bermuda and tax resident in Ireland) was for 26 narrow body aircraft of average age 4 years, and similar other characteristics to the Avolon collateral. The proceeds of the Series A and B loans were used by AABS to partially finance the purchase of a high-quality portfolio of 26 commercial passenger aircraft from affiliates of GE Capital Aviation Services Limited (“GECAS”) consisting primarily of young tier 1 aircraft (in-production, in-demand aircraft types).

The Avolon pool includes wide bodies, narrow bodies, and regional jets with an average age of 3.07 years. The AABS securitization was rated A+/BBB, and A/BBB by S&P and Fitch respectively. Kroll has rated the Avolon/Emerald Notes Class A an “A” and Class B a “BBB”.

The Avolon issue will comprise US$546,000,000 of 4.65% Class A-1 Fixed Rate Asset Backed Notes and US$90,210,000 of 6.35% Class B-1 Fixed Rate Asset Backed Notes (together, the ‘Initial Notes’). Avolon will acquire the junior Class E Note issued by the Issuer. The transaction is expected to close on or about 16 October 2013. The final maturity date for the notes will be October 2038.

As of 15 September, 2013, the 'Initial Aircraft' were leased to 15 lessees based in 14 countries. The 'Initial Aircraft' will comprise a mix of narrowbody, widebody and regional jets with an average age of 3.07 years. Avolon will act as servicer with respect to the Initial Aircraft and any additional aircraft acquired by the Issuer.

The ABS Securities will be listed on the Irish Stock Exchange.

The fleet includes approximately 72.9 per cent (by value) narrowbody Boeing and Airbus aircraft, according to a Kroll Pre Sale rating report.
Approximately 20.9 per cent are widebody aircraft manufactured by Airbus, and approximately 6.2 per cent are large regional jets manufactured by Embraer.

Kroll’s report shows the LTV for the Class A-1 notes is 66% and 77% for the Class B-1 notes. (The initial loan to value (“LTV”) of the portfolio is based on the lesser of the mean and the median maintenance adjusted base value appraisals, done on a desktop basis, provided by AVITAS, Inc., IBA Group Limited and Morten, Beyer & Agnew, Inc.)

Avolon president and chief commercial officer John Higgins said he cannot comment on the issue until the transaction closes because of SEC filing rules.

It is Avolon Aerospace Leasing Limited’s inaugural securitization under Rule 144A of the Securities Act.

The Joint Bookrunners are Wells Fargo Securities, LLC and BNP Paribas Securities Corp.

The notes amortize to a targeted schedule on a 16 year straight line basis. Seven years after the closing date, if the notes are not refinanced, principal
payments are accelerated, with no further payments made to the unrated Class E1 notes. The Class E-1 notes represent the equity interest in the Emerald transaction.

Details of the Transaction Parties:

Issuer: Emerald Aviation Finance Limited, (a newly formed bankruptcy remote SPV organized in the Cayman Islands and a resident of Ireland for tax purposes; Seller/Servicer & Administrative Agent: Avolon Aerospace Leasing Limited; Indenture Trustee, Security Trustee & Cash Manager: Wells Fargo Bank, N.A.; Liquidity Provider: BNP Paribas S..A.; Structuring Agent: Wells Fargo Securities, LLC; The Joint Bookrunners are Wells Fargo Securities, LLC and BNP Paribas Securities Corp.
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