Collateral Pools Shift as Aircraft ABS Accelerates

Abstract

Aircraft asset-backed security (ABS) issuance has picked up in the past two years after coming to a halt following the 2007–2008 recession, and strong issuance is expected to continue into 2016. Stable performance and ratings are expected for outstanding transactions, supported by solid passenger-demand expectations. In this article, however, the author notes some softness in values and lease rates, particularly with regard to certain small-variant wide-body aircraft.

The recent increase in ABS issuance has also introduced the market to collateral pools that represent a shift from what has typically been seen in the space. Notably, a few transactions have been completed that feature mid- to end-of-life aircraft and increased concentrations in regional jets and turboprop aircraft. Meanwhile, the author’s outlook for aircraft lessors is stable to positive because they are supported by strong industry fundamentals.

TOPICS: Asset-backed securities (ABS), legal/regulatory/public policy