Asia-Pacific Structured Finance Issue: BOC Aviation-SAIL US$808m ABS
China’s domestic market has been a hotbed for development in structured finance in recent years, but it was an offshore deal that broke new ground this year when BOC Aviation printed the first asset-backed securitisation from an Asian aircraft leasing company.
BOC Aviation, which is a Singapore-based subsidiary of Bank of China, found a welcoming reception for its first securitisation, supported by its A–/A– ratings from S&P and Fitch, the highest among major global aircraft leasing companies.
It sold a portfolio of 24 aircraft to Shenton Aircraft Investment I, which issued an US$808m offering of ABS backed by the planes.
The aircraft in the initial asset pool are leased to 21 airlines in 18 countries, with a relatively young weighted average age of 4.6 years and weighted-average remaining lease of 5.7 years, attracting investors with the quality and diversification of the portfolio.
The Class A notes of US$747.444m paid a coupon of 4.75%, yielding 5.00%, and were rated Single A by S&P and Fitch, while the Class Bs of US$60.532m paid 5.75%, yielding 5.875%, and were rated BBB/BBB. Both mature on October 15 2042. An equity tranche was sold to an institutional investor.
The issuer did not retain any tranches of the paper, but some management fee income is subordinated, so BOC Aviation is incentivised to make sure the assets perform well.
The deal was marketed under 144A/Reg S and was popular in the US, where investors are more familiar with the asset class, but investors from across Asia and the Middle East flocked to the deal as well. High-quality asset managers, pension funds and insurers were represented, following global roadshows.
SAIL left a little on the table for investors, since it was a debut deal, ensuring that the issue performed well in secondary trading and gave it access to the market in future.
Citigroup was sole global coordinator, and joint bookrunner with BOC International and Goldman Sachs.
Other Asian leasing companies jumped into action following the success of this transaction, and are expected to bring ABS transactions to market in future, though few have a track record comparable to BOC Aviation, which started life in 1993 as Singapore Aircraft Leasing Enterprise. While others in the region may take a while to follow, the benchmark has been set.
As a pioneer in Asia’s underdeveloped offshore securitisation market, BOC Aviation-SAIL’s US$808m ABS is IFR’s Asia-Pacific Structured Finance Issue of the Year.