OREANDA-NEWS. S&P Global Ratings today assigned its ratings to Castlelake Aircraft Securitization Trust 2016-1's $916 million fixed-rate series 2016-1's class A, B, and C loans (see list).

The note issuance an ABS transaction backed by the AOE issuers' series A, B, and C loans, which are in turn backed by aircraft - and engine-related leases, and shares or beneficial interests in entities that directly and indirectly receive aircraft portfolio lease and residual cash flows, among others.

The ratings are based on information as of Aug. 16, 2016. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.

The ratings reflect:The likelihood of timely interest on the class A loans (excluding the step-up amount) on each payment date, the timely interest on the class B loans (excluding the step-up amount) when they are the senior-most loans outstanding on each payment date, and the ultimate interest and principal payment on the class A, B, and C loans on the legal final maturity at the respective rating stress. The 67.80% loan-to-value (LTV) ratio (based on the lower of the mean and median [LMM] of the half-life base values and the half-life current market values) on the class A loans; the 80.16% LTV ratio on the class B loans; and the 86.89% LTV ratio on the class C loans. The initial asset portfolio comprises 39 narrow-body passenger planes (25 A320 family, two B737-700, 11 B737-800, one B757-200), four A330-200 wide-body passenger planes, eight CRJ-900 regional jets, one B747-400F freighter, and one CFM56-7B22 engine. The 53 assets have a weighted average age of approximately 12 years and remaining average lease term of approximately 4.5 years. Of the 53 assets, 4.8% by value is out of production. The initial assets in the portfolio are in mid-life, with a 12-year weighted average age (by value). Currently, all 53 assets are on lease, with a 4.5-year weighted average remaining maturity. Some of the lessees are in emerging markets where the commercial aviation market is growing. The class A and B loans follow a 12-years-to-zero amortization profile for the first seven years, followed by a 15-year amortization profile afterward. The class C loans follow a five-years-to-zero amortization profile for the first two years, followed by a seven-year amortization profile afterwards. Five years after the initial closing date but before year six, if no rapid amortization event has occurred and is continuing, the transaction will pay 50% of the available collections first to the class A loans and second to the class B loans. Six years after the initial closing date but before year seven, if no rapid amortization event has occurred and is continuing, the transaction will pay 75% of the available collections first to the class A loans and second to the class B loans. After seven years, if no rapid amortization has occurred and is continuing, the transaction will pay 100% of available collections to the class A loans and second to the class B loans. Three years after the initial closing date, the transaction will pay 30% of the available collections to the class C loans; and seven years after the initial closing date, the transaction will pay 100% of the available collections to the class C loans. If a rapid amortization event (the debt service coverage ratio or utilization triggers have been breached or seven years after the initial closing date) has occurred and is continuing, the transaction will pay the class A loans' outstanding principal balance. If no rapid amortization event has occurred and is continuing but a disposition deficit has occurred, the class A loans will receive a disposition deficit amount. A similar arrangement applies to the class B loans after the class A loans are paid. A portion of the end-of-lease payments will be paid to the class A, B, and C loans according to a percentage based on the targeted outstanding principal amount. There is a liquidity facility that equals nine months of interest on the class A and B loans. Morten Beyer & Agnew (MBA) will provide a maintenance analysis at closing. After closing, Castlelake L. P. (Castlelake) will perform the maintenance analysis, which will be confirmed for reasonableness and achievability in an opinion letter from MBA. Maintenance reserve accounts are required to keep a balance to meet the higher of $1 million in the aggregate and the sum of forward-looking maintenance expenses (up to 12 months). The excess maintenance over the required maintenance amount will be transferred to the payment waterfall. Additionally, there will be a heavy maintenance account specifically to address the expectation of higher near-term maintenance expenses related to a certain portion of the portfolio. The senior indemnification (capped at $10 million) is modeled to occur in the first 12 months. The junior indemnification (uncapped) is subordinated to the rated classes' principal payment. Castlelake, a private investment firm focusing on distressed assets, is the servicer for this transaction. Castlelake's in-house aircraft assets and aviation finance team is experienced in managing mid-life and older aircraft assets.