Russia Roils Plane-Backed Bonds by Keeping $10 Billion of Jets
(Bloomberg) -- Russia’s decision to block foreign owners from seizing hundreds of planes worth about $10 billion is roiling a market where aircraft leases are bundled into bonds and sold to investors.
European Union sanctions imposed on Russia because of its Ukraine invasion give plane owners until March 28 to retrieve the vehicles. But only a handful have been extracted, and hopes for more are dim.
And so some asset-backed securities in the aviation space are coming under duress as a result. Although these types of transactions are designed to survive cash flow problems at the airlines leasing the planes, fully losing access to planes under these circumstances almost guarantees that lease payments that feed these ABS deals will soon dry up, with recourse uncertain.
“It will be interesting to watch, as potentially the bottom capital structure could start to see losses,” said Jennifer Thomas, portfolio manager at Loomis, Sayles & Co.
The situation has already had a chilling effect on over two dozen aircraft ABS deals that are exposed to the region, with investors fearing some tranches within those deals might take losses. Among the ones most exposed are two from Carlyle Aviation -- one with 44% and another with 37% of lease payments tied to Russia or Ukraine -- and two others from Castlelake Aviation.
https://finance.yahoo.com/news/russia-roils-plane-backed-bonds-174656312.html
