Global Capital: Investors cool on aircraft ABS as sector feels late cycle pressures

Investors say they are backing away from aircraft ABS as heightened competition
2 min read
Share this post

Original article by Jennifer Kang


Investors say they are backing away from aircraft ABS as heightened competition and one-off deals with weak collateral shine a light on late-cycle behavior in the asset class, reported Global Capital today.


According to Senior Portfolio Manager Jake Remley, of Income Research + Management, investors’ search for yield has allowed the sector to price a high number of deals from new entrants and a variety of collateral types, even if the collateral is weak or untested.


“You are starting to see more widebodied collateral get placed in deals,” said Remley. “Widebodied aircrafts are reasonably valuable, but have more volatility. Airlines tend to back up that type of airframe in terms of purchasing it when the economic cycle turns down.”


In October 2017, Fitch Ratings stated that while corporate jet aircraft ABS transactions backed by a pool of fixed contracts is rate-able, niche deals such as the Business Jets Securities series from Global Jet Aircraft do not meet the rating agency’s investment grade standards.


“We looked at it very carefully, but we were not comfortable with the degree of volatility of private jets,” said Remley. “You are seeing those deals get priced and that’s a sign of late cycle behavior, a sign of investors looking for yield. Anything that approaches around 200bp on spreads that is investment grade is looking attractive to a lot of investors.”


Read the full article here (paywalled).

Share this post

Related posts

View All
2 min read

BondBloxx Breaks Out New Tax-Aware ETF

On Thursday, BondBloxx partnered with Income Research + Management (IR+M) to launch the BondBloxx IR+M Tax-Aware Short Duration ETF (NYSE Arca: TAXX).

2 min read

Fund Files: BlackRock PM comes off $2bn fund, BondBloxx launches active ETF

Veteran BlackRock portfolio manager Joseph Wolfe has come off of the $1.9bn BlackRock Large Cap Focus Value fund (MABAX) and the $7.8m BlackRock Global Impact fund (BGIMX), according to filings with the Securities and Exchange Commission (SEC).

2 min read

Eikon: Wendy’s and Massage Envy Land Whole Biz ABS

Recent pricing on wholesale ABS deals for chains Wendy’s and Massage Envy illustrate differences on deals in this area of the market, reports Eikon.

Data provided as of January 2, 2024
@ 2024 Income Research + Management. All Rights Reserved.