WAVE 2019-1 LLC/WAVE 2019-1 Ltd

Presale: WAVE 2019-1 LLC/WAVE 2019-1 Ltd.

September 25, 2019

PRIMARY CREDIT ANALYST

Preliminary Ratings Rajesh Subramanian Centennial Preliminary amount (mil. Assumed coupon Legal final maturity (1) 303-721-4241 Series Preliminary rating $) (%) LTV (%)(ii) date rajesh.subramanian A A (sf) 555.531 3.825 71.2 Sept 2044 @spglobal.com

B BBB (sf) 81.696 4.875 81.6 Sept 2044 SECONDARY CONTACTS

C BB (sf) 40.848 7.000 86.9 Sept 2044 Belinda Ghetti New York Note: This presale report is based on information as of Sept. 23, 2019. The ratings shown are preliminary. Subsequent information may result in (1) 212-438-1595 the assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed as evidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (ii)Note amount divided by the lower belinda.ghetti of the mean and median of three appraisers' half-life base values and half-life current market values. LTV--Loan-to-value ratio. @spglobal.com Maxym Rumyantsev New York + 1 (212) 438 0302 Transaction Overview maxym.rumyantsev @spglobal.com WAVE 2019-1 LLC is a newly established Delaware limited liability company. WAVE 2019-1 LLC CORPORATE & GOVERNMENT CREDIT and the co-issuer, Wave 2019-1 Ltd., will issue the series A, B, and C fixed-rate notes under an ANALYST indenture and use the proceeds from it to acquire 23 aircraft. Betsy R Snyder, CFA The portfolio comprises exclusively narrow-body passenger planes (nine A320-200, one New York A320-200NEO, seven A321-200, and six 737-800). The 23 assets are currently leased to 17 airlines (1) 212-438-7811 in 13 countries worldwide. They have a weighted average age of approximately 4.5 years and a betsy.snyder @spglobal.com remaining average lease term of approximately 6.3 years. Wings Capital Partners LLC (Wings), along with certain affiliates, will act as sellers, and Wings will act as servicer along with Wings ANALYTICAL MANAGER Capital Partners Aviation Ireland Ltd. Kate R Scanlin New York This transaction is mostly collateralized by young aircraft, but also includes some mid-life aircraft. (1) 212-438-2002 We believe the servicers have demonstrated core competencies in managing this portfolio. kate.scanlin @spglobal.com The series A and B notes' scheduled principal payments follow a straight-line 14-years-to-zero amortization profile. The series C notes' scheduled principal payment follows a straight-line RESEARCH ASSISTANT eight-years-to-zero amortization profile. Peter J Lorbiecki Centennial This transaction has an expected final payment date eight years after closing, after which the series A and B notes' amortization will be full turbo after scheduled principal payments. This is slightly longer than most recently rated transactions, which have an expected final payment date after seven years.

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Profile

Expected closing date October 2019.

Issuer WAVE 2019-1 LLC.

Co-issuer Wave 2019-1 Ltd.

Collateral The 23 aircraft and the related leases, and shares or beneficial interests in entities that directly and indirectly receive aircraft portfolio lease rental and residual cash flows, among others.

Seller Wings Capital Partners LLC and certain affiliates.

Servicers Wings Capital Partners LLC and Wings Capital Partners Aviation Ireland Ltd.

Managing agent Canyon Financial Services Ltd.

Global coordinator and lead Goldman Sachs & Co. LLC. structuring agent

Joint structuring agent Crédit Agricole Securities (USA) Inc.

Lead bookrunner Goldman Sachs & Co. LLC.

Joint lead bookrunners Goldman Sachs & Co. LLC, Deutsche Bank Securities Inc., and Crédit Agricole Securities (USA) Inc.

Passive bookrunners Credit Suisse Securities (USA) LLC, MUFG Securities Americas Inc., Natixis Securities Americas LLC, and BNP Paribas.

Liquidity facility provider Crédit Agricole Corporate And Investment Bank.

Trustee, security trustee, and UMB Bank N.A. operating bank

Rationale

The preliminary ratings assigned to WAVE 2019-1's $678.08 million fixed-rate series A, B, and C notes reflect:

- The likelihood of timely interest on the series A notes (excluding the step-up amount) on each payment date, the timely interest on the series B notes (excluding the step-up amount) when they are the senior-most notes outstanding on each payment date, and ultimate interest and principal payments made to the series A, B, and C notes on the legal final maturity in our rating stress scenario.

- The 71.17% loan-to-value (LTV) ratio on the series A notes, the 81.64% LTV ratio on the series B notes, and the 86.87% LTV ratio on the series C notes. The LTV ratios are based on the S&P Global Ratings-adjusted lower of the mean and median [LMM] of the three half-life base values and the three half-life current market values.

- The aircraft collateral's quality and lease rental and residual value generating capability. The portfolio comprises 23 planes currently leased to 17 airlines worldwide, with a weighted average age of approximately 4.5 years and remaining average lease term of approximately 6.3 years.

- Many of the initial lessees' low credit quality, with 91% (by aircraft value) domiciled in emerging markets. Our view of the lessee credit quality, country risk, lessee concentration, and country concentration is reflected in our lessee default rate assumptions.

- A revolving credit facility that equals nine months of interest on the series A and B notes.

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- Alton Aviation Consultancy LLC's (Alton's) maintenance analysis as of Aug. 31, 2019.

- That the senior maintenance reserve required amount and junior reserve required amount indicate a target balance of the higher of $1 million (or the sum of the outstanding principal balance of the series A and series B notes if less than $1 million), and the sum of forward-looking maintenance expenses (for more details see the Maintenance Cash Flow Assumptions section). The maintenance reserve account will be funded at $1.40 million at closing. The excess maintenance amounts over the required amount will be transferred to the payment waterfall.

- The senior indemnification, which is capped at $10 million and is modeled to occur in the first 12 months.

- The junior indemnification, which is uncapped and is subordinated to the rated series' principal payment.

- The servicers for the transaction are Wings and Wings Capital Partners Aviation Ireland Ltd., which are affiliated aircraft leasing companies. Their in-house aircraft asset and aviation finance teams are experienced in managing new and mid-life aircraft assets.

Transaction Strengths

The transaction's strengths include:

- Many of the aircraft in the portfolio are young and among the most popular commercial jets in the current aviation market. The aircraft in the portfolio tend to have strong liquidity and their popularity makes them relatively easier to be leased out.

- The transaction has performance triggers, including the aircraft utilization rate (75%) and debt service coverage ratios (DSCRs) (1.15x for the cash sweep and 1.20x for the cash trap), to speed up the series A and B notes' principal amortization or retain available cash if the trigger tests fail.

- The transaction has a maintenance reserve mechanism that has a forward-looking feature.

- The transaction has a liquidity facility that covers nine months' scheduled interest on the series A and B notes.

- Many lessees in the portfolio are domiciled in regions where the commercial aviation market has evolved rapidly during the past few years and has good long-term growth prospects.

Transaction Weaknesses

The transaction's weaknesses are:

- Cyclical demand, aircraft lease rates, and customer airlines' frequent weak credit quality are inherent risks in the aircraft leasing business.

- Some of the aircraft are mid-life aircraft, though all are in-production models. Older in-production aircraft typically require heavier maintenance than younger in-production aircraft.

- Many of the lessees have low credit quality, which is not uncommon in aircraft securitizations. Many airlines do not have access to capital and thus turn to aircraft lessors as a means of acquiring them. Usually older and less popular aircraft are more likely to be leased to weaker

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airlines.

- Interjet is the largest lessee in the portfolio with 11% exposure. It has recently come under financial stress following an order to start paying off significant sums in back taxes.

- Many of the underlying assets in the portfolio are owned by pre-existing entities. A potential liability claim arising from the pre-existing aircraft-owning entities' (AOEs') prior activities could negatively affect this transaction.

- At closing, instead of transferring them to the issuers, the seller will keep all of the security deposits that the lessees have paid under the initial leases. However, the issuers are responsible for re-paying the security deposits (which they didn't get at closing) to non-defaulted lessees at the initial lease maturity. If a lessee were to default, the issuers would not have any security deposit to mitigate the defaulted lease payment.

Mitigating Factors

The following factors partially mitigate the transaction's weaknesses:

- Our cash flow assumptions consider the lessee portfolio concentration, the lessees' credit quality, and the aircraft or engine model concentration.

- In addition to our standard cash flow stress assumptions that we published in August 2010, we incorporated additional sensitivity analysis that focused on end-of-useful life assumptions with shorter life and longer-lasting value decline on selected models (see "Revised Cash Flow Assumptions And Stresses For Global Aircraft And Aircraft Engine Lease Securitizations," published Aug. 26, 2010).

- Our lease rate model is regularly calibrated to reflect up-to-date lease yield levels. Lease rate factors (LRFs) are lower today than they have been in recent years.

- Our default rate assumptions reflect the large exposure to Interjet.

- The pre-existing AOEs have been limited to owning, acquiring, and leasing aircraft. All prior financings on the aircraft or engines in the portfolio will be paid off by this transaction. Local counsel may perform lien searches, if possible, to confirm that no liens exist on the aircraft other than those that will be discharged on the date the aircraft are added to the structure. Additionally, the seller provides representation and warranties that there are no litigation, proceedings, or claims against the aircraft. Therefore, we view their past activities' risk as insignificant, but applied an additional transition cost when the related lease under the pre-existing AOE defaults (see the Pre-existing AOEs section).

- The transaction has a security deposit reserve top-up mechanism that covers the security deposit refund obligation. This allows for security deposit reserve top-up in the collection account payment priority (though it's junior in the payment priority). We modeled both the security deposit refund obligations as well as the security deposit top-up mechanism in our rating analysis.

Legal Structure

WAVE 2019-1 LLC, a Delaware limited liability company, and WAVE 2019-1 Ltd., a Cayman exempted company (collectively, WAVE 2019-1), will co-issue the series A, B, and C notes. Similar to other aircraft securitizations, WAVE 2019-1 is not expected to directly own any aircraft, but will

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own directly or indirectly 100% of the shares or beneficial interest in each of the AOEs, which own the 23 aircraft.

Chart 1

As security for its obligations under the initial series A, B, and C notes, WAVE 2019-1 will pledge the following to the security trustee:

- The interests in the aircraft;

- The beneficial interests in the AOEs and in certain other wholly owned subsidiaries;

- The leases and associated payments;

- The accounts;

- Cash on-hand and invested;

- The interests under any hedge agreements and the liquidity facility;

- Certain other collateral; and

- The collateral proceeds.

The transaction features the registration of interests under the Cape Town Convention and its related aircraft equipment protocol (the Convention). The Convention is an international treaty that creates a centralized, electronic registry for interests, referred to as international interests, in

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"aircraft objects" like those in the portfolio. When international interests are created and assigned, they must be registered under the Convention to ensure that the interests and their relative priorities are effective against other subsequently registered international interests.

On the date each aircraft is sold into the structure, the relevant aircraft owner will be located in a contracting state under the Convention and is expected to pledge interest in its aircraft to the security trustee, which is expected to be registered as an international interest under the Convention. Other interests in the aircraft that may be registered under the Convention include certain lease agreements, head-lease agreements, sale contracts, and international interest assignments.

Similar to other aircraft securitizations, local law mortgages generally will not be filed in the aircraft registries where the aircraft are registered, even though security interests will be granted under the security agreement and, in some cases, registered under the Convention. If the security granted is not effective in a local jurisdiction because a mortgage has not been filed, then a registration under the Convention would not necessarily enable creditors to exercise certain direct rights and remedies regarding the aircraft. However, if an international interest under the Convention is created but not registered, then the unfiled interest could be primed by a subsequently filed international interest in terms of the international registry priority scheme.

Pre-existing AOEs

Many aircraft in this portfolio are owned by pre-existing entities and were subject to prior financings. There is risk associated with potential liabilities arising from a pre-existing AOE's previous leasing activities. The issuer will pay off all prior financings on the aircraft in the portfolio. If possible under local law, local counsel will perform lien searches to confirm that no liens exist on the aircraft other than those that will be discharged on the date the aircraft are sold into the structure. In addition, the seller provided representations and warranties that there are no litigation, proceedings, or claims against the aircraft. Therefore, we view the risk from their past activities as minimal. To address this potential risk, we added $100,000 to each aircraft's repossession cost if the lease defaults in our rating run.

Transaction Comparison

Table 1

Transaction Comparison(i)

Zephyrus Capital KDAC Aviation Aviation Harbour MAPS Partners MAPS Finance Aircraft WAVE WAVE JOL Air 2019-1 2018-1 2018-1 (Cayman) Sprite Investments 2019-1 LLC 2017-1 LLC 2019-1 Limited Ltd. START Ltd. Ltd. Ltd. 2017-1 Ltd.

Servicer Wings Wings Stratos Merx Zephyrus GE Capital Merx DVB World Star Aergen Capital Capital Aviation Aviation Aviation Aviation Aviation Aviation Partners Partners Servicing Capital Ltd. Services Servicing (UK) Ltd. Finance Ltd. LLC LLC Ltd. Ltd. Ltd.

LMM of aircraft half-life base values and 781 566 638 521 454 703 605 881 695 631 half-life current market values (mil. $)

Class A initial LTV (%)(iii) 71 69 72 63 74 61 69 65 66 71

Class A initial rating A (sf)(ii) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf)

Class B initial LTV (%)(iii) 82 79 83 76 N/A 78 78 76.03 79 81

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Table 1

Transaction Comparison(i) (cont.)

Class B initial rating BBB (sf)(ii) BBB (sf) BBB (sf) BBB (sf) N/A BBB (sf) BBB (sf) BBB (sf) BBB (sf) BBB (sf)

Classes A and B scheduled amortization 14 year 13 year 14 year 12.5 year 12 year 14 year 13 year 12 year 13 year 12.5 year (years) straightline straightline straightline straightline straightline straightline straightline straightline straightline straightline for first four for the first years, then seven 11 year years, then straightline 4 year thereafter straightline thereafter

Expected maturity (years) 8 7 7 7 7 7 7 7 7 7

No. of aircraft 23 19 15 19 21 24 25 36 21 30

Weighted average age (years) 4.5 7.2 4.1 8.5 13.3 8.2 9.0 11.8 8.9 12.4

Weighted avg. remaining lease term (years) 6.3 4.1 8.1 5.2 2.9 4.0 4.4 4 3.8 2.8

Developing market exposure (%) 91 63 72 76 29 64 56 42 68 44

Narrow-bodies/wide-bodies/cargo/regional 100/0/0/0 88/12/0/0 63/37/0/0 89/11/0/0 69/31/0/0 89/11/0/0 100/0/0/0 58/42/0/0 65/35/0/0 100/0/0/0 jet (%)

Largest initial country concentration (%) Vietnam Indonesia Malaysia U.S. (20.1) South India (14.7) U.S. (33.6) Netherlands Taiwan U.S. (14.6) (19.1) (12.4) (23.6) Korea (13.3) (21.0) (17.1)

Largest initial lessee (%) Interjet Lion Air Qatar Aerovías Qantas Jet Airways American Air Asia X Air France Virgin (11.1) (12.4) Airways Del (12.9) India Ltd. (15.9) (12.9) (14.0) America Q.C.S.C. Continente (14.7) (13.5) (18.7) Americano S.A. Avianca (15.7)

(i)All percentages and averages are weighted by the aircraft initial appraised values. (ii)Expected. (iii)Based on LMM of half-life base values and half-life current market values. LMM--Lower of the mean and median. N/A--Not applicable. LTV--Loan-to-value.

Portfolio Overview

The following table presents the stratifications of the underlying portfolio.

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Table 2

Closing Aircraft Portfolio

Alton Aviation Initial Consultancy appraised LMM of LLC's value HLBV and maintenance reported in HLMV ($) adjustment transaction Aircraft Date of (July-August ($) (August document No. MSN model manufacture Engine type Lessee 2019) 2019) ($)

1 3546 A321-200 6/6/2008 V2533-A5 Aegean 25,363,833 181,108 25,610,108 Airlines

2 7833 A321-200 9/1/2017 CFM56-5B3/3 PIP Interjet 42,980,500 4,261,456 47,548,456

3 7903 A321-200 11/8/2017 CFM56-5B3/3 PIP Interjet 43,375,500 4,648,520 48,275,520

4 8061 A321-200 1/18/2018 CFM56-5B3/3 PIP Vietjet 42,556,000 4,421,174 47,561,841

5 6878 A320-200 12/17/2015 CFM56-5B4/3 Vietjet 33,930,233 945,615 34,884,615

6 34253 B737-800 2/10/2006 CFM56-7B26 Corendon 19,964,500 (3,346,338) 18,142,995

7 4532 A320-200 12/21/2010 V2527-A5 Select Indigo 25,222,500 (114,354) 26,294,979 One

8 41349 B737-800 3/15/2016 CFM56-7B26E China 37,064,517 3,607,636 40,533,303 Airlines

9 5779 A321-200 10/1/2013 CFM56-5B3/3 S7 36,869,000 2,129,388 38,906,721

10 7771 A320-200 7/17/2017 V2527-A5 Select JetStar 36,291,500 3,446,465 39,684,798 Two

11 7796 A320-200 8/24/2017 V2527-A5 Select JetStar 36,416,833 3,523,787 39,887,787 Two

12 4462 A320-200 10/27/2010 CFM56-5B6/3 AirAsia 24,376,500 (4,958,889) 20,513,444

13 4989 A320-200 1/25/2012 CFM56-5B6/3 PIP AirAsia 26,988,500 (3,207,801) 24,345,866

14 5908 A320-200 12/20/2013 CFM56-5B6/3 PIP AirAsia 30,750,000 (2,129,674) 29,008,993

15 8539 A320-200 11/20/2018 V2527-A5 Select Jetsmart 37,958,000 6,975,896 44,933,229 One

16 7985 A321-200 11/29/2017 V2533-A5 Select Asiana 43,005,000 4,123,986 47,356,986 Two

17 40266 B737-800 7/24/2014 CFM56-7B27E/B1F flydubai 35,440,500 (620,714) 35,455,953

18 7193 A321-200 8/3/2016 CFM56-5B3/3 Aeroflot 40,712,000 3,539,653 44,710,986

19 7396 A320-200NEO 3/20/2017 PW1127G-JM Indigo 39,814,333 2,470,504 42,253,171

20 39833 B737-800 2/27/2015 CFM56/7B24E Malindo 33,654,000 985,967 34,548,300 Air

21 6619 A320-200 6/5/2015 CFM56-5B6/3 PIP Pegasus 32,806,600 527,739 33,369,406

22 37961 B737-800 11/22/2011 CFM56-7B26E MIAT 29,770,500 (4,171,510) 25,670,157

23 35774 B737-800 9/16/2009 CFM56-7B424/3 China 25,255,000 2,014,089 27,460,089 United

Total 780,565,850 29,253,703 816,957,703

LMM--Lower of the mean and median. HLBV--Half-life base value. HL MV--Half-life current market value.

The issuer expects to acquire the portfolio within 270 days after the closing date. The seller may

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issue an irrevocable letter of credit (to be provided by an eligible letter of credit provider) in favor of the issuer in an amount equal to the amount that may be drawn from the aircraft acquisition account for an aircraft that is subject to the letter of credit. If the seller fails to deliver an aircraft or make rental payments associated with an aircraft, the issuer can draw upon the letter of credit to the extent of the undrawn amount. The eligible letter of credit provider meets the rating requirements under our counterparty criteria.

Initial Asset Values

We have received aircraft appraisals as of July 2019 from the International Bureau of Aviation (IBA) and Morten, Beyer & Agnew (MBA), and as of Aug. 2, 2019, from Collateral Verifications LLC (CV). Each appraiser provided us with the half-life base value and half-life current market value. Additionally, Alton provided a maintenance adjustment for each aircraft in the portfolio as of Aug. 31, 2019.

Unlike the maintenance-adjusted value, which reflects an aircraft's actual technical status and maintenance condition, the half-life value assumes that an aircraft is halfway between major maintenance overhauls. We use the half-life value in our analysis to project future lease rentals because it is more stable than using the maintenance-adjusted value, which is volatile because it depends on an aircraft's or engine's actual maintenance status.

To project the initial assets' cash flow, the half-life value we use is the LMM of the three appraisers' half-life base values and half-life current market values, which totaled $780,565,850 for this portfolio. We use this half-life value in our cash flow modeling.

The initial appraised value reported in the transaction documents is $816,957,703.

Table 3

Initial Asset Portfolio Values As Of August 2019

Appraisals

Half-life base value Half-life current market ($) value ($) Amount ($)

IBA 776,042,000 780,530,000

CV 828,250,000 816,461,400

MBA 758,820,000 768,640,000

LMM of half-life base values and half-life 780,565,850 current market values

Alton Aviation Consultancy LLC's maintenance 29,253,703 adjustment

Initial appraised value reported in the 816,957,703 transaction documents

IBA-- International Bureau of Aviation. CV-- Collateral Verifications LLC. MBA-- Morten Beyer & Agnew. LMM--Lower of the mean and median.

Aircraft Asset Analysis

Aircraft type

Approximately 42% of the portfolio's value consists of Airbus' A320-200 and A320-200NEO aircraft. The A320, a medium-size narrow-body jet introduced in 1989, remains one of the most

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widely used and marketable aircraft. The A320-200 has a broad airline user base that would likely attract many potential lessees if an aircraft in the portfolio is repossessed from its original lessee (see chart 2 and table 4).

Chart 2

Table 4

Initial Asset Portfolio Composition By Type

Aircraft model LMM half-life value (%) No. of aircraft Average age (years) Airframe still in production?

A320-200 36.5% 9 4.9 Yes

A320-200NEO 5.1% 1 2.5 Yes

A321-200 35.2% 7 4.0 Yes

B737-800 23.2% 6 7.4 Yes

LMM--Lower of the mean and median.

Airbus delivered its first new fuel-efficient engine option version (neo) of these planes in January 2016. The portfolio contains one of these aircraft. This version is up to 15% more fuel efficient than the A320-200. However, we don't foresee a substantial negative value on lease rates and values for non-"neo" versions in the foreseeable future, since replacing all of the current A320 family will take many years.

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An additional 35% of the portfolio is made up of the Airbus A321-200, a slightly enlarged version of the A320. Like its smaller sibling, the A321 is a highly desirable and liquid aircraft with a positive outlook and robust demand in the leasing market.

Approximately 23% of the portfolio's value consists of six Boeing B737-800 narrow-body aircraft. The B737-800 is the most successful of Boeing's family of current technology narrow-body planes. Its direct competitor is the Airbus A320, which is itself a very successful airplane. We consider the B737-800 to be, along with the A320-200, the best aircraft collateral currently available, given its very extensive user base and strong residual value performance. However, as is the case for the Airbus narrow-body aircraft, Boeing has introduced a successor model--the MAX version featuring new, fuel efficient engines and some other changes. Although the introduction of the successor Boeing MAX has been met with unexpected delays and issues, we expect its problems to be resolved in 2020. Still, given the size of the existing B737-800 fleet and the long backlog for the MAX version, we do not expect material downward pressure on the value of these planes until well into the next decade.

Aircraft depreciation and useful life

For aircraft that employ older technology or have other adverse asset risk factors, assumed depreciation would be more rapid and vice-versa. We applied an annual compounding depreciation rate (see table 5) on the preceding year's value. Our depreciation rates generally correlate with our views on the aircraft models' resale liquidity and technological risk.

We typically assume 25 years of useful life for the Airbus and Boeing aircraft in this portfolio (see table 5). In our sensitivity analysis, we assume 22 years of useful life. If an asset's contracted initial lease maturity is beyond the end of its useful life, and if the asset's contracted initial lease is not projected to default in our stress run, we assume this asset will be disposed of at the contracted initial lease maturity rather than at the end of its useful life.

Table 5

Aircraft Depreciation And Useful Life

Aircraft Annual compounding depreciation (%) Airframe useful life (years)

A320-200 93.0 25

A320-200NEO 93.0 25

A321-200 92.5 25

B737-800 94.0 25

Initial asset age

With a weighted average age of 4.5 years, we consider most of the aircraft in this portfolio to be young. However, there are some aircraft in the portfolio that are mid-life. These tend to have higher volatility in value retention. When there is surplus capacity, the most technologically efficient aircraft will stay in use.

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Chart 3

Lessee Analysis

Our CDO Evaluator considered the lessee concentration and correlations; therefore, our projected default rates at various rating stresses reflect this portfolio's lessee concentration (see table 6).

The initial airline lessees' overall credit quality is estimated to be well into speculative-grade ('BB+' or below), which is typical for aircraft operating lease portfolio securitizations. Three of the 23 aircraft are leased to flag carriers internationally. Approximately 91% of the lessees (by aircraft value) are in emerging markets with growing commercial aviation industries. Our airline default modeling assumptions were similar to those we have used for most aircraft operating lease securitizations.

Table 6

Lessee Country Distribution

Country Asset value (%) No. of assets

Vietnam 19.1 4

Malaysia 14.8 4

Mexico 11.1 2

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Table 6

Lessee Country Distribution (cont.)

Country Asset value (%) No. of assets

Russia 9.9 2

India 8.3 2

Turkey 6.8 2

South Korea 5.5 1

Chile 4.9 1

Taiwan 4.7 1

United Arab Emirates 4.5 1

Mongolia 3.8 1

Greece 3.2 1

China 3.2 1

Total 100.0 23

Table 7

Lessee Distribution

Lessee Asset value (%) No. of assets

Interjet 11.1 2

AirAsia 10.5 3

Vietjet 9.8 2

JetStar 9.3 2

Indigo 8.3 2

Asiana 5.5 1

Aeroflot 5.2 1

Jetsmart 4.9 1

China Airlines 4.7 1

S7 4.7 1 flydubai 4.5 1

Malindo Air 4.3 1

Pegasus 4.2 1

MIAT 3.8 1

Aegean Airlines 3.2 1

China United 3.2 1

Corendon 2.6 1

Total 100.0 23

Chart 4 shows the initial asset portfolio distribution by initial lease remaining maturity.

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Chart 4

Aircraft Leasing Business Outlook

According to the most recent Airbus and Boeing forecasts, airline passenger traffic is expected to grow by about 4.4%-4.8% per year between 2018 and 2038. Airbus predicts 4.4% per year between 2018 and 2037; Boeing forecasts 4.6% per year between 2019 and 2038. Airbus forecasts 36,560 new passenger aircraft deliveries and 830 freighters, and Boeing forecasts 43,000 new passenger fleet deliveries and 1,040 freighter deliveries. Around 40% of the new airplanes will be delivered to the Asia-Pacific region and 15%-20% to the Middle East, Latin America, Africa regions to meet continuous growth demands, and the remaining 35%-40% to North America and Europe, mainly to replace aging aircrafts.

The number of lessor-owned aircraft has been steadily growing. Operating leases account for over 40% of the global commercial fleet and could grow to approximately 50% in the next five to 10 years. Aircraft leasing is attractive to airlines because of lower capital outlay requirements, fleet planning flexibility, delivery position availability, and residual value risk avoidance. In addition, the lessors generally are more creditworthy, which gives them better access to capital at more attractive pricing than many airlines. On Jan. 1, 2013, export credit financing costs increased for aircraft because of higher pricing and equity contributions, which led more airlines to lease aircraft because it became more cost efficient. More recently, the U.S. and European export credit agencies have been virtually precluded from providing guarantees on new aircraft deliveries. As a result, we expect airlines will find it more cost efficient to lease aircraft; thus, lessors are expected to continue to take over some of their orders through sale/leaseback transactions.

Many European banks curtailed their lending to the aviation sector during the 2008-2009 financial crisis. Beginning in 2010, the capital markets stepped up their involvement in the sector, raising secured and unsecured financing to fund new aircraft deliveries and refinance debt maturities.

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Not only has this trend continued, but European banks have returned to the market, and banks in other regions, particularly Asia, have either increased their lending or entered this market for the first time. In addition, some aircraft lessors have accessed other types of capital, including equity infusions from their parent companies (many are owned by financial institutions) or IPOs. At the same time, the capital markets have been quite receptive in this sector, on both a secured and unsecured basis. Rising capital invested in the aviation market, new entrants to the lessor has increased competition in leasing industry.

A number of large aircraft portfolios have also been sold, including Genesis (to AerCap) in 2010, while RBS Aviation Capital (now called SMBC Aviation) was acquired by Sumitomo Mitsui Banking Corp. in May 2012 for $7.3 billion. In early 2013, Mitsubishi UFJ Lease and Finance Co. acquired start-up aircraft lessor Jackson Square Aviation LLC for around $1.3 billion. In addition, in May 2014, after numerous attempts to sell or issue an IPO, International Lease Finance Corp. was acquired by AerCap for $3 billion in cash and approximately 46% of the company's stock (approximately $7 billion total). In 2014, Avolon completed its IPO and was subsequently acquired by HNA Group Co. Ltd. in January 2016, and was then combined with Hong Kong Aviation Capital Ltd. Also, in early 2016, AWAS Aviation Capital sold about 90 aircraft to Macquarie Group Ltd. Bank of China Aviation completed an IPO in mid-2016. In 2017, several transactions occurred. In April, Avolon acquired CIT Aviation, and the combined entity became the third-largest aircraft lessor. In August, Dubai Aerospace Enterprise Ltd. (DAE) completed its acquisition of the larger AWAS Aviation Capital Ltd. In December, Aviation Capital Group LLC (ACG) completed a transaction in which Tokyo Century Corp. acquired a 20% ownership stake. In 2018, this trend continued. In July, Amadeo Capital and Intrepid Aviation Holdings Group formed a strategic alliance. In September, Avolon announced that ORIX Corp., through its wholly owned subsidiary ORIX Aviation Systems, had entered into an agreement to acquire a 30% stake in Avolon Holdings Ltd. for $2.2 billion. Also in September, Goshawk Aviation acquired SKY Leasing's Irish aircraft leasing subsidiary. At the same time, Chinese banks and other entities have continued to build up their aircraft lease portfolios.

Though the prolonged grounding of Boeing 737 Max and U.S.-China trade tensions raised the concerns in the aviation market, we are optimistic in the fundamental strength in the market in the long term, as the inherent demand for global air travel and growth prospects of the leasing market is still strong.

Servicer Review

Wings and Wings Capital Partners Aviation Ireland Ltd. are the servicers for the transaction. They will provide the transaction with re-lease remarketing, aircraft sales, third-party aircraft maintenance monitoring, technical inspections, and other professional services.

Wings was founded in 2013 by R. Stephen Hannahs, who had formerly acted as CEO and group managing director at Aviation Capital Group (ACG), and by Two Sigma Private Investments. Many members of the senior management team at Wings also previously had roles at ACG, including Bryan Billings, Art Schmidt, Loren Dollet, and Cesar Romero, who act as Wings' CFO, CCO, chief legal and administrative officer, and senior vice president marketing, respectively. Wings primarily focuses on single-aisle production aircraft less than 10 years of age.

We believe the servicer's capability to service this transaction's aircraft portfolio is adequate.

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Other Service Providers

Maintenance appraiser

The issuer contracted Alton to forecast the transaction's life-time maintenance-related cash flows before the transaction closes.

Initial liquidity facility provider

Crédit Agricole Corporate and Investment Bank (A+/Stable/A-1) will provide a liquidity facility that may be drawn on to pay expenses, any senior hedge amounts due, and interest on the series A and B notes issued by the two issuers. The rating on Crédit Agricole Corporate and Investment Bank is consistent with our counterparty criteria to support the preliminary ratings we assigned to the series A and B notes. The transaction's threshold rating requires a long-term unsecured credit rating of 'BBB' or better when the series A notes are outstanding. When the series B notes are the senior-most outstanding notes, the threshold rating is 'BBB-'.

Aircraft Or Engine Acquisition

This transaction can use the available disposition proceeds to purchase additional aircraft within 90 days after the disposition proceeds are received, as long as the following conditions are met:

- No event of default has occurred and is continuing.

- The aircraft substitution does not result in a breach of concentration limitations.

- The additional aircraft is a permitted aircraft type.

- The additional aircraft's manufacturing date is no earlier than 12 months before to the disposed aircraft's manufacturing date.

- The additional aircraft has a maintenance adjusted base value greater than or equal to the related disposed aircraft's maintenance adjusted base value.

- The additional aircraft is subject to an aircraft operating lease agreement containing agreed core lease provisions that has an expiration no sooner than the lease agreement of the disposed aircraft.

- The net present value (NPV) of the aggregate rental payments under the additional aircraft's lease are greater than or equal to 90% of the NPV of the aggregate rental payments under the related disposed aircraft's lease.

- The board has approved such acquisition.

- The aggregate adjusted value of all additional aircraft acquired with available disposition proceeds or additional note issuance proceeds does not exceed 12.5% of the aggregate initial appraised value.

- The additional aircraft is purchased within 96 months of the initial closing date.

- The number of aircraft that the issuers own after the acquisition is greater than or equal to the number of aircraft they owned before it.

- The issuer has received approval on the majority of the E notes.

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- Written notice of such acquisition shall be provided to S&P Global Ratings.

As S&P Global Ratings is notified of additional aircraft acquisitions, we will analyze the extent to which the cash flows of the updated portfolio will still support the given rating of each class of notes.

Payment Priority

Payment priority before an event of default

The amount the collection account is payable on each payment date in the following priority if there is no event of default (see table 8).

Table 8

Collection Account Payment Priority (Before An Event Of Default)

Priority Payment

1 Servicing fees; engine lease expenses; trustee, managing agent, and liquidity provider fees; other issuers' and transaction-related parties' fees including lessee and indemnification amounts; and a reserve for anticipated fees in next three months.

2 First, pro rata to pay series A note interest amount and hedge payment; second, pay series B note interest amount

3 Liquidity facility provider principal and interest.

4 Replenish the Maintenance Reserve Account up to the senior required amount.

5 First, to pay series A notes scheduled principal payment amount; second, to pay series B notes scheduled principal payment amount.

6 Pay disposition and EOL fee to servicer pro rata.

7 First, to pay series A outstanding disposition premium; second, the series B outstanding disposition premium.

8 First, the lesser of the series A outstanding principal balance and the excess proceeds series A payments; second, the lesser of the series B outstanding principal balance and the excess proceeds series B payments.

9 If a rapid amortization event has occurred or is continuing, to pay senior rapid amortization amount as follows: first, to the series A principal balance; second, to the series B principal balance

10 If a cash trap event has occurred and is continuing, to the DSCR cash trap account, all remaining amounts.

11 First, the series C notes interest amount; second, the series C scheduled principal amount.

12 Replenish maintenance reserve to Junior required amount.

13 The lesser of the series C outstanding principal balance and the excess proceeds series C payments.

14 To the servicers, the servicer incentive fee.

15 From and after the eighth anniversary of the initial closing date, first, the series A notes step-up amount; second, the series B notes step-up amount; third, the series C notes step-up amount.

16 Required amount to security deposit account.

17 If applicable, the interest amount on the series D notes.

18 If applicable, first, scheduled principal payment on the series D notes; second, the lesser of the series D outstanding principal balance and the excess proceeds series D payments.

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Table 8

Collection Account Payment Priority (Before An Event Of Default) (cont.)

Priority Payment

19 Subordinated expenses and hedge payments if applicable.

20 After the eighth anniversary of closing, the series D notes step-up amount if applicable.

21 To the servicers, the extraordinary expenses amount.

22 Fund a disposition contribution account up to an amount determined by the servicer.

23 After the earlier of the notes being paid in full and the final maturity date, to pay intercompany obligations between the co-issuers.

24 At the discretion of the Cayman issuer's board, a distribution to WAVE 2019-1 Holdings LLC.

25 First, to repay any cure advances; second, to repay additional advances; and third, to the class E noteholders, all remaining amounts.

DSCR--Debt service coverage ratio. MR--Maintenance reserve.

- A DSCR cash trap event occurs on a payment date occurring on or after the sixth payment date after the initial closing date, when the DSCR for that payment date or either of the two immediately preceding payment dates is less than 1.20x.

- A DSCR amortization event occurs on a payment date occurring on or after the sixth payment date after the initial closing date, when the DSCR for that payment date or either of the two immediately preceding payment dates is less than 1.15x.

- A utilization event occurs on any payment date if less than 75% of the number of aircraft is utilized as of that payment date or either of the two immediately prior payment dates.

- A rapid amortization event occurs on a payment date when the DSCR amortization event occurs, the utilization event occurs, or eight years after the initial closing date.

The series A and B notes' amortizations are subject to a full cash sweep or the rapid amortization described above. The series C notes do not have turbo amortization based on performance triggers (DSCR or utilization rate).

Excess proceeds include the following:

- End-of-lease payments;

- Proceeds or fees associated with a lease restructuring or lease termination not reinvested to cover maintenance;

- Lease payments under a green-time lease;

- Payments relating to the re-leasing of an asset when, at the time of the re-leasing, the asset's adjusted base value is less than 75% of the product of the allocable notional series amount multiplied by the scheduled series percentage; and

- Other payments by a lessee in lieu of maintenance, future lease payments, or other obligations under a lease.

We assumed a $10 million senior indemnity payment in the transaction's first year in the cash flow stress tests that we applied to the transaction.

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Payment priority following an event of default

The amount in the collection account is payable on each payment date in the following priority after an event of default (see table 9).

Table 9

Collection Account Payment Priority (Following An Event Of Default)

Priority Payment

1 Servicing fees; disposition fees; lease expenses; trustee and managing agent; other issuers' and transaction-related parties' fees including indemnification amounts.

2 Liquidity facility provider principal and interest.

3 Pro rata, the series A note interest amount and hedge payment, and then the series A notes' outstanding principal balance.

4 The series B note interest amount and then the series B notes' outstanding principal balance.

5 The series C notes' interest amount and then the series C notes' outstanding principal balance.

6 The series D (additional) notes' interest amount, and then the series D (additional) notes' outstanding principal balance.

7 The series A notes' outstanding disposition premium and then the series B notes' outstanding disposition premium.

8 Pro rata, any sales fees and end of lease fees.

9 Servicer incentive fee.

10 From and after the eighth anniversary of the initial closing date, the series A notes step-up amount, then the series B notes' step-up amount, then the series C notes' step-up amount, and then the series D step-up amount.

11 Subordinated indemnification amounts.

12 Subordinated hedge payments.

13 After the earlier of the notes being paid in full and the final maturity date, to pay intercompany obligations between the co-issuers.

14 At the discretion of the Cayman issuer's board, a distribution to WAVE 2019-1 Holdings LLC.

15 First, to repay any cure advances; second, to repay additional advances; and third, to the class E noteholders, all remaining amounts.

Events of Default

Each of the following constitutes an event of default for the issuer, subject to certain cure and grace periods, under the issuer's documents:

- Failure to pay when interest is due (excluding any step-up amount) on the most senior series of A or B notes, and the failure is not cured in five business days;

- Failure to pay the series A, B, or C notes' outstanding principal on the legal final maturity date;

- Failure to pay any other amount when due and payable on the notes, to the extent that there are available amounts, and the failure is not cured in five business days;

- Failure to comply with any of the representations, warranties, covenants, or obligations under transaction documents;

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- The issuer's voluntary or involuntary bankruptcy;

- A judgment or order for the payment of money exceeding 5% of the aggregate adjusted portfolio value; and

- The lien of the security trust agreement ceases to be effective.

Cash Flow Analysis Assumptions

To assess the portfolio's ability to service the rated series A, B, and C notes issued by WAVE 2019-1, we conducted our own stress tests built around a few deterministic scenarios. The stress test assumptions include:

- Lessee defaults;

- Reduced rental rates on leases during a recession;

- Diminished residual value for aircraft during a recession;

- The repossessed aircraft's off-lease time period;

- New leases' shortened terms;

- Remarketing, reconfiguration, andrepossession costs;

- Deferred maintenance; and

- Reduced security deposit requirements.

Recession assumptions

In general, we assume one recession will occur in every seven-to-10-year commercial aviation industry cycle, which reflects the industry's historical averages. For aircraft with 25-year useful lives, we typically model three four-year-long recessions. During the first two modeled recessions, we usually stress both the lease rates and residual values. For the third recession, when we believe most of the planes in the portfolio would have reached the end of their useful lives, we usually stress only the residual values because the aircraft's sale will likely generate the majority of the cash flow during this recession.

Table 10

Recession Timing

Rating

A BBB BB

Recession 1 start (mos.) 1 1 1

Recession 2 start (mos.) 119 119 119

Recession 3 start (mos.) 232 232 232

Length of the recessions (years) 4 4 4

Lessee defaults assumptions

We use our CDO Evaluator to generate the aircraft portfolio-level default rate. The simulation

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model inputs include lessee name, lessee credit quality, aircraft value, correlation within the airline industry, lessee country, country rating, and correlations among countries and regions. For airline lessees in the portfolio that S&P Global Ratings does not rate, we will provide a credit assessment based on public information.

In general, we view the airline industry as high risk. Our assessment reflects our view of the sector's high-risk cyclicality based on observed cyclicality in revenue and profit margins and its moderately high-risk competitive risk and growth. This model enables us to analyze lessee industry, country, and region by running 500,000 correlated simulation scenarios based on the lease portfolio's concentration risk instead of setting a hard percentage limit on lessee, country, and region concentration. Under our default simulation model, a concentrated portfolio will have a higher portfolio default rate and less generated cash flow.

Once the portfolio default rate is determined, we run a few deterministic default patterns such as defaulting by highest to lowest aircraft value, defaulting by lowest to highest credit quality lessee, and defaulting by highest to lowest lease rental. In all of the runs, defaulting by highest to lowest aircraft value usually provides the most onerous result, and we use this as a rating run.

Table 11

Lessee Default Rate

Rating

Lessee default rate A BBB BB

Recession 1 (%) 68.43 60.12 39.55

Recessions 2 and 3 (%) 78.43 70.12 49.55

Lease rates assumptions in and outside recessions

The lease rates outside recessions are based on the interest rate environment and aircraft age. During recessions, we apply additional reductions to a projected base-case depreciated value to stress lease rates and values. The decline magnitude is generally determined by the aircraft model's liquidity and technology level, the servicer's remarketing and disposition capability, the aircraft diversification, and the transaction's rating level. Such lease rate and sale-to-value ratio declines reflect our view of a particular portfolio's ability to maintain cash flow consistent with the ratings on obligations that are backed by the portfolio during recessions. This stress is intended to result in lower residual values of the aircraft or the aircraft engines sold, or lower rental rates on planes or aircraft engines re-leased during recessions. We model the lease rate decline in full during the second and third years of a recession, but we apply 50% of the lease rate's decline in the recession's first and last years. This assumption reflects our view that aviation industry recessions, particularly the aircraft values' and rental rates' decline and recovery, typically take time.

Table 12

Lease Rate/Value Decline

Rating

Decline A BBB BB

Recession 1 (%) 48.66 36.76 25.63

Recessions 2 and 3 (%) 68.09 53.90 39.92

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Repossession and remarketing period assumptions

The repossession period is the time it takes for the lessor to repossess an aircraft or an aircraft engine if the defaulting lessee has not agreed to a voluntary return of the equipment. The remarketing period is the time necessary to find a new lessee once the aircraft or engine has been returned to the lessor. In summary, we assume three months aircraft-on-ground time outside a recession and six-to-12 months during a recession. Within a recession, we assume a longer remarketing period.

Table 13

Repossession Or Remarketing Time

Rating

Repossession or remarketing time A BBB BB

In recession (mos.) 10 9 8

Outside recession (mos.) 3 3 3

Repossession, remarketing, and refurbishment (RRR) cost assumptions

If a lessor has to repossess an aircraft or aircraft engine, it will typically incur various costs related to legal work, insurance, pilot expenses, fuel, storage, technical check, and deregistration documents. These costs are in addition to the refurbishment or modifications necessary to re-lease the aircraft or the aircraft engine. We generally assume a wide-body plane has higher RRR costs than a narrow-body plane; a passenger plane has higher RRR costs than a freighter; and higher RRR costs can occur during a recession.

Table 14

Repossession, Remarketing, And Refurbishment Costs

Rating

Repossession costs A BBB BB

Narrow-body passenger and 500,000 in a recession; 500,000 in a recession; 500,000 in a recession; regional aircraft or engine ($) 350,000 outside a recession 350,000 outside a recession 350,000 outside a recession

Wide-body passenger aircraft or 1,500,000 in a recession; 1,500,000 in a recession; 1,500,000 in a recession; engine ($) 1,000,000 outside a 1,000,000 outside a 1,000,000 outside a recession recession recession

Lease terms assumptions

For re-leasing events, we typically assume three-year lease terms during each recession. We also assume five-year lease terms for re-leasing events outside of a recession.

Table 15

New Lease Terms

Rating

Lease term A BBB BB

In recession (years) 3 3 3

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Table 15

New Lease Terms (cont.)

Rating

Lease term A BBB BB

Outside recession (years) 5 5 5

Security deposit assumptions

In this transaction, the security deposits under the initial leases are not retained by the issuer or its subsidiaries, and they need to pay back these security deposits if the related lessees do not default. Therefore, in our analysis, we model that the issuer is required to return 100% of the security deposits to the non-defaulted lessees at the initial lease maturity and a percentage of security deposits to the defaulted lessees at the time of default (see table 16).

Table 16

Security Deposit Haircut

Rating

A BBB BB

Security deposit haircut (%) 30 20 10

Aircraft Maintenance

Aircraft maintenance, which is heavily regulated, is essential in aircraft operation to keep them in serviceable and reliable condition. An aircraft's maintenance status is also important in determining its value, especially for older aircraft. Depending on the type of work needed, such as airframe, airframe component, and engine maintenance (including engine performance restorations and limited part replacements), aircraft maintenance can be costly.

Lessors typically manage the maintenance expense exposure by either requiring lessees to pay maintenance reserves (also referred to as maintenance or utilization rent) during the lease or requiring an end-of-lease maintenance adjustment payment, if no maintenance reserve is collected. Regularly collected maintenance reserves are typically calculated based on flight hours and flight cycles. When due, lessees typically have the maintenance work done, pay the maintenance provider, and then claim a reimbursement from the lessor from a maintenance reserve account, which is funded by a maintenance reserve collection. When maintenance reserves are not collected, if the lessee defaults on the lease and doesn't pay an end-of-lease maintenance adjustment payment, the lessor will have to bear the potential maintenance exposure when the aircraft is returned.

For WAVE 2019-1's portfolio, the initial aircraft leases contain provisions specifying maintenance standards and the aircraft's required condition on redelivery. Some of the initial leases require the lessee to provide monthly maintenance reserves, and others do not have regular payment provisions. Specifically, of the initial 23 leases, 16 require monthly cash maintenance reserve payments and 16 have end-of-lease adjustments, which includes leases that also have monthly maintenance reserve payment obligations.

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Maintenance Cash Flow Assumptions

WAVE 2019-1 has engaged Alton to be the maintenance cash flow appraiser. Maintenance cash flow is an integral part of our cash flow model. We input the aircraft maintenance cash flow (month-by-month maintenance reserves and expenses) and the end-of-lease payments that Alton generates into our overall cash flow model and analyze the maintenance account activity per the maintenance account mechanism outlined in the transaction documents.

For the initial fleet, the Alton model forecasts each aircraft's utilization rates and conditions, according to the existing contractual and projected future lease terms, together with the associated maintenance-related cash flows. Specifically, the model predicts the timing and lessor-related inflows and outflows associated with airframe (heavy checks), engine (performance restorations and life-limited part replacements), and component (landing gear and auxiliary power unit overhauls) maintenance. The model does not forecast cash flows for remarketing, lease transition, and repossession, etc.

The Alton analysis includes both base- and stress-case scenarios. The base-case scenario (a cash flow run without any stresses) assumes all aircraft remain subject to existing lease agreements through the initial leases' contractual expiration dates and then, that each aircraft will be re-leased to consecutive new lessees until each aircraft reaches its assumed retirement age. Among other assumptions, the base-case scenario assumes that all payments are made in a timely manner and that no events of default occur.

For the stress-case scenarios, Alton provided stress scenario maintenance projections using a set of stress scenario assumptions consistent with our sector-wide stress maintenance projection assumptions as outlined in " S&P Outlines Maintenance Analysis For Aircraft/Aircraft Engine-Backed Securitizations ," published June 11, 2015. The article outlines recessionary periods, default rates, default timing, RRR duration, the new lease's length, the percentage of subsequent leases paying maintenance reserve, and maintenance-delay timing. Given the uncertainty of how many new leases would require maintenance reserve payments after the initial leases mature, the stress maintenance projection assumes that the number of leases that have maintenance reserve requirements will decline by 50% after the initial leases mature. The stress maintenance projection further assumes that aircraft subject to defaulted leases have had no major maintenance performed within the 12 months before the default so that the transaction will bear any required major maintenance costs. Utilizing these assumptions and its own assumptions on aircraft and engine maintenance expense and timing, Alton projected the maintenance-related cash inflows and outflows.

Under a "medium" default rate scenario, for the maintenance cash flow period up to the end of the asset's useful life, Alton projected the total maintenance-related cash inflows to equal approximately $580 million in an 'A' rating stress, $607 million in a 'BBB' rating stress, $629 million in a 'BB' rating stress, and $913 million in a base-case stress; the total maintenance-related outflows would equal approximately $562 million in an 'A' rating stress, $551 million in a 'BBB' rating stress, $538 million in a 'BB' rating stress, and $617 million in a base-case stress. Therefore, the cumulative projected maintenance profit or loss equals approximately $18 million loss in an 'A' rating stress, a $57 million loss in a 'BBB' rating stress, a $91 million loss in a 'BB' rating stress, and a $296 million surplus in a base-case stress.

Chart 5 shows the cumulative maintenance profit or loss under base-case, 'A', 'BBB', and 'BB' stress scenarios.

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Chart 5

The transaction has a maintenance reserve account that is expected to have an $1.40 million balance at closing. The maintenance expenses will be drawn first from the maintenance reserve accounts and if insufficient, then from the collection account.

After paying senior fees, interest on the series A and B notes, and liquidity facility advances, the remaining available collection will be used pro rata to top-up the maintenance reserve account so that the maintenance reserve account can maintain a required amount equal the sum of the following projected future months' maintenance expenses, as applicable:

- For the first two years: the sum of 100% of maintenance expense in month one, 50% in month two, 40% in month three, 30% in month four, 20% in month five;

- From year three to month 54: the sum of 100% of maintenance expense in month one, 50% in month two, 30% in month three, 20% in month four, 15% in month five; and

- Starting in month 55 to year nine: the sum of 100% of maintenance expense in month one, 50% in month two, 40% in month three, 30% in month four, 20% in month five; and

- Starting in year ten: 100% of maintenance expense for the first six months.

The transaction will top-up the maintenance reserve account at a junior level in the waterfall so that the maintenance reserve account maintains a required amount equal the sum of the following projected future months' maintenance expenses:

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- For the first two years: the sum of 100% of maintenance expense in month one, 75% in month two, 62.5% in month three, 50% in months four and five, 25% in months six and seven, 12.5% in months eight, nine and ten.

- From year three through month 54: the sum of 100% of maintenance expense in month one, 75% in months two and three, 62.5% in months four and five, 50% in months six and seven, 37.5% in months eight and nine, 25% in months sixteen and 11, 20% in months 12 and 13, 12.5% in month 14 and 15.

- from month 55 to year nine: 100% of maintenance expense in month 1, 75% in month 2, 62.5% in month three, 50% in months four and five, 25% in months six and seven, 12.5% in month eight, nine, and ten.

- Starting in year ten: 100% of maintenance expense for the first six months

Alton will perform maintenance expense projections each year. The excess reserve amounts over the required amount will be transferred to the collection account and distributed according to the collection account payment priorities.

Cash Flow Analysis Results

Our ratings approach considered cash flow primarily from the 23 assets in the portfolio. Cash is generated from lease or replacement lease payments, aircraft or engine disposition proceeds, and the liquidity facility. The leases are operating leases that were initially signed for fixed periods and have a 6.3-year remaining weighted average lease term. We also took into consideration the below half-life maintenance status of the portfolio as projected by Alton. Specifically, subtracting from sales proceeds generated at the end of the assets' useful life the below half-life value as projected by Alton.

Under our stress scenarios commensurate with the preliminary 'A (sf)' rating, the cash flow results showed that timely interest and ultimate principal on the class A notes would be paid off by July 2037. Under our stress scenarios commensurate with the preliminary 'BBB (sf)' rating, the cash flow results showed that ultimate interest and principal on the class B notes would be paid off by November 2035. Under our stress scenarios commensurate with the preliminary 'BB (sf)' rating, the cash flow results showed that ultimate interest and principal on the class C notes would be paid off by January 2034.

Chart 6 shows the lease revenue projections in 'A', 'BBB' , and 'BB' rating runs and base-case scenarios.

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Chart 6

Chart 7 shows the series A, B, and C notes' scheduled amortization curves.

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Chart 7

Chart 8 shows the series A notes' projected amortization curves under an 'A' rating run stress compared with the scheduled amortization curve.

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Chart 8

Chart 9 shows the series B notes' projected amortization curve under a 'BBB' rating run stress compared with the scheduled amortization curve.

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Chart 9

Chart 10 shows the series C notes' projected amortization curve under a 'BB' rating run stress compared with the scheduled amortization curve.

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Chart 10

Sensitivity Analysis

Aircraft are operating assets with lease revenue that is highly sensitive to lease rates, their useful lives, and the servicer's capability.

In sensitivity run 1, we modeled aircraft to be sold at the age of 22 years if the majority of the aircraft are relatively young. In this run, the series A notes are projected to be paid off in July 2036 at the 'A' rating stress, the series B notes are projected to be paid off in May 2035 at the 'BBB' rating stress, and the series C notes are projected to be paid off in January 2032 at the 'BB' rating stress.

In sensitivity run 2, we analyzed how sensitive lifetime revenue is to our assumed LRFs (or lease yield). We reduced the LRF by a 6.0% break-even haircut at the 'A' level for the class A notes when the class A notes can still receive timely interest and ultimate principal. we reduced the LRF by a 13.0% break-even haircut at the 'BBB' level for the class B notes when the class B notes can still receive ultimate interest and principal. We reduced the LRF by a 28.0% break-even haircut at the 'BB' level for the class C notes when the class C notes can still receive ultimate interest and ultimate principal. All of the other assumptions are consistent with the rating run.

For each of the runs (both rating and sensitivity runs), we calculated the lifetime revenue's NPV and compared it in each scenario with that in a base-case scenario (i.e., a cash flow run without

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any stresses in an aircraft lease rental and sales proceeds analysis). See tables 17, 18, and 19 for each sensitivity test's revenue NPV with a 5% discount rate as a percentage of the base-case run's revenue NPV at the 'A', 'BBB', and 'BB' rating levels, respectively.

Table 17

Cash Flow Runs--Series A Notes

Revenue NPV as a percentage of the base-case run (5% discount) Cash flow test result

Base-case run 100.00

'A' rating run 74.98 Paid off in July 2037; no interest shortfall.

'A' 22-year useful life 71.34 Paid off in July 2036; no interest sensitivity shortfall.

'A' (6% LRF breakeven) 71.90 Paid off in January 2039; no interest shortfall.

NPV--Net present value. LRF--Lease rate factor.

Table 18

Cash Flow Runs--Series B Notes

Revenue NPV as a percentage of the base-case run (5% discount) Cash flow test result

Base-case run 100.00

'BBB' rating run 80.78 Paid off in November 2035; no interest shortfall.

'BBB' 22-year useful life 77.06 Paid off in May 2035; no interest sensitivity shortfall.

'BBB' (13% LRF breakeven) 73.71 Paid off in May 2038 no interest shortfall.

NPV--Net present value. LRF--Lease rate factor.

Table 19

Cash Flow Runs--Series C Notes

Revenue NPV as a percentage of the base-case run (5% discount) Cash flow test result

Base-case run 100.00

'BB' rating run 87.35 Paid off in January 2034; no interest shortfall.

'BB' 22-year useful life 83.38 Paid off in January 2032 no interest sensitivity shortfall.

'BB' (28% LRF breakeven) 72.73 Paid off in September 2042; no interest shortfall.

NPV--Net present value. LRF--Lease rate factor.

Table 20 compares the sensitivity run results for other recent aircraft transactions.

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Table 20

Revenue NPV As A Percentage Of The Base-Case Run (5% Discount)

Zephyrus KDAC Capital Aviation Aviation Finance MAPS Partners MAPS (Cayman) Sprite JOL AIR Ltd. 2019-1 Ltd. 2018-1 Ltd. START Ltd. 2018-1 Ltd. Ltd. 2017-1

Class A rating A (sf)(i) A (sf)(i) A (sf) A (sf) A (sf) A (sf) A (sf)

Class A LTV (% 72 63 74 61 69 64 66 based on LMM of half-life values)

Base-case run 100 100 100 100 100 100 100 (%)

A' rating run 72.06 68.82 68.26 70.80 72.03 71.69 68.27 (%)

Sensitivity run 71.60 (with 61.92 (with 67.84 (with 68.87 (with 66.57 (with 51.53 (with 66.48 (with - break even on 1% 28% 1% 4% 13% 3.5% 4% LRF (%) additional additional additional additional additional additional additional break-even break-even break-even break-even break-even break-even break-even haircut to haircut to haircut to haircut to haircut to haircut to haircut to LRF) LRF) LRF) LRF) LRF) LRF) LRF)

Class B rating BBB(sf) BBB(sf) n/a BBB(sf) BBB(sf) BBB(sf) BBB(sf)

Class B LTV (% 83.1 76 n/a 78 78 74.98 78.79 denominator is the LMM of the half-life aircraft values)

Base-case run 100 100 n/a 100 100 100 100 (%)

'BBB' rating 77.6 76.3 n/a 76.8 77.56 77.53 74.44 run (%)

Sensitivity run 71.34 (with 65.86 (with n/a 73.68 (with 65.36 (with 54.09 (with 69.78 (with - break even on 13% 22% 6% 27% 13% 10% LRF (%) additional additional additional additional additional additional break-even break-even break-even break-even break-even break-even to LRF) to LRF) to LRF) to LRF) haircut to haircut to LRF) LRF)

(i)Expected. LRF--Lease rate factor.

Surveillance

We use surveillance data to perform periodic reviews on all rated aircraft securitizations to identify potential and emerging trends. Our ratings reflect the transaction's ongoing risk profile.

We will maintain surveillance on the transaction until the notes are paid off, review the servicer's monthly reports on underlying collateral performance, and maintain periodic contact with the managing agent and the servicer to ensure that the minimum servicing standards are sustained and any material changes in the servicer's operations are communicated and assessed.

We will continue to develop and provide performance information, research, and analysis to

www.standardandpoors.com September 25, 2019 33

increase the level of transparency, as well as information on our methodology, ratings, and rated transactions' performance.

Related Criteria

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019

- Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012

- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012

- Criteria | Structured Finance | ABS: Revised Cash Flow Assumptions And Stresses For Global Aircraft And Aircraft Engine Lease Securitizations, Aug. 26, 2010

- Criteria | Structured Finance | ABS: Aircraft Securitization Criteria: Rating Considerations For Lease Pools, Sept. 1, 2004

- Criteria | Structured Finance | ABS: Aircraft Securitization Criteria: Maintenance And Related Issues, Sept. 1, 2004

- Criteria | Structured Finance | ABS: Aircraft Securitization Criteria: The Rating Process For Aircraft Portfolio Securitizations, Sept. 1, 2004

Related Research

- Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, Dec. 16, 2016

- S&P Outlines Maintenance Analysis For Aircraft/Aircraft Engine-Backed Securitizations, June 11, 2015

In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Counterparty Risk Framework: Methodology And Assumptions," March 8, 2019; "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, 2009.

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