Raptor Aircraft Finance I Ltd./Raptor Aircraft Finance I LLC Raptor Aircraft Finance I Ltd./Raptor Aircraft Finance I

Presale: Raptor Aircraft Finance I Ltd./Raptor Aircraft Finance I LLC

October 11, 2019

PRIMARY CREDIT ANALYST

Preliminary Ratings Rajesh Subramanian Centennial Legal final maturity (1) 303-721-4241 Series Preliminary rating Preliminary amount (mil. $) Coupon (%)(i) LTV (%)(ii) date rajesh.subramanian A A (sf) 553.000 4.212 66.8 August 2044 @spglobal.com

B BBB (sf) 116.500 5.193 80.9 August 2044 SECONDARY CONTACTS

C BB (sf) 56.500 6.900 87.7 August 2044 Belinda Ghetti New York Note: This presale report is based on information as of Oct. 11, 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. (i)Assumed coupon for preliminary belinda.ghetti rating purposes. (ii)Note amount divided by the lower of the mean and median of three appraisers' half-life base values and half-life current @spglobal.com market values. LTV--Loan-to-value ratio. NR--Not rated. Maxym Rumyantsev New York + 1 (212) 438 0302 maxym.rumyantsev Transaction Overview @spglobal.com

The series A, B, and C notes issued by Raptor Aircraft Finance I Ltd. (the Cayman issuer), an Chang Ge, CFA exempted Cayman Islands limited liability company, and Raptor Aircraft Finance I LLC (the U.S. New York issuer), a Delaware limited liability company (collectively, Raptor), are backed by a portfolio of 19 (1) 212-438-4389 chang.ge in-production narrow- and wide-body aircraft and their related leases. @spglobal.com

The portfolio consists of 16 narrow-body aircraft and three wide-body aircraft and has a weighted CORPORATE & GOVERNMENT CREDIT average age of approximately 3.92 years. All of the aircraft are currently on lease to 14 different ANALYST airlines worldwide, with a 6.78-year weighted average remaining lease term. The weighted average Betsy R Snyder, CFA age and weighted average maturity are calculated as of the anticipated closing date. New York (1) 212-438-7811 The transaction will be serviced by Seraph Aviation Management Ltd. (Seraph), a related entity of betsy.snyder Stellwagen Group. Seraph was created in 2007, and it operated under the name Volito Aviation @spglobal.com

Services Ireland Ltd. until 2015. The group has managed aircraft for third parties since 2012. ANALYTICAL MANAGER Seraph will collect rents and other amounts due from lessees, monitor obligations of the lessees Kate R Scanlin under the leases, enforce rights against the lessees, remarket aircraft for re-lease or sale, and New York perform other specified aircraft-related services. (1) 212-438-2002 Similar to most of the recent aircraft securitization transactions S&P Global Ratings has rated, kate.scanlin @spglobal.com this transaction has an expected final payment date of seven years after closing, after which the See complete contact list at end of article.

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series A and B notes' amortization will be full turbo.

This transaction has positive features that help mitigate the risk of monetization of an aircraft's green time (or maintenance status). Specifically, if the servicer decides to not use maintenance rent to restore an aircraft or engine but to instead to pay rents through the rental waterfall, the portfolio's value over time will fall below the half-life values that we model. Note principal is not protected by a commensurate additional amortization.

The positive features also include the following:

- A pro rata portion of the end-of-lease payments and/or disposition proceeds will be used to pay down the series A, B, and C notes, and the future payment periods' allocable series A, B, and C note balances are reduced accordingly.

- There is no separate payment priority for aircraft disposition proceeds. Aircraft disposition proceeds are distributed under the regular payment priority. Therefore, if there is a below-value sale, the rental cash flow (to the extent available) can be used to offset the below-value portion.

Profile

Expected closing date October 2019.

Co-issuers Raptor Aircraft Finance I Ltd. (Cayman) and Raptor Aircraft Finance I LLC (Delaware).

Collateral Nineteen aircraft, and the related leases, shares, and beneficial interests in an entity that directly and indirectly receives aircraft portfolio lease rental and residual cash flows, among others.

Servicer Seraph Aviation Management Ltd.

Liquidity facility provider BNP Paribas.

Administrative agent Stellwagen Group Ltd.

Security trustee, operating bank Wilmington Trust Co. and trustee

Lead structuring agent and lead Deutsche Bank Securities. bookrunner

Joint bookrunners Standard Chartered Bank and BNP Paribas.

Appraisers Morten Beyer & Agnew Inc., IBA Group Ltd., and Avitas Inc.

Maintenance evaluator Alton Aviation Consultancy LLC.

Rationale

The preliminary ratings assigned to Raptor's series 2019-1 series A, B, and C fixed-rate notes reflect the following:

- The likelihood of timely interest on the series A notes (excluding step up interest) on each payment date, timely interest on the series B notes (excluding step-up interest) when the series A notes are no longer outstanding on each payment date prior to the subordination date (14 years from the closing date), and ultimate interest and principal payment on the series A, B, and C notes on or before the legal final maturity date at the respective 'A', 'BBB', and 'BB' rating stress scenarios.

- The approximately 67% loan-to-value (LTV) ratio on the series A notes, the 81% LTV on the series B notes, and the 88% LTV on the series C notes. The LTV ratio is based on the lower of the

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mean and median (LMM) of the half-life base value (HLBV) and the half-life current market value (HLMV).

- The aircraft portfolio consists of approximately 67% narrow-body aircraft (39% from the Airbus A320 family and 28% from the Boeing B737 family) and 33% wide-body aircraft (20% from the A330 family and 12% from the B787 family) by the LMM of the half-life value. All of the aircraft models are in production.

- The weighted average age (by value) of the aircraft in the portfolio is 3.92 years. Currently, all 19 of the aircraft are on lease, with a weighted average remaining term of approximately 6.78 years.

- Some of the lessees are in emerging markets where the commercial aviation market is growing.

- The existing and future lessees' estimated credit quality and diversification. The 19 aircraft are currently leased to 14 airlines in 12 countries. Some of the initial lessees have low credit quality, and approximately 80% of the lessees (by aircraft value) are domiciled in emerging markets. Three of the 19 aircraft are leased to flag carriers internationally.

- Each series' scheduled amortization profile, which is a straight line over 14 years for series A and B and a straight line over seven years for series C.

- The transaction's debt service coverage ratio (DSCRs) and utilization triggers--a failure of which will result in the series A and B notes' turbo amortization. Turbo amortization for the series A and B notes will also occur if they are outstanding after year seven.

- The subordination of series C principal and interest to series A and B principal and interest.

- A revolving credit facility that BNP Paribas will provide and that will be available to cover senior expenses, including hedge payments and interest on the series A and, prior to the subordination date, series B notes.

- Alton Aviation Consulting LLC (Alton) performed a maintenance analysis before closing. After closing, the servicer will perform a forward-looking 27-month maintenance analysis at least annually, which Alton will review and confirm for reasonableness and achievability.

- The maintenance reserve account (funded to $1.0 million balance at closing), which receives senior payments from the waterfall, based on the projected maintenance expenses during the next six months of the transaction, and junior payments, based on the projected maintenance expenses during the next 12 months of the transaction. After month 84, the senior payments will be based on the next 16 months of projected expenses.

- The expense reserve account, which will be funded at closing with approximately $500,000 from the note proceeds and is expected to cover the next three months of expenses.

- The series C reserve account, which will be funded at closing with approximately $500,000 from the note proceeds.

- The initial average lease rate factor of 0.95%, (based on the LMM of half-life values), as measured by the portfolio's weighted average lease rate factor based on aircraft half-life value.

- The senior indemnification (excluding indemnification amounts to lessees under leases entered into before the transaction closing date) is capped at $10 million and modeled to occur during the first 12 months.

- The junior indemnification (uncapped) is subordinated to the rated series' principal payment.

- Seraph, an aircraft lessor, is the servicer for this transaction.

- The transaction's legal structure, which is expected to be bankruptcy remote.

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Transaction Strengths

The transaction's strengths are as follows:

- A portion of the end-of-lease payments, based on the then-current aggregate LTV ratio, will be allocated to the series A, B, and C notes according to their pro rata percentage (unpaid amounts will accrue to subsequent payment periods). Series A, B, and C scheduled principal payments in the following periods will be adjusted down to reflect end-of-lease payments received in this period. Applying a portion of end-of-lease payments to pay principal on the notes benefits the lenders, particularly in transactions backed by midlife and older aircraft/engine assets. When a midlife or older aircraft returns from a lease, the lessor may not spend the end-of-lease adjustment for maintenance to restore aircraft value because the increased aircraft value following the maintenance is unlikely to surpass the maintenance expense spent. In transactions where the end-of-lease payments flow through the collection account payment priority without adjusting down the scheduled target principal balance of the notes in the future payment periods, the lenders would suffer from aircraft value declining without being compensated by receiving the end-of-lease payment.

- The transaction has performance triggers, including aircraft utilization (75%) and DSCR (1.15x for cash sweep and 1.20x for cash trap) to speed up series A, B, and C 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.

- 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.

- The aircraft in this portfolio are relatively early in their useful lives (weighted average age of 3.92) and have a relatively long average remaining lease term (6.78 years).

- The transaction has a novation expense account of $1.25 million funded at closing, which can be used to cover any novation expenses incurred in connection with the acquisition of any aircraft during the delivery period.

- Unlike other recent aircraft transactions, the liquidity facility is available to pay up to 12 months of interest after the anticipated repayment date (seven years from closing).

Transaction Weaknesses

The transaction's weaknesses are as follows:

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

- Unlike other aircraft transactions, this transaction's series A and B notes do not have partial rapid amortization, which usually amortizes the notes faster during years five, six, and seven. The notes will receive sequential turbo principal payments only after seven years from closing.

- Although Seraph has been in existence since 2007 (but under a different name prior to 2015) and its management has many years of industry experience in aircraft financing before its inception, this is its first securitization. We view Seraph's capability to service this transaction's aircraft portfolio as adequate. However, we view its servicing capability less favorably than the largest and midsize global aircraft lessors.

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- The aircraft portfolio is less diversified than those of the recent comparable transactions S&P Global Ratings has rated in terms of aircraft model, though all models are current generation and the most liquid narrow- and wide-body aircraft.

- As of Oct. 2, 2019, Avianca S.A. and Transportes Aereos del Continente Americano (TACA; now known as Avianca El Salvador) were delinquent in the payment of four rent payments totaling $1,973,361.40, in each case for a period of 30 days or more under each aircraft's initial lease.

- Seven aircraft are subject to third-party sale agreements that have expired or may need to receive extensions prior to the closing date. If the issuer is unable to secure the extensions for those third-party sale agreements, the transaction will pay down from the proceeds included in the aircraft acquisition account.

- The aircraft portfolio is also smaller than other recent transactions, with only 19 aircraft; and it is less diversified in terms of geographic location, with a 36% concentration in the Asia-Pacific region and a 33% concentration in the Central and South America.

- The issuer will not create new aircraft-owning entities (AOEs) for these aircraft.

Mitigating Factors

The following factors partially mitigate the transaction's weaknesses:

- The servicer assessment we assigned to Seraph is lower than what we assigned to global mid-tier aircraft lessors, which translates to a relatively high lease rate decline assumption.

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

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

- Our lease rate model is continuously calibrated to reflect updated lease yield levels.

- Our default rate assumptions address the delinquencies of TACA and Avianca.

- We modeled the transaction assuming the third-party sale agreement will be extended. If the issuer fails to secure those extensions by the closing date, we will review the transaction for the additional concentration risk.

- To address the concentration of aircraft models in the portfolio, we assigned a relatively low diversification score for this portfolio, which translates into a relatively high lease rate decline assumption.

- The pre-existing AOEs have been limited to owning, acquiring, and leasing aircraft. All prior financings on the aircraft in the portfolio will be paid off by this transaction. In addition, the local counsel will perform lien searches and the aircraft transferor will provide representation and warranties. Therefore, although we view the risk from the AOEs' past activities as insignificant, we applied an additional transition cost ($100,000 for each aircraft) when the related lease under the pre-existing AOE defaults in our projection.

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Legal Structure

The rated notes will be issued by Raptor Aircraft Finance I Ltd., the Cayman issuer, and Raptor Aircraft Finance I LLC, the U.S. issuer.

Raptor Aircraft Finance I Ltd. is an exempted limited liability company incorporated under the laws of the Cayman Islands and an Irish tax resident. The shares of this entity will be held by a Cayman charitable trust. Raptor Aircraft Finance I LLC is a wholly owned subsidiary of the Cayman issuer formed as a Delaware limited liability company.

Aircraft in the asset portfolio will be held by a number of separate aircraft-owning subsidiaries. These entities will be owned by the Cayman issuer, except for entities owning aircraft leased to U.S. lessees, which will be owned by the U.S. issuer.

Each issuer will be governed by a board of directors, with at least one director independent from the servicer and the equity holders.

The subordinated E note for this transaction will be held by RAF I Holdings Ltd. This entity will act as the E noteholder and issue a single series of equity certificates.

The transaction's anticipated structure at the end of the purchase period is shown in chart 1. The solid lines indicate payment or performance obligations, and the dotted lines indicate ownership interests.

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Chart 1

As security for their obligations under the notes, the issuer group and their subsidiaries will pledge the following to the security trustee:

- The interests in the aircraft and engines,

- The beneficial interests in the AOEs and other issuer group members,

- The leases and associated payments,

- The accounts,

- The cash on hand and invested cash,

- 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 (the

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Convention) and its related aircraft equipment protocol, to the extent applicable. The Convention is an international treaty that creates a centralized electronic registry for interests, referred to as international interests in aircraft objects, such as 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.

Each aircraft owner is located in a contracting state under the Convention and is expected to pledge its interest in its aircraft and engines 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 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 under the security agreement 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.

Transaction Comparison

Table 1 provides a comparison of recent aircraft securitization transactions.

Table 1

Transaction Comparison(i)

Zephyrus Capital Aviation Raptor JOL Air Ltd. MAPS Partners MAPS Aircraft (Series 2019-1 2018-1 2018-1 Finance 2019-1) Ltd. Ltd. START Ltd. Ltd.

Servicer Seraph Stratos Merx Zephyrus GE Capital Merx Aviation Aviation Aviation Aviation Aviation Management Servicing Capital Ltd. Services Servicing Ltd. Ltd. Ltd. Ltd.

LMM of aircraft half-life base values and 827.45 637.58 521.00 454.00 703.00 605.00 half-life current market values (mil. $)

Class A initial LTV (%)(ii) 67 72 63 74 61 69

Class A initial rating A (sf)(iii) A (sf) A (sf) A (sf) A (sf) A (sf)

Class B initial LTV (%)(ii) 81 83 76 N/A 78 78

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

Class C initial LTV (%)(ii) 88 87 83 N/A 84 84

Class C initial rating BB (sf)(iii) NR BB (sf) N/A BB (sf) BB (sf)

Classes A and B scheduled amortization 14 years, 14 years, 12.5 years, 12 years, 14 years, 13 years, (years) straightline straightline straightline straightline straightline straightline

Expected maturity (years) 7 7 7.0 7 7.0 7.0

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Table 1

Transaction Comparison(i) (cont.)

Zephyrus Capital Aviation Raptor JOL Air Ltd. MAPS Partners MAPS Aircraft (Series 2019-1 2018-1 2018-1 Finance 2019-1) Ltd. Ltd. START Ltd. Ltd.

No. of aircraft 19 15 19.0 21.0 24.0 25

Weighted average age (years) 3.92 4.10 8.50 13.30 8.20 9.00

Weighted avg. remaining lease term (years) 6.78 8.10 5.20 2.90 4.00 4.40

Developing market exposure (%) 80 72 76 29 64 56

Narrow-bodies/wide-bodies/cargo/regional 67/33/0/0 63/37/0/0 89/11/0/0 69/31/0/0 89/11/0/0 100/0/0/0 jet (%)

Largest initial country concentration (%) China (14.2) Malaysia U.S. (20.1) South India (14.7) U.S. (33.6) (23.6) Korea (17.1)

Largest initial lessee (%) Avianca Qatar Aerovías Qantas Jet Airways American (12.4) Airways Del (12.9) India Ltd. (15.9) Q.C.S.C. Continente (14.7) (18.7) Americano S.A. Avianca (15.7)

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

Portfolio Overview

Table 2 provides a summary of the transaction's closing aircraft portfolio.

Table 2

Closing Aircraft Portfolio

Alton Aviation Initial Consultancy appraised LLC's value LMM of HLBV and maintenance reported in HLMV adjustment transaction Aircraft Date of (November-December (July 2019) document No. MSN model manufacture Engine type Lessee 2018) ($) ($) ($)

1 1600 A330-300 2/3/2015 Trent 772B-60EP AirAsia X 77,812,770 (2,381,491) 76,767,461 Berhad

2 6535 A320-200 4/29/2015 V2527-A5 Vueling 34,653,587 344,016 34,345,289

3 6594 A320-200 5/22/2015 V2527-A5 Vueling 34,761,457 587,765 34,696,704

4 7784 A320-200 7/26/2017 CFM56-5B4/3 InterJet 39,573,064 4,575,567 43,838,523

5 7792 A320-200 8/8/2017 CFM56-5B4/3 InterJet 39,705,349 4,482,739 43,877,695

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Table 2

Closing Aircraft Portfolio (cont.)

6 1792 A330-300 6/9/2017 Trent 772B-60 South 90,639,516 9,934,373 100,612,753 African Airways

7 39619 B737-800 6/26/2013 CFM56-7B27E/B1 GoL 31,651,500 (2,847,315) 28,408,119

8 37509 B787-8 8/11/2016 Trent 1000-D2 Avianca 102,339,420 3,807,340 106,146,760

9 42276 B737-800 2/13/2017 CFM56-7B26E Norwegian 40,726,691 4,837,918 45,246,536 Air International

10 5818 A320-200 10/18/2013 CFM56-5B4-3 Latam 32,396,626 (1,249,139) 30,835,278

11 36812 B737-800 6/8/2009 CFM56-7B26/3 Sriwijaya 26,128,000 (2,177,205) 23,644,121

12 4906 A320-200 11/30/2011 V2527E-A5 TACA 27,809,500 2,227,252 30,138,952 International

13 6681 A320-200 7/28/2015 CFM56-5B4/3 Qingdao 35,429,290 2,872,146 37,680,470 Airlines

14 7819 A320-200 9/14/2017 CFM56-5B4/3 PT Batik 39,279,093 4,593,293 43,562,312

15 7905 A320-200 10/30/2017 CFM56-5B4/3 PT Batik 39,372,542 4,869,372 43,978,198

16 31105 B737-800 9/23/2010 CFM56-7B24/3 American 27,076,500 (574,602) 26,082,004 Airlines

17 43426 B737-800 9/12/2017 CFM56-7B26E Hainan 41,805,907 5,178,538 46,743,353 Airlines

18 60701 B737-800 3/24/2017 CFM56-7B26E Tianjin Air 40,578,629 4,721,434 44,982,122

19 31081 B737-800 11/30/2009 CFM56-7B24/3 American 25,714,500 (1,975,370) 23,323,960 Airlines

Total ------827,453,940 41,826,631 864,910,609

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

Initial Asset Values

Aircraft appraisals were provided by Morten Beyer & Agnew Inc., IBA Group Ltd., and Avitas Inc. as of November or December 2018. Each appraiser provided appraisals of the HLBV and HLMV of each aircraft in the portfolio.

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 actual maintenance status.

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To project the initial aircraft portfolio's cash flow, the half-life value we use is the LMM of the three appraisers' HLBVs and HLMVs, which totals $827,453,940 for this portfolio. We use this half-life value in both our cash flow modeling and portfolio statistics.

The initial appraised value reported in the transaction documents is $864,910,609 (see table 3).

Table 3

Initial Asset Portfolio Values

Appraisals

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

Morten Beyer & Agnew Inc. 781,280,000 788,657,510 -

IBA Group Ltd. 857,103,000 854,920,000 -

Avitas Inc. 830,868,933 870,134,154 -

Average 823,083,978 837,903,888 -

Alton Aviation Consultancy LLC's maintenance - - 41,826,631 adjustment (July 2019)

Initial appraised value reported in the transaction - - 864,910,609 documents

Aircraft Asset Analysis

Aircraft type

Approximately 39% of the portfolio's value consists of Airbus' A320-200 aircraft. The A320, a medium-size narrow-body jet introduced in 1989, remains one of the most 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).

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Chart 2

Table 4

Initial Asset Portfolio Composition By Type

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

A320-200 39.0 9 3.6 Yes

A330-300 20.4 2 3.3 Yes

B737-800 28.2 7 5.3 Yes

B787-8 12.4 1 3.0 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. 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 the foreseeable future, since replacing all of the current A320 family will take many years.

Approximately 28% of the portfolio's value consists of seven 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 Airbus' A320, which is also a very successful airplane. We consider the B737-800 to be, along with the A320-200, the best aircraft collateral currently

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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. In addition, the neo version of the Airbus A320 has already entered into service. Although the launch of the successor Boeing MAX has been met with unexpected delays, we expect its problems to be resolved in early 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.

Approximately 20% of the portfolio's value consists of two wide-body Airbus A330-300. The A330-300 entered into service in 1994. The A330 is widely used, and competes primarily with the Boeing's B767 and B777 in size and range. The neo version entered into service in late 2018. However, because of the large user base and relatively young age of the A330-300, we do not expect material downward pressure on these aircraft until well into the future.

Approximately 12% of the portfolio's value accounts for one B787-8 aircraft. The B787-8 is a member of Boeing's long-range, midsize family of wide-body planes. The family includes the somewhat larger B787-9 and the still larger B787-10. The B787 family has been a huge success in terms of orders. The companies that own this family are globally diversified and include a mix of airlines and aircraft leasing companies. The B787 family generally carries slightly less passengers than the larger B777 family.

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.

Table 5

Aircraft Depreciation And Useful Life

Annual compounding depreciation Aircraft useful life (rating run, Aircraft useful life (sensitivity run, Aircraft (%) years) years)

A320-200 93.0 25 22

A330-300 92.0 25 22

B737-800 94.0 25 22

B787-8 92.5 25 22

We typically assume 25 years of useful life for the Airbus and Boeing aircraft in this portfolio. 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 its contracted initial lease is not projected to default in our stress run, we assume the asset will be disposed at the contracted initial lease maturity rather than at the end of its useful life.

Initial asset age

With a weighted average age of 3.92 years, we view the portfolio as an early-life aircraft portfolio (see chart 3). Although these aircraft models are still in production, aircraft that are manufactured near the end of the model's production tend to have higher volatility in value retention than those

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produced earlier.

Chart 3

Lessee Analysis

The top three lessees represent approximately 33% of the portfolio by portfolio value (see tables 6 and 7). Our CDO Evaluator considered the lessee concentration and correlations, and our projected default rates at various rating stresses reflect this portfolio's lessee concentration.

Table 6

Lessee Country Distribution

Country Asset value (%) No. of assets

China 14.2 3

Indonesia 12.7 3

Colombia 12.4 1

South Africa 11.0 1

Mexico 9.6 2

Malaysia 9.4 1

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Table 6

Lessee Country Distribution (cont.)

Country Asset value (%) No. of assets

Spain 8.4 2

USA 6.4 2

Ireland 4.9 1

Chile 3.9 1

Brazil 3.8 1

El Salvador 3.4 1

Table 7

Lessee Distribution(i)

Lessee Asset value (%) No. of assets

Avianca 12.4 1

South African Airways 11.0 1

Hainan Airlines 10.0 2

InterJet 9.6 2

PT Batik 9.5 2

AirAsia X Berhad 9.4 1

Vueling 8.4 2

American Airlines 6.4 2

Norwegian Air International 4.9 1

Qingdao Airlines 4.3 1

Latam 3.9 1

GoL 3.8 1

TACA International 3.4 1

Sriwijaya 3.2 1

The initial airline lessees' overall credit quality is estimated to be well into the speculative-grade category (rated 'BB+' or below), which is typical for aircraft operating lease portfolio securitizations. Three of the 19 aircraft (37% of portfolio value) are leased to flag carriers internationally. Approximately 80% 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 used for most aircraft operating lease securitizations.

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 in the mid-4% range annually through 2019. Airbus predicts 4.4% annual growth between 2018 and 2037, while Boeing forecasts 4.6% annual growth 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 freighters. Of the new aircraft scheduled for delivery, 40% will be delivered to Asia-Pacific to meet continuous growth demands, about 40% will be delivered to North America and Europe, mostly to replace aging aircraft, and approximately 20% will be delivered to the rest of the world.

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 continue to find it more cost efficient to lease aircraft and lessors are thus 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. However, beginning in 2010, the capital markets stepped up their involvement in the sector,

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raising secured and unsecured financing to fund new aircraft deliveries and refinance debt maturities. 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, including an increase in the number of asset-backed securitizations. Abundant capital has resulted in new entrants in this sector leading to increased competition.

Servicer Review

Seraph, the servicer for the transaction, will collect rents and other amounts due from lessees, monitor obligations of the lessees under the leases, enforce rights against the lessees, remarket Aircraft for re-lease or sale, and perform other specified aircraft-related services. The servicer is an indirect wholly owned subsidiary of Stellwagen Group Ltd.

The servicer was founded in 2007 as Volito Aviation Services Ireland Ltd., and began operating under the Seraph name in 2015. Seraph has a team of 29 to perform its core functions, with its senior management team averaging over 20 years of experience in the aviation industry. As of June 30, 2019, Seraph manages a portfolio of 90 aircraft that are leased to 46 different lessees and valued at approximately $4 billion.

We believe Seraph's capability to service this transaction's aircraft portfolio is adequate. However, we view its servicing capability less favorably than those of large or midsize global aircraft lessors.

Other Service Providers

Maintenance appraiser

The issuer has contracted Alton to forecast the transaction's lifetime maintenance-related cash flows before the transaction closes. After the transaction closes, the servicer will provide a forward-looking 27-month maintenance expense projection at least semiannually, which Alton will review and confirm for reasonableness and achievability.

Initial liquidity facility provider

BNP Paribas (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. The issuer credit rating on BNP Paribas is expected to be consistent with our counterparty criteria to support the preliminary ratings we assigned to the notes. The transaction's threshold rating requires a long-term unsecured credit rating of 'BBB' or better while the series A notes are outstanding and, if the series A notes are not outstanding, 'BBB-'.

Security trustee, trustee, and operating bank

Wilmington Trust Co. (A/Stable/A-1) will act as the security trustee, trustee, and operating bank.

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Administrative agent

Stellwagen Group Ltd. will act as the administrative agent and, in this role, perform certain administrative and cash management services, including producing the monthly, quarterly, and annual reports.

Aircraft disposition

Members of the Raptor Group may not sell, transfer, or otherwise dispose of any aircraft, except in connection with a lease of an asset as permitted by the indenture. Members of the Raptor Group may sell an aircraft in any of the following transactions:

- A disposition pursuant to a purchase option granted to a lessee, provided the purchase price is equal to or greater than the assumed note target price.

- A disposition within the Raptor Group members.

- A disposition pursuant to receipt of insurance proceeds in connection with the total loss of an aircraft.

- A disposition approved by director resolution, which does not create an event of default.

- A below-value disposition approved by director resolution, which does not create an event of default, provided notice is given to each rating agency.

- A disposition approved by director resolution, which has received approval from the controlling party, provided notice is given to each rating agency.

- In connection with a transfer of title or another interest in an asset to or in favor of a trust or other entity for the purpose of registering the asset under the laws of any applicable jurisdiction, or for tax or other regulatory purposes, where a Raptor Group member retains the beneficial or economic ownership of the asset or from such trust or entity to a Raptor Group member.

- Pursuant to an agreement that is designed to allow a person that is unrelated to Raptor or any Raptor Group member to realize tax benefits associated with the asset or other assets being sold pursuant to the first six bullets above, provided that prior written notification has been provided to each rating agency.

- A disposition of parts, airframes, or engines pursuant to the relevant covenant

- An asset trade in compliance with the relevant covenant

Amortization Schedule

Scheduled amortization

The series A and B notes' scheduled principal payment follows a straight-line amortization schedule to zero over 14 years. The series C notes' scheduled principal payment follows a straight-line amortization schedule to zero over seven years.

Similar to most of the recent aircraft securitization transactions S&P Global Ratings has rated, this transaction has an expected final payment date (seven years post-closing) after which the

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notes' amortization will be full turbo after scheduled principal payments.

Excess proceeds payment

The excess proceeds payment equals the pro rata portion of 105% of any excess proceeds collected. Excess proceeds include end-of-lease payments, finance lease payments, lease payments under a green-time lease, and other payments by a lessee in lieu of maintenance, future lease payments, or other obligations under a lease.

Rapid amortization

A rapid amortization event occurs when any notes remain outstanding after the expected final payment date.

Cash trap

If on any payment date from and after the seventh payment after closing, the DSCR is less than 1.20x, then 100% of the remaining available collections on each payment date after making all payments entitled to priority under the pre-default waterfall will be transferred to the cash trap account. If the DSCR is above 1.20x for three consecutive months, the trigger will be cured and all amounts on deposit in the cash trap account will be released to the collections account.

Payment Priority

All available collections, including the net sales proceeds from dispositions, will be distributed monthly according to the priority of payments show in table 8.

Table 8

Pre-Default Waterfall

Priority Payment

1 Required expenses (operating and administrative expenses, trustee fees, administrative agent fees, servicer fees, etc., including all rent, end of lease, and disposition fees), novation expenses, and all other amounts payable or reimbursable to the servicer under the servicing agreements; maintenance expenses not covered by amounts in the maintenance reserve account; security deposit refunds not covered by amounts in the security deposit account; the liquidity facility commitment fee and indemnification amounts subject, with limited exceptions, to a cap of $10,000,000, to the extent that the balance in the expense reserve account is insufficient to cover such amounts; and an amount to the expense reserve account such that the balance retained in the expense reserve account is equal to the target expense reserve amount.

2 To the series A noteholders, interest payments due and payable on the series A notes (other than step-up interest) and to the hedge counterparties, senior hedge payments, if any, pro rata.

3 Prior to the subordination date, to the series B noteholders, interest payments due and payable on the series B notes (other than step-up interest).

4 To the liquidity facility provider, to repay amounts drawn under the liquidity facility and any accrued interest.

5 To the maintenance reserve account, an amount equal to the additional senior reserve amount.

6 The scheduled principal payment amount of the series A notes.

7 After the subordination date, to the series B noteholders, interest payments due and payable on the series B notes (other than step-up interest).

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Table 8

Pre-Default Waterfall (cont.)

Priority Payment

8 The scheduled principal payment amount of the series B notes;

9 To the maintenance reserve account, an amount equal to the additional junior reserve amount.

10 To the series account for the series A notes, an amount equal to the lesser of the excess proceeds series payment for the series A notes for each asset related to the excess proceeds and the outstanding principal balance of the series A notes.

11 To the series account for the series B notes, an amount equal to the lesser of the excess proceeds series payment for the series B notes for each asset related to the excess proceeds and the outstanding principal balance of the series B notes.

12 If an early amortization event or a rapid amortization event has occurred and is continuing, to the series account for the series A notes, an amount equal to the outstanding principal balance of the series A notes.

13 If an early amortization event or a rapid amortization event has occurred and is continuing, to the series account for the series B notes, an amount equal to the outstanding principal balance of the series B notes.

14 An amount equal to any outstanding disposition premium on the series A notes, to the series account for the series A notes; and then an amount equal to any outstanding disposition premium on the series B notes to the series account for the series B notes.

15 If a DSCR cash trap event has occurred and is continuing, but no early amortization event or rapid amortization event has occurred and is continuing, the remainder to the DSCR cash trap account.

16 Interest amount (other than the step-up amount) on the series C notes.

17 The scheduled principal payment amount of the series C notes.

18 To the administrative agent, an amount equal to the administrative agent fees then due and payable.

19 To the series account for the series C notes, an amount equal to the lesser of the excess proceeds series payment for the series C notes for each asset related to the excess proceeds and the outstanding principal balance of the series C notes.

20 An amount equal to any outstanding disposition premium on the series C notes to the series account for the series C notes.

21 On and after the expected final payment date for such series, the step-up amount to the series account for the series A notes.

22 On and after the expected final payment date for such series, the step-up amount to the series account for the series B notes.

23 On and after the expected final payment date for such series, the step-up amount to the series account for the series C notes.

24 Prior to the delivery expiry date, pro rata to the series A, B, and C notes, an amount equal to the unacquired designated percentage of all remaining amounts after application of the amounts in items 1-23 above.

25 Pro rata, subordinated hedge payments and subordinated expenses.

26 To the aircraft disposition contribution account, the aircraft disposition accrual amount, if any.

27 To the aircraft acquisition account, an amount approved for discretionary aircraft modifications.

28 On and after the earlier of the date all of the notes are paid in full and the last final maturity date, repayment of intercompany obligations, if any, between the Cayman and U.S. issuers.

29 If determined by the board of the U.S. issuer, a distribution from the U.S. issuer to the Cayman issuer, provided that any amount transferred to the Cayman issuer will continue to be part of the available collections amount.

30 All remaining amounts to the E note account.

DSCR--debt service coverage ratio.

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If an event of default has occurred and is continuing, available collections will be distributed monthly according to the priority of payments outlined in table 9.

Table 9

Post-Default Waterfall

Priority Payment

1 To the expense account, up to expense cap.

2 To the liquidity facility provider, to repay amounts drawn under the liquidity facility and any accrued interest.

3 Pro rata, interest amount (other than the step-up amount) on the series A notes and any hedge payments (other than any subordinated hedge payments).

4 To the maintenance reserve account, an amount equal to the additional senior reserve amount.

5 To the series account for the series A notes, an amount equal to the outstanding principal balance of the series A notes.

6 To the series account for the series B notes, the interest amount (other than the step-up amount) on the series B notes.

7 To the series account for the series B notes, an amount equal to the outstanding principal balance of such series B notes.

8 To the series account for the series C notes, the interest amount (other than the step-up amount) on the series C notes.

9 To the series account for the series C notes, an amount equal to the outstanding principal balance of the series C notes.

10 To the administrative agent, an amount equal to the junior administrative agent fees then due and payable.

11 To the payment of any outstanding disposition premium, to the series account for the series A notes; then to the payment of any outstanding disposition premium, to the series account for the series B notes; and then to the payment of any outstanding disposition premium, to the series account for the series C notes.

12 On and after the expected final payment date for such series, step-up amount to the series account for the series A notes.

13 On and after the expected final payment date for such series, step-up amount to the series account for the series B notes.

14 On and after the expected final payment date for such series, step-up amount to the series account for the series C notes.

15 Pro rata, to the hedge counterparties and subordinated hedge payments.

16 On and after the earlier of the date all of the notes are paid in full and the last final maturity date, repayment of intercompany obligations, if any, between the Cayman and U.S. issuers.

17 If determined by the board of the U.S. issuer, a distribution from the U.S. issuer to the Cayman issuer, provided that any amount transferred to the Cayman issuer will continue to be part of the available collections amount.

18 All remaining amounts to the E note account.

Events Of Default

Events of default include, but are not limited to (subject to certain notices and grace periods) the events outlined in table 10.

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Table 10

Events Of Default

Item Trigger

1 Failure to pay the interest amount (but excluding any step-up amount) on the series A notes when due; and, after the series A notes have been repaid in full but solely prior to the subordination date, failure to pay the interest amount (but excluding any step-up amount) on the series B notes when due and the default is unremedied for five business days.

2 Failure to pay the outstanding principal of any note, and failure to pay all accrued and unpaid interest amount (but excluding any step-up amount) on any note, in each case on the applicable final maturity date.

3 Failure to pay any amount, (other than a payment default for which provision is made in items 1 or 2 above) when due and payable in connection with any series of notes, to the extent that there are, on any payment date, amounts available for the payment in the collections accounts or under the liquidity facility, if applicable to the note series, and the default continues for 10 or more business days.

4 Failure of any of Raptor representations or warranties under the indenture or the security trust agreement to be true and correct; or Raptor fails to comply with any of the covenants, obligations, conditions or provisions binding on it under the indenture, the security trust agreement, or any of the notes (other than a payment default for which provision is made in items 1, 2, or 3) above) and the failure materially adversely affects the noteholders.

5 A court having jurisdiction in the premises enters a decree or order for: relief for Raptor, any significant subsidiary of Raptor, or any significant subsidiary group under any applicable law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization, examinership, relief of debtors, or other similar law in effect; the appointment of a receiver, liquidator, examiner, assignee, custodian, trustee, sequestrator, or similar official of raptor or any significant subsidiary of raptor or any significant subsidiary group; or the examinership or the winding up or liquidation of the affairs of Raptor, any significant subsidiary of Raptor, or subsidiary group and, in each case, the decree or order will remain unstayed or the writ or other process will not have been stayed or dismissed within 90 days from entry.

6 Raptor, any significant subsidiary of Raptor, or any significant subsidiary group: commences a voluntary case under any applicable law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization, examinership, relief of debtors or other similar law in effect, or consents to the entry of an order for relief in any involuntary case under any such law; consents to the appointment of or taking possession by a receiver, liquidator, examiner, assignee, custodian, trustee, sequestrator, or similar official or for all or substantially all of the property and assets of Raptor, any significant subsidiary of Raptor, or any significant subsidiary group; effects any general assignment for the benefit of creditors; or admits in writing its inability to pay its debts generally as they come due, or voluntarily suspends payment of its obligations.

7 A judgment or order for the payment of money in excess of 10% of the aggregate adjusted portfolio value (other than as a result of a judgment or order for the payment of any special litigation expenses or indemnification amounts) is rendered against Raptor, any significant subsidiary of Raptor, or any significant subsidiary group; and either enforcement proceedings have been commenced by any creditor upon such judgment or order, or there is a period of 30 consecutive days during which a stay of enforcement of the judgment or order, by reason of a pending appeal or otherwise, is not in effect. Provided that the judgment or order will not be an indenture event of default if and as long as either: the amount of the judgment or order is covered by a valid and binding policy of insurance between the defendant and the insurer covering payment, and the insurer, which will be rated at least "A" by A.M. Best Co. or has received a substantially equivalent rating from a similarly situated entity, has been notified of, and has not disputed the claim made for payment of, the amount of such judgment or order; or the judgment or order is for the payment of amounts (including indemnification amounts) owed or payable by Raptor or any subsidiary to any secured party under, or pursuant to the notes, the indenture, or any other related document, and has been given in favor of a person who has agreed to limit such person's recourse to Raptor or the subsidiary on the terms set forth in the indenture or on substantially similar terms set forth in any related document binding on such person, (including in a secured party supplement, as defined in the security trust agreement).

Servicer Termination Events

Servicer termination events include the following:

- The servicer ceases, or gives notice to Raptor that it intends to cease, to be actively involved in

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the aircraft lease servicing and management business.

- The servicer fails in any material respect to perform any material services in accordance with the servicer's standard of care or conflicts standard, and the failure has a material adverse effect on the Raptor Group.

- Any representation or warranty made by the servicer under the servicing agreement or certain related documents proves to have been false or misleading in any material respect when made, and the misrepresentation has a material adverse effect on the Raptor Group or a material adverse effect on the servicer's ability to perform its obligations under the servicing agreement.

- The servicer becomes subject to certain involuntary bankruptcy or insolvency proceedings, and in certain cases, the proceedings continue undismissed for 60 days or are not discharged within 60 days.

- The servicer becomes subject to certain voluntary bankruptcy or insolvency proceedings.

- An indenture event of default occurs regarding the payment of interest on the senior obligations due to insufficient funds in the collections accounts on the relevant date (i.e., a date on which no amount is available for drawing under the liquidity facility) and it continues unremedied for 60 days.

- The occurrence of any other indenture event of default under the indenture and, except in the case of certain insolvency events of raptor, the issuance of a default notice where the outstanding principal balance of the notes and all accrued and unpaid interest is due and payable. Provided that at the time of the indenture event of default at least 25% (by number) of the aircraft will not be subject to leases, and each aircraft will have been off-lease and reasonably available for re-lease for a period of at least six months following the date the default occurred.

- The servicer breaches its undertaking to not take steps to procure the appointment of an administrative receiver, make any administrative order, institute against Raptor or any member of the Raptor Group any bankruptcy, reorganization, arrangement, insolvency, winding up, liquidation, examinership, composition, or similar proceedings under the laws of any jurisdiction.

Cash Flow Analysis Assumptions

To assess the portfolio's ability to service the loans, 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,

- Repossession, remarketing, and refurbishment (RRR) costs,

- Deferred maintenance, and

- Reduced security deposit requirements.

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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 recessions (see table 11). 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. In the 22-year useful life sensitivity run for all aircraft, we started the second recession in month 114 and the third recession in month 207.

Table 11

Recession Timing

Rating

A BBB BB

Recession 1 start (mos.) 1 1 1

Recession 2 start (mos.) 114 114 114

Recession 3 start (mos.) 233 233 233

Length of the three recessions (years) 4 4 4

Lessee defaults assumptions

We use our CDO Evaluator to generate the aircraft portfolio-level default rate. The simulation 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 quality estimate based on public information. With respect to the off-lease aircraft, we assume a rating of 'CCC-' for the future lessee.

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 its revenue and profit margins and its moderately high-risk competitive risk and growth. This model enables us to address lessee industry, country, and region by running 500,000 correlated simulation scenarios to address 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 (see table 12). 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.

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Table 12

Lessee Default Rate

Rating

A BBB BB

Lessee default rate (recession 1) (%) 78.24 70.37 57.02

Lessee default rate (recessions 2 and 3) (%) 83.24 75.37 62.02

Lease rate 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 (see table 13). 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.

These lease rate/sale-to-value 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 declining lease rate in the first and last years of the recession. This assumption reflects our view that aviation industry recessions, particularly the aircraft values' and rental rates' decline and recovery, typically take time.

Table 13

Lease Rate/Value Decline

Rating

A BBB BB

Value decline (recession 1) (%) 51.4 39.2 27.6

Value decline (recessions 2 and 3) (%) 70.8 56.3 41.9

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. We assume three months aircraft-on-ground time outside a recession and six to 12 months during a recession(see table 14). Within a recession, we assume a longer remarketing period.

Table 14

Repossession/Remarketing Time

Rating

A BBB BB

Repossession/remarketing time (in recession) (mos.) 10 9 8

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Table 14

Repossession/Remarketing Time (cont.)

Rating

A BBB BB

Repossession/remarketing time (outside recession) (mos.) 3 3 3

Repossession/remarketing/refurbishment 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 (see table 15).

Table 15

Repossession/Remarketing/Refurbishment Costs

Rating

A BBB BB

Repossession costs 500,000 in recession; 500,000 in recession; 500,000 in recession; (narrow-body passenger and 350,000 outside recession 350,000 outside recession 350,000 outside recession regional) ($)

Repossession costs (wide-body 1,500,000 in recession; 1,500,000 in recession; 1,500,000 in recession; passenger) ($) 1,000,000 outside recession 1,000,000 outside recession 1,000,000 outside recession

Lease term assumptions

For re-leasing events, we typically assume lease terms of three years during each recession and five-year lease terms for re-leasing events outside of a recession (see table 16).

Table 16

New Lease Term

Rating

A BBB BB

Lease term (in recession) (years) 3 3 3

Lease term (outside recession) (years) 5 5 5

Security deposit assumptions

In most of the aircraft securitization transactions S&P Global Ratings has rated, the seller transfers the security deposits under the initial leases to the issuer when the related aircraft is delivered into the transaction. Security deposits held by the issuer can help to partially offset the defaulted rent and RRR costs if a lessee defaults. We typically incorporate the security deposits into our modeling after reducing the amount by up to 40% of the security deposits for initial leases

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(the higher percentage reductions correspond to the higher rating levels). For modeling purposes, we assume no security deposits for subsequent leases (see table 17).

Table 17

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 the aircraft 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, such as airframe maintenance, airframe component maintenance, and engine maintenance (including engine performance restorations and limited-life 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. In the former, the 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 (funded by a maintenance reserve collection). In the latter, 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.

Maintenance Cash Flow Assumptions

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) that Alton generates into our overall cash flow model and model the maintenance account activity according to 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 lease terms 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, repossession, etc.

Alton's 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

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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," 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 a maintenance reserve, and maintenance delay timing. Given the uncertainty as to 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 in the stress-case scenario. 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 expenses and timing, Alton ran a set of Monte Carlo simulations involving 250 trials in which specific lease defaults and the timing of such lease defaults varied, and then took the average of the maintenance-related cash inflows/outflows.

Under a "high" 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 $474.5 million in an 'A' rating stress, $494.7 million in a 'BBB' rating stress, $519.7 million in a 'BB' rating stress, and $813.2 million in a base case. The total maintenance-related outflows would equal approximately $439.0 million in an 'A' rating stress, $432.3 million in a 'BBB' rating stress, $436.8 million in a 'BB' rating stress, and $524.4 million in a base case. Therefore, the cumulative projected maintenance profit/loss equals an approximately $35.4 million surplus in an 'A' rating stress, a $62.5 million surplus in a 'BBB' rating stress, $82.9 million surplus in a 'BB' rating stress, and a $288.8 million surplus in a base case.

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

Chart 5

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The transaction has a maintenance reserve account, which will be funded at closing with note proceeds totaling approximately $1.0 million. Maintenance expenses will be drawn first from the maintenance reserve accounts and, if insufficient, then from the expense account or by drawing under the liquidity facility.

After paying senior fees, interest on the loans, and liquidity facility advances, the remaining available collection will be used to top up the maintenance reserve account up to the senior maintenance required amount so that this account can maintain a required amount equal to the sum of the following projected future monthly maintenance expenses, as applicable:

- Before the seventh anniversary of the initial closing date, the sum of 100% of the maintenance expenses in month one, 80% in month two, 60% in month three, 40% in month four, 20% in month five, and 10% in month six; and

- Starting from the seventh anniversary of the initial closing date, the sum of 100% of the maintenance expenses in month one, 90% in month two, 90% in month three, 80% in month four, 80% in month five, 70% in month six, 70% in month seven, 60% in month eight, 60% in month nine, 50% in month 10, 50% in month 11, 40% in month 12, 40% in month 13, 30% in month 14, 20% in month 15, and 10% in month 16.

After paying the series A notes' scheduled principal payment amount and the series B notes' scheduled principal payment amount, the transaction will top up the maintenance reserve account so that the maintenance reserve account can maintain a required amount equal to the sum of the following projected future months' maintenance expenses:

- The sum of 100% of maintenance expenses in month one, 90% in month two, 80% in month three, 70% in month four, 60% in month five, 50% in month six, 40% in month seven, 30% in month eight, 25% in month nine, 20% in month 10, 15% in month 11, and 10% in month 12.

After the transaction closes, the servicer will perform maintenance expense projections for the forward-looking 27 months each year, which Alton will review and confirm for reasonableness and achievability.

Amounts on deposit in the maintenance reserve account may be used only to fund maintenance costs.

Cash Flow Analysis Results

Our ratings approach considered cash flow primarily from the 19 assets in the portfolio. Cash is generated from lease or replacement lease payments, aircraft/engine disposition proceeds, and the liquidity facility. 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 our preliminary 'A (sf)' rating, the cash flow results showed that timely interest and ultimate principal on the series A notes would be paid in full by August 2041. Under our stress scenarios commensurate with the preliminary 'BBB (sf)' rating, the cash flow results showed that ultimate interest and principal on the series B notes would be paid in full by March 2041. Under our stress scenarios commensurate with the preliminary 'BB (sf)' rating, the cash flow results showed that ultimate interest and principal on the series C notes would be paid in full by June 2040.

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

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Chart 6

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

Chart 7

Chart 8 shows the series A notes' projected amortization curves under an 'A' rating run stress

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compared with the scheduled amortization curve.

Chart 8

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

Chart 9

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

Chart 10

Sensitivity Analysis

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

In sensitivity run 1, we modeled the aircraft to be sold when it reaches 22 years old and started the third recession in month 207. The series A notes are projected to be paid off in November 2039 at the 'A' rating stress, the series B notes are projected to be paid off in October 2039 at the 'BBB' rating stress, and the series C notes are projected to be paid off in February 2039 at the 'BB' rating stress.

In sensitivity run 2, we analyzed how sensitive lifetime revenue is to our assumed lease rate factors (or lease yield). We reduced the lease rate factor by a 2% break-even haircut at the 'A' level for the series A notes and the class still receives timely interest and ultimate principal. We reduced the lease rate factor by a 6% break-even haircut at the 'BBB' level for the series B notes and the class still receives ultimate interest and principal. We reduced the lease rate factor by a 6% break-even haircut at the 'BB' level for the series C notes and the class still receives ultimate interest and 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 net present value (NPV) of the lifetime revenue and compared it in each scenario with that in a base-case scenario (i.e., a cash flow run without any stresses in an aircraft lease rental and sales proceeds analysis). See tables 18-20 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.

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Table 18

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 69.92 Paid off in August 2041; no interest shortfall.

'A' 22-year useful life 65.56 Paid off in November 2039; no interest sensitivity shortfall.

'A' (2% LRF breakeven) 68.93 Paid off in March 2042; no interest shortfall.

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

Table 19

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 74.51 Paid off in March 2041; no interest shortfall.

'BBB' 22-year useful life 70.60 Paid off in October 2039; no interest sensitivity shortfall.

'BBB' (6% LRF breakeven) 71.34 Paid off in October 2042; no interest shortfall.

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

Table 20

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 81.35 Paid off in June 2040; no interest shortfall.

'BB' 22-year useful life 77.64 Paid off in February 2039; no interest sensitivity shortfall.

'BB' (6% LRF breakeven) 78.22 Paid off in October 2042; no interest shortfall.

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

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Table 21

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

Zephyrus KDAC Capital Aviation Raptor JOL AIR Ltd. Aviation Finance Aircraft (Series MAPS Partners MAPS (Cayman) Finance 2019-1) 2019-1 Ltd. 2018-1 Ltd. START Ltd. 2018-1 Ltd. Ltd.

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

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

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

A' rating run 69.92 72.06 68.82 68.26 70.8 72.03 71.69 (%)

Sensitivity run 68.93 (with 71.60 (with 61.92 (with 67.84 (with 68.87 (with 66.57 (with 51.53 (with - break even on 2% 1% 28% 1% 4% 13% 3.5% 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) BBB(sf) N/A BBB(sf) BBB(sf) BBB(sf)

Class B LTV (% 81.00 83.10 76.00 N/A 78.00 78.00 74.98 denominator is the LMM of the half-life aircraft values)

Base-case run 100 100 100 N/A 100 100 100 (%)

'BBB' rating 74.51 77.6 76.3 N/A 76.8 77.56 77.53 run (%)

Sensitivity run 71.34 (with 71.34 (with 65.86 (with N/A 73.68 (with 65.36 (with 54.09 (with - break even on 6% 13% 22% 6% 27% 13% 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) to LRF) haircut to LRF)

(i)Expected. NPV--Net present value. LTV--Loan-to-value. LRF--Lease rate factor.

Surveillance

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

We will maintain surveillance on the transaction until the loans 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 transaction performance information, research, and

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analysis, as well as information on our methodology and ratings, to increase the level of transparency.

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 2016: The Effects Of The Top Five Macroeconomic Factors, 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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Contact List

PRIMARY CREDIT ANALYST SECONDARY CONTACT SECONDARY CONTACT

Rajesh Subramanian Belinda Ghetti Maxym Rumyantsev Centennial New York New York (1) 303-721-4241 (1) 212-438-1595 + 1 (212) 438 0302 [email protected] [email protected] [email protected]

SECONDARY CONTACT CORPORATE & GOVERNMENT CREDIT ANALYST ANALYTICAL MANAGER

Chang Ge, CFA Betsy R Snyder, CFA Kate R Scanlin New York New York New York (1) 212-438-4389 (1) 212-438-7811 (1) 212-438-2002 [email protected] [email protected] [email protected]

RESEARCH ASSISTANT

Peter J Lorbiecki Centennial

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