A portion of the proceeds of the three-note issuance MAPS 2019-1 Ltd will be used to refinance the RISE Ltd. aircraft ABS transaction that was initially issued and serviced by GE Capital Aviation Services, and in which Merx was an equity investor. But last year Merx replaced GECAS as servicer of RISE and all but one of the aircraft in the MAPS 2019-1 portfolio are owned by subsidiaries of the issuer as part of the RISE securitization, with the one other asset currently owned and serviced by Merx. Pursuant to the refinancing, RISE was renamed MAPS 2019-1 Limited.

The initial weighted average aircraft age of the portfolio is approximately 8.4 years, with a weighted average remaining lease term of approximately 5.3 years. The average age of the portfolio is younger than most of the recent mid-life to end-of-life aircraft ABS transactions.

In a report on MAPS 2019-1, Kroll Bond Rating Agency says that ‘Although Merx does not have a lengthy historical track record in terms of servicing aircraft portfolios they have had successful remarketing activity across multiple aircraft over the past year ... and possesses the capability to remarket, maintain and repossess the aircraft in the portfolio over the life of the transaction.’

The agency also notes that in MAPS 2019-1 there was a relatively low variance between the half-life base values provided by the appraisers compared to other aircraft ABS transactions, something it views as a credit positive for the transaction.

It also observes that unlike other recent aircraft ABS transactions, the majority of aircraft in the portfolio will already be owned by the issuer, including the 18 aircraft refinanced from the RISE transaction, with the other aircraft expected to be transferred during the delivery period, which begins on the closing date and ends 270 days thereafter. This compares with more typical delivery periods up to 365 days. The approach adopted in this issuance, the agency argues, ‘forces the servicer to focus on contributing the aircraft to the transaction earlier than compared to certain other aircraft ABS transactions.’

With affiliates of Merx currently owning, and Merx servicing, all the aircraft in the portfolio, KBRA considers there is less execution risk relating to delivery of the aircraft into the transaction compared to other recent transactions. In addition, it notes, aircraft ABS transactions have had a successful track record in delivering the vast majority, if not all, of the aircraft within the prescribed delivery periods. MAPS 2019-1, unlike other aircraft ABS transaction, does not allow for substitutions of any aircraft.

Unusually, too, the portfolio includes a currently off-lease 14 year-old 737-800 and another two 737-800s on which lease payments are overdue. Monthly lease payments amounting to $980,000 are due on an aircraft on lease to Hainan Airlines, a portion of which is more than 100 days overdue. The lessee has indicated it intends making a payment on this in mid-February and KBRA notes that Hainan Airlines ‘has remitted lease payments to the lessor on a delayed, but consistent basis throughout its lease term.’ As of February 14, lease payments of $300,000 were overdue on a 737-800 on lease to Garuda Indonesia, portion of which are overdue by more than 30 days.

KBRA says that MAPS 2019-1 mitigates the exposure for the off-lease aircraft by including a trigger event such that if the aircraft is not utilized by August 15, 2019, it is required to be sold and all debt raised against the aircraft is required to be repaid in full, leaving the portfolio secured by the remaining 18 aircraft. KBRA says it believes the remaining 18 aircraft would support the assigned ratings based on the size and diversity of the portfolio at such time.

Merx was co-founded as an aircraft leasing and management company in 2012 by Apollo Investment Corporation and a former Citigroup MD, Gary Rothschild, who managed the bank’s aircraft trading and leasing business and has over 25 years of experience in aviation finance. It is headquartered in New York and has an office in Dublin. As of December 31, 2018, Merx owned or managed 105 aircraft on lease to 47 airlines in 26 countries. This includes 44 aircraft for which Merx took over the servicing in May 2018.

Over the last five years the company has transitioned from a ‘platform-light’ to a full-service asset manager, recruiting internal counsel, marketing and technical personnel to support its growth.

Merx’s strategy for continued growth is to participate in secondary market transactions with other aircraft lessors and financial institutions, sale-lease back transactions with airlines as well looking out for possible merger and acquisition opportunities.