Fitch's stress and rating sensitivity analysis are discussed in the new issue report titled 'RISE Ltd. Asset Backed Secured Term Loan, dated
The loans to RISE are backed by payments pursuant to operating leases and disposition proceeds on a portfolio of 25 narrowbody and 1 widebody commercial aircraft manufactured by Airbus (A) and Boeing (B).
KEY RATING DRIVERS
Quality of the Portfolio: The pool is of high quality aircraft, comprising a majority of young tier 1 aircraft (in-production, in-demand aircraft types) with generally long expected remaining useful lives. The transaction also benefits from a long average remaining lease term, which limits releasing risk.
Technological Risk Related to the Assets: Despite their current popularity, the aircraft in the pool face replacement programs in the latter half of this decade. Fitch expects that the large operator bases and long lead time to replace these assets will partially mitigate this risk.
Concentrations in Poor Credit Quality Lessees: RISE carries significant lessee concentrations, and most leases are extended to unrated or speculative-grade lessees. Fitch assumed unrated lessees would perform consistent with a 'B' to 'CCC' Issuer Default Rating (IDR) depending on the assumed economic environment, to reflect increased default risk.
Cyclicality of the Commercial Aviation Industry: Commercial aviation has historically been subject to significant cyclicality stemming from macroeconomic downturns. These periods are typically marked by reduced asset utilization, values and lease rates. Fitch's analysis assumes multiple periods of increased default risk and significant volatility in asset values and lease rates over the life of the transaction.
Structure, Credit Enhancement and Cash Flow Stress Results: Credit enhancement (CE) primarily comprises overcollateralization (OC) and a liquidity facility. The transaction also benefits from various performance triggers that could accelerate amortization. Fitch created multiple cash flow scenarios to evaluate the structure, as detailed in this report.
Heavy Servicer Reliance: RISE will depend on GECAS's ability to collect lease payments and maintenance reserves, remarket and potentially repossess the aircraft following lessee default, and procure maintenance, among other functions, which are all crucial to the assets' values and transaction performance. Fitch believes GECAS, a leading aircraft lessor, to be capable of performing these functions on behalf of RISE.
The proceeds of the offering by RISE will be paid primarily to affiliates (or associated trusts) of GECAS selling the aircraft to RISE. GECAS is a wholly owned subsidiary of General Electric Capital Corporation (GECC), whom in turn is a wholly owned subsidiary of General Electric Company (GE; Not rated publicly by Fitch).
Additional information is available at 'www.fitchratings.com'.
--'Global Rating Criteria for Aircraft Operating Lease ABS' (
--'Global Structured Finance Rating Criteria' (
--'Counterparty Criteria for Structured Finance and Covered Bonds' (
Global Rating Criteria for Aircraft Operating Lease ABS
Global Structured Finance Rating Criteria
Counterparty Criteria for Structured Finance and Covered Bonds
Source: Fitch Ratings
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