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May 31, 2019

Milbank Advises on Groundbreaking Japanese Operating Lease ABS

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Milbank advised JP Lease Products and Services and Stratos Aircraft Management on a first-of-its-kind aircraft lease ABS transaction. 

The JOL AIR 2019-1 deal, comprising 15 aircraft, is the first aircraft lease ABS to include “Japanese operating lease” (“JOL”) structures.  

The deal is JP Lease’s first ABS, and Stratos’ first ABS deal as servicer. It is comprised of a $456 million Class A debt tranche (rated ‘A’ by Kroll Bond Rating Agency (KBRA") and Standard & Poor’s (S&P), a $73.8 million Class B debt tranche (rated at BBB by KBRA and S&P) and an unrated $23.8 million Class C debt tranche. Equity in the transaction is provided by Japanese investors via the JOL structure. Goldman Sachs acted as lead structuring agent and lead left bookrunner, while Deutsche Bank was joint structuring agent and joint lead bookrunner. Natixis’ New York branch was the liquidity facility provider. 

In addition to the JOL structuring, the deal included a number of innovative features, such as a 100% cash sweep at the bottom of the waterfall (for the benefit of the Class A notes and Class B notes) before the equity is paid.

All 15 aircraft were transferred into the ABS on the closing date, with proceeds repaying a secured warehouse facility (on which Milbank represented JP Lease and Stratos). 

The Milbank team was comprised of lawyers from the London and New York offices and was led by Transportation and Space Group partners Drew Fine and Nick Swinburne, alongside partners Brett Nadritch and Andrew Walker, special counsel Freyda Mechlowicz, associates Jon Cripps, Niels Jensen, Olivia Cornelius, Matt Slider, George Miller, Demi Hueth and Elizabeth McNichol, and trainee Ryan Cattle.

Mr. Swinburne, co-head of Milbank’s European Transportation and Space group said: “We are very pleased to have been able to help JP Lease and Stratos on this unique and complex transaction. The deal demonstrates Milbank’s unmatched ability to structure and execute transactions which break new ground in the transportation finance sector, as well as our ability to bring together bespoke teams to achieve the best results for our clients.” 

Mr. Fine, leader of Milbank’s global Finance practice, added: “Milbank is invariably involved in the transactions which bring new structures and features to the aircraft lease ABS market. This deal shows the strength and sophistication of the market, and shows how Milbank leverages its long and deep experience of aircraft lease ABS to add real value to our clients.”