Description

Summary:

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SAVE EETC first and second lien notes are a buy. First lien SAVE EETCs offer a strong margin of safety and are a buy at $90 or below. 2nd lien EETC securities offer a strong risk/reward under $80 if you take a view that SAVE is unlikely to file for Chapter 11 bankruptcy, or that they would be affirmed in any distressed, Chapter 11 bankruptcy scenario, which I do. 

SAVE has two outstanding EETC deals (2015 and 2017). Both are secured by narrowbody A320-200 and A321-200 aircraft that offer a margin of safety. 2015 planes are 6-7 years old and 2017 deal planes are 3-4 years old, compared to a 20 year useful life for your average narrowbody aircraft. At current security pricing, generally, LTVs of ~70% or better on first lien notes and 2nd lien notes are covered by assets due to sub $80 prices. First lien 2015 bonds are trading at or under $85 (300 bps wide to 2017 “AA” fist lien) and second lien SAVE EETCs are under $80, making the 2015 deal relatively more attractive. For the 2015-1 “A” first lien deal, there’s a return opportunity of 10%+ should the security re-rate to a 5% yield from it’s current 7%+ yield, resulting in a price appreciation from $85 to $95.

I will assume some familiarity among readers regarding the EETC structure to begin with. At the end of the write up, I will highlight some features of the EETC structure for those less familiar.

This thesis is focused on the bonds’ favorable security packages (narrowbody planes), Spirit Air’s exceptionally strong liquidity position, and the likely slow recovery in North American leisure travel which suits Spirit’s model (relative to International travel facing a longer recovery timeline). These are the key drivers. SAVE is a relatively well known airline, and I will leave some more in depth, competitive analysis of the airline to past Spirit write ups on here.

The A320 family of narrowbody planes back all SAVE EETCs, as Spirit operated a homogenous A320 fleet (like LUV does with its 737s). A320 aircraft are historically very liquid planes, used by global airlines as low cost, workhorse narrowobdy aircraft for point to point flights. The A320 family is second only to 737s in terms of ubiquity for narrowbody planes. Currently there are over 4,000 A320s and 1,600 A321s in global airline fleets. Airline trends have favored narrowbody aircraft historically, and will continue to do so going forward as air travel recovers from the current pandemic. The recovery will favor domestic, efficient, low cost leisure focused aircraft, which A320s are suited for. 

Narrowbody aircraft are preferred for domestic travel and are much lower cost ($30M+) relative to twin aisle, widebody aircraft ($100M+). Furthermore, within narrowbodies, the environment of lower fuel costs for longer favors middle aged aircraft relative to more expensive, new age aircraft that are more fuel efficient. However, this will be offset to some degree given lower load factors and global ESG trends favoring more fuel efficiency in new gen narrowbodies (A320neo).

 It's important to note that the market has been short narrowbody aircraft for some time as well, considering the 7-year backlogs for MAX and A320 NEOs pre-COVID, which has supported middle aged and older aircraft values in these SAVE EETC deals. MAX delivery delays and A320NEO engine delays have also supported aircraft values to date. It also could lead to some more downside in aircraft values than the market expects as deliveries resume.  All that said, aircraft values will remain under pressure as air travel demand won’t hit 2019 levels for another 36+ months, if ever. Most airlines are likely overfleeted, so as they go bankrupt or leases run off, supply likely outpaces retirements. Despite the collateral value pressures, the Spirit EETC deals are well covered by their assets, especially when EETC securities can be bought well below $100 par, adding to their margin of safety.

Why the opportunity exists

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The entire aircraft EETC market remains extremely dislocated as the airline industry is disrupted by the COVID pandemic, creating real opportunities in some EETC securities with favorable collateral packages, especially those issued from stronger airlines that have lower odds of filing for Chapter 11 bankruptcy. I view SAVE as one of those well positioned airlines coming out of the pandemic (whereas AAL might have a tough time).

 Nearly all of the SAVE EETC security complex offers a 10%+ return opportunity as the market becomes less dislocated and as air travel recovers slowly, resulting in a re-rating of bond prices to be more in line with "better" airlines like Delta and “better” regionals like JetBlue. I will focus on SAVE 2015-1 first and second lien EETCs, and also touch on the SAVE 2017-1 deal. Either are a buy at the right prices, but the 2015 deal offers more upside with only modestly more risk due to 2-3 year older aircraft.

The opportunity also exists because EETCs, especially first lien notes, have generally existed as "A" or "AA" investment grade notes, providing a yield pickup to vanilla "A" and "AA" corporate bonds to investment managers that can invest outside the index. With the recent turmoil, some IG investors not knowing what they own, or being rating sensitive, have hit the exit button, resulting in ugly TRACE prints that have lingered too long in an environment with compressing corporate bond spreads and low yields. This has resulted in a slow uptick of interest among High Yield buyers, as they get comfortable with the EETC structure. Bids on EETCs have finally begun to improve, but it it takes time for HY managers to get up to speed on the sector.

Furthermore, it's increasingly likely that first lien notes with solid collateral and high affirmation factors will retain some degree of investment grade ratings from the ratings agencies. This may help new or existing IG investors jump back into the EETC market in the 'lower for longer' rate environment, supporting security prices.

Bear in mind, prices are based on loose broker indications and recent trades in the securities. The market is dislocated and illiquid, but they are transact-able using trading desks well versed in the space.

SAVE EETC Securities:

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SAVE 2015-1 Securities

LTVs at $30M per aircraft:

• “A” - $330M outstanding debt. 74% LTV at current appraisal values. 106% assuming 30% downside shock in collateral values (at $100 par). LTV falls to 90% assuming a $85 entry price and 30% shock in collateral values.

• “B”- $67M outstanding debt. 89% LTV. 126% with 30% shock (at $100 par). At a $75 price, LTV is 96% assuming a 30% decline in collateral values.

• “C” - $103M outstanding debt. 112% LTV. 160% with 30% shock (at $100 par)

The 2015-1 Deal consists of 15 aircraft with $450M of collateral value at current appraisal values.

• 3 A320-200s 

• 12 A321-200s. 

Planes have an estimated appraisal value between $30 and $34 million per plane. Using $30 million per plane, we arrive at $450 million of collateral value. SAVE 2015-1 first lien notes currently have $330 million of outstanding debt. This represents a 74% LTV or 1.35x asset coverage on the deal. Appraisal values are certainly not mark to market given the lack of aircraft trading happening post-COVID. Nonetheless, it would take another 30% decline in plane values for the first lien notes to approach a 100% LTV.

The most recent collateral value estimates from Oriel and Cirium (available on Bloomberg)  are $472 million and $454 million respectively for the entire SAVE 2015 EETC deal as of May 2020. These estimates are already 10% lower versus December 2019. Oriel estimated collateral values of $529 million at the end of 2019 and Cirium at $550 million.

So to underwrite the assets, you have a margin of safety of roughly 20-25% in underlying collateral values if you assume some draconian 5-10% going to costs for a potential scenario of a bankruptcy and EETC rejection. This margin of safety increases when buying first lien bonds at $85 rather than $100 par.

Second lien 2015 notes in the same deal offer a higher risk reward if you’re comfortable taking the view SAVE does not file bankruptcy or affirms the notes in the event they file. These notes have a 80% LTV using current collateral value estimates, which grows to 116% assuming a very worst case of 30% shock to collateral values. But considering a price of $75, 2nd lien notes remain covered with a 96% LTV in that scenario. 

Recent Trades and 2015 vs 2017 first lien

Notably, the SAVE 2015-1 first lien “A” notes are inexplicably too cheap to SAVE 2017-1 first lien “AA”. The 2015 1L has planes that are only 3 years older than the 2017 Deal,  but 2015 1st lien has traded 300 bps wide to the 2017 “AA”. While the 2017 has a higher affirmation factor, it’s not worth 300 bps in my view.

Most recent trace prints: 

6/17/2020 : SAVE 4.1 2028 traded 83.5/84 - 2015 1st lien “A”

6/17/2020:  SAVE 3 ⅜ 02/15/30 traded $92.36/92.61 - 2017 1st lien “AA”

6/15/2020:  SAVE 4.45 04/01/24 traded $75.25

SAVE 2017-1 EETCs

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LTVs:

• “AA” $221M outstanding – 61% LTV. 88% with 30% shock (at $100 par)

• “A” $74M outstanding – 82% LTV. 117% with 30% shock (at $100 par)

• “B” $66M outstanding – 102% LTV. 143 with 30% shock (at $100 par)

SAVE 2017-1 EETCs are similarly well secured by twelve 3-4 year old narrowbody A320-200 and A321-200 aircraft. 2017 deal has a higher affirmation factor in any bankruptcy filing due to the younger planes. If you don’t believe SAVE will file, the 2015 offer a lot more attractive entry point. Appraisal values for these 2017 aircraft are between $34M and $40M. Just using $30M, that’s $360M of collateral value for the deal in total. That results in 61% LTV for “AA” ($221M of debt), 82% for “A” (+74M of debt), and 102% for “B”. Again, these LTVs are at $100 par prices, so buying below par gives investors a higher margin of safety in scenarios where collateral values fall.

Spirit Air Liquidity:

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I view a SAVE view bankruptcy unlikely at this point after their equity and convert raise in the middle of May. SAVE has 20 months of liquidity at current burn rates and is favorably positioned to recover quicker than other airlines as air travel recovers due to their North America and Leisure focus. In the event they do file for Chapter 11 protection if demand fails to come back quickly and a COVID-19 second wave occurs, I believe they would affirm this EETC, so the bonds would remain money good despite more volatility.

Today SAVE has roughly $2.4Bn of liquidity after a recent $360M raise with a convert and stock deal that came mid-May. Liquidity consists of the following:

• $1.3B cash

• $335M CARE Act PPP support

• A potential $741M CARE Act secured loan. SAVE has applied for the $741M secured government loan, but like every airline, they are still evaluating it and have yet to take it. I have included it in the $2.4B liquidity figure. They have until September to do so. 

Treasury has encouraged airlines to be ‘creative’ with security packages for these low cost secured loans, and the loan could be secured by spare parts, unencumbered aircraft (which SAVE has), or even softer assets like gates, routes, and  loyalty programs. For example, AAL estimated a loyalty program value of $15-30B. It's clearly a joke, but is being done to have some sort of security package available for the gov't secured loans. SAVE has $650M in unencumbered assets should it need more financing at a later date from capital markets. UAL is pursuing a secured loan (which will be syndicated) backed by secured interests in their loyalty program, with loan talk value of $5B.

With a burn rate of $4M a day (average, expected to improve 2H’20), SAVE has ~20 months of liquidity to ride out a prolonged period of low demand. This bests every other US airline except for LUV. Upside exists in the burn rate should SAVE successfully defer deliveries of new Airbus NEO aircraft scheduled for this year. Furthermore, mass layoffs are possible after September 30 when the current payroll support package from the government expires (assuming no more gov’t help), representing more upside in burn rates that suit the new environment.

Spirit Air Competitive Positioning

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The airline is relatively well positioned to come out of the COVID-19 pandemic as a low cost, high operating margin, relatively low legacy cost structure, leisure focused, North American airline with ample liquidity. SAVE checks most of the boxes when it comes to favorable themes for airlines coming out of the COVID pandemic that investors in secured EETCs should better appreciate. The main exception being that it’s a fringe airline that will not be saved by the government in any imaginable scenario. 

SAVE represents less than 5% of domestic air travel The vitriol hate some people and buy side investors has always weighed on security prices to some extent, given the no frills, high fee, poor service operating model Spirit is notorious for that doesn't resonate with your average buy side investor. Thus, bonds will not recover to levels seen from Delta, but that’s priced in given security prices in the $80s for first lien notes.

SAVE EETC Scenarios

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1) SAVE avoids bankruptcy –

Bonds will make scheduled payments and are money good over time. In this scenario, all SAVE EETCs will trade up to $100 par or better over time, representing a 4% yield for a first lien note on 5-year investment grade paper.

2) SAVE files for bankruptcy –

While unlikely today given SAVE’s liquidity position, a more deadly, prolonged second wave from Covid-19 could push the industry into bankruptcy. In a bankruptcy scenario, SAVE has 60 days to affirm or reject the EETC deal due to section 1110. Bonds will trade worse, if they trade at all. Deals are cross collateralized, so SAVE would be rejecting or affirming all of the planes in the EETC deal. If SAVE files for bankruptcy, it’s important to note that 2nd lien paper will become interest only until first lien notes fully amortize, thus extending their maturity (rather than amortizing down), and reducing IRR. I believe this extension risk is already priced in to an extent for 2nd lien notes at $70-80 prices.

2a) SAVE Affirms the EETC deal during Chapter 11 bankruptcy–

SAVE will continue to make regularly scheduled payments and the bonds will likely trade better, up to $95 or $100 par after affirmation given the lift of the overhang. I would expect an affirmation in bankruptcy given the importance of the planes to SAVE’s fleet, the relatively low cost of financing, and the characteristics of the planes. Furthermore, rejecting the EETC would likely inhibit their ability to ever access the EETC market again in the future, which is a detriment considering the low cost of financing historically offered via EETCs.

2b) SAVE rejects the EETC in bankruptcy –

SAVE bonds will trade sloppy and on the recovery value of the planes as planes are returned to bondholders. The trust that owns the planes will then pursue alternative options for the planes. The trust will then either attempt to re-lease the planes to other parties, or sell the planes. A liquidity facility in the EETC deal will continue to make interest payments on the bonds for 18 months as the trust figures out what to do with the planes. The ultimate outcome in this scenario is unknown, and where the dollar price paid for the bonds becomes important along with the quality of the collateral. EETC holders would then also receive an unsecured claim on SAVE.

Worst Case Scenario: Bankruptcy, EETC rejection. Look at LATAM EETCs?

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Historically, first lien EETCs have never lost money. That will be put to the test in this crisis, and collateral value will be paramount for the sector. LATAIR provides a good, recent case study for distressed EETCs.

LATAIR first lien EETC Comp (LATAIR 4.2 11/15/27 Corp CUSIP 51817TAB8): Latam airlines recently declared bankruptcy and immediately rejected their LATAIR EETC, telling EETC note holders to collect their planes. In the filing, it was revealed that LATAIR planes and engines are spread across the globe, making the repossession more costly for noteholders. Despite the circumstances, LATAIR first lien EETCs have already recovered and have been well bid at $80. They traded down to $50 briefly on the filing and subsequent rejection. This only further stresses the point of how dislocated the market is given most holders are longterm, IG ratings  focused, not willing to look at true value.

The LATAIR 1st lien EETCs is backed by relatively favorable collateral at a ~70% LTV, much like SAVE EETCs. LATAIR collateral consists of 6-year old A321 narrowbodies, A350-9 widebodies (some of the most favorable widebody planes, core and flown by Delta), and B787-9 widebody planes (also extremely favorable planes in terms of widebodies in short supply). 40% of appraised value is narrowbody with 60% widebody. This mix of collateral is relatively less favorable compared to SAVE’s pure 100% Airbus narrowbody collateral when it comes to liquidity.

Despite the relatively worse characteristics of the LATAIR EETC deal and bankruptcy, LATAIR EETCs have performed better than expectations being bid at $80. 

In my view, this limits the fundamental downside in SAVE EETCs when it’s clear distressed investors will workout a lot more complex LATAIR EETC.  It bodes well for SAVE first lien securities that can be bought around $90 or lower today. Scattered planes and engines should be less of an issue for distressed/workout buyers if the worst case scenario does happen considering SAVE is NA focused.

Spirit Air’s Fleet:

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Spirit has a fleet of 151 Airbus A320 family aircraft with an average age of 5.9 years, in line with the age of the planes in the 2015-1 EETC, and older than their 2017 fleet (which is why 2017 EETC trades somewhat richer). Spirit has an orderbook of 100 new NEO planes with an option for another 50 (as of Dec’19, 6 were delivered in Q1’2020). 

Spirit’s growth ambitions motivated their large order book – mostly placed in Dec 2019 - so with air travel growth prospects much lower today, there is some risk to the affirmation factor for planes in 2015-1 (relative to younger planes in SAVE 2017-1) should Spirit enter Chapter 11 bankruptcy. 

It’s plausible that Spirit could reject the planes in 2015 in a Chapter 11 filing,  in favor of taking new plane deliveries given the composition of their fleet as demand recovers. However, I don’t anticipate that they would do this. Any potential aircraft sales and lease rejections would likely focus on older aircraft before hitting EETC planes. Rejecting an EETC would hurt their new EETC issuance prospects in the future as well. Historically, EETCs are a valuable aircraft funding source for airlines given their relatively low all-in costs from printing IG bonds to yield hungry investors. IG investors certainly have short memories, but I wouldn’t anticipate SAVE turning its back on this funding source unless they’re up against the wall, which their liquidity position today does not suggest.

Spirit Air Fleet as of YE’2019:

• A319 Avg Ag 13.3 31 aircraft, 23 owned

• A320ceo Avg age 5.2, 64 aircraft, 36 owned

• A320neo, Avg age 1.2, 20 aircraft, 2 owned

• A321, Avg age 3, 30 aircraft, 30 owned

Aircraft and Aviation market update June 2020

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The BUY EETCs recommendation is somewhat time sensitive given the recovery in aircraft-related debt markets since the beginning of June. EETC bids have strengthened recently, helped by strong activity in primary issuance. Market participants know SAVE is pretty cheap, but incremental bids above current pricing are hard to come by. So the opportunity still exists to take advantage of forced sellers.

Some recent highlights in Aviation financing: 

1) AerCap successfully re-opened the air lessor market June 3, issuing new 5y unsecured notes with a 6.5% coupon into very strong demand. The notes currently trade at $101.50, 6.15% YTM, attracting high yield buyers with its Baa3/BBB, Negative outlook ratings. Lessor bonds were previously trading at 800bps of spread. Air Lease (BBB) followed by issuing a 5y bond at +325. It should be noted, however, that Air Lease does benefit from its domestic issuer status, and is included in the Fed’s current Secondary Market facility buying program that can by AL paper.

2) Delta followed AerCap with a $1.25Bn Sr. Unsecured note offering (DAL 7 ⅜ 01/15/26). Delta marketed $500M of bonds, with the expectation of an increase to $1B. They printed $1.25B bonds after building an order book of $5.9B.

The demand for both offerings exceeded expectations. Bear in mind Delta last issued $5 bn of secured notes and bonds at the end of April. In that deal, notes were secured by gates and routes. The deal was upsized by $2B and included $3.5B of DAL 7 05/01/25 notes, which now trade at $106, 5.57% YTM.

3) JetBlue also recently issued a $750M term loan at L+525, $97 with a soft gates and route collateral package.

4) Alaska Air has conducted a non-deal roadshow for their first EETC (likely backed by 737 and Embraer 175 aircraft). A successful Alaska Air EETC issuance should only help SAVE EETCs. 

Industry Capacity and Demand

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• American announced at the beginning of June that they expect July domestic capacity to only be down 45% YoY.

• American’s daily passengers hit 110k per day at the end of May versus 32k in April.

• United expects July Domestic capacity to be down 70%

TSA Travel Throughput and Leisure Re-Opening

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TSA Travel throughput data highlights the early demand recovery. Throughput increased to $502k travelers on 6/11/2020, up from $350k 6/1/2020. This bodes well for North American leisure, along with the slow re-opening of leisure destinations. Vegas casinos have (in)famously re-opened and Disney will re-open Disneyworld July 11 and Disneyland July 17.

https://www.tsa.gov/coronavirus/passenger-throughput

EETC Structure

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At the risk of being repetitive, I will outline the general EETC structure for those unfamiliar. EETCs are a pretty niche area of the corporate bond market for aircraft and airlines. Most notes are brought with investment grade ratings in normal times, offering an attractive yield pickup relative to plain vanilla corporate bonds with similar ratings. I may get some specifics technically wrong, but for a high level overview.

Security tranches “A” vs “AA”: the newest deals (Post 2015), “AA” represents 1st lien notes, typically rated “AA” by rating agencies, with the “A” tranche being second lien, “A” rated notes at the time of issuance. 

Back in 2015,, “A” used to be the first lien security notes on EETC deals, and “B” the 2nd lien. This is evident in the SAVE notes. Where the 2015-1 deal, “A” notes represent the first lien, but in the 2017 deal “AA” represents the first lien”. This is confusing and nonsensical, but clearly done for bond marketing purposes and being more issuer friendly, allowing for more junior tranches.

EETCs are notes issued by an airline from a bankruptcy remote trust protected by Section 1110. For example, if SAVE is taking delivery of 10 new aircraft worth $100M, they may issue $90M of EETC bonds against those planes’ values. Each of the 10 aircraft will have a separate note the trust holds, and the planes are leased back to the operating airline. In this scenario, SAVE may issue $70M of first lien notes (now called “AA”, they were “A” in the past, like this 2015 deal). They will then issue $90M of a  junior second lien “A” (previously “B”) notes with a higher coupon to compensate for the higher risk position in terms of LTVs.

EETC notes a sinking fund / amortization feature. This is to avoid increasing LTVs as aircraft depreciate in value over time. Generally, think of this as 3-5% per year of the initial value. So the notes paydown 5% of principal per year along with their interest, to ensure LTVs don’t rise too drastically along with aircraft depreciation.

“New” EETCs are all cross collateralized. Meaning a couple things. If an airline defaults on a payment to an EETC, it’s a default and the airlines can be thrown into bankruptcy. So if an airline does not declare bankruptcy, all EETCs will be money good as they pay them off. Regardless if they’re even flying the planes anymore. Failing to pay an EETC is an act of default.

Second, if an airline does declare Chapter 11 bankruptcy, they will have 60 days to affirm or reject their EETCs. This is on an all or none basis for the aircraft that secure any specific EETC deal. So airlines are not able to pick and choose the specific aircraft they want to affirm or reject from any particular EETC deal (which they could in the past).

Another important note is that if an airline is in bankruptcy, general the junior tranches of a deal convert to interest-only securities rather than following their typical principal paydown schedules. This extends the maturities of junior notes, reducing their IRRs. This risk is mitigated to an extent when buying well below par at double digit yields as the bonds trade on price (asset recovery value).

The EETC structure has held up over time and generally has been money good. No first lien noteholders have ever lost more than their principal and recovery on junior securities has been in the high 90%s. 

COVID-19 will be the major test to this structure, as asset values have a looming question mark over them and airlines are facing an unprecedented low demand environment, of course right after a year of record profits in 2019.

New deals (EETC 2.0, both SAVE deals qualify) also come with liquidity facility that covers interest payments due to noteholders should the airline file for bankruptcy and reject the aircraft in a particular EETC. The liquidity facility generally covers 18 months worth of interest payments to noteholders, buying time for the trust to figure out what to do with the aircraft. If an EETC is rejected during bankruptcy, ratings agencies will certainly lower ratings on EETC bonds, but generally not to “D” given the time the trust has. Full recovery is possible with a re-lease or sale of assets, even before the final maturity date. This would have the potential to boost IRR on any below par investment in such an event where 1st lien bonds are bought at $85 and planes are sold 6 month later resulting in a $100 par payment to first lien noteholders.

Thus, the fundamental analysis should focus on the following:

1 – How well covered are the debt obligations in an EETC deal covered by the asset values

2 – How likely is the airline to declare Chapter 11 bankruptcy

3 – How likely is the airline to affirm a particular EETC deal in the event of a Chapter 11 filing

4 – How easy will it be to re-lease or sell the aircraft in a particular EETC deal should the airline file for Chapter 11 protection and subsequently reject an EETC deal

Affirmation Factor:

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Generally, investors would expect the most recent, newest EETC deals with the youngest aircraft to be affirmed in any bankruptcy scenario. This is due to them being the youngest aircraft, and due to the lowest rates (coupons) that are financing the deals. Airlines tend to like to keep their planes in their fleet given startup/wind down costs with removing or adding aircraft. They know the maintenance schedules of owned aircraft. And in middle aged EETC deals, they might already “own” and have equity in the planes, making the airline generally less likely to reject planes in an EETC to try to lease or buy some new aircraft. But obviously this is a capitalistic business, so they will do whatever’s the most economical in any distressed situation.

All things equal, an old EETC with aircraft that are still viable may also have a generally higher affirmation factor due to the collateral. For a simplistic example, an old EETC deal with potentially $75M market value worth of collateral that has a $50M final payment due, it might make sense for an airline to affirm considering they would be able to own the aircraft outright after the final payment, and potentially use it as a source of security of other financing going forward once it’s unencumbered.

Given the fluid situation of air travel due to COVID-19, many of these issues will be put to the test, and rigorous analysis of airlines, security packages, demand forecasts, and fleet plans is required to be comfortable with such investments. Nonetheless, SAVE EETCs remain an attractive buy in my view, along with other well covered EETCs from other airlines if you can take the view that air travel will see some sort of recovery over the next 24-36 months despite all of the uncertainty today.

Full Comparable Securities List

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Note Price Yield Average life CUSIP

SAVE 2015-1 “A” SAVE 4.1 04/01/28 $85 7.4% 11/2025 84858DAA6

SAVE 2015-1 “B” SAVE 4.45 04/01/24 $75 15.6% 3/2023 84858EAA4

SAVE 2015-1 “C” SAVE 4.93 04/01/23 $80? 13.7% 3/2023 AT9994928 –private

SAVE 2017-1 “AA” SAVE 3 ⅜ 02/15/30 $90 5.20% 11/2026 84858WAA4

SAVE 2017-1 “A” SAVE 3.65 02/15/30 $80 7.65% 8/2026 84858XAA2

SAVE 2017-1 “B” SAVE 3.8 02/15/26 $73 12.2% 6/2024 84859MAA5

JBLU 2019-1 “AA” JBLU 2 ¾ 05/15/32 $91 4.05% 7/2028 477143AH4

JBLU 2019-1 “A” JBLU 2.95 05/15/28 $89 5.00% 9/22026 477143AJ0

HA 2016-1 “A” HA 3.9 01/15/26 $88 7.25% 8/2024 419838AA5

- Secured by less desirable widebody airbus aircraft

DAL Gates & Routs DAL 7 05/01/25 $106 5.57% 5/2025 247361ZX9

DAL Sr. Unsecured DAL 7 ⅜ 01/15/26 $99.50 7.48% 1/2026 247361ZZ4

DAL 2020-1 “AA” DAL 2 06/10/28 $95 2.94% 4/2026 247361ZV3

DAL 2020-1 “A” DAL 2 ½ 06/10/28 $91 4.37% 11/2025 247361ZW1

AAL 2017-2 “AA” AAL 3.35 10/15/29 $91 5% 11/2026 02376AAA7

AAL 2017-2 “A” AAL 3.6 10/15/29 $80 7.61% 8/2026 02377CAA2

“Old Collateral” deals for reference – requires a view on firm bankruptcy given lower affirmation factors. AAL 1/2021 for example priced at $80 with poor collateral likely to be rejected in any Chapter 11 filing prior to 1/2021.

UAL 2014-2 “A” UAL 3 ¾ 09/03/26 $90 6.14% 1/2025 90932QAA4

UAL 2014-2 “B” UAL 4 ⅝ 09/03/22 $90 10.9% 3/2022 90932QAB2

AAL 2011-1 “A” AAL 5 ¼ 01/31/21 $80 49% 1/2021 023767AA4

Catalyst

North American leisure air travel recovery, re-rating of the currently dislocated and illiquid secured EETC market, lower-for-longer interest rate environment, continuation of lower corporate spread environment with fed backing, continuation of "yield grab" liftahon among IG bond investors

Catalyst

North American leisure air travel recovery, re-rating of the currently dislocated and illiquid secured EETC market, lower-for-longer interest rate environment, continuation of lower corporate spread environment with fed backing, continuation of "yield grab" liftahon among IG bond investors, continued improvement in the primary bond market for aviation related issuers and sectors boosting appetite for EETC securities