Kroll Bond Rating Agency released research about the impact of the current Israel-Hamas conflict on aviation asset-based securities, stating that exposure to Israeli lessees in such transactions is currently limited, as it is present in only three of the more than 50 aviation ABS transactions the agency has rated.
According to KBRA, while none of the exposures exceeds 10% of the underlying portfolio value, the transactions may be susceptible to future cash flow interruption due to credit deterioration of airlines operating in Israel or possible collateral damage to any aircraft located or operating in the country. Certain U.S. and European airlines have suspended direct flights to Israel after the aviation administrations from these areas urged airlines to exercise caution. Flight cancellations and disruptions to the normal functioning of the Israeli economy as a result of the war may cause airlines to experience financial stress and possibly request hardship relief or renegotiate lease terms.
The three KBRA-rated aviation ABS transactions that have exposure to lessees located in Israel, based on data from September 2023 payment date reports, include the following:
- Horizon Aircraft Finance II Limited with one aircraft, approximately 7.23% by value, serviced by BBAM Aviation Services Limited
- AASET 2021-1 Trust with one aircraft, approximately 4.05% by value, serviced by Carlyle Aviation Management Limited
- MACH 1 Cayman Limited with one aircraft, approximately 1.92% by value, serviced by ACG Aircraft Leasing Ireland Limited
