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These excerpts taken from the AYR 10-K filed Mar 2, 2009. Securitization
No. 1
On June 15, 2006, we closed Securitization No. 1, a
$560.0 million transaction comprising 40 aircraft and
related leases, which were refer to as Portfolio No. 1. In
connection with Securitization No. 1, two of our
subsidiaries, ACS Aircraft Finance Ireland plc, or ACS Ireland,
and ACS Aircraft Finance Bermuda Limited, or ACS Bermuda, which
we refer to together with their subsidiaries as the ACS 1 Group,
issued $560.0 million of ACS 1 Notes to the ACS
2006-1 Pass
Through Trust or the ACS 1 Trust. The ACS 1 Trust simultaneously
issued a single class of
Class G-1
pass through trust certificates, or the ACS1 Certificates,
representing undivided fractional interests in the notes.
Payments on the ACS 1 Notes will be passed through to holders of
the ACS 1 certificates. The ACS 1 Notes are secured by ownership
interests in aircraft-owning subsidiaries of ACS Bermuda and ACS
Ireland and the aircraft leases, cash, rights under service
agreements and any other assets they may hold. We retained 100%
of the rights to receive future cash flows from Portfolio
No. 1 after the payment of claims that are senior to our
rights, including but not limited to payment of expenses related
to the aircraft and fees of service providers, interest and
principal payments to certificate holders, amounts owed to hedge
providers and amounts, if any, owed to the policy provider and
liquidity provider for previously unreimbursed advances.
Each of ACS Bermuda and ACS Ireland has fully and
unconditionally guaranteed the other’s obligations under
the ACS 1 Notes. However, the ACS 1 Notes are neither
obligations of nor guaranteed by Aircastle Limited. The ACS 1
Notes mature on June 20, 2031, but we expect to refinance
the ACS 1 Notes on or prior to June 2011. In the event that the
notes are not repaid on or prior to June 2011, the excess
securitization cash flow will be used to repay the principal
amount of the ACS1 Notes and will not be available to us to pay
dividends to our shareholders.
During the first five years from issuance, Securitization
No. 1 has an amortization schedule that requires that lease
payments be applied to reduce the outstanding principal balance
of the indebtedness so that such balance remains at 54.8% of the
assumed future depreciated value of Portfolio No. 1. If the
debt service coverage ratio requirements are not met on two
consecutive monthly payment dates in the fourth and fifth year
following the closing date of Securitization No. 1, all
excess securitization cash flow is required to be used to reduce
the principal balance of the indebtedness and will not be
available to us for other purposes, including paying dividends
to our shareholders. The ACS 1 Groups’ compliance with
these requirements depends substantially upon the timely receipt
of lease payments from their lessees.
The ACS 1 Notes provide for monthly payments of interest at a
floating rate of one-month LIBOR plus 0.27%, and scheduled
payments of principal. Financial Guaranty Insurance Company, or
FGIC, issued a financial guaranty insurance policy to support
the payment of interest when due on the ACS 1 Certificates and
the payment, on the final distribution date, of the outstanding
principal amount of the ACS 1 Certificates. The downgrade in the
rating of FGIC did not result in a change in any of the rights
or obligations of the parties to Securitization No. 1.
We have entered into a series of interest rate hedging contracts
intended to hedge the interest rate exposure associated with
issuing floating-rate obligations backed by primarily fixed-rate
lease assets. Obligations owed to the hedge counterparty under
these contracts are secured on a pari passu basis with the same
collateral that secures the ACS 1 Notes and, accordingly, the
ACS 1 Group has no obligation to pledge cash collateral to
secure any loss in value of the hedging contracts if interest
rates fall.
Securitization
No. 2
On June 8, 2007, we completed Securitization No. 2, a
$1.17 billion transaction comprising 59 aircraft and
related leases, which we refer to as Portfolio No. 2. In
connection with Securitization No. 2, two of our
subsidiaries, ACS Aircraft Finance Ireland 2 Limited, or ACS
Ireland 2, and ACS
Table of Contents
2007-1
Limited, or ACS Bermuda 2, which we refer to together with their
subsidiaries as the ACS 2 Group, issued $1.17 billion of
Class A notes, or the ACS 2 Notes, to a newly formed trust,
the ACS
2007-1 Pass
Through Trust, or the ACS 2 Trust. The ACS 2 Trust
simultaneously issued a single class of
Class G-1
pass through trust certificates, or the ACS 2 Certificates,
representing undivided fractional interests in the ACS 2 Notes.
Payments on the ACS 2 Notes will be passed through to the
holders of the ACS 2 Certificates. The ACS 2 Notes are secured
by ownership in aircraft owning subsidiaries of ACS Bermuda 2
and ACS Ireland 2 and the aircraft leases, cash rights under
service agreements and any other assets they may hold. We
retained 100% of the rights to receive future cash flows from
Portfolio No. 2 after the payment of claims that are senior
to our rights. All claims are senior to our rights to receive
future cash flows, including but not limited to payment of
expenses related to the aircraft and fees of service providers,
interest and principal payments to certificate holders, amounts
owed to hedge providers and amounts, if any, owed to the policy
provider and liquidity provider under Securitization No. 2
for previously unreimbursed advances.
Each of ACS Bermuda 2 and ACS Ireland 2 has fully and
unconditionally guaranteed the other’s obligations under
the ACS 2 Notes. However, the ACS 2 Notes are neither
obligations of nor guaranteed by Aircastle Limited. The ACS 2
Notes mature on June 8, 2037, but we expect to refinance
the notes on or prior to June 2012. In the event that the notes
are not repaid on or prior to June 2012, the excess
securitization cash flow will be used to repay the principal
amount of the notes and will not be available to us to pay
dividends to our shareholders.
During the first five years from issuance, Securitization
No. 2 has an amortization schedule that requires that lease
payments be applied to reduce the outstanding principal balance
of the indebtedness so that such balance remains at 60.6% of an
assumed value of the aircraft, decreased over time by an assumed
amount of depreciation. During the first five years of the
transaction, subject to compliance with the debt service
coverage ratio test in years four and five, all cash flows
attributable to the underlying aircraft after payment of
expenses, interest and scheduled principal payments, or excess
securitization cash flows, will be available for distribution to
us. We have used and intend to use the excess securitization
cash flow to pay dividends and to make additional investments.
If during year four or five of the transaction, the debt service
coverage ratio test fails on two consecutive payment dates the
excess securitization cash flow will be used to repay the
principal amount of the notes and will not be available to us to
pay dividends to our shareholders or make additional
investments. The ACS 2 Groups’ compliance with these
covenants depends substantially upon the timely receipt of lease
payments from their lessees.
The ACS 2 Notes provide for monthly payments of interest at a
floating rate of one-month LIBOR plus 0.26%, and scheduled
payments of principal. FGIC issued a financial guaranty
insurance policy to support the payment of interest when due on
the ACS 2 Certificates and the payment, on the final
distribution date, of the outstanding principal amount of the
ACS 2 Certificates. A downgrade in the rating of FGIC will not
result in any change in the rights or obligations of the parties
to Securitization No. 2.
We have entered into a series of interest rate hedging contracts
intended to hedge the interest rate exposure associated with
issuing floating-rate obligations backed by primarily fixed-rate
lease assets. Obligations owed to the hedge counterparty under
these contracts are secured on a pari passu basis with the same
collateral that secures the ACS 2 Notes and, accordingly, the
ACS 2 Group has no obligation to pledge cash collateral to
secure any loss in value of the hedging contracts if interest
rates fall.
Securitization No. 1 On June 15, 2006, we closed Securitization No. 1, a $560.0 million transaction comprising 40 aircraft and related leases, which were refer to as Portfolio No. 1. In connection with Securitization No. 1, two of our subsidiaries, ACS Aircraft Finance Ireland plc, or ACS Ireland, and ACS Aircraft Finance Bermuda Limited, or ACS Bermuda, which we refer to together with their subsidiaries as the ACS 1 Group, issued $560.0 million of ACS 1 Notes to the ACS 2006-1 Pass Through Trust or the ACS 1 Trust. The ACS 1 Trust simultaneously issued a single class of Class G-1 pass through trust certificates, or the ACS1 Certificates, representing undivided fractional interests in the notes. Payments on the ACS 1 Notes will be passed through to holders of the ACS 1 certificates. The ACS 1 Notes are secured by ownership interests in aircraft-owning subsidiaries of ACS Bermuda and ACS Ireland and the aircraft leases, cash, rights under service agreements and any other assets they may hold. We retained 100% of the rights to receive future cash flows from Portfolio No. 1 after the payment of claims that are senior to our rights, including but not limited to payment of expenses related to the aircraft and fees of service providers, interest and principal payments to certificate holders, amounts owed to hedge providers and amounts, if any, owed to the policy provider and liquidity provider for previously unreimbursed advances. Each of ACS Bermuda and ACS Ireland has fully and unconditionally guaranteed the other’s obligations under the ACS 1 Notes. However, the ACS 1 Notes are neither obligations of nor guaranteed by Aircastle Limited. The ACS 1 Notes mature on June 20, 2031, but we expect to refinance the ACS 1 Notes on or prior to June 2011. In the event that the notes are not repaid on or prior to June 2011, the excess securitization cash flow will be used to repay the principal amount of the ACS1 Notes and will not be available to us to pay dividends to our shareholders. During the first five years from issuance, Securitization No. 1 has an amortization schedule that requires that lease payments be applied to reduce the outstanding principal balance of the indebtedness so that such balance remains at 54.8% of the assumed future depreciated value of Portfolio No. 1. If the debt service coverage ratio requirements are not met on two consecutive monthly payment dates in the fourth and fifth year following the closing date of Securitization No. 1, all excess securitization cash flow is required to be used to reduce the principal balance of the indebtedness and will not be available to us for other purposes, including paying dividends to our shareholders. The ACS 1 Groups’ compliance with these requirements depends substantially upon the timely receipt of lease payments from their lessees. The ACS 1 Notes provide for monthly payments of interest at a floating rate of one-month LIBOR plus 0.27%, and scheduled payments of principal. Financial Guaranty Insurance Company, or FGIC, issued a financial guaranty insurance policy to support the payment of interest when due on the ACS 1 Certificates and the payment, on the final distribution date, of the outstanding principal amount of the ACS 1 Certificates. The downgrade in the rating of FGIC did not result in a change in any of the rights or obligations of the parties to Securitization No. 1. We have entered into a series of interest rate hedging contracts intended to hedge the interest rate exposure associated with issuing floating-rate obligations backed by primarily fixed-rate lease assets. Obligations owed to the hedge counterparty under these contracts are secured on a pari passu basis with the same collateral that secures the ACS 1 Notes and, accordingly, the ACS 1 Group has no obligation to pledge cash collateral to secure any loss in value of the hedging contracts if interest rates fall. Securitization No. 2 On June 8, 2007, we completed Securitization No. 2, a $1.17 billion transaction comprising 59 aircraft and related leases, which we refer to as Portfolio No. 2. In connection with Securitization No. 2, two of our subsidiaries, ACS Aircraft Finance Ireland 2 Limited, or ACS Ireland 2, and ACS
Table of Contents2007-1 Limited, or ACS Bermuda 2, which we refer to together with their subsidiaries as the ACS 2 Group, issued $1.17 billion of Class A notes, or the ACS 2 Notes, to a newly formed trust, the ACS 2007-1 Pass Through Trust, or the ACS 2 Trust. The ACS 2 Trust simultaneously issued a single class of Class G-1 pass through trust certificates, or the ACS 2 Certificates, representing undivided fractional interests in the ACS 2 Notes. Payments on the ACS 2 Notes will be passed through to the holders of the ACS 2 Certificates. The ACS 2 Notes are secured by ownership in aircraft owning subsidiaries of ACS Bermuda 2 and ACS Ireland 2 and the aircraft leases, cash rights under service agreements and any other assets they may hold. We retained 100% of the rights to receive future cash flows from Portfolio No. 2 after the payment of claims that are senior to our rights. All claims are senior to our rights to receive future cash flows, including but not limited to payment of expenses related to the aircraft and fees of service providers, interest and principal payments to certificate holders, amounts owed to hedge providers and amounts, if any, owed to the policy provider and liquidity provider under Securitization No. 2 for previously unreimbursed advances. Each of ACS Bermuda 2 and ACS Ireland 2 has fully and unconditionally guaranteed the other’s obligations under the ACS 2 Notes. However, the ACS 2 Notes are neither obligations of nor guaranteed by Aircastle Limited. The ACS 2 Notes mature on June 8, 2037, but we expect to refinance the notes on or prior to June 2012. In the event that the notes are not repaid on or prior to June 2012, the excess securitization cash flow will be used to repay the principal amount of the notes and will not be available to us to pay dividends to our shareholders. During the first five years from issuance, Securitization No. 2 has an amortization schedule that requires that lease payments be applied to reduce the outstanding principal balance of the indebtedness so that such balance remains at 60.6% of an assumed value of the aircraft, decreased over time by an assumed amount of depreciation. During the first five years of the transaction, subject to compliance with the debt service coverage ratio test in years four and five, all cash flows attributable to the underlying aircraft after payment of expenses, interest and scheduled principal payments, or excess securitization cash flows, will be available for distribution to us. We have used and intend to use the excess securitization cash flow to pay dividends and to make additional investments. If during year four or five of the transaction, the debt service coverage ratio test fails on two consecutive payment dates the excess securitization cash flow will be used to repay the principal amount of the notes and will not be available to us to pay dividends to our shareholders or make additional investments. The ACS 2 Groups’ compliance with these covenants depends substantially upon the timely receipt of lease payments from their lessees. The ACS 2 Notes provide for monthly payments of interest at a floating rate of one-month LIBOR plus 0.26%, and scheduled payments of principal. FGIC issued a financial guaranty insurance policy to support the payment of interest when due on the ACS 2 Certificates and the payment, on the final distribution date, of the outstanding principal amount of the ACS 2 Certificates. A downgrade in the rating of FGIC will not result in any change in the rights or obligations of the parties to Securitization No. 2. We have entered into a series of interest rate hedging contracts intended to hedge the interest rate exposure associated with issuing floating-rate obligations backed by primarily fixed-rate lease assets. Obligations owed to the hedge counterparty under these contracts are secured on a pari passu basis with the same collateral that secures the ACS 2 Notes and, accordingly, the ACS 2 Group has no obligation to pledge cash collateral to secure any loss in value of the hedging contracts if interest rates fall. Securitization
No. 1
On June 15, 2006, we completed our first securitization, a
$560,000 transaction comprised of 40 aircraft and related
leases, which we refer to as “Securitization
No. 1”. In connection with Securitization No. 1,
two of our subsidiaries, ACS Ireland and ACS Aircraft Finance
Bermuda Limited (“ACS Bermuda”), which we refer to
together with their subsidiaries as the “ACS 1 Group”,
issued $560,000 of
Class A-1
notes, or the “ACS 1 Notes” to the ACS
2006-1 Pass
Through Trust, or the “ACS 1 Trust.” The ACS 1 Trust
simultaneously issued a single class of
Class G-1
pass through trust certificates, or the “ACS 1
Certificates,” representing undivided fractional interests
in the notes. Payments on the ACS 1 Notes will be passed through
to holders of the ACS 1 certificates. The ACS 1 Notes are
secured by ownership interests in aircraft-owning subsidiaries
of ACS Bermuda and ACS Ireland and the aircraft leases, cash,
rights under service agreements and any other assets they may
hold. Each of ACS Bermuda and ACS Ireland has fully and
unconditionally guaranteed the other’s obligations under
the notes. However, the ACS 1 Notes are neither obligations of,
nor guaranteed by, Aircastle Limited. The ACS 1 Notes mature on
June 20, 2031.
Table of Contents
Aircastle
Limited and Subsidiaries
Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts)
The terms of Securitization No. 1 require the ACS Group to
satisfy certain financial covenants, including the maintenance
of debt service coverage ratios. The ACS Groups’ compliance
with these covenants depends substantially upon the timely
receipt of lease payments from their lessees. In particular,
during the first five years from issuance, Securitization
No. 1 has an amortization schedule that requires that lease
payments be applied to reduce the outstanding principal balance
of the indebtedness so that such balance remains at 54.8% of the
assumed future depreciated value of the portfolio. If the debt
service coverage ratio requirements are not met on two
consecutive monthly payment dates in the fourth and fifth year
following the closing date of Securitization No. 1, and in
any month following the fifth anniversary of the closing date,
all excess securitization cash flow is required to be used to
reduce the principal balance of the indebtedness and will not be
available to us for other purposes, including paying dividends
to our shareholders.
The ACS 1 Notes provide for monthly payments of interest at a
floating rate of one-month LIBOR plus 0.27%, and scheduled
payments of principal. Financial Guaranty Insurance Company
(“FGIC”) issued a financial guaranty insurance policy
to support the payment of interest when due on the ACS 1
Certificates and the payment, on the final distribution date, of
the outstanding principal amount of the ACS 1 Certificates. The
downgrade in the rating of FGIC did not result in a change in
any of the rights or obligations of the parties to
Securitization No. 1. We have entered into a series of
interest rate hedging contracts intended to hedge the interest
rate exposure associated with issuing floating-rate obligations
backed by primarily fixed-rate lease assets. Obligations owed to
the hedge counterparty under these contracts are secured on a
pari passu basis with the same collateral that secures the ACS 1
Notes and, accordingly, the ACS 1 Group has no obligation to
pledge cash collateral to secure any loss in value of the
hedging contracts if interest rates fall.
Securitization
No. 2
On June 8, 2007, we completed our second securitization, a
$1,170,000 transaction comprising 59 aircraft and related
leases, which we refer to as “Securitization
No. 2”. In connection with Securitization No. 2,
two of our subsidiaries, ACS Ireland 2 and ACS
2007-1
Limited (“ACS Bermuda 2”), to which we refer together
with their subsidiaries as the “ACS 2 Group” issued
$1,170,000 of Class A notes, or the “ACS 2
Notes”, to the ACS
2007-1 Pass
Through Trust, or the “ACS 2 Trust.” The ACS 2 Trust
simultaneously issued a single class of
Class G-1
pass through trust certificates, or the “ACS 2
Certificates,” representing undivided fractional interests
in the ACS 2 Notes. Payments on the ACS 2 Notes will be passed
through to the holders of the ACS 2 Certificates. The ACS 2
Notes are secured by ownership in aircraft owning subsidiaries
of ACS Bermuda 2 and ACS Ireland 2 and the aircraft leases,
cash, rights under service agreements and any other assets they
may hold. Each of ACS Bermuda 2 and ACS Ireland 2 has fully and
unconditionally guaranteed the other’s obligations under
the ACS 2 Notes. However, the ACS 2 Notes are neither
obligations of, nor guaranteed by, Aircastle Limited. The ACS 2
Notes mature on June 14, 2037.
The terms of Securitization No. 2 require the ACS 2 Group
to satisfy certain financial covenants, including the
maintenance of debt service coverage ratios. The ACS 2
Group’s compliance with these covenants depends
substantially upon the timely receipt of lease payments from
their lessees. In particular, during the first five years from
issuance, Securitization No. 2 has an amortization schedule
that requires that lease payments be applied to reduce the
outstanding principal balance of the indebtedness so that such
balance remains at 60.6% of an assumed value of the 59 aircraft
securing the ACS 2 Notes. If the debt service coverage ratio
requirements are not met on two consecutive monthly payment
dates in the fourth and fifth year following the closing date of
Securitization No. 2, and in any month following the fifth
anniversary of the closing date, all excess securitization cash
flow is required
Table of Contents
Aircastle
Limited and Subsidiaries
Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts)
to be used to reduce the principal balance of the indebtedness
and will not be available to us for other purposes, including
paying dividends to our shareholders.
We used a portion of Securitization No. 2 to repay amounts
owed on Amended Credit Facility No. 2 and to repay Credit
Facility No. 3 in full in July 2007. The remainder of the
proceeds was used for the acquisition of aircraft and working
capital purposes.
The ACS 2 Notes provide for monthly payments of interest at a
floating rate of one-month LIBOR plus 0.26%, and scheduled
payments of principal. FGIC issued a financial guaranty
insurance policy to support the payment of interest when due on
the ACS 2 Certificates and the payment, on the final
distribution date, of the outstanding principal amount of the
ACS 2 Certificates. A downgrade in the rating of FGIC will not
result in any change in the rights or obligations of the parties
to Securitization No. 2. We have entered into a series of
interest rate hedging contracts intended to hedge the interest
rate exposure associated with issuing floating-rate obligations
backed by primarily fixed-rate lease assets. Obligations owed to
the hedge counterparty under these contracts are secured on a
pari passu basis with the same collateral that secures the ACS 2
Notes and, accordingly, the ACS 2 Group has no obligation to
pledge cash collateral to secure any loss in value of the
hedging contracts if interest rates fall.
Securitization No. 1 On June 15, 2006, we completed our first securitization, a $560,000 transaction comprised of 40 aircraft and related leases, which we refer to as “Securitization No. 1”. In connection with Securitization No. 1, two of our subsidiaries, ACS Ireland and ACS Aircraft Finance Bermuda Limited (“ACS Bermuda”), which we refer to together with their subsidiaries as the “ACS 1 Group”, issued $560,000 of Class A-1 notes, or the “ACS 1 Notes” to the ACS 2006-1 Pass Through Trust, or the “ACS 1 Trust.” The ACS 1 Trust simultaneously issued a single class of Class G-1 pass through trust certificates, or the “ACS 1 Certificates,” representing undivided fractional interests in the notes. Payments on the ACS 1 Notes will be passed through to holders of the ACS 1 certificates. The ACS 1 Notes are secured by ownership interests in aircraft-owning subsidiaries of ACS Bermuda and ACS Ireland and the aircraft leases, cash, rights under service agreements and any other assets they may hold. Each of ACS Bermuda and ACS Ireland has fully and unconditionally guaranteed the other’s obligations under the notes. However, the ACS 1 Notes are neither obligations of, nor guaranteed by, Aircastle Limited. The ACS 1 Notes mature on June 20, 2031.
Table of ContentsAircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) The terms of Securitization No. 1 require the ACS Group to satisfy certain financial covenants, including the maintenance of debt service coverage ratios. The ACS Groups’ compliance with these covenants depends substantially upon the timely receipt of lease payments from their lessees. In particular, during the first five years from issuance, Securitization No. 1 has an amortization schedule that requires that lease payments be applied to reduce the outstanding principal balance of the indebtedness so that such balance remains at 54.8% of the assumed future depreciated value of the portfolio. If the debt service coverage ratio requirements are not met on two consecutive monthly payment dates in the fourth and fifth year following the closing date of Securitization No. 1, and in any month following the fifth anniversary of the closing date, all excess securitization cash flow is required to be used to reduce the principal balance of the indebtedness and will not be available to us for other purposes, including paying dividends to our shareholders. The ACS 1 Notes provide for monthly payments of interest at a floating rate of one-month LIBOR plus 0.27%, and scheduled payments of principal. Financial Guaranty Insurance Company (“FGIC”) issued a financial guaranty insurance policy to support the payment of interest when due on the ACS 1 Certificates and the payment, on the final distribution date, of the outstanding principal amount of the ACS 1 Certificates. The downgrade in the rating of FGIC did not result in a change in any of the rights or obligations of the parties to Securitization No. 1. We have entered into a series of interest rate hedging contracts intended to hedge the interest rate exposure associated with issuing floating-rate obligations backed by primarily fixed-rate lease assets. Obligations owed to the hedge counterparty under these contracts are secured on a pari passu basis with the same collateral that secures the ACS 1 Notes and, accordingly, the ACS 1 Group has no obligation to pledge cash collateral to secure any loss in value of the hedging contracts if interest rates fall. Securitization No. 2 On June 8, 2007, we completed our second securitization, a $1,170,000 transaction comprising 59 aircraft and related leases, which we refer to as “Securitization No. 2”. In connection with Securitization No. 2, two of our subsidiaries, ACS Ireland 2 and ACS 2007-1 Limited (“ACS Bermuda 2”), to which we refer together with their subsidiaries as the “ACS 2 Group” issued $1,170,000 of Class A notes, or the “ACS 2 Notes”, to the ACS 2007-1 Pass Through Trust, or the “ACS 2 Trust.” The ACS 2 Trust simultaneously issued a single class of Class G-1 pass through trust certificates, or the “ACS 2 Certificates,” representing undivided fractional interests in the ACS 2 Notes. Payments on the ACS 2 Notes will be passed through to the holders of the ACS 2 Certificates. The ACS 2 Notes are secured by ownership in aircraft owning subsidiaries of ACS Bermuda 2 and ACS Ireland 2 and the aircraft leases, cash, rights under service agreements and any other assets they may hold. Each of ACS Bermuda 2 and ACS Ireland 2 has fully and unconditionally guaranteed the other’s obligations under the ACS 2 Notes. However, the ACS 2 Notes are neither obligations of, nor guaranteed by, Aircastle Limited. The ACS 2 Notes mature on June 14, 2037. The terms of Securitization No. 2 require the ACS 2 Group to satisfy certain financial covenants, including the maintenance of debt service coverage ratios. The ACS 2 Group’s compliance with these covenants depends substantially upon the timely receipt of lease payments from their lessees. In particular, during the first five years from issuance, Securitization No. 2 has an amortization schedule that requires that lease payments be applied to reduce the outstanding principal balance of the indebtedness so that such balance remains at 60.6% of an assumed value of the 59 aircraft securing the ACS 2 Notes. If the debt service coverage ratio requirements are not met on two consecutive monthly payment dates in the fourth and fifth year following the closing date of Securitization No. 2, and in any month following the fifth anniversary of the closing date, all excess securitization cash flow is required
Table of ContentsAircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) to be used to reduce the principal balance of the indebtedness and will not be available to us for other purposes, including paying dividends to our shareholders. We used a portion of Securitization No. 2 to repay amounts owed on Amended Credit Facility No. 2 and to repay Credit Facility No. 3 in full in July 2007. The remainder of the proceeds was used for the acquisition of aircraft and working capital purposes. The ACS 2 Notes provide for monthly payments of interest at a floating rate of one-month LIBOR plus 0.26%, and scheduled payments of principal. FGIC issued a financial guaranty insurance policy to support the payment of interest when due on the ACS 2 Certificates and the payment, on the final distribution date, of the outstanding principal amount of the ACS 2 Certificates. A downgrade in the rating of FGIC will not result in any change in the rights or obligations of the parties to Securitization No. 2. We have entered into a series of interest rate hedging contracts intended to hedge the interest rate exposure associated with issuing floating-rate obligations backed by primarily fixed-rate lease assets. Obligations owed to the hedge counterparty under these contracts are secured on a pari passu basis with the same collateral that secures the ACS 2 Notes and, accordingly, the ACS 2 Group has no obligation to pledge cash collateral to secure any loss in value of the hedging contracts if interest rates fall. This excerpt taken from the AYR 8-K filed Sep 26, 2007. Securitization No. 1 On June 15, 2006, we completed our first securitization, a $560,000 transaction comprised of 40 aircraft, which we refer to as Securitization No. 1. In connection with Securitization No. 1, two of our subsidiaries, ACS Aircraft Finance Ireland plc (“ACS Ireland”) and ACS Aircraft Finance Bermuda Limited (“ACS Bermuda”), which we refer to together with their subsidiaries as the “ACS Group,” issued $560,000 of Class A-1 notes, or the “Notes,” to a newly formed trust, the ACS 2006-1 Pass Through Trust, or the “Trust.” The Trust simultaneously issued a single class of Class G-1 pass through trust certificates, or the “Certificates,” representing undivided fractional interests in the notes. Payments on the Notes will be passed through to holders of the certificates. The Notes are secured by ownership interests in aircraft-owning subsidiaries of ACS Bermuda and ACS Ireland and the aircraft leases, cash, rights under service agreements and any other assets they may hold. Each of ACS Bermuda and ACS Ireland has fully and unconditionally guaranteed the other’s obligations under the notes. However, the Notes are neither obligations of nor guaranteed by Aircastle Limited. The Notes mature on June 20, 2031. The terms of Securitization No. 1 require the ACS Group to satisfy certain financial covenants, including the maintenance of debt service coverage ratios. The ACS Groups’ compliance with these covenants depends substantially upon the timely receipt of lease payments from their lessees. In particular, during the first five years from issuance, Securitization No. 1 has an amortization schedule that requires that lease payments be applied to reduce the outstanding principal balance of the indebtedness so that such balance remains at 54.8% of the assumed future depreciated value of the portfolio. If the debt service coverage ratio requirements are not met on two consecutive monthly payment dates in the fourth and fifth year following the closing date of Securitization No. 1, and in any month following the fifth anniversary of the closing date, all excess securitization cash flow is required to be used to reduce the principal balance of the indebtedness and will not be available to us for other purposes, including paying dividends to our shareholders. The Notes provide for monthly payments of interest at a floating rate of one-month LIBOR plus 0.27%, which at December 31, 2006 was 5.62%, and scheduled payments of principal. Financial Guaranty Insurance Company issued a financial guaranty insurance policy to support the payment of interest when due on the Certificates and the payment, on the final distribution date, of the outstanding principal amount of the Certificates. The Certificates are rated Aaa and AAA by Moody’s Investors Service and Standard & Poor’s rating services, respectively. We have entered into a series of interest rate hedging contracts intended to hedge the interest rate exposure associated with issuing floating-rate obligations backed by primarily fixed-rate lease assets. These contracts, together with the guarantee premium, the spread referenced above and other costs of trust administration, result in a fixed rate cost of 6.60% per annum, after the amortization of issuance fees and expenses.
F-14
ACS Ireland, which had total assets of $146,990 at December 31, 2006, is a VIE which we consolidate. At December 31, 2006, the outstanding principal amount of ACS Ireland’s notes was $106,366. | EXCERPTS ON THIS PAGE:
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