ISTAT Jetrader - Winter 2020 - 13

leasing entity have always remained
disciplined with more than adequate
risk-adjusted returns at PAFCO, JSA
and SKY Leasing twice. I believe the
compression in lease rental rates
was the result of overheated traffic
growth expectations, lessors under
pressure to meet annual budgets,
and lessors completing transactions
at any cost to get market share.
SKY Leasing structures acquisitions
with the knowledge that the core
drivers of risk-adjusted returns will
be attractive to sophisticated buyers.
SKY Leasing has a wealth of data over
many years to avoid transactions that
really are not capable of being sold if
two or more core drivers of risk and
return are missing, such as aircraft
retirements, high-quality long-term
lease contracts, passenger traffic
growth and the new technology in the
aircraft deliveries going forward.
Jetrader: You have been very active with ABS/securitizations for many years.
How do you see the state of the ABS market, both in terms of the performance
of current ABS's and with respect to investors' appetite? After the shipping
crisis, financiers and investors avoided that industry for years. Could aviation
see a similar development?
RW: Yes, the ABS capital market is very attractive to SKY Leasing given the
tool of managing risk by diversification. The senior debt in the ABS structures
post-COVID-19 are a safe bet, but the lower debt tranches and equity will
likely lose money for select transactions in this downturn from the unexpected
macroeconomics of the pandemic and specific portfolio compositions.
Jetrader: Having participated in a number of direct participation equity fund
raises over the past 10-15 years or so, how has the equity funds marketplace
evolved? What have been the major differences and challenges in past
years of raising equity funds versus raising equity funds today from various
financial institutions and private equity firms?
RW: My experience has been the capital available to lessors is divided between
private equity capital and institutional investors that invest in general partner
( " GP " ) sponsored funds. These are two different types of investors. Private equity
is generally available to lessors for aircraft leasing in an aviation cycle of distress,
which would describe the two investments by Oaktree Capital in PAFCO and JSA.
Private equity seeks risk-adjusted returns to reflect the lack of available capital
and exits the investment once liquidity returns to the market. The key focus for
the private equity investor is to invest in an existing platform with a seasoned
management team. Beginning in 2015, institutional investors like pension funds
began to realize that aircraft leasing could offer long-dated returns that could match
their liabilities for pension payouts.
GP sponsored funds began to issue ABS bonds and sell equity notes (E notes)
to higher risk credit funds that sought the leverage required to meet higher returns.

The first SKY Leasing, identified
an underinvested segment of the
worldwide fleet of 0-7 years-old aircraft
both delivering to the airlines and
with large trades in secondary market
where major lessors were looking
to manage portfolio concentrations.
SKY raised capital from a hybrid PE
investor that invests in funds but also
desired co-invest opportunities. The
goal was to scale both a platform and
portfolio, where we acquired a US$3
billion portfolio in less than 36 months
and then exited to a buyer with more
permanent capital. The current SKY
Leasing projected disruption beginning
in 2021 forward from the oversupply
of aircraft and the number of lease
returns scheduled for older aircraft.
The pandemic has accelerated the
disruption both for the airlines and
lessors. The advantage for SKY Leasing
as a GP-sponsored asset manager
is no legacy issues from an existing
aircraft portfolio or speculative aircraft
orders. Institutional investors partner
with SKY Leasing today because they
want access to new technology aircraft
and long-dated lease contractual
Jetrader

* WINTER 2020 * 1 3



ISTAT Jetrader - Winter 2020

Table of Contents for the Digital Edition of ISTAT Jetrader - Winter 2020

ISTAT Jetrader - Winter 2020
From the President
News & Events
Perspectives: Q&A With Rich Wiley of SKY Leasing
Winds of Change
10 Years of Air Shows
ISTAT Foundation
Appraisal: Airbus A330-300 and Boeing 767-300ER
At a Glance: Peter Hopkins
Advertiser Index
ISTAT Jetrader - Winter 2020 - Intro
ISTAT Jetrader - Winter 2020 - ISTAT Jetrader - Winter 2020
ISTAT Jetrader - Winter 2020 - Cover2
ISTAT Jetrader - Winter 2020 - 1
ISTAT Jetrader - Winter 2020 - From the President
ISTAT Jetrader - Winter 2020 - 3
ISTAT Jetrader - Winter 2020 - 4
ISTAT Jetrader - Winter 2020 - 5
ISTAT Jetrader - Winter 2020 - 6
ISTAT Jetrader - Winter 2020 - 7
ISTAT Jetrader - Winter 2020 - News & Events
ISTAT Jetrader - Winter 2020 - 9
ISTAT Jetrader - Winter 2020 - Perspectives: Q&A With Rich Wiley of SKY Leasing
ISTAT Jetrader - Winter 2020 - 11
ISTAT Jetrader - Winter 2020 - 12
ISTAT Jetrader - Winter 2020 - 13
ISTAT Jetrader - Winter 2020 - 14
ISTAT Jetrader - Winter 2020 - 15
ISTAT Jetrader - Winter 2020 - Winds of Change
ISTAT Jetrader - Winter 2020 - 17
ISTAT Jetrader - Winter 2020 - 18
ISTAT Jetrader - Winter 2020 - 19
ISTAT Jetrader - Winter 2020 - 20
ISTAT Jetrader - Winter 2020 - 21
ISTAT Jetrader - Winter 2020 - 22
ISTAT Jetrader - Winter 2020 - 23
ISTAT Jetrader - Winter 2020 - 24
ISTAT Jetrader - Winter 2020 - 25
ISTAT Jetrader - Winter 2020 - 10 Years of Air Shows
ISTAT Jetrader - Winter 2020 - 27
ISTAT Jetrader - Winter 2020 - 28
ISTAT Jetrader - Winter 2020 - 29
ISTAT Jetrader - Winter 2020 - 30
ISTAT Jetrader - Winter 2020 - 31
ISTAT Jetrader - Winter 2020 - 32
ISTAT Jetrader - Winter 2020 - 33
ISTAT Jetrader - Winter 2020 - 34
ISTAT Jetrader - Winter 2020 - 35
ISTAT Jetrader - Winter 2020 - 36
ISTAT Jetrader - Winter 2020 - 37
ISTAT Jetrader - Winter 2020 - ISTAT Foundation
ISTAT Jetrader - Winter 2020 - 39
ISTAT Jetrader - Winter 2020 - 40
ISTAT Jetrader - Winter 2020 - 41
ISTAT Jetrader - Winter 2020 - Appraisal: Airbus A330-300 and Boeing 767-300ER
ISTAT Jetrader - Winter 2020 - 43
ISTAT Jetrader - Winter 2020 - 44
ISTAT Jetrader - Winter 2020 - 45
ISTAT Jetrader - Winter 2020 - At a Glance: Peter Hopkins
ISTAT Jetrader - Winter 2020 - 47
ISTAT Jetrader - Winter 2020 - Advertiser Index
ISTAT Jetrader - Winter 2020 - Cover3
ISTAT Jetrader - Winter 2020 - Cover4
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