<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1998.
REGISTRATION NO. 333-43453
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------
AIRPLANES PASS THROUGH TRUST
(In whose assets the Certificates represent interests)
<TABLE>
<S> <C>
AIRPLANES LIMITED AIRPLANES U.S. TRUST
Exact Name of Registrants as specified in memorandum of association or trust agreement
(Originators of the Trusts described herein and issuers of the Notes and the Guarantees)
JERSEY, CHANNEL ISLANDS DELAWARE
(State or other jurisdiction of incorporation or organization)
7359 13-3521640
SIC Codes (I.R.S. Employer Identification Nos.)
AIRPLANES LIMITED AIRPLANES U.S. TRUST
22 GRENVILLE STREET 1100 NORTH MARKET STREET,
ST. HELIER RODNEY SQUARE NORTH
JERSEY, JE4 8PX WILMINGTON, DELAWARE
CHANNEL ISLANDS 19890-0001
(011 44 1534 609 000) (1-302-651-1000)
</TABLE>
(Addresses and telephone numbers of Registrants' principal executive offices)
------------------------------------
CORPORATION SERVICE COMPANY
375 HUDSON STREET
NEW YORK, NEW YORK 10014-3660
(212) 463-2700
(Name, address and telephone number of agent for service of registrants)
Please send copies of all communications to:
<TABLE>
<S> <C>
THOMAS J. REID, ESQ. WILLIAM J. WIEGMANN, ESQ.
DAVIS POLK & WARDWELL JOHN D. WILSON, ESQ.
1 FREDERICK'S PLACE SHEARMAN & STERLING
LONDON EC2R 8AB 199 BISHOPSGATE
LONDON EC2M 3TY
</TABLE>
------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE(2)
- ------------------------------------------------------------------------------------------------------------
Certificates............ $850,000,000 100% $850,000,000 $250,750(3)
- ------------------------------------------------------------------------------------------------------------
Notes of Airplanes
Limited................. $765,000,000 100% $ None
- ------------------------------------------------------------------------------------------------------------
Guarantees of Airplanes
Limited................. -- (2) (2) None
- ------------------------------------------------------------------------------------------------------------
Notes of Airplanes U.S.
Trust................... $85,000,000 100% $ None
- ------------------------------------------------------------------------------------------------------------
Guarantees of Airplanes
U.S. Trust.............. -- (2) (2) None
- ------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) The registration fee relates to the registration of the Certificates, the
Notes and the Guarantees. No separate consideration will be received for the
Notes or the Guarantees.
(3) Previously paid.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
</TABLE>
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS (Subject to Completion)
Issued February , 1998
$850,000,000
Airplanes Pass Through Trust
SUBCLASS A-6 AND SUBCLASS A-7
PASS THROUGH CERTIFICATES
------------------------
Each pass through certificate of any subclass (the "1998 Refinancing
Certificates") offered as described herein (the "Offering") will represent a
fractional undivided beneficial interest in two corresponding subclasses of
refinancing notes (collectively, the "1998 Refinancing Notes") issued by
Airplanes Limited, a Jersey limited liability company ("Airplanes Limited"), and
Airplanes U.S. Trust, a Delaware business trust ("Airplanes Trust" and, together
with Airplanes Limited, "Airplanes Group"). Airplanes Limited and Airplanes
Trust have each fully and unconditionally guaranteed (the "1998 Refinancing
Guarantees") the other's obligations under the 1998 Refinancing Notes. Each
corresponding subclass of 1998 Refinancing Notes will be held by a separate pass
through trust (each, a "1998 Refinancing Trust" and, collectively, the "1998
Refinancing Trusts"), formed pursuant to a Pass Through Trust Agreement (the
"Trust Agreement") among Airplanes Limited, Airplanes Trust, and Bankers Trust
Company, as pass through trustee (the "1998 Refinancing Trustee"). The only
source of payment for the 1998 Refinancing Notes, the 1998 Refinancing
Guarantees and other obligations of Airplanes Group will be the payments made by
the Lessees under the Leases, proceeds from dispositions, if any, of the assets
of Airplanes Group, net payments, if any, under the Swap Agreements, disposals
of the 1998 Refinancing Notes by the Indenture Trustees under certain
circumstances and net cash proceeds received from the sale of Refinancing
Certificates. There can be no assurance that rental payments under the Leases
will be adequate to pay the interest, principal and premium, if any, on the 1998
Refinancing Notes in accordance with their terms. Payments on the 1998
Refinancing Notes and the 1998 Refinancing Certificates will be subordinated to
certain other obligations of Airplanes Group as further described herein.
Wholly owned subsidiaries of GPA Group plc ("GPA Group" and, together with its
subsidiaries and affiliates, "GPA") act as Administrative Agent and Cash Manager
and GE Capital Aviation Services, Limited ("GECAS") acts as Servicer in
connection with the transaction described herein.
------------------------
NEITHER THE 1998 REFINANCING CERTIFICATES NOR THE 1998 REFINANCING NOTES ARE
OBLIGATIONS OF, OR GUARANTEED BY, OR OFFERED FOR SALE BY, THE TRUSTEE, GPA
GROUP, OR ANY OF THEIR AFFILIATES.
NEITHER THE 1998 REFINANCING CERTIFICATES NOR THE 1998 REFINANCING NOTES ARE
OBLIGATIONS OF, OR GUARANTEED BY, OR OFFERED FOR SALE BY, GENERAL ELECTRIC
CAPITAL CORPORATION OR ANY OF ITS AFFILIATES. THE 1998 REFINANCING NOTES
AND THE 1998 REFINANCING GUARANTEES ARE SOLELY THE OBLIGATIONS OF
AIRPLANES LIMITED AND AIRPLANES TRUST. THE 1998 REFINANCING
CERTIFICATES REPRESENT ONLY BENEFICIAL INTERESTS IN THE 1998
REFINANCING NOTES AND THE 1998 REFINANCING GUARANTEES HELD
BY THE 1998 REFINANCING TRUSTS.
------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER CONSIDERATIONS, THE
INFORMATION SET FORTH IN THE SECTION ENTITLED "RISK FACTORS" COMMENCING ON
PAGE .
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PASS THROUGH INITIAL AGGREGATE EXPECTED FINAL FINAL PRICE TO
CERTIFICATES PRINCIPAL AMOUNT INTEREST RATE PAYMENT DATE(2) MATURITY DATE PUBLIC(3)(4)
- ----------------------- ------------------- ------------------- ------------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Subclass A-6........... $ LIBOR+. %(1) March 15, 2019 %
Subclass A-7........... $ LIBOR+. %(1) March 15, 2019 %
</TABLE>
- ------------
(1) London interbank offered rate for one month U.S. dollar deposits (unless
otherwise specified, "LIBOR") plus the applicable margin.
(2) Based on the Assumptions set forth herein. See "Description of Securities --
The Certificates -- Payments and Distributions".
(3) The aggregate net proceeds to the 1998 Refinancing Trusts from the sale of
all the 1998 Refinancing Certificates will be $ million after deducting
aggregate underwriting discounts and commissions of $ million but
before deducting transaction expenses payable by Airplanes Limited and
Airplanes Trust, which are expected to be approximately $ million. See
"Underwriting".
(4) Airplanes Limited, Airplanes Trust and GPA Group have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting".
------------------------
The 1998 Refinancing Certificates are offered subject to prior sale, when, as
and if delivered to and accepted by the Underwriters, and subject to approval of
certain legal matters by Shearman & Sterling, counsel to the Underwriters. It is
expected that delivery of the 1998 Refinancing Certificates will be made in
book-entry form on or about March 16, 1998 through the facilities of The
Depository Trust Company, Cedel Bank, societe anonyme, and Morgan Guaranty Trust
Company of New York, Brussels Office, as operator of the Euroclear System,
against payment therefor in immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS SALOMON SMITH BARNEY
, 1998
<PAGE> 3
EXPLANATORY NOTE
This registration statement relates to the securities of two registrants,
Airplanes Limited and Airplanes U.S. Trust (the "REGISTRANTS"), neither of which
has any equity ownership in the other but both of which are governed by the same
indentures and certain of the assets of which are subject to the same service
agreements. The terms and conditions of these indentures and service agreements
apply to the assets of both Registrants on a combined and identical basis.
Furthermore, each of the Registrants has fully and unconditionally guaranteed
the obligations of the other under the Notes registered on this registration
statement.
2
<PAGE> 4
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE 1998 REFINANCING
CERTIFICATES. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH
THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE 1998 REFINANCING CERTIFICATES
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE LUXEMBOURG STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
There has been no market for the 1998 Refinancing Certificates prior to the
Offering. The Underwriters have advised Airplanes Limited and Airplanes Trust
that they presently intend to make a market in the 1998 Refinancing
Certificates. The Underwriters are not obligated, however, to make a market in
the 1998 Refinancing Certificates and any such market-making may be discontinued
at any time at the sole discretion of the Underwriters. Accordingly, no
assurance can be given as to the liquidity of or trading market for the 1998
Refinancing Certificates. See "Underwriting".
Each subclass of the 1998 Refinancing Certificates will be issued as global
securities in registered form, which is expected to be deposited with Bankers
Trust Company, as custodian for the Depository Trust Company ("DTC"). Except as
described under "Description of Securities -- The Certificates", no Definitive
Certificates will be available to the purchasers thereof. Beneficial interests
in the 1998 Refinancing Certificates will be shown on, and transfers thereof
will be effected only through, records maintained in book-entry form by DTC, or
its nominee and its participants (including Cedel Bank, societe anonyme ("CEDEL
BANK") or Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear System ("EUROCLEAR") holding through their respective
depositaries, Citibank, N.A. and Morgan Guaranty Trust Company of New York).
Unless otherwise stated, all monetary amounts are expressed herein in
United States Dollars ("$").
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the 1998 Refinancing Trusts, Airplanes Limited,
Airplanes Trust, GPA Group or the Underwriters. This Prospectus does not
constitute an offer of any securities other than those to which it relates or an
offer to sell, or a solicitation of an offer to buy, to any person in any
jurisdiction where such an offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the 1998 Refinancing Trusts, Airplanes Limited, Airplanes Trust or
GPA Group since the date hereof or that the information contained herein is
correct as of any time subsequent to the date hereof.
Until , 1998, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
Neither General Electric Capital Corporation ("GE CAPITAL"), GECAS nor any
of their affiliates is the issuer or guarantor of the 1998 Refinancing Notes or
the 1998 Refinancing Certificates. Accordingly, neither GE Capital, GECAS nor
any of their affiliates makes any representations or warranties as to the
accuracy or completeness of the information contained in this Prospectus and
nothing herein shall be deemed to constitute any such representation or warranty
by GE Capital, GECAS or any of their affiliates or any representation or
warranty as to the future performance of Airplanes Limited or Airplanes Trust or
the ability of Airplanes Limited or Airplanes Trust to make payments of interest
or principal with respect to the 1998 Refinancing Notes or the 1998 Refinancing
Certificates.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. AIRPLANES GROUP'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR
3
<PAGE> 5
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
The consent of the Finance and Economics Committee of the States of Jersey
(the "COMMITTEE") under the Control of Borrowing (Jersey) Order 1958 (as
amended) (the "1958 ORDER") will be obtained to the issue of the 1998
Refinancing Notes by Airplanes Limited and, to the extent the same may be
required under the 1958 Order, the 1998 Refinancing Certificates.
When this document is circulated there will have been delivered a copy
thereof to the Registrar of Companies in Jersey in accordance with Article 6 of
the Companies (General Provisions) (Jersey) Order 1992 and the consent of the
Registrar of Companies to its circulation will have been given and not
withdrawn. It must be distinctly understood that, in giving these consents,
neither the Registrar of Companies nor the Committee takes any responsibility
for the financial soundness of Airplanes Limited or for the correctness of any
statements made, or opinions expressed, with regard to it.
In accordance with the rules of the Luxembourg Stock Exchange, Airplanes
Group states that it has taken all reasonable care to confirm that the
information contained in this Prospectus in relation to Airplanes Group and the
1998 Refinancing Certificates is true and accurate in all material respects and
that in relation to Airplanes Group and the 1998 Refinancing Certificates there
are no material facts the omission of which would make misleading any statement
herein, whether of fact or opinion.
4
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Prospectus Summary.............................. 6
Summary Combined Financial Data................. 27
Risk Factors.................................... 31
Risks Relating to Airplanes Group and
Certain Third Parties....................... 31
Aircraft Risks................................ 36
Risks Relating to the Leases.................. 41
Risk of Lessee Default........................ 44
Risks Relating to Payments on the
1998 Refinancing Certificates............... 47
Capital Markets Risks......................... 48
Certain Bankruptcy Considerations............. 49
Tax Risks..................................... 50
The Parties..................................... 52
Airplanes Limited............................. 52
Airplanes Trust............................... 53
The Trust and Trustee......................... 54
GPA........................................... 55
GECAS......................................... 57
Use of Proceeds................................. 60
The Aircraft, Related Leases and Collateral..... 61
The Aircraft.................................. 61
Purchase Options.............................. 61
Insurance..................................... 61
Maintenance Reserves.......................... 61
Appraisers' Reports........................... 62
Portfolio Information......................... 63
Airplanes Group Portfolio Analysis............ 66
The Leases.................................... 70
The Lessees................................... 72
Downtime...................................... 75
The Commercial Aircraft Industry................ 76
Demand for Aircraft........................... 76
New Aircraft Supply........................... 77
Used Aircraft Supply.......................... 78
Operating Leasing............................. 78
Role of Government............................ 78
Technical Regulation.......................... 79
Management of Airplanes Group................... 81
Directors and Controlling Trustees............ 81
Beneficial Ownership of Airplanes Limited..... 84
Beneficial Ownership of Airplanes U.S.
Trust....................................... 85
The Servicer.................................. 85
Corporate Management.......................... 90
Selected Combined Financial Data................ 93
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 97
Introduction.................................. 97
<CAPTION>
PAGE
-------
<S> <C>
General....................................... 97
Results of Operations -- Nine Months Ended
December 31, 1997 Compared with Nine Months
Ended December 31, 1996..................... 97
Results of Operations -- Year Ended March 31,
1997 Compared with Year Ended March 31,
1996........................................ 101
Results of Operations -- Year Ended March 31,
1996 Compared with Year Ended March 31,
1995........................................ 104
Financial Resources and Liquidity............. 106
The Accounts.................................. 111
Description of Securities....................... 115
General....................................... 115
The Certificates.............................. 116
Revenue Assumptions........................... 122
The Notes and the Guarantees.................. 130
Defeasance.................................. 139
Priority of Payments........................ 139
The Class E Notes............................. 156
The Cash Management Agreement................. 158
The Accounts.................................. 158
Reports to Certificateholders................... 159
Book-Entry Registration, Global Clearance and
Settlement.................................... 161
Book-Entry Registration....................... 161
Definitive Certificates....................... 163
CUSIP, ISIN and Common Code Numbers........... 164
Tax Considerations.............................. 165
Certain Jersey Tax Considerations............. 165
Irish Tax Considerations...................... 166
U.S. Federal Income Tax Considerations........ 167
ERISA Considerations............................ 172
Underwriting.................................... 174
Legal Matters................................... 177
Enforcement of Civil Liabilities................ 177
Experts......................................... 178
Additional Information.......................... 178
Index to Financial Statements................... F-1
Independent Auditors' Consent and Report on
Schedule...................................... S-1
Appendix 1. Table of Defined Terms.............. A-1
Appendix 2. Aircraft Types Data................. A-5
Appendix 3. Monthly Gross Revenues Based on the
Assumptions................................... A-6
Appendix 4. Expected Portfolio Value Based on
the Depreciation Factors...................... A-7
Appendix 5. Target Loan to Value Ratio and
Target Principal Balance of Class A and Class
B Certificates................................ A-9
Appendix 6. Supplemental Loan to Value Ratio and
Supplemental Principal Balance................ A-11
Appendix 7. Scheduled Principal Payment Amounts
and Target Pool Factors for Fixed Rate
Certificates.................................. A-12
</TABLE>
5
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Capitalized terms
used in this Prospectus Summary without definition have the meanings assigned in
the text of this Prospectus. An Index referencing defined terms is attached as
Appendix 1 hereto. Investors should thoroughly consider this Prospectus in its
entirety, including the information set forth herein under "Risk Factors", prior
to an investment in the 1998 Refinancing Certificates.
OVERVIEW
The separate 1998 Refinancing Trusts will issue either Subclass A-6
Certificates (the "SUBCLASS A-6 CERTIFICATES") or Subclass A-7 Certificates (the
"SUBCLASS A-7 CERTIFICATES") or both. The relative amount of Subclass A-6
Certificates and Subclass A-7 Certificates to be issued will be determined by
market conditions at the time of issuance, but the aggregate principal amount of
all 1998 Refinancing Certificates to be issued will not exceed $850 million. Any
Subclass A-6 Certificate that is issued will represent a fractional undivided
interest in a pair of corresponding Subclass A-6 Notes issued by Airplanes
Limited and Airplanes Trust (together with, unless the context otherwise
requires, their subsidiaries, "AIRPLANES GROUP") and held by the "1998
REFINANCING TRUST-A-6". Any Subclass A-7 Certificate that is issued will
represent a fractional undivided interest in a pair of corresponding Subclass
A-7 Notes issued by Airplanes Limited and Airplanes Trust and held by the "1998
REFINANCING TRUST-A-7". The proceeds of the underwritten offering of the 1998
Refinancing Certificates (the "OFFERING") will be used to refinance Airplanes
Limited's and Airplanes Trust's Subclass A-1 Notes. Airplanes Limited and
Airplanes Trust have each fully and unconditionally guaranteed the other's
obligations under their respective 1998 Refinancing Notes.
AIRPLANES GROUP'S CAPITAL STRUCTURE AND PORTFOLIO
Airplanes Limited and Airplanes Trust are special purpose vehicles that
were established to acquire 229 aircraft from GPA in March 1996. Airplanes
Limited and Airplanes Trust funded this acquisition by causing Airplanes Pass
Through Trust to issue $4,048 million of Pass Through Certificates
(collectively, the "EXISTING CERTIFICATES" and, together with the 1998
Refinancing Certificates, the "CERTIFICATES") in four classes -- Class A, Class
B, Class C and Class D. The Class A Certificates were further subdivided into
five separate sub-classes. Each class and subclass of the Certificates
represents fractional undivided beneficial interests in two corresponding
classes or subclasses of notes (collectively, the "EXISTING NOTES" and, together
with the 1998 Refinancing Notes, the "NOTES") issued by Airplanes Limited and
Airplanes U.S. Trust. Airplanes Group received the net proceeds from an
underwritten offering of the Existing Certificates (the "1996 OFFERING") in
exchange for the Existing Notes and used such net proceeds, together with
approximately $604 million in aggregate principal amount of a fifth class of
Airplanes Group notes (the "CLASS E NOTES") to acquire certain subsidiaries of
GPA Group which owned the 229 aircraft (the "ACQUISITION"). GPA is the holder of
a majority in aggregate principal amount of the Class E Notes.
Of the $598 million of Subclass A-5 Notes and $375 million of Class B Notes
originally issued, $490 million and $37 million, respectively, had been repaid
as of February 16, 1998 in accordance with the terms of such Notes. Of the $604
million of Class E Notes issued, approximately $13 million was subsequently
canceled pursuant to the purchase price adjustment provisions of the agreements
pursuant to which the aircraft-owning subsidiaries of GPA Group were sold to
Airplanes Group.
Of the 229 aircraft and related leases acquired from GPA on March 28, 1996,
Airplanes Limited indirectly acquired 206 of the aircraft and related leases
through the acquisition of 95% of the capital stock of Airplanes Holdings
Limited ("HOLDING CO.") and Airplanes Trust indirectly acquired 23 aircraft
through the acquisition of the capital stock of AeroUSA, Inc. ("AEROUSA"), a
Connecticut corporation. During the fiscal year ending March 31, 1997, in order
to facilitate the structuring of certain leasing transactions, two aircraft were
transferred from the indirect ownership of Airplanes Limited to AeroUSA.
At January 23, 1998, ten of the original 229 aircraft had been sold, one
had suffered a constructive total loss (a "constructive total loss" occurs when
an aircraft is damaged and the cost of repair exceeds the value of the
aircraft), and 212 of the remaining 218 owned aircraft (the "AIRCRAFT") in the
portfolio of Aircraft owned
6
<PAGE> 8
by Airplanes Group (the "PORTFOLIO") were on lease to 74 operators in 38
countries. The leases with respect to the Aircraft at January 23, 1998 are
referred to as the "EXISTING LEASES". The number of Aircraft in the Portfolio at
January 23, 1998 gives effect to the delivery of three DC8 Aircraft to Emery
Worldwide Airlines, Inc. ("EMERY"), as if all of such deliveries occurred prior
to January 23, 1998. A contract for the sale of six DC8 aircraft (including the
three aircraft mentioned above) to Emery was signed on December 30, 1997, for an
aggregate price that meets the aggregate Note Target Price (as defined under
"Description of Securities -- The Notes and Guarantees -- Trust Indenture
Covenants"). Three Aircraft were delivered to Emery on December 30, 1997, and
the remaining three Aircraft are expected to be delivered to Emery by March 16,
1998. See "The Aircraft, the Related Leases and Collateral".
As of January 23, 1998, Holding Co. owned (i) 30 of the Aircraft and
related Existing Leases, (ii) twelve wholly owned subsidiaries which owned 167
of the Aircraft (including Holding Co., the "AIRCRAFT OWNING COMPANIES") and
(iii) ten other wholly owned subsidiaries ("SPECIAL LESSORS") which owned no
Aircraft and whose business is to lease certain of the Aircraft from the
Aircraft Owning Companies and sublease such Aircraft to various aircraft
operators. The Special Lessors are largely incorporated in various European
jurisdictions. Additional Special Lessors may be organized in other
jurisdictions in the future. As of January 23, 1998, AeroUSA owned, directly and
indirectly, 21 of the Aircraft. The indirect ownership of the Aircraft by two
different entities, Airplanes Limited and Airplanes Trust, reflects GPA Group's
corporate structure prior to the Acquisition. It would not have been
tax-efficient in Ireland or the United States to have a single direct or
indirect owner of the Aircraft following the Acquisition. The Aircraft Owning
Companies, the Special Lessors and AeroUSA are referred to herein as the
"TRANSFERRED COMPANIES".
SERVICER
GECAS acts as servicer (the "SERVICER") pursuant to the servicing agreement
among Airplanes Limited, AeroUSA, Holding Co., Airplanes Trust, GPA Cash Manager
Limited, as Cash Manager, and GECAS dated as of March 28, 1996 (the "SERVICING
AGREEMENT") and performs certain aircraft-related services on behalf of
Airplanes Group. Airplanes Limited, AeroUSA and Holding Co. have directed the
Servicer to perform such services in a manner that is intended to be consistent
with maximizing the cash flows derived from the Aircraft and the Existing Leases
and future leases related thereto (the "FUTURE LEASES" and, together with the
Existing Leases, the "LEASES") over time, subject to the constraints imposed by
the Trust Indentures and by seeking to achieve a balanced and diversified
portfolio (including, without limitation, with respect to lessees, geography and
lease term lengths), in all cases taking into account then existing and
anticipated market conditions affecting the operating lease market for used
aircraft and the commercial aviation industry generally. The Servicer is not
required pursuant to the terms of the Servicing Agreement to obtain rental rates
designed to pay any amounts due and owing under the Notes and no assurance can
be given that the rental rates of the Leases will be sufficient to pay interest
and principal on the Notes in accordance with their terms.
As described below under "The Parties -- GPA", GE Capital has the right to
acquire at any time until October 29, 2001, 90% of the ordinary share capital of
GPA Group. There can be no assurance, however, that GE Capital will elect to
acquire any of such ordinary shares. Neither the Certificates nor the Notes are
obligations of, or guaranteed by, or offered for sale by, GE Capital, GECAS or
any of their affiliates.
RANKING
After the payment of amounts due and owing in respect of, among other
things, taxes and obligations to lessees and various service providers
(including, without limitation, the Servicer, the Administrative Agent and the
Cash Manager), the cash flows derived primarily from the Leases will be applied,
indirectly, towards the payment of amounts due to Certificateholders. Payments
of interest on the 1998 Refinancing Notes and the corresponding 1998 Refinancing
Certificates will rank equally with payments of interest on the other subclasses
of Class A Notes. Interest at the rate of 1% on the outstanding principal
balance of the Class E Notes will be paid in priority to certain payments of
principal on the 1998 Refinancing Notes and the corresponding 1998 Refinancing
Certificates and, assuming Available Collections are sufficient therefor, this
would result in maximum annual interest payments on the Class E Notes of $5.91
million. See "Prospectus Summary -- Overview of Priority of Payments" and
"Description of Securities -- The Notes and the Guarantees -- Priority of
Payments".
7
<PAGE> 9
GPA
The Acquisition was structured, and Airplanes Group's activities since the
Acquisition have been conducted, with the intent of establishing Airplanes
Limited, Airplanes Trust, Holding Co., AeroUSA and their respective subsidiaries
as legal entities distinct from GPA that would be unaffected by the bankruptcy
or insolvency of GPA Group or any of its affiliates. If such entities were to be
consolidated with GPA Group or otherwise affected by any bankruptcy or
insolvency of the GPA Group and its affiliates, payments to Certificateholders
could be materially adversely affected. See "Risk Factors -- Certain Bankruptcy
Considerations".
A majority of the Directors of Airplanes Limited and a majority of the
Controlling Trustees of Airplanes Trust are independent of GPA, although certain
significant transactions may only be approved by a unanimous vote of all the
Directors of Airplanes Limited and all the Controlling Trustees of Airplanes
Trust, respectively.
LACK OF EXECUTIVE MANAGEMENT
Airplanes Limited and Airplanes Trust have no employees or executive
officers. Accordingly, the Directors and Controlling Trustees rely upon the
Servicer, the Administrative Agent, the Cash Manager and other service providers
for all asset servicing, executive and administrative functions pursuant to the
respective service provider agreements. See "Management of Airplanes Group".
THE 1998 REFINANCING CERTIFICATES
The following table summarizes certain of the principal terms of the
Offering.
<TABLE>
<CAPTION>
SUBCLASS A-6 SUBCLASS A-7
CERTIFICATES CERTIFICATES
-------------- --------------
<S> <C> <C>
Aggregate Principal Amount:.............................. $
Expected Ratings
DCR.................................................... AA AA
Moody's................................................ Aa2 Aa2
Standard & Poor's...................................... AA AA
Interest Rate:........................................... LIBOR+. % LIBOR+. %
Initial Loan to Aircraft Value (Cumulative)(1):.......... % %
Expected Average Life:................................... Years Years
Expected Final Payment Date:.............................
Final Maturity Date:..................................... March 15, 2019 March 15, 2019
</TABLE>
- ---------------
(1) "INITIAL LOAN TO AIRCRAFT VALUE" represents the initial aggregate principal
amount of the 1998 Refinancing Certificates, plus the outstanding aggregate
principal balance at , 1998 of the other subclasses of Class A
Certificates, expressed as a percentage of (i) the aggregate Appraised Value
of the Aircraft plus (ii) $ million, being the amount of cash held
in the Collection Account representing the Liquidity Reserve Amount on
, 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- The Accounts -- Liquidity Reserve
Amount".
8
<PAGE> 10
RATINGS OF THE 1998 REFINANCING CERTIFICATES
The ratings of the 1998 Refinancing Certificates address the likelihood of
the timely payment of interest and the ultimate payment of principal and
premium, if any, on the 1998 Refinancing Certificates. Payments of principal and
interest on the 1998 Refinancing Notes will be payable only after any Expenses
have been paid or provided for in full and only to the extent that Available
Collections are sufficient therefor in accordance with the priority of payments
established for the Notes. In addition, Airplanes Group's ability to pay Step-Up
Interest or principal in full on the 1998 Refinancing Notes on the Expected
Final Payment Date (as indicated in the table above, the "EXPECTED FINAL PAYMENT
DATE") for the 1998 Refinancing Certificates (or on any other date prior to the
Final Maturity Date (as indicated in the table above, the "FINAL MATURITY
DATE")) has not been rated by any of the Rating Agencies. The ratings assigned
to the 1998 Refinancing Certificates do not address the effect of any imposition
of any withholding tax on any payments under the Leases, the 1998 Refinancing
Notes, the 1998 Refinancing Guarantees, the 1998 Refinancing Certificates or
otherwise. See "Risk Factors -- Tax Risks" and "Tax Considerations".
A rating is not a recommendation to buy, sell or hold 1998 Refinancing
Certificates inasmuch as ratings do not comment as to market price or
suitability for a particular investor and may be subject to revision, suspension
or withdrawal at any time by the assigning Rating Agency. In the event that a
rating initially assigned to the 1998 Refinancing Certificates is subsequently
lowered, suspended or withdrawn for any reason, no person or entity is obliged
to provide any additional support or credit enhancement with respect to the 1998
Refinancing Certificates.
9
<PAGE> 11
THE AIRCRAFT AND LESSEES
The following pie charts summarize Airplanes Group's exposure as of January
23, 1998 to various types of Aircraft, Lessees, ages of Aircraft, noise
restrictions applying to Aircraft and the regions and countries in which Lessees
are based. All percentages have been calculated by reference to the Appraised
Value (as of January 23, 1998) of the Aircraft based on a Portfolio of 218
Aircraft (after giving effect to the delivery of three aircraft to Emery as if
such deliveries had occurred prior to January 23, 1998).
EXPOSURE TO INDIVIDUAL LESSEES
<TABLE>
<S> <C>
Malev................... 2.37%
Air Europa.............. 2.48%
TAM..................... 2.55%
Mexicana................ 2.83%
Off-Lease............... 2.91%
Transbrasil............. 3.02%
Airtours................ 3.30%
Avianca................. 3.55%
Burlington Air.......... 4.14%
THY..................... 4.74%
Canadian Airlines....... 5.51%
Aeromexico.............. 5.57%
Varig................... 6.70%
Other................... 50.33%
</TABLE>
Total Number of Lessees is 74
EXPOSURE TO TYPE OF AIRCRAFT
<TABLE>
<S> <C>
DHC8-300CA.............. 2.09%
B757-200................ 3.32%
B737-200A............... 4.46%
B737-500................ 6.13%
MD11.................... 6.22%
B767-300ER.............. 6.78%
F100.................... 6.78%
B737-300................ 6.41%
DC8-71F................. 7.73%
A320-200................ 9.66%
Other................... 11.33%
MD83.................... 12.99%
B737-400................ 15.40%
</TABLE>
Total Number of Aircraft is 218
Narrow Body Aircraft: 203 (82.12%)
Widebody Aircraft: 15 (16.88%)
EXPOSURE TO COUNTRIES IN WHICH LESSEES ARE BASED
<TABLE>
<S> <C>
Ireland................. 2.40%
Italy................... 2.41%
Sweden.................. 2.81%
Off-Lease............... 2.91%
Chile................... 2.92%
China................... 3.56%
Spain................... 4.50%
UK...................... 4.65%
Colombia................ 4.59%
Canada.................. 6.18%
Mexico.................. 8.59%
Turkey.................. 8.68%
USA..................... 10.99%
Brazil.................. 13.94%
Other................... 20.87%
</TABLE>
Total Number of Countries is 38
EXPOSURE OF AIRCRAFT TO NOISE RESTRICTIONS(1)
<TABLE>
<S> <C>
Stage 2 Aircraft........ 6.56%
Stage 3 Aircraft........ 93.44%
</TABLE>
Turboprop Aircraft are included as Stage 3 Aircraft
EXPOSURE TO REGION IN WHICH LESSEES ARE BASED
<TABLE>
<S> <C>
Other................... 2.35%
Off-Lease............... 2.91%
Asia and Far East....... 10.29%
North America........... 17.17%
Europe.................. 33.64%
Latin America........... 33.64%
</TABLE>
Europe includes Turkey and Other includes CIS countries
EXPOSURE TO YEAR OF AIRCRAFT MANUFACTURE OR SUBSEQUENT FREIGHTER CONVERSION
<TABLE>
<S> <C>
1987.................... 1.55%
1993.................... 3.30%
1989.................... 4.39%
1988.................... 5.80%
1990.................... 10.40%
Other................... 12.86%
1991.................... 23.15%
1992.................... 39.35%
</TABLE>
Weighted average age from manufacture or conversion is approximately 7.6 years
(1) See "The Aircraft, Related Leases and Collateral -- Portfolio Information
-- The Aircraft".
10
<PAGE> 12
PAYMENT FLOWS
The flowchart under this heading provides a summary of payment flows
within Airplanes Group. Payments under the Leases are received from the Lessees
by AeroUSA, a subsidiary of Airplanes U.S. Trust and by Holding Co. and
Aircraft Owning Companies and Special Lessors, all of which are subsidiaries of
Airplanes Limited. The Lease payments are then used by the above named
subsidiaries of Airplanes U.S. Trust and Airplanes Limited to pay interest and
principal on intercompany loans to Airplanes U.S. Trust and Airplanes Limited.
Airplanes U.S. Trust uses the funds received from AeroUSA to pay interest and
principal on the Airplanes Trust Notes and Guarantees to Airplanes Pass Through
Trust and to pay interest and principal on the Class E Notes to GPA, Inc.
Airplanes Limited uses the funds it receives from the Aircraft Owning Companies
and Special Lessors and Holding Co. to pay interest and principal on the
Airplanes Limited Notes and Guarantees to Airplanes Pass Through Trust, to pay
interest and principal on the Class E Notes to GPA Group(1) and to pay
dividends on equity interest in Airplanes Limited to the Charitable Trusts.
Finally, Airplanes Pass Through Trust uses the funds it receives from Airplanes
U.S. Trust and Airplanes Limited to pay interest and principal on the Class A-D
Certificates.
- -----------------
(1) Approximately $83 million (or 14%) of the aggregate principal amount of
the Class E Notes are held by consolidated subsidiaries of GPA Group in
which minority shareholders have interests representing approximately $23
million (or 4%) of the aggregate principal amount of the Class E Notes.
See "The Parties -- GPA".
11
<PAGE> 13
OWNERSHIP STRUCTURE(1)
The flowchart under this heading sets forth the ownership structure of
Airplanes Group. Airplanes Group consists of Airplanes Limited, a Jersey limited
liability company and Airplanes U.S. Trust, a Delaware business trust.
One-hundred percent of the equity interest in Airplanes Limited is held by
the Charitable Trusts. Airplanes Limited holds 95% of the equity interest in
Holding Co. GPA Group holds the remaining 5% equity interest in Holding Co.
Holding Co. owns 100% of the equity interest in the Aircraft Owning Companies
and Special Lessors. Together, Holding Co. and the Aircraft Owning Companies and
Special Lessors own 197 Aircraft.
The residual interest in Airplanes U.S. Trust is held by GPA, Inc.
One-hundred percent of the equity interest in GPA, Inc. is held by GPA Group.
Airplanes U.S. Trust owns 100% of the equity interest in AeroUSA and its wholly
owned subsidiary(2). AeroUSA and its subsidiary together own 21 Aircraft.
- -----------------
(1) Airplanes Group may establish additional subsidiaries from time to time
for the purpose of directly or indirectly leasing Aircraft from the
Aircraft Owning Companies or any other subsidiary of Holding Co. or
AeroUSA and sub-leasing them to operators where commercial or other
reasons make it desirable to do so. Any additional subsidiaries will be
subject to restrictions set forth in the Trust Indentures.
(2) The shares of AeroUSA and its wholly-owned subsidiary are held by voting
trusts with First Security Bank of Utah, National Association acting as
trustee in order to satisfy regulations of the U.S. Federal Aviation
Administration regarding the U.S. citizenship of the owners of
U.S.-registered aircraft. Airplanes Trust holds voting trust certificates
representing such respective shares.
12
<PAGE> 14
OVERVIEW OF
PRIORITY OF PAYMENTS
The following chart summarizes the order of priority of payments on the
Notes, the Class E Notes and other obligations of Airplanes Group as described
in more detail in "Description of the Securities -- The Notes and the
Guarantees -- Priority of Payments".
Collections
(i) Required Expense Amount
(ii) Class A Interest and Swap Payments
(iii) First Collection Account Top-Up
(iv) Minimum Hedge Payment
(v) Class A Minimum Principal
(vi) Class B Interest
(vii) Class B Minimum Principal
(viii) Class C Interest
(ix) Class D Interest
(x) Second Collection Account Top-Up
(xi) Class A Principal Adjustment Amount
(xii) Class C Scheduled Principal
(xiii) Class D Scheduled Principal
(xiv) Modification Payments
(xv) Class A Note Step-Up Interest
(xvi) Class E Minimum Interest
(xvii) Supplemental Hedge Payment
(xviii) Class B Supplemental Principal
(xix) Class A Supplemental Principal
(xx) Class D Outstanding Principal
(xxi) Class C Outstanding Principal
(xxii) Class E Supplemental Interest
(xxiii) Class B Outstanding Principal
(xxiv) Class A Outstanding Principal
(xxv) Subordinated Swap Payments
(xxvi) Class E Accrued Unpaid Interest
(xxvii) Class E Outstanding Principal
13
<PAGE> 15
THE OFFERING
The 1998 Refinancing
Trusts..................... Each 1998 Refinancing Trust will be formed under
the laws of the State of New York pursuant to a
Trust Agreement among Airplanes Limited, Airplanes
Trust and Bankers Trust Company, as trustee for the
holders of the Existing Certificates, and will
acquire the 1998 Refinancing Notes and the 1998
Refinancing Guarantees and will issue and sell the
1998 Refinancing Certificates. The 1998 Refinancing
Trusts together with the Existing Trusts are
referred to as the "AIRPLANES PASS THROUGH TRUST"
or the "TRUST". Bankers Trust Company will be
trustee for the holders of the 1998 Refinancing
Certificates (the "1998 REFINANCING TRUSTEE" and,
together with the trustee for the holders of the
Existing Certificates, the "TRUSTEE"). The Trust's
principal office is located in care of the Trustee
at 4 Albany Street, New York, New York 10006. See
"The Parties -- The Trust and Trustee".
Trust Assets............... The respective subclasses of 1998 Refinancing Notes
and 1998 Refinancing Guarantees, will represent
substantially all of the assets of the
corresponding 1998 Refinancing Trust (the "TRUST
ASSETS"). Under the Trust Agreement, the Trustee
may not transfer any of the 1998 Refinancing Notes
or the 1998 Refinancing Guarantees except in
connection with an exercise of remedies following a
Note Event of Default. See "The Parties -- The
Trust and Trustee".
Payment Dates.............. Interest on the 1998 Refinancing Certificates will
be payable monthly in arrears on the fifteenth day
of each month, commencing April 15, 1998 (each a
"PAYMENT DATE"); provided that if any Payment Date
would otherwise fall on a day which is not a
Business Day, the relevant Payment Date will be the
first following day which is a Business Day. For
the purposes of the Certificates, "BUSINESS DAY"
means a day on which U.S. dollar deposits may be
dealt in on the London inter-bank market and
commercial banks and foreign exchange markets are
open in New York, New York and London, England. See
"Description of Securities -- The Certificates --
Payments and Distributions".
Record Date................ The record date (the "RECORD DATE") with respect to
each Payment Date will be the close of business on
the day that is 15 days prior to such Payment Date,
whether or not such day is a Business Day. See
"Description of Securities -- The Certificates --
Payments and Distributions".
Reference Date............. The reference date (the "REFERENCE DATE") with
respect to each Payment Date will be the day that
is two Business Days prior to such Payment Date.
See "Description of Securities -- The Notes and the
Guarantees -- Reference Agency Agreement".
Calculation Date........... The fourth Business Day immediately preceding each
Payment Date is the "CALCULATION DATE".
Interest Accrual Period.... The period beginning on (and including) March 16,
1998 (the "CLOSING DATE") and ending on (but
excluding) the first Payment Date and each
successive period beginning on (and including) a
Payment Date and ending on (but excluding) the next
succeeding Payment Date is called an "INTEREST
ACCRUAL PERIOD"; provided that the final Interest
Accrual Period will end on but exclude the Final
Maturity Date (or, if earlier with respect to any
class or subclass of Notes, the date such class or
14
<PAGE> 16
subclass of Notes is paid in full). Account
balances with respect to each Interest Accrual
Period shall be determined by reference to the
balance of funds on deposit in Accounts on the
Calculation Date immediately preceding each Payment
Date. See "Description of Securities -- The
Certificates -- Payments and Distributions".
Accrued Interest........... Any accrued interest that is not paid on a Payment
Date will bear interest at the stated rate of the
relevant subclass of the 1998 Refinancing Notes.
Sources of Payments on the
1998 Refinancing
Certificates
and 1998 Refinancing
Notes.................... The only source of payment for the 1998 Refinancing
Certificates, the 1998 Refinancing Notes, the 1998
Refinancing Guarantees and the other obligations of
Airplanes Group will be the payments made by the
Lessees under the Leases, proceeds from
dispositions, if any, of the assets of Airplanes
Group, net payments, if any, under the Swap
Agreements and other hedging instruments, net cash
proceeds received from the sale of Refinancing
Certificates and proceeds, if any, received in
connection with disposals of the 1998 Refinancing
Notes by the Indenture Trustees under certain
circumstances. Payments on the 1998 Refinancing
Notes and the 1998 Refinancing Guarantees and,
correspondingly, on the 1998 Refinancing
Certificates, will be made only to the extent of
amounts on deposit in the Collection Account on the
Calculation Date relating to each Payment Date net
of Expenses (other than Permitted Accruals in
respect of Modification Payments) then due and
payable or reasonably anticipated to become due and
payable during the next Interest Accrual Period
(the "REQUIRED EXPENSE AMOUNT") and other amounts
set forth in "Description of Securities -- The
Notes and the Guarantees -- Priority of Payments"
(the "AVAILABLE COLLECTIONS"). On each Payment
Date, interest, principal and premium, if any, paid
in respect of each subclass of the 1998 Refinancing
Notes, to the extent received by the 1998
Refinancing Trustee, will be passed through to
holders of the corresponding subclass of the 1998
Refinancing Certificates on the Record Date for
such Payment Date (the "1998 REFINANCING
CERTIFICATEHOLDERS" and together with the holders
of the Existing Certificates, the
"CERTIFICATEHOLDERS"). It is expected, based on the
Assumptions, that funds to be received by the 1998
Refinancing Trustee in respect of the 1998
Refinancing Notes will be sufficient to pay
interest, principal and premium, if any, on the
1998 Refinancing Certificates. See "Description of
Securities -- The Certificates" and "-- The Notes
and the Guarantees -- Priority of Payments", "Risk
Factors -- Risks Relating to Payments on the 1998
Refinancing Certificates" and "-- Capital Markets
Risks".
1998 Refinancing
Guarantees................. Each of Airplanes Limited and Airplanes Trust shall
unconditionally guarantee the obligations of the
other under the 1998 Refinancing Notes (the "1998
REFINANCING GUARANTEES"). Payments under the 1998
Refinancing Guarantees will be subordinated in
priority of payment in accordance with the priority
of payments on each subclass of the 1998
Refinancing Notes. The guarantees on the Existing
Notes are referred to herein as the "EXISTING
GUARANTEES". The Existing Guarantees, together with
the 1998 Refinancing Guarantees, are referred to
herein as the "GUARANTEES".
15
<PAGE> 17
Use of Proceeds............ The purpose of the Offering is to refinance the
Subclass A-1 Notes of Airplanes Group. All of the
proceeds from the offering will be used for such
purpose. See "Use of Proceeds".
Ratings of the 1998
Refinancing Certificates... It is a condition to the issuance of the 1998
Refinancing Certificates that each subclass of the
1998 Refinancing Certificates will receive ratings
from Duff & Phelps Credit Rating Co. ("DCR"),
Moody's Investors Service, Inc. ("MOODY'S") and
Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. ("STANDARD & POOR'S"
and, together with DCR and Moody's, the "RATING
AGENCIES") as set forth under "Description of the
Securities -- The Certificates -- Ratings".
Listing.................... Application has been made to list the 1998
Refinancing Certificates on the Luxembourg Stock
Exchange. See "Additional Information".
Denominations.............. The 1998 Refinancing Certificates will be available
for purchase in minimum denominations of $100,000
and integral multiples of $1,000 in excess thereof;
provided that a single Certificate of each subclass
may be issued in a denomination of less than
$100,000. See "Description of the Securities -- The
Certificates".
Form....................... It is expected that the 1998 Refinancing
Certificates will be issued in fully registered
form only in the name of Cede & Co. as the nominee
of DTC. No person acquiring an interest in the 1998
Refinancing Certificates will be entitled to
receive a Definitive Certificate representing such
person's interest in the corresponding 1998
Refinancing Trust, except in the event that
Definitive Certificates are issued under the
limited circumstances described herein. 1998
Refinancing Certificateholders will hold their 1998
Refinancing Certificates through DTC (in the United
States) or Cedel Bank or Euroclear (in Europe), if
they are participants in such systems, or
indirectly through organizations which are
participants in such systems. See "Book-Entry,
Registration, Global Clearance and Settlement".
Airplanes Limited.......... Airplanes Limited is a special purpose limited
liability company formed under the laws of Jersey
with its registered and principal office located at
22 Grenville Street, St. Helier, Jersey, JE4 8PX,
Channel Islands (telephone: 011-44-1534-609-000)
("AIRPLANES LIMITED"). See "The Parties --
Airplanes Limited" and "Management of Airplanes
Group".
Airplanes Trust............ Airplanes U.S. Trust is a Delaware business trust
("AIRPLANES TRUST"), organized pursuant to the
Airplanes Trust Agreement (the "AIRPLANES TRUST
AGREEMENT") among GPA, Inc., a wholly owned
subsidiary of GPA Group ("GPA, INC."), as settlor
(the "SETTLOR"), Wilmington Trust Company, as
trustee (the "DELAWARE TRUSTEE") and the
Controlling Trustees thereunder. Airplanes Trust's
principal office is located in care of the Delaware
Trustee at 1100 North Market Street, Rodney Square
North, Wilmington, Delaware 19890-0001 (telephone:
1-302-651-1000). See "The Parties -- Airplanes
Trust" and "Management of Airplanes Group".
Airplanes Group............ Airplanes Limited and Airplanes Trust and, unless
the context otherwise requires, the subsidiaries of
each of them on a combined basis. See "Prospectus
Summary -- The Portfolio".
16
<PAGE> 18
Airplanes Limited
1998 Refinancing Notes... Airplanes Limited will issue the 1998 Refinancing
Notes (the "AIRPLANES LIMITED 1998 REFINANCING
NOTES") pursuant to a supplement to the trust
indenture dated March 28, 1996 (as amended or
supplemented, the "AIRPLANES LIMITED INDENTURE"),
among Airplanes Limited, Airplanes Trust and
Bankers Trust Company, as Airplanes Limited
Indenture Trustee (the "AIRPLANES LIMITED INDENTURE
TRUSTEE"). The Airplanes Limited 1998 Refinancing
Notes, together with the Existing Notes issued by
Airplanes Limited, are referred to as the
"AIRPLANES LIMITED NOTES". See "Description of
Securities -- The Notes and the Guarantees".
Airplanes Trust
1998 Refinancing Notes... Airplanes Trust will issue the 1998 Refinancing
Notes (the "AIRPLANES TRUST 1998 REFINANCING
NOTES") pursuant to a supplement to the trust
indenture dated March 28, 1996 (as amended or
supplemented, the "AIRPLANES TRUST INDENTURE" and,
together with the Airplanes Limited Indenture, the
"TRUST INDENTURES"), among Airplanes Limited,
Airplanes Trust and Bankers Trust Company, as
Airplanes Trust Indenture Trustee (the "AIRPLANES
TRUST INDENTURE TRUSTEE", and together with the
Airplanes Limited Indenture Trustee, the "INDENTURE
TRUSTEES"). The Airplanes Trust 1998 Refinancing
Notes, together with the Existing Notes issued by
Airplanes Trust, are referred to as the "AIRPLANES
TRUST NOTES". See "Description of Securities -- The
Notes and the Guarantees".
1998 Refinancing Notes..... The 1998 Refinancing Notes shall comprise the
Airplanes Limited 1998 Refinancing Notes and the
Airplanes Trust 1998 Refinancing Notes. The 1998
Refinancing Notes are expected to be divided into
two subclasses, the Subclass A-6 Notes and the
Subclass A-7 Notes, but may be further subdivided
into additional subclasses. Each subclass of the
1998 Refinancing Notes will be entitled to receive
interest from their date of delivery at a rate per
annum equal to one month LIBOR on the applicable
Reference Date plus the applicable margin set forth
on the cover page of this Prospectus. The interest
rates on each subclass of the 1998 Refinancing
Notes will be determined for the initial Interest
Accrual Period two Business Days prior to the
scheduled delivery thereof.
The 1998 Refinancing Notes, the other subclasses of
Class A Notes and the Class B Notes are referred to
collectively herein as the "FLOATING RATE NOTES"
and the 1998 Refinancing Certificates, the other
subclasses of Class A Certificates and the Class B
Certificates are referred to collectively herein as
the "FLOATING RATE CERTIFICATES". The Existing
Class C Notes and Class D Notes are collectively
referred to herein as the "FIXED RATE NOTES" and
the Existing Class C Certificates and Class D
Certificates are collectively referred to herein as
the "FIXED RATE CERTIFICATES". See "Description of
Securities -- The Notes and the Guarantees".
Status of 1998 Refinancing
Notes....................
The 1998 Refinancing Notes will constitute direct
obligations of Airplanes Limited and Airplanes
Trust, as the case may be. None of the Trustee, the
Indenture Trustees or the Certificateholders has or
will have any security interest, mortgage, charge
or other similar interest in any of
17
<PAGE> 19
the Aircraft or the Leases. The Security Trustee
has been granted a security interest in one-third
of the ordinary share capital of Holding Co. and
its subsidiaries and in Airplanes Group's interests
in the cash in the Accounts. In addition, the
Accounts (except for certain Rental Accounts) are
held in the name of the Security Trustee. See
"Description of Securities -- The Notes and the
Guarantees". Airplanes Group's ability to incur
indebtedness is significantly constrained. However,
Airplanes Group will have the ability, in certain
circumstances, to refinance certain classes or
subclasses of Certificates through the issuance and
sale by separate trusts of new certificates (the
"REFINANCING CERTIFICATES"). Such Refinancing
Certificates will rank equally with the classes or
subclasses of refinanced Certificates and will
never rank higher in priority than the Class A
Certificates. See "Description of Securities -- The
Notes and the Guarantees -- Trust Indenture
Covenants -- Limitations on Indebtedness".
Payments on the
1998 Refinancing Notes... Interest, principal and premium, if any, on the
1998 Refinancing Notes will be paid only out of
Available Collections with respect to any Interest
Accrual Period received on or prior to the
Calculation Date relating to such Interest Accrual
Period. On each Payment Date, principal will be
payable in respect of the 1998 Refinancing Notes
and the Existing Notes to the extent of Available
Collections, in an amount up to the Principal
Distribution Amount, if any, on such Payment Date
but only to the extent that funds are available for
such purpose after having made the payments ranking
in priority thereto. The expected principal
payments on the 1998 Refinancing Notes have been
determined on the basis of certain assumptions
(such assumptions, as set forth under "Description
of Securities -- The Certificates", the
"ASSUMPTIONS"), including, among other things,
assumptions regarding the timing and amount of
payments under the Existing Leases, assumptions
regarding the terms of and payments under Future
Leases and assumptions regarding the ability of the
Trust to refinance maturing Certificates, including
Subclass A-6 Certificates, through the issuance and
sale of Refinancing Certificates. On the basis of
the Assumptions, the Subclass A-6 Certificates are
not expected to receive any payments of Principal
Distribution Amount until they are repaid in full
with an issue of Refinancing Certificates on or
prior to their Expected Final Payment Date on March
, . Also on the basis of the
Assumptions and following repayment in full of the
Existing Subclass A-5 Certificates, the Subclass
A-7 Certificates are expected to receive, to the
extent there are Available Collections sufficient
therefor, all Principal Distribution Amounts
payable with respect to the Class A Certificates
until the Subclass A-7 Certificates have been
repaid in full. The Outstanding Principal Balance
of the Subclass A-5 Certificates was approximately
$108 million at February 16, 1998. The Expected
Final Payment Date of the Subclass A-5 Certificates
is April 15, 1999, but, based on the payment
performance of the Subclass A-5 Certificates to
date, the Subclass A-5 Certificates are expected to
be paid in full by August 17, 1998. The Expected
Final Payment Date of the Subclass A-7 Certificates
is . It is highly likely that the
Assumptions will not correspond to actual
experience and as a result the actual principal
payments received are likely to vary from the
expected principal payments in respect of such
18
<PAGE> 20
class or subclass of Certificates, and the actual
maturity of any class or subclass of Certificates
is likely to occur earlier or later than its
Expected Final Payment Date. See "Description of
Securities -- The Notes and the Guarantees --
Priority of Payments", "Risk Factors -- Risks
Relating to Payments on the 1998 Refinancing
Certificates" and "Risk Factors -- Capital Markets
Risks".
Step-Up Interest........... If any of the Subclass A-2, A-3, A-4 or A-6 Notes
is not repaid on or before the Expected Final
Payment Date for such subclass, such subclass of
Notes will accrue interest thereafter at a rate
equal to the stated interest rate therefor, plus
0.50% per annum (the "STEP-UP INTEREST"). For any
period in which Step-Up Interest is accruing on any
subclass of the Class A Notes, Step-Up Interest
will also accrue on the Subclass A-5 and Subclass
A-7 Notes. Payments of Step-Up Interest will be
subordinated to certain other obligations of
Airplanes Group, including the payment of the
Principal Adjustment Amount to the Class A Notes
and the Minimum Principal Payment Amount of the
Class B Notes and payment of the Scheduled
Principal Payment Amount to the Class C Notes and
Class D Notes and will not be rated by the Rating
Agencies. See "Description of Securities -- The
Notes and the Guarantees -- Interest".
Priority of Payments....... On each Payment Date, distributions from Available
Collections will be made in accordance with the
priority of payments set forth in "Description of
Securities -- The Notes and the Guarantees --
Priority of Payments". Payments on the Notes will
be subordinated to all fees, costs, or expenses
incurred by any Airplanes Group member in the
course of the business activities permitted to be
conducted by it under the Trust Indentures (the
"EXPENSES") and (other than interest payments on
the Class A Notes with respect to which such
amounts rank equally) certain amounts due to the
parties providing interest rate swaps and other
hedging instruments (the "SWAP PROVIDERS").
Furthermore, payments on the Class D Notes and
Class D Certificates will be effectively
subordinated in priority of payment to payments on
all other classes of Notes and Certificates,
payments on the Class C Notes and Class C
Certificates will be effectively subordinated in
priority of payment to payments on the Class A and
Class B Notes and Class A and Class B Certificates
and payments on the Class B Notes and Class B
Certificates will be effectively subordinated in
priority of payment to payments on the Class A
Notes and Class A Certificates.
Redemption of the
1998 Refinancing Notes... Subject to certain conditions described in
"Description of Securities -- The Notes and the
Guarantees -- Redemption", the 1998 Refinancing
Notes may be redeemed on any Payment Date, in whole
or in part, at the Redemption Price, plus accrued
but unpaid interest. Within each subclass of the
1998 Refinancing Notes, the Redemption Price will
be applied pro rata among all such Notes to the pro
rata reduction of the remaining expected principal
payments thereof.
The Redemption Price on the Subclass A-7 Notes
redeemed will equal the Outstanding Principal
Balance of such subclass of Notes being redeemed,
without premium.
19
<PAGE> 21
The Redemption Price on the Subclass A-6 Notes
redeemed (i) prior to will be % of
the Outstanding Principal Balance of such subclass
and (ii) on or after , will be equal to
the Outstanding Principal Balance of such subclass,
without premium.
Each subclass of the 1998 Refinancing Notes may
also be redeemed on any Payment Date, in whole, at
the Redemption Price, plus accrued but unpaid
interest, in connection with any sale of all or
substantially all of the assets of the Airplanes
Group. The 1998 Refinancing Notes may also be
redeemed at such time as other classes or
subclasses of Notes are being defeased. See
"Description of the Securities -- The Notes and the
Guarantees -- Defeasance".
In addition, each subclass of the 1998 Refinancing
Notes may be redeemed on any Payment Date, in
whole, but not in part, without premium, upon the
occurrence of certain adverse tax events affecting
Airplanes Group, at a Redemption Price equal to the
Outstanding Principal Balance thereof, plus accrued
and unpaid interest thereon. See "Description of
the Securities -- The Notes and the Guarantees --
Redemption".
Capital Stock of Airplanes
Limited.................. Airplanes Limited has an authorized share capital
of 10,000 ordinary shares, $1 par value per share
("CAPITAL STOCK"), of which 30 shares have been
issued. The issued Capital Stock of Airplanes
Limited is held by Juris Limited and Lively
Limited, each a Jersey corporation, (together, the
"NOMINEES"), for the benefit of certain charitable
trusts established under the laws of Jersey
(collectively, the "CHARITABLE TRUSTS"). See "The
Parties -- Airplanes Limited".
Airplanes Trust Residual
Interest................. GPA, Inc., a wholly owned subsidiary of GPA Group,
owns all of the residual ownership interest in
Airplanes Trust (the "AIRPLANES TRUST RESIDUAL
INTEREST"). Upon repayment in full of the Airplanes
Trust Notes, the Airplanes Trust Class E Notes and
the Airplanes Trust Refinancing Notes, if any, the
AeroUSA Shares will revert to GPA through its
ownership of the Airplanes Trust Residual Interest.
See "The Parties -- Airplanes Trust".
GPA Group.................. GPA Group is a public limited company incorporated
in Ireland. Wholly owned subsidiaries of GPA Group
act as the Administrative Agent and Cash Manager.
See "The Parties -- GPA" and "Management of
Airplanes Group -- Corporate Management."
Appraised Value............ As described herein, Airplanes Group has obtained
from Aircraft Information Services, Inc., BK
Associates, Inc. and Airclaims Limited (the
"APPRAISERS") three desktop appraisals (the
"APPRAISALS") of the value of each of the Aircraft
as of January 23, 1998. The Appraisers ascertain
the value of each Aircraft on the basis of an open,
unrestricted, stable market environment with a
reasonable balance of supply and demand, and with
full consideration of the Aircraft's "highest and
best use", presuming an arm's-length, cash
transaction between willing, able and knowledgeable
parties, acting prudently, with an absence of
duress and with a reasonable period of time
available for marketing, adjusted to account for
the maintenance status of each Aircraft (with
certain assumptions as to use since the last
reported status), (each value so
20
<PAGE> 22
ascertained for the Aircraft, a "BASE VALUE"). The
average of the Base Values as of January 23, 1998
for each of the Aircraft in the Portfolio as of
January 23, 1998 (with the exception of 9 Aircraft
subject to finance leases as of January 23, 1998
which have been included in the computation of the
Appraised Value of the Portfolio at Airplanes
Group's net book value) is referred to herein as
the "APPRAISED VALUE". (Finance leases are fixed
term leases pursuant to which Airplanes Group
retains title to the aircraft but substantially all
of the risks and rewards associated with ownership,
including the residual value of the aircraft, are
transferred to the Lessee as the payment terms of a
finance lease are structured on the basis that the
lessee has economic ownership of the aircraft and
makes a series of "rental" payments designed to pay
for substantially all of the cost of the aircraft
(the principal element) and the cost of financing
the aircraft price (the interest element).) None of
the Appraisals attribute any value to the relevant
Lease, the Maintenance Reserves, cash and certain
commitment fees that serve as security
(collectively, the "SECURITY DEPOSITS") or certain
letters of credit, third-party guarantees or bank
guarantees or the cash equivalent thereof required
under the relevant Leases (the "RELATED
COLLATERAL"), if any, related to the particular
Aircraft. The aggregate Appraised Value of the
Portfolio at January 23, 1998 was approximately
$3,813 million based on a portfolio of 218 Aircraft
($3,859 million based on a portfolio of 221
Aircraft, prior to giving effect to the delivery of
three Aircraft to Emery as if such deliveries had
occurred prior to January 23, 1998). An appraisal
is only an estimate of value and should not be
relied upon as a measure of realizable value. The
proceeds received upon a sale of any Aircraft are
likely to be less than the Appraised Value thereof.
See "Risk Factors -- Aircraft Risks -- Risk of
Decline in Aircraft Values" and "The Aircraft,
Related Leases and Collateral -- Appraisers'
Report."
Leases..................... At January 23, 1998, the average remaining term,
weighted by Appraised Value (without giving effect
to Purchase Options, early termination options or
extension options) of the Existing Leases was
approximately 32 months. All of the Existing Leases
will expire under their terms prior to the last
Final Maturity Date of the Certificates and,
therefore, Airplanes Group must re-lease
substantially all of the Aircraft one or more times
prior to the last Final Maturity Date except to the
extent that Aircraft are sold prior to such Final
Maturity Date. Each Existing Lease is either (a) an
operating lease for a fixed term pursuant to which
Airplanes Group will retain title to the Aircraft
and substantially all of the risks and rewards
associated with ownership, including the residual
value of the Aircraft (although, as of January 23,
1998, 140 of the Existing Leases contained, and a
certain portion of the Future Leases may contain,
Purchase Options, early termination options or
extension options), or (b) a finance lease for a
fixed term, pursuant to which Airplanes Group
retains title to the Aircraft but substantially all
of the risks and rewards associated with ownership,
including the residual value of the Aircraft, are
transferred to the Lessee. Only 9 of the Existing
Leases (or 1.47% as a percentage of the Appraised
Value of the Portfolio) were classified as finance
leases as of January 23, 1998. See "Risk Factors --
Risks Relating to the Leases -- Inability to
Re-Lease Aircraft on Favorable Terms" and "The
Aircraft, Related Leases and Collateral -- The
Leases."
21
<PAGE> 23
Lessees.................... As of January 23, 1998, there were 74 lessees
(together with the lessees in respect of Future
Leases, the "LESSEES") of the Aircraft pursuant to
the Existing Leases in 38 different countries. Many
of the Lessees are in a relatively weak financial
condition and some face serious financial
difficulties. At December 31, 1997, 24 Lessees were
in arrears with respect to Rental Payments for
periods greater than 30 days, amounting to $18.2
million (of which $7.6 million related to five
previous lessees) or 0.47% of the aggregate
Appraised Value of the Portfolio. Of the $18.2
million total, $2.4 million was in arrears for a
period greater than 30 days, $1.7 million was in
arrears for a period greater than 60 days and $14.1
million was in arrears for a period greater than 90
days. As of December 31, 1997, six additional
Lessees were being allowed deferrals of Rental
Payments, maintenance and miscellaneous payments
totaling approximately $16.1 million (of which $0.4
million was in arrears for greater than 30 days,
$0.1 million was in arrears for greater than 60
days and $15.6 million was in arrears for greater
than 90 days). These Lessees are being allowed
deferrals of rentals, maintenance and miscellaneous
payments for periods of up to 70 months. See "Risk
Factors -- Risk of Lessee Default.
Rental Accounts............ The "RENTAL ACCOUNTS" are the accounts into which
payments made by Lessees under the Leases are paid.
The balance on deposit in each Rental Account is
transferred within one Business Day of receipt
thereof into the Collection Account, other than
certain limited amounts required to be left on
deposit for local legal or regulatory reasons. See
"Description of Securities -- The Accounts".
Lessee Funded Account...... The "LESSEE FUNDED ACCOUNT" is the account (or
accounts) into which amounts received from Lessees
in respect of Maintenance Reserves and Security
Deposits that are required to be segregated from
Airplanes Group's other funds ("SEGREGATED FUNDS")
are deposited and held. Funds on deposit in the
Lessee Funded Account are used to make certain
maintenance and security deposit related payments
to Lessees or may be applied against maintenance
related payments otherwise required to be made by
the Lessee during the term of the related Lease or
upon expiration thereof or repossession of the
Aircraft. In certain circumstances, on expiration
of a Lease, surplus funds may be credited from the
Lessee Funded Account to the Collection Account.
Amounts on deposit in the Lessee Funded Account are
not available to pay interest, principal or
premium, if any, on the Certificates. See
"Description of Securities -- The Accounts".
Collection Account......... The "COLLECTION ACCOUNT" is the account into which
all Collections received by or on behalf of
Airplanes Group in the course of conducting its
business are deposited. Except as noted below, the
Collection Account is maintained at a balance at
least equal to the Liquidity Reserve Amount. The
Liquidity Reserve Amount is currently approximately
$174 million and is intended to provide, to the
extent that payments required in respect of the
Leases are insufficient, for (i) Airplanes Group's
maintenance obligations, (ii) Airplanes Group's
obligation to repay Lessee Security Deposits and
(iii) certain other contingencies in respect of the
Aircraft (the "LIQUIDITY RESERVE AMOUNT"). The
balance of funds in the Collection Account may fall
below the Liquidity Reserve Amount at any time and
Airplanes Group
22
<PAGE> 24
may continue to make certain payments required on
the Notes in the circumstances described under
"Description of Securities -- The Accounts --
Liquidity Reserve Amount". See "Description of
Securities -- The Accounts".
Expense Account............ The "EXPENSE ACCOUNT" is the account into which the
Cash Manager deposits the Required Expense Amount
(other than certain Expenses transferred directly
to payees from the Collection Account) on each
Payment Date. See "Description of Securities -- The
Accounts".
Servicer................... GECAS provides certain services with respect to the
aircraft owned at any time by Airplanes Group and
the related Leases in accordance with the terms of
the Servicing Agreement. Airplanes Limited, AeroUSA
and Holding Co. are jointly and severally obligated
to pay the Servicer an annual asset-based servicing
fee equal to approximately 0.495%, adjusted
annually for inflation, of the agreed book value of
each Aircraft being serviced by the Servicer. Such
fees amounted to $22.7 million in the year ended
March 31, 1997. The Servicer is also entitled to
certain additional fees based, in part, on the
annual cash flow generated by the Leases in excess
of certain cash flow targets and on sales of
Aircraft at the direction of the Airplanes Group,
which fees are subject to an aggregate annual
minimum in the amount of approximately $1.5
million. In the year ended March 31, 1997 the
Servicer was paid $1.5 million in such additional
fees.
Pursuant to the Servicing Agreement, the Servicer
provides certain services to Airplanes Group,
including, among others, collecting Rental Payments
and other receivables due under the Leases,
monitoring the performance of maintenance and
insurance obligations of Lessees, enforcing payment
by Lessees under the Leases and remarketing,
including re-leasing Aircraft on lease expiration
or repossession from Lessees.
The initial term of the Servicing Agreement expires
on the earlier of (i) March 28, 2014 (which is
prior to the Final Maturity Date of the 1998
Refinancing Certificates) or (ii) payment in full
of all amounts Outstanding to be paid under the
Notes. Airplanes Group and the Servicer each have
the ability to terminate the Servicing Agreement
prior to the expiration of its initial term under
certain circumstances described under "Management
of Airplanes Group -- The Servicer -- Term and
Termination" and "-- Tax Status". The Servicer is
not required pursuant to the terms of the Servicing
Agreement to obtain rental rates designed to pay
any amounts due and owing under the Notes and no
assurance can be given that the rental rates of
Leases or Rental Payments with respect thereto will
be sufficient to pay interest and principal on the
Notes in accordance with their terms. See
"Management of Airplanes Group -- The Servicer."
Neither the 1998 Refinancing Certificates nor the
1998 Refinancing Notes are obligations of, or
guaranteed by, or offered for sale by, GE Capital,
GECAS or any of their affiliates.
Cash Manager............... GPA Cash Manager Limited, a wholly owned subsidiary
of GPA Group, ("GPA CASH MANAGER") acts as Cash
Manager (the "CASH MANAGER") pursuant to a Cash
Management Agreement dated as of March 28, 1996,
among Airplanes Limited, Airplanes Trust, the Cash
Manager, GPA
23
<PAGE> 25
Group, the Indenture Trustees and the Security
Trustee (the "CASH MANAGEMENT AGREEMENT"). The Cash
Management Agreement, the Trust Indentures and the
Security Trust Agreement, taken together, establish
the rights of the Noteholders as among themselves
with respect to the Aircraft owned by Airplanes
Group, the related Leases and all proceeds
therefrom, and govern the distribution of Available
Collections to pay amounts due and owing under the
Notes. The Cash Management Agreement and Trust
Indentures taken together further provide for the
creation and operation of the Accounts. See
"Management of Airplanes Group -- Corporate
Management". In the year ended March 31, 1997, the
Cash Manager was paid $0.9 million in fees. Neither
the 1998 Refinancing Certificates nor the 1998
Refinancing Notes are obligations of, or guaranteed
or offered for sale by, the Cash Manager.
Administrative Agent....... GPA Financial Services (Ireland) Limited, a wholly
owned subsidiary of GPA Group ("GPA FINANCIAL"),
acts as Administrative Agent (the "ADMINISTRATIVE
AGENT") pursuant to an administrative agency
agreement, dated as of March 28, 1996 (the
"ADMINISTRATIVE AGENCY AGREEMENT"), among Airplanes
Limited, Airplanes Trust, Holding Co., AeroUSA, the
Administrative Agent and GPA Group. The
Administrative Agent provides certain liability
management, interest rate risk management,
corporate administrative and accounting services to
Airplanes Group and also provides certain financial
modeling and computational services to Airplanes
Group, including providing cash flow projections
and forecasts to assist the Directors and the
Controlling Trustees in making leasing, selling,
refinancing, hedging and certain other decisions.
See "Management of Airplanes Group -- Corporate
Management". In addition, it monitors the
performance of the Servicer (including the
Servicer's compliance with the Servicing Agreement)
and reports on such performance to Airplanes Group.
In the year ended March 31, 1997, fees paid to the
Administrative Agent were $7.6 million. Neither the
1998 Refinancing Certificates nor the 1998
Refinancing Notes are obligations of, guaranteed by
or offered for sale by the Administrative Agent.
Future Aircraft
Dispositions............... Airplanes Group may sell Aircraft (i) pursuant to
the exercise of Purchase Options held by Lessees,
(ii) within Airplanes Limited and its subsidiaries
and within Airplanes Trust and its subsidiaries,
without limitation, and within the Airplanes Group,
provided that such sale does not materially
adversely affect the Certificateholders and (iii)
in other circumstances, provided that any such sale
does not cause a Note Event of Default under the
Trust Indentures and certain other conditions are
met. In addition, Airplanes Group may sell Aircraft
at prices below the specified target prices in
certain limited circumstances which may, in turn,
affect the amount and timing of principal payments
to Certificateholders and, in turn, affect the
average life of the Certificates. See "Description
of Securities -- The Notes and the Guarantees --
Trust Indenture Covenants", "-- Redemption" and "--
Defeasance".
Operating Covenants........ Airplanes Group may not enter into any Future Lease
(other than a renewal, extension or restructuring
of any Lease) unless after entering into such
Future Lease, Airplanes Group is in compliance with
certain criteria in respect of, among others,
geographic and other concentration limits (the
"RE-LEASING GUIDELINES"); provided that Airplanes
Group
24
<PAGE> 26
may enter into a Future Lease not meeting such
criteria if the Rating Agencies shall have
confirmed in writing that entering into such Lease
will not result in the lowering or withdrawal by
them of their current ratings on any class of the
Certificates then outstanding. See "Description of
Securities -- The Notes and the Guarantees --
Operating Covenants", "-- Concentration Limits",
"-- Compliance with Law, Maintenance of Permits",
"-- Appraisal of Portfolio", "-- Maintenance of
Assets", "-- Notification of Indenture Trustee,
Cash Manager and Administrative Agent", "--
Leases", "-- Opinions", "-- Insurance" and "--
Indemnity".
Certain Taxation Matters... In the opinion of Davis Polk & Wardwell, United
States Federal Tax Counsel to Airplanes Limited and
Airplanes Trust, each of the 1998 Refinancing
Trusts will be classified as a "grantor trust" for
United States Federal income tax purposes and not
as an association (or publicly traded partnership)
taxable as a corporation and accordingly, each 1998
Refinancing Certificateholder will be treated as if
it owned directly the portion of each 1998
Refinancing Note of Airplanes Limited and each 1998
Refinancing Note of Airplanes Trust represented by
such 1998 Refinancing Certificate.
Airplanes Limited will receive an opinion of
Mourant du Feu & Jeune, Jersey Tax Counsel, that,
among other things, payments by Airplanes Limited
on the Airplanes Limited 1998 Refinancing Notes
will not be subject to Jersey withholding tax. In
addition, Airplanes Limited will receive an opinion
of McCann FitzGerald, Irish Tax Counsel, that,
among other things, payments by Airplanes Limited
on the Airplanes Limited 1998 Refinancing Notes
will not be subject to Irish withholding tax on the
basis described in "Tax Considerations -- Irish Tax
Considerations".
Neither Airplanes Limited nor Airplanes Trust, nor
any subsidiary of either of them, will be obliged
to make any additional payments with respect to any
subclass of the 1998 Refinancing Notes (or the
Intercompany Loans), and thus no payments will be
passed through to a corresponding subclass of the
1998 Refinancing Certificateholders, in respect of
any withholding or deduction required to be made
under applicable law from payments on any subclass
of the 1998 Refinancing Notes or the Intercompany
Loans. If any withholding or deduction is required
with respect to any subclass of the 1998
Refinancing Notes and such subclass of the 1998
Refinancing Notes is not redeemed, the net amount
of interest received by the 1998 Refinancing
Trustee and passed through to such 1998 Refinancing
Certificateholders and all entities acquiring a
beneficial interest in such subclass of the 1998
Refinancing Certificates will be reduced by the
amount of such withholding or deduction. See "Tax
Considerations".
Certain favorable Irish tax benefits currently
existing in favor of Airplanes Group could be lost
if the Servicer does not maintain certain
employment levels in Shannon, Ireland. The Servicer
has not agreed to, and there can be no assurances
that the Servicer will, maintain any such
employment levels at any time in the future. See
"Risk Factors -- Risks Relating to Airplanes Group
and Certain Third Parties -- Inability of
Certificateholders or Trustee to Participate in
Management", "-- Tax
25
<PAGE> 27
Risks -- Loss of Certain Irish Tax Benefits" and
"Management of Airplanes Group -- The Servicer --
Tax Status".
ERISA Considerations....... The 1998 Refinancing Certificates are eligible for
purchase under certain circumstances by an employee
benefit plan or other plan subject to Title I of
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and/or Section 4975 of
the United States Internal Revenue Code of 1986, as
amended (the "CODE"). See "ERISA Considerations".
Any such plan should consider whether an investment
in the 1998 Refinancing Certificates could result
in a prohibited transaction or cause the assets of
each 1998 Refinancing Trust to be plan assets.
26
<PAGE> 28
SUMMARY COMBINED FINANCIAL DATA
The summary combined financial data set out below for each of the years in
the three-year period ended March 31, 1997 have been extracted or derived from
the audited Financial Statements of Airplanes Limited and Airplanes Trust
included elsewhere in this Prospectus, which have been audited by KPMG --
Dublin, Ireland, independent chartered accountants. See "Experts". These
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States ("U.S. GAAP"). The selected financial
data set forth below as of December 31, 1997 and for the nine month periods
ended December 31, 1996 and December 31, 1997 have not been audited but in the
opinion of management reflect all adjustments, consisting only of normal and
recurring adjustments, necessary to present a fair statement of the information
presented therein.
The summary combined financial data set forth below are presented on the
basis that the Aircraft have been operated separately from GPA within the
Airplanes Group for all periods presented or from the date of acquisition by
GPA, as appropriate. Investors should note, however, that Airplanes Group has
conducted independent business operations only since March 28, 1996.
Accordingly, for periods prior to March 28, 1996, adjustments and allocations
were made of, among other items, historical indebtedness, net interest expense,
selling, general and administrative expenses and tax amounts, as further
described in Note 2 to the Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations". While Airplanes
Group believes that the summary combined financial data set forth below are an
appropriate presentation, such data for the period prior to March 28, 1996 are
not necessarily indicative of the financial results that might have occurred had
Airplanes Group been an independently financed and managed group during the
periods up to March 28, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
The summary combined financial data set forth below combine the operating
results, assets, liabilities and cash flows of each of Airplanes Limited and
Airplanes Trust. The separate balance sheets, statements of operations,
statements of changes in shareholders' deficit/net liabilities and statements of
cash flows of Airplanes Limited and Airplanes Trust are contained in the
Financial Statements included elsewhere in this Prospectus, and investors should
note that the Notes and the Guarantees comprise obligations of two different
legal entities owning different assets. The Directors of Airplanes Limited and
the Controlling Trustees of Airplanes Trust believe that a combined presentation
is most appropriate because, among other things, the assets of Airplanes Limited
and Airplanes Trust are managed on the basis of one combined aircraft fleet, and
each of Airplanes Limited and Airplanes Trust has fully and unconditionally
guaranteed the performance of the other under their respective Notes. The
Guarantees have been structured to ensure that no payments are made on a junior
class of Notes of Airplanes Trust or Airplanes Limited, as the case may be,
before any amounts due and payable on a more senior class of Notes of Airplanes
Limited or Airplanes Trust, respectively, are paid pursuant to the Guarantees.
As GPA continues to hold substantially all of the Class E Notes through
which it has access to certain of the benefits inherent in the Aircraft,
aircraft assets are stated on the predecessor cost basis (i.e., reflecting GPA's
historical cost less accumulated depreciation). The difference between such
predecessor cost basis and the amount of Airplanes Group's indebtedness is a
significant component of Total Shareholders' Deficit in the Combined Balance
Sheet Data.
27
<PAGE> 29
COMBINED STATEMENT OF OPERATIONS DATA(1)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------- ------------
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
$MILLIONS
<S> <C> <C> <C> <C> <C>
Revenues(2)
Aircraft leasing....................................... 608 616 604 459 450
Aircraft sales......................................... -- -- -- -- 94
Expenses
Cost of aircraft sales................................. -- -- -- -- (90)
Depreciation and amortization.......................... (208) (207) (223) (155) (146)
Net interest expense(3)(4)............................. (348) (368) (383) (286) (308)
Provision for maintenance.............................. (88) (97) (91) (72) (70)
Bad and doubtful debts................................. (33) 28 (--) -- --
Provision for loss making leases and downtime,
net(5).............................................. (5) 15 12 14 7
Other lease costs...................................... (17) (21) (21) (30) (22)
Selling, general and administrative expenses........... (34) (35) (38) (27) (29)
Income tax benefit....................................... 16 13 10 -- 2
----- ----- ----- ----- -----
Net loss................................................. (109) (56) (130) (97) (112)
===== ===== ===== ===== =====
</TABLE>
COMBINED BALANCE SHEET DATA(1)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------------- ------------
1995 1996 1997 1997
------ ------ ------ ------------
$MILLIONS
<S> <C> <C> <C> <C>
Aircraft, net, and net investment in capital and sales
type leases......................................... 4,181 3,965 3,731 3,481
----- ----- ----- -----
Total assets.......................................... 4,386 4,236 4,048 3,860
===== ===== ===== =====
Indebtedness(3)..................................... (4,602) (4,634) (4,397) (4,224)
Provision for maintenance........................... (268) (311) (313) (314)
Total liabilities..................................... (5,228) (5,252) (5,194) (5,118)
===== ===== ===== =====
Net liabilities....................................... (842) (1,016) (1,146) (1,258)
</TABLE>
COMBINED STATEMENT OF CASH FLOWS AND OTHER DATA(1)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------- ------------
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
$MILLIONS
<S> <C> <C> <C> <C> <C>
Cash paid in respect of interest(3)(4)................... 303 323 265 200 190
EBITDA(6)................................................ 440 514 483 356 352
Net cash provided by operating activities (after payment
of interest)........................................... 177 216 224 182 177
Net cash (used in)/provided by investing activities...... (23) 13 19 13 103
Net cash (used in) financing activities.................. (154) (144) (238) (175) (175)
----- ----- ----- ----- -----
Net movements in cash.................................... NIL 85 5 20 105
===== ===== ===== ===== =====
</TABLE>
28
<PAGE> 30
SELECTED RATIOS(1)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------- ------------
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Deficiency of Combined Earnings to Combined Fixed
Charges(7) ($ millions)................................ (125) (69) (140) (97) (114)
EBITDA(6) to cash paid in respect of interest(3)(4)...... 1.45 1.59 1.82 1.78 1.85
Indebtedness, less the Class E Note Portion, to
EBITDA(3)(6)(8) (interim period EBITDA amounts
annualized)............................................ 8.85 7.87 7.88 8.15 7.74
</TABLE>
- ---------------
(1) The financial statements of Airplanes Group are stated in U.S. dollars which
is the principal operating currency of Airplanes Group and the aviation
industry.
(2) Revenues include Maintenance Reserve receipts. See Note 16 to the Financial
Statements.
(3) For all periods and dates prior to March 28, 1996, net interest expense,
indebtedness and cash paid in respect of interest have been based on certain
assumptions as described more fully in Note 2 to the Financial Statements.
For all periods and dates since March 28, 1996, net interest expense,
indebtedness and cash paid in respect of interest have reflected the actual
terms of the Existing Notes and Airplanes Group's Class E Notes.
(4) Net interest expense is significantly higher than cash paid in respect of
interest in all periods reflecting the high interest rate accruing on the
Class E Notes (20% adjusted for inflation) relative to the lower amount of
cash interest payable on the Class E Notes for so long as the Notes remain
outstanding. Net interest expense is stated after crediting interest income
of $9 million in 1995, $8 million in 1996, $17 million in 1997, $12 million
in the nine months ended December 31, 1996 and $12 million in the nine
months ended December 31, 1997.
(5) A lease agreement is deemed to be "loss making" in circumstances where the
contracted rental payments are insufficient to cover depreciation and
interest attributable to the Aircraft plus certain direct costs attributable
to the lease over its term. Following the adoption of SFAS 121 "Accounting
for the Impairment of Long Lived Assets and Long Lived Assets To Be Disposed
Of ("FAS 121"), with effect from April 1, 1996, Airplanes Group no longer
makes separate provisions for downtime costs. See Note 4(b) to the Financial
Statements.
(6) EBITDA represents operating results before provision for income taxes and
before interest expense and depreciation and amortization. EBITDA as defined
by Airplanes Group is not necessarily comparable to similarly captioned
measures reported by other entities. Investors should not rely on EBITDA as
an alternative to operating income (as determined in accordance with U.S.
GAAP) as an indication of Airplanes Group's operating performance, or as an
alternative to cash flow from operating activities (as determined in
accordance with U.S. GAAP) as a measure of Airplanes Group's liquidity, but
rather to provide additional information related to Airplanes Group's
ability to service the Notes. Airplanes Group believes, however, that EBITDA
provides significant information with respect to Airplanes Group's capacity
to make payments on the Notes because it indicates the amount of non-cash
charges against earnings, including depreciation and amortization expenses,
which would have been available to pay Airplanes Group's obligations during
the years indicated, which information is not indicated by the "Deficiency
of earnings to fixed charges" ratio. Investors should consider carefully,
however, that there are significant uses to which Airplanes Group's cash
flows will need to be applied before any cash will be available to make
payments on the Notes, including payment of Expenses (including payments of
taxes, certain required financing costs and expenses, such as service
provider fees, trustee fees and other charges and certain investing costs),
which rank prior to the Notes. The amount of Expenses which will be incurred
by Airplanes Group cannot be estimated with certainty and there can be no
assurance that Airplanes Group will not incur Expenses to such an extent as
to jeopardize its ability to make future payments on the Notes.
(7) Represents the amount by which Airplanes Group's loss before income taxes
and fixed charges exceeded fixed charges. Fixed charges consists of interest
expense. Because Airplanes Group's fixed charges exceeded earnings for all
periods presented, a ratio of earnings to fixed charges is not presented.
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(8) For the period from March 28, 1996, the Class E Note Portion equals that
amount of Airplanes Group's total indebtedness which is actually represented
by the Class E Notes (equal to $591 million at March 31, 1997). The Class E
Note Portion in the period until March 28, 1996 equals 15% of Airplanes
Group's indebtedness.
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RISK FACTORS
The following summarizes certain risks involved in an investment in the
1998 Refinancing Certificates which may materially affect the ability of
Airplanes Limited and Airplanes Trust to pay the interest, principal of, and
premium, if any, on the 1998 Refinancing Notes (and hence, the ability of each
1998 Refinancing Trust to pay interest, principal and premium, if any, on the
1998 Refinancing Certificates) in full at or before their respective Final
Maturity Dates. Investors should read and carefully consider, among other
things, the following factors in connection with the purchase of the 1998
Refinancing Certificates.
There can be no assurance that rental payments under the Existing Leases
will be adequate to pay the interest, principal and premium, if any, on the 1998
Refinancing Notes in accordance with their terms.
RISKS RELATING TO AIRPLANES GROUP AND CERTAIN THIRD PARTIES
LIMITED RESOURCES OF EACH 1998 REFINANCING TRUST
The 1998 Refinancing Notes and the 1998 Refinancing Guarantees are solely
obligations of Airplanes Limited and Airplanes Trust. The 1998 Refinancing
Trusts do not have, nor are they expected to have, any significant assets or
sources of funds other than the applicable subclass of 1998 Refinancing Notes
and the related 1998 Refinancing Guarantees. Neither the 1998 Refinancing
Certificates nor the 1998 Refinancing Notes are obligations of, guaranteed by,
or offered for sale by, the Trustee, the Indenture Trustees, GPA Group or any
affiliate of the foregoing. Furthermore, neither the 1998 Refinancing
Certificates nor the 1998 Refinancing Notes are obligations of, or guaranteed
by, or offered for sale by, GE Capital, GECAS or any of their affiliates.
RELIANCE ON SUBSIDIARIES TO MAKE PAYMENTS
Substantially all of the assets of Airplanes Limited and Airplanes Trust
are the shares of their direct subsidiaries and loans to their direct and
indirect subsidiaries. Accordingly, Airplanes Limited and Airplanes Trust depend
on intercompany loan and other payments from their direct and indirect
subsidiaries to make payments on the Notes. The ability of Airplanes Limited and
Airplanes Trust to make payments on the Notes will therefore be affected by,
among other things, the imposition of withholding or other taxes on payments
within Airplanes Group, including payments by such subsidiaries to Airplanes
Limited and Airplanes Trust and the payment by such subsidiaries of amounts due
to other creditors, including lessees and tax authorities. To the extent that
these obligations to Lessees and other creditors significantly exceed
expectations, or to the extent that unforeseen and significant tax liabilities
arise, there may be a significant adverse impact upon payments on the Notes.
Airplanes Limited has guaranteed the obligations of many of its subsidiaries to
Lessees and payments on these guarantees, which comprise part of the Expenses,
rank senior in priority of payment to any payments on any class of Notes.
The ability of Airplanes Limited's and Airplanes Trust's subsidiaries to
make payments on their intercompany obligations to Airplanes Limited and
Airplanes Trust, and Airplanes Limited's and Airplanes Trust's ultimate ability
to pay interest and premium, if any, on, and repay the principal of, the Notes,
will be primarily dependent upon the receipt of payments under the Leases and,
in the case of each of the Subclass A-2, A-3, A-4 and A-6 Notes, the ability of
Airplanes Group to refinance the Outstanding Principal Balance of such Notes by
issuing Refinancing Notes. See "-- Capital Markets Risks -- Refinancing of
Certain Certificates". Receipt of sufficient payments under the Leases will
depend upon a number of factors, including without limitation (i) the timing of
receipt of Rental Payments and the ability of the Lessees to make such payments;
(ii) the ability to re-lease any Aircraft upon expiration or termination of a
Lease without excessive levels of downtime and at sufficient rental rates; (iii)
the possible exercise by a Lessee of a Purchase Option or an early termination
option and (iv) future maintenance costs associated with re-leasing Aircraft.
There can be no assurance that the Rental Payments actually received during the
term of the Leases will be sufficient to meet amounts due under the Notes. See
"-- Risks Relating to Payments on the Certificates".
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LACK OF SECURITY INTEREST
None of the Trustee, the Indenture Trustees or the Certificateholders has
or will have any security interest, mortgage, charge or other similar interest
in any of the Aircraft or the Leases. As a result, such parties do not have
available to them certain rights upon a Note Event of Default which would have
been available to them had their interests in the Aircraft and the Leases been
directly secured by such assets. The Security Trustee has been granted a
security interest in one-third of the ordinary share capital of Holding Co.,
certain of its subsidiaries and the subsidiaries of Airplanes Trust. In
addition, the Accounts (other than certain Rental Accounts) are held in the name
of the Security Trustee.
POSSIBLE CONTINGENT LIABILITIES OF TRANSFERRED COMPANIES
The Aircraft and certain of the Existing Leases were acquired in the
Acquisition through Airplanes Group's purchase of the Transferred Companies.
Prior to the sale of the Transferred Companies in March 1996, GPA Group took
steps to ensure that there were no material contingent liabilities related to
any of the Transferred Companies, but no assurances can be given that
pre-transfer liabilities will not be identified in the future. GPA has
indemnified Airplanes Group against certain losses, if any, suffered by
Airplanes Group (including any Transferred Company or any of their directors) as
a result of, among others, the breach of GPA's representations and warranties in
the stock purchase agreements pursuant to which the shares of Holding Co. and
AeroUSA were purchased (the "STOCK PURCHASE AGREEMENTS") that there were no
liabilities, actual or contingent, of a Transferred Company that existed at the
time of transfer but were not disclosed in the financial statements of the
relevant Transferred Company or otherwise disclosed to Airplanes Group. Many of
the representations and warranties were qualified by standards relating to their
materiality in relation to Airplanes Group. The maximum amount that may be
recovered from GPA as a result of such indemnification or any breach of
representation or warranty contained in the Stock Purchase Agreements is an
amount approximately equal to the purchase price (the "PURCHASE PRICE") paid in
the Acquisition. In addition, the representations and warranties of GPA
contained in the Stock Purchase Agreements will only survive until March 28,
1999.
Tax Liabilities of AeroUSA. AeroUSA and its wholly owned subsidiary,
AeroUSA 3 Inc., a Connecticut corporation, ("AEROUSA 3"), continue to file U.S.
federal consolidated tax returns and certain state and local tax returns with
GPA, Inc. and its subsidiaries (the "GPA U.S. TAX GROUP"). There are ongoing tax
audits by certain state and local tax authorities with respect to taxes
previously reported by the GPA U.S. Tax Group. GPA Group believes that none of
these audits will have a material adverse impact upon the results of operations,
financial condition or liquidity of AeroUSA or AeroUSA 3. AeroUSA, Airplanes
Trust, GPA, Inc. and GPA Group entered into a Tax Sharing Agreement (the "TAX
SHARING AGREEMENT") dated as of March 28, 1996 pursuant to which GPA indemnified
AeroUSA against any U.S. federal, state or local tax liabilities ("TAX
LIABILITIES"), suffered by AeroUSA or AeroUSA 3 that are (i) related to any tax
period or portion thereof prior to March 28, 1996 or (ii) related to any tax
period or portion thereof beginning on or after March 28, 1996 and are Tax
Liabilities that AeroUSA or AeroUSA 3 would not have incurred if they were not
members of the GPA U.S. Tax Group. Furthermore, under the Tax Sharing Agreement,
with respect to GPA U.S. Tax Group returns, (i) AeroUSA shall be liable to GPA,
Inc. for its share of Tax Liabilities based on the amount of Tax Liabilities
that AeroUSA would have incurred if it and AeroUSA 3 were not members of the GPA
U.S. Tax Group (the "STAND-ALONE TAX LIABILITY") and (ii) to the extent that any
amount payable by any member of the GPA U.S. Tax Group (other than AeroUSA or
AeroUSA 3) in respect of Tax Liabilities for any tax period following March 28,
1996 is reduced as a result of a tax asset generated by AeroUSA or AeroUSA 3,
then GPA Group will pay to AeroUSA, at the time such tax savings are realized,
an amount equal to the difference between the actual taxes paid for such tax
period and the amount of taxes that would have been payable in the absence of
such tax asset. With respect to a liability of AeroUSA described in clause (i)
of the preceding sentence, AeroUSA will pay such amounts to GPA, Inc. in cash
only to the extent that payments due to taxing authorities are attributable to
the Stand-alone Tax Liability of AeroUSA and AeroUSA 3; the remainder of any
amounts payable to GPA, Inc. described in clause (i) will be paid in the form of
subordinated, non-interest paying AeroUSA notes. Tax
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warranties of GPA and the indemnity of GPA for Tax Liabilities related to any
tax period or portion thereof prior to March 28, 1996 will survive until March
28, 2003.
The receipt by Airplanes Group from GPA of any amounts pursuant to
indemnities against tax and other liabilities of the Transferred Companies will
depend upon the financial condition and liquidity of GPA at the time any claim
is made. Furthermore, to the extent any tax or other claims are successfully
made against the Transferred Companies and not indemnified by GPA or paid from
Airplanes Group's available cash flow, investors should recognize that because
the Notes are not secured directly or indirectly by the Aircraft or the Leases,
substantially all of the assets of the Transferred Companies, including the
Aircraft, would be available for attachment and satisfaction of any such claim.
INABILITY OF CERTIFICATEHOLDERS OR TRUSTEE TO PARTICIPATE IN MANAGEMENT
Except to the limited extent described herein, neither the Trustee nor any
Certificateholder has any right to participate in the management or affairs of
Airplanes Group. In particular, such parties cannot supervise the functions
relating to the Leases and the re-lease of the Aircraft, which functions have
generally been delegated to the Servicer under the Servicing Agreement. See
"Management of the Aircraft -- Corporate Management", "Description of Securities
- -- The Notes and the Guarantees -- Trust Indenture Covenants" and "-- Note
Events of Default and Remedies".
RELIANCE UPON SERVICE PROVIDERS
Because Airplanes Group neither has nor will have executive management
resources of its own (although Airplanes Limited has a Board of Directors and
Airplanes Trust has a Board of Controlling Trustees), Airplanes Group relies
upon the Servicer, the Administrative Agent, the Cash Manager and other service
providers for all asset servicing, executive and administrative functions
pursuant to the respective service provider agreements. While Airplanes Group
has retained GECAS as the Servicer and wholly owned subsidiaries of GPA Group as
the Cash Manager and Administrative Agent, there can be no assurance that
Airplanes Group will continue its arrangements with these organizations until
the Notes are paid in full or that such organizations will continue their
relationship with Airplanes Group until such time. Failure of these foregoing
organizations to perform their respective contractual obligations to Airplanes
Group could have a material adverse effect upon Airplanes Group's operations,
which could adversely affect Airplanes Group's ability to repay the Notes and
consequently affect the amount of payments made in respect of the Certificates.
In the event that the Servicer, the Administrative Agent or the Cash Manager
were to resign or have their respective contracts terminated pursuant to their
respective contractual arrangements with, or on behalf of, Airplanes Group,
there can be no assurance that suitable replacement service providers could be
found, or found in a timely manner, and engaged on terms acceptable to Airplanes
Group or that would not cause a downgrading in the then current ratings relating
to the Certificates. The loss of the Servicer, the Administrative Agent or the
Cash Manager under such circumstances could have a material adverse effect on
Airplanes Group's ability to make payments on the Notes.
Accordingly, no investor should purchase 1998 Refinancing Certificates
unless such investor accepts the terms upon which the various services are to be
provided by the Servicer, the Administrative Agent and the Cash Manager pursuant
to the Servicing Agreement, the Administrative Agency Agreement and the Cash
Management Agreement, respectively. See "Management of Airplanes Group --
Corporate Management".
Reliance Upon Service Providers for Certain Tax Benefits. In addition, in
the event that either GECAS or a GPA subsidiary no longer serves as Servicer or
Administrative Agent and Cash Manager, respectively, on behalf of Airplanes
Group or either such party fails to maintain, among other things, certain
employment levels in Ireland, or GPA fails to hold 5% of the capital stock of
Holding Co., certain corporate tax and other tax benefits currently afforded to
Holding Co. and other Irish tax resident Transferred Companies may be lost.
Holding Co. and other Irish tax resident Transferred Companies are currently
entitled to pay Irish corporate tax at a reduced rate of 10% and may deduct
interest payments to Airplanes Limited on intercompany loans from their income
in computing their liability to Irish tax. If such benefits were lost, these
companies would be subject to Irish corporate taxation at general Irish
statutory rates (currently 32%) and may lose the ability to
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deduct such interest payments to Airplanes Limited. The loss of such tax
benefits would likely lead to a downgrade in the current ratings of the
Certificates and would have a material adverse effect on Airplanes Limited's
ability to pay interest, principal and premium, if any, on the Airplanes Limited
Notes. See "-- Risks Relating to the Financial Condition of GPA" and "-- Tax
Risks" and "Management of Airplanes Group -- The Servicer".
CONFLICTS OF INTEREST OF GECAS
In addition to acting as Servicer, GECAS also participates in the
management of certain aircraft assets owned by Aircraft Lease Portfolio
Securitization 94-1 Limited ("ALPS 94-1"), GE Capital and its affiliates and
other third parties, including GPA and its affiliates. GECAS will from time to
time have conflicts of interest in performing its obligations to Airplanes Group
and the other entities to which it provides management services and with respect
to the aircraft for which it provides such services. Under the terms of the
Servicing Agreement, the Servicer is not obliged to disclose conflicts of
interest. Therefore, Airplanes Group will not always be aware of all conflicts
of interest involving the Servicer. Such conflicts may be particularly acute in
situations involving GE Capital or its affiliates or investment vehicles
sponsored by GE Capital or its affiliates (collectively, "GE GROUP"). Under
certain of GECAS's aircraft servicing arrangements (including the ALPS 94-1
Servicing Agreement), such conflicts will not entitle the entities to whom GECAS
provides services to replace GECAS as servicer except in certain limited
circumstances.
As of December 31, 1997, the portfolio of aircraft managed by GECAS and its
affiliates (the "GECAS MANAGED PORTFOLIO") comprised approximately 855 aircraft.
At such date, the owned portfolio of GE Group was comprised of 490 aircraft or
57% of the GECAS Managed Portfolio. GECAS announced in early 1996 it had entered
into a multi-year order for five Boeing 777's and 102 Boeing 737 jet aircraft,
and options for 76 Boeing 737 jet aircraft of which 18 Boeing 737 jet aircraft
were purchased in the period up to December 31, 1997. Under the agreement with
Boeing, GECAS also may purchase up to a further 76 Boeing 737 jet aircraft. In
addition, in the same period GECAS purchased nine Boeing 737 jet aircraft, which
were not included in the order announced in 1996. On July 15, 1996, GECAS
entered into an order for a combination of 40 A319, A320 or A321 aircraft and
five A340 aircraft, and options for a further 40 A319, A320 or A321 aircraft and
five A340 aircraft. The first aircraft under this Airbus order was delivered in
August 1997. From time to time, GE Group is likely to acquire additional new and
used aircraft that are expected to be included in the GECAS Managed Portfolio
and to be managed by GECAS and its affiliates and, in addition, GECAS may from
time to time provide aircraft services to various third parties. GECAS also
manages, and may in the future form and sponsor, additional aircraft or
equipment leasing programs, some of which may have investment objectives that
are the same as, or similar to, those of Airplanes Group. It is likely that, at
various times, the aircraft in any such programs will compete with the Aircraft
when the Aircraft are being marketed for re-lease or sale, and such programs may
create additional conflicts of interest with respect to the marketing of the
Aircraft for re-lease or sale. Conflicts of interest may also arise that involve
the provision by GE Group of aircraft or engine financing to third parties,
including the Lessees. Moreover, certain of GECAS's marketing and servicing
arrangements with its affiliates and other third parties include provisions that
may have the effect, in certain circumstances, of requiring GECAS to give
preference to such affiliates, other third parties or their respective aircraft
over the Aircraft. Particularly acute conflicts of interest may arise when a
lessee in financial distress needs to release some of its aircraft and its fleet
consists of a mixture of GE Capital-owned aircraft and GE Capital-managed
aircraft.
GECAS acts as servicer of 87 Stage 3 and six Stage 2 aircraft (as of
December 31, 1997) that are owned or leased-in (i.e., an aircraft that is not
owned but is leased from a third party and then sub-leased to an airline) by GPA
or its affiliates pursuant to an amended and restated management agreement
between GECAS and GPA dated as of March 28, 1996 (the "GPA MANAGEMENT
AGREEMENT"). In addition, in connection with ALPS 94-1, GECAS services 27 Stage
3 aircraft and provides certain other services, which primarily relate to the
sale and lease of aircraft after the expiration of their initial lease terms.
Pursuant to the terms of the Servicing Agreement, GECAS has agreed to
perform the services required thereby with reasonable care and diligence at all
times (the "GECAS SERVICES STANDARD"). If a conflict of interest arises
regarding GECAS's management of two particular Aircraft, or aircraft assets
other than those
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owned by the Airplanes Group, on the one part, and Aircraft, on the other part,
the Servicer is required to perform the services in good faith and to the extent
that two particular Aircraft or the Aircraft and other aircraft then managed by
GECAS are substantially similar in terms of objectively identifiable
characteristics that are relevant for purposes of the particular services to be
performed, the Servicer will not discriminate, (a) among the Aircraft or (b)
between any of the Aircraft and any other aircraft then managed by GECAS on an
unreasonable basis (the "GECAS CONFLICTS STANDARD").
Under certain limited circumstances in which a conflict of interest arises
with respect to a particular Aircraft or Lease that requires, in the good faith
opinion of the Servicer, an arm's-length negotiation between the Servicer or any
of its affiliates and Airplanes Group, the Servicing Agreement provides that the
Servicer shall be entitled to withdraw from acting as Servicer with respect to
such Aircraft or Lease in connection with the negotiation of the issue giving
rise to such conflict of interest and Airplanes Group shall be entitled to
appoint an independent representative to act on behalf of Airplanes Group with
respect to such negotiation. The Servicer shall be entitled to act on behalf of
itself or any of its affiliates with respect to such negotiation. In the event
that the Servicer reasonably determines that certain services required to be
carried out under the Servicing Agreement would place the Servicer in a conflict
of interest such that the Servicer could not, in its good faith opinion, perform
its obligations within the requirements of the Servicing Agreement, the Servicer
may resign as Servicer for all Aircraft, or, at its election, for any affected
Aircraft, such resignation to become effective upon the appointment of a
replacement servicer.
LIMITATION OF LIABILITY ON THE PART OF THE SERVICER
Pursuant to the Servicing Agreement, the Servicer and its affiliates are
not liable or accountable to any person, other than Airplanes Limited, AeroUSA
and Holding Co. to the limited extent described below, under any circumstances,
for any liabilities, obligations, losses, damages, penalties, taxes, suits,
judgments, costs, fees, expenses and disbursements directly or indirectly
arising out of, in connection with or related to, the management by the Servicer
of the Aircraft or other aircraft assets ("LOSSES"), and Airplanes Limited,
AeroUSA and Holding Co. shall jointly and severally indemnify the Servicer and
its affiliates on an after-tax basis for any Losses, unless such Losses are
finally adjudicated to have resulted directly from the Servicer's gross
negligence or wilful misconduct in respect of its obligation to apply the GECAS
Services Standard or the GECAS Conflicts Standard in respect of its performance
of the services under the Servicing Agreement. Airplanes Limited, AeroUSA and
Holding Co. also jointly and severally indemnify the Servicer and its affiliates
on an after-tax basis for any losses that may be imposed on, incurred by or
asserted against, the Servicer and its affiliates, directly or indirectly,
arising out of, in connection with or related to, the Servicer or any of its
affiliates' involvement in connection with the structuring or implementation of
any aspect of the Acquisition, the original offering of the Existing Notes and
related transactions in March 1996. Airplanes Limited, AeroUSA and Holding Co.
are entitled to terminate the Servicing Agreement if the Servicer fails in any
material respect to perform any material service thereunder to either the GECAS
Services Standard or the GECAS Conflicts Standard and such failure has a
material adverse effect on Airplanes Group taken as a whole. The Servicer does
not assume any liability or accountability for (i) the direct or indirect
transfer of the Aircraft, the Leases or any assets to any person within the
Airplanes Group, (ii) the adequacy of the terms of any Lease relating to any
Aircraft to the extent any such Lease was novated, amended or modified in
connection with the direct or indirect transfer of the Aircraft or the Leases to
or among the Transferred Companies on or prior to March 28, 1996, (iii) the
reliability or creditworthiness of any Lessee with respect to its obligations
under any Lease, (iv) the adequacy of the Rental Payments derived from the
Leases to support the various obligations of the Airplanes Group, (v) the
adequacy of the Maintenance Reserves or Security Deposits relating to the
Aircraft, (vi) the terms and conditions of the Notes or any notes issued in
refinancings (the "REFINANCING NOTES"), (vii) the ability of Airplanes Limited
and Airplanes Trust to comply with the terms and conditions of the Notes, the
Guarantees or any Refinancing Notes and (viii) the structuring or implementation
of any aspect of the various transactions contemplated in this Prospectus.
The duties and obligations of the Servicer are limited to those expressly
set forth in the Servicing Agreement and the Servicer does not have any
fiduciary or other implied duties or obligations to Airplanes Group or any other
person, including any Certificateholder.
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CONFLICTS OF INTEREST OF GPA
GPA currently holds substantially all of the Class E Notes issued by
Airplanes Group. GPA Financial acts as Administrative Agent and GPA Cash Manager
acts as Cash Manager for Airplanes Group. In addition, GPA holds all of the
Class E Notes issued by ALPS 94-1 and, as a result, has certain access to
potential benefits relating to the aircraft it sold to ALPS 94-1. Finally, as at
December 31, 1997, GPA owned and leased-in a significant fleet of 87 Stage 3
aircraft and six Stage 2 aircraft. Of the 87 Stage 3 aircraft, 26 aircraft are
leased-in.
GPA Financial may from time to time have conflicts of interest in
performing its obligations to Airplanes Group as Administrative Agent resulting
from GPA's interests in its own aircraft and GPA's interests in ALPS 94-1. These
conflicts may arise, for instance, when GPA Financial as Administrative Agent
advises Airplanes Group as to the annual budget to be adopted for Airplanes
Group and with respect to decisions by Airplanes Group to re-lease or sell
Aircraft.
Pursuant to the Administrative Agency Agreement, GPA Financial is
obligated, in performing its services as Administrative Agent, to devote the
same amount of time and attention and is required to exercise the same level of
skill, care and diligence in the performance of its services as it would if it
were administering such services on its own behalf (the "ADMINISTRATIVE AGENT'S
SERVICES STANDARD"). In addition, if any conflicts of interest arise with
respect to GPA Financial's role as Administrative Agent and its other interests,
the Administrative Agency Agreement requires GPA Financial to report such
conflict promptly to Airplanes Group and to act in a manner that treats
Airplanes Group equally with the entities giving rise to the conflict of
interest, does not violate the Administrative Agent's Services Standard and
would not be reasonably likely to have a material adverse effect on Airplanes
Group (the "ADMINISTRATIVE AGENT'S CONFLICT DUTIES").
Given the limited discretion that may be exercised by GPA Cash Manager in
its role as Cash Manager, it is unlikely that conflicts of interest in
connection with its services in such capacity will arise relative to GPA's other
interests.
ABSENCE OF PROFITABLE OPERATIONS
Airplanes Group has incurred net losses since its inception and expects to
continue to incur net losses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". There can be no assurance that
Airplanes Group will achieve or sustain profitability in the future.
CONFLICTS OF INTEREST OF LEGAL COUNSEL
Airplanes Group and GPA Group are, and have in the past been, represented
by the same Jersey and United States legal counsel, and it is anticipated that
such multiple representation will continue in the future. Without independent
legal representation, the terms of the agreements negotiated between Airplanes
Group and GPA could disproportionately benefit one party over the other. Should
a significant dispute arise in the future between Airplanes Group and GPA or any
of their respective affiliates, Airplanes Group anticipates that it will retain
separate counsel to represent it in such matter.
AIRCRAFT RISKS
RISK OF OPERATIONAL RESTRICTIONS AFFECTING AIRPLANES GROUP'S ABILITY TO
COMPETE
In connection with re-leasing of the Aircraft, Airplanes Group may
encounter competition from, among others, other aircraft leasing companies
(including GPA and International Lease Finance Corporation), airlines, aircraft
manufacturers, aircraft owners, financial institutions (including GE Capital and
its affiliates), aircraft brokers, special purpose vehicles (including ALPS
94-1) formed for the purpose of acquiring, leasing and selling aircraft and
public and private limited partnerships and funds with investment objectives
similar to those of Airplanes Group (including investment vehicles sponsored by
GE Capital and its affiliates). Airplanes Group is subject to restrictions in
the Trust Indentures and the constituent documents of Airplanes Limited and
Airplanes Trust that will impair Airplanes Group's operational flexibility. For
instance, GPA has in the past granted concessionary rental rates to airlines in
return for equity investments in order to place
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aircraft on lease and minimize the number of aircraft on the ground. GPA has
also entered into similar arrangements with troubled lessees in order to
restructure the obligations of those lessees while maximizing the number of
aircraft remaining on viable leases to such lessees and minimizing the overall
cost to GPA. It can be expected that Airplanes Group will encounter similar
commercial situations in the future but its ability to offer a flexible,
market-driven, response will be limited by certain contractual constraints. In
addition, certain competing aircraft lessors (including GE Capital and its
affiliates) have, or have access to, financial resources substantially greater
than those of Airplanes Group, may have a lower overall cost of capital and may
provide financial services or other benefits to potential lessees that Airplanes
Group cannot provide. Airplanes Group is also subject to certain limitations as
to eligible Lessees and geographic diversification of the Lessees that must be
satisfied in order to maintain the ratings of the Certificates. Airplanes
Group's competitors may not be subject to such limitations.
CYCLICALITY OF SUPPLY OF AND DEMAND FOR AIRCRAFT
General Factors Causing Fluctuation in Supply and Demand. The aircraft
leasing market in general is affected by various factors that are not within the
control of Airplanes Group such as interest rates, the availability of credit
and other general economic conditions; manufacturer production levels and price
discounting; passenger demand; retirement and obsolescence of aircraft models;
re-introduction into service of aircraft previously in storage; fuel costs;
governmental regulation and air traffic control infrastructure constraints. The
effects of deregulation of commercial aviation in the United States and the
increasing trend toward deregulation in other significant jurisdictions where
Lessees currently, or may in the future, operate aircraft, may contribute to
further uncertainty in the commercial aviation industry. The availability of
commercial jet aircraft for lease or sale has periodically experienced cycles of
oversupply and undersupply, primarily as a result of the cyclicality of the
world economy. The condition of the aviation industry will vary at different
points in the business cycle for lessors and sellers of aircraft at the times
when the Aircraft are being marketed for re-lease or sale, and there can be no
assurance such conditions will allow re-lease or, where applicable, sale, on
satisfactory terms. Despite the relatively strong demand currently prevailing
for aircraft on operating lease in general, an oversupply of certain types of
used Stage 3 aircraft continues to exist, in particular, older widebody
aircraft. Also, as airlines increasingly have the option to use jet aircraft
with similar seat capacities to turboprop aircraft, the market for turboprop
aircraft, in particular ATR 42-300s, remains problematic in respect of both the
lease rates achievable and used aircraft values. ATR 42-300 Aircraft represented
0.67% of the Portfolio by Appraised Value at January 23, 1998.
Fluctuation of Supply and Demand Due to Isolated Events. In addition to
the general factors discussed above, the values of specific aircraft types will
also be affected by developments not within the control of Airplanes Group such
as manufacturers exiting the industry or ceasing to produce certain aircraft
types in the Portfolio and the introduction by manufacturers of new and more
efficient aircraft that compete directly with aircraft types in the Portfolio,
particularly if such new aircraft types are introduced at discounted prices.
The recent bankruptcy of Fokker N.V. and the discontinuation of its
aircraft manufacturing operations have resulted in significant reductions of
values and lease rates for Fokker aircraft, which reductions may continue. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Nine Months Ended December 31, 1997
Compared with Nine Months Ended December 31, 1996." Uncertainty as to the
long-term marketability for lease or sale of Fokker 100 aircraft generally is
expected to lead to further reductions in value for this aircraft type, which
could be significant. Approximately 6.78% of the Aircraft in the Portfolio by
Appraised Value are Fokker 100s. Also, the merger between Boeing and McDonnell
Douglas Corporation may adversely affect the value of aircraft manufactured by
McDonnell Douglas Corporation and lease rates that Airplanes Group is able to
obtain on those aircraft. Boeing has announced that it will cease production of
MD83 aircraft in 1999. Approximately 19.21% of the Aircraft in the Portfolio by
Appraised Value are MD11s and MD83s.
All of the major manufacturers are implementing programs to shorten the
lead times and reduce the cost of manufacturing commercial aircraft, including
reorganization of design and production systems and business arrangements with
suppliers which have resulted in shifts in aircraft ordering patterns such that
purchasers are able to acquire aircraft at shorter lead times than previously
required. Some manufacturers are also
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<PAGE> 39
considering the use of lower cost production locations than those they currently
use. These developments have resulted in decreases in the prices of new aircraft
when adjusted for inflation. Boeing has introduced a new series of B737 aircraft
at attractive prices and Airbus has continued to offer A320, A319 and A321
aircraft at competitive prices. This price discounting is the primary cause of
declines in the value of existing A320 aircraft and B737-300/400 and 500 series
aircraft. A320-200 and B737-300/400 and 500 Aircraft represented 37.60% of the
Portfolio by Appraised Value at January 23, 1998. Depending on the extent to
which cost savings continue to be achieved and passed on to the manufacturers'
customers, these factors could have an adverse impact on the ability of
Airplanes Group to re-lease or sell the Aircraft and on the Rental Payments from
Future Leases of the Aircraft.
RISK OF DECLINE IN AIRCRAFT VALUES
The Purchase Price paid by Airplanes Group to GPA for the Aircraft was
calculated largely on the basis of the Initial Appraised Value (the average of
three appraisals performed by independent appraisers as of October 31, 1995)
(the "INITIAL APPRAISED VALUE") of the Aircraft which assumed an open,
unrestricted "stable market environment with a reasonable balance of supply and
demand" and certain other factors set out in the definition of Base Value above.
Base Values of aircraft are often greater, and often substantially greater than,
the current market values of such aircraft. The Initial Appraised Value was more
than, and may have been substantially more than, the value of aircraft in the
market at the time of purchase, given overcapacity in the aviation industry at
that time.
The value of specific aircraft will depend on the factors identified above
under "-- Cyclicality of Supply of and Demand for Aircraft" as well as on a
number of other factors that are not within the control of Airplanes Group, such
as market and economic condition of the aircraft, the particular maintenance and
operating history of the aircraft, the number of operators using each type of
aircraft, the supply of each type of aircraft and any regulatory and legal
requirements that must be satisfied before the aircraft can be sold. Values of
the Aircraft may be adversely affected by changes in the competitive and
financial position of the relevant commercial aircraft manufacturer, by the
withdrawal of such manufacturer from the commercial aviation market, or from the
maintenance and spare parts markets, or by unexpected manufacturing defects that
may surface.
Updated appraisals of the Aircraft were obtained by Airplanes Group on
January 23, 1998. On the basis of these three updated appraisals, the average
appraised Base Value of the Aircraft in the Portfolio at January 23, 1998 was
approximately $3,813 million ($3,859 million prior to giving effect to the
delivery of three aircraft to Emery as if such deliveries had occurred prior to
January 23, 1998) compared with $4,034 million ($4,085 million prior to giving
effect to the delivery of three aircraft to Emery as if such deliveries had
occurred prior to January 23, 1998) based on the February 1997 appraisals. This
decrease was approximately $83 million more ($84 million more prior to giving
effect to the delivery of three aircraft to Emery as if such deliveries had
occurred prior to January 23, 1998) than the expected decrease implied by the
aircraft depreciation schedules that form part of the terms of the Notes.
Greater than expected decreases in value occurred across the Portfolio with
significant impacts resulting from decreases in values of Fokker 100s and, to a
lesser extent, MD11s and MD83s. These greater than expected decreases were due
primarily, in the case of the Fokker 100s, to Fokker exiting the industry, and
in the case of the MD11s and MD83s, to the Boeing/McDonnell Douglas merger.
Airplanes Group also suffered greater than expected decreases in the value of
its B767-300ER Aircraft due in part to the competition this aircraft type now
faces from the relatively new A330-200 aircraft. Finally, greater than expected
decreases also occurred with respect to the values of A320-200s and
B737-300/400/500s due primarily to continued price discounting by Boeing and
Airbus.
Any reduction in Aircraft values may adversely affect Airplanes Group's
ability to maintain the current rental rates and may adversely affect its
ability to make payments on the Notes.
EXERCISE OF PURCHASE OPTIONS AT PRICES BELOW ESTIMATED FAIR MARKET VALUE OR
NET BOOK VALUE
As of January 23, 1998, five Lessees with respect to 18 Aircraft,
representing approximately 7.2% of the Portfolio by Appraised Value, have
options to purchase Aircraft at prices below either estimated fair market value
or Airplanes Group's estimated net book value at the option exercise date. (For
the purposes of this
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<PAGE> 40
analysis, estimated fair market value has been arrived at by deducting the
estimated depreciation (as calculated by Airplanes Group's existing depreciation
policy) from January 23, 1998 to the option exercise date from the Appraised
Value of each Aircraft as determined as of January 23, 1998).
In the event that a significant number of options to purchase Aircraft are
exercised at prices below estimated fair market value or Airplanes Group's
estimated net book value at the option exercise date, the amount and timing of
principal payments to certain Certificateholders and the average lives of the
Certificates may be adversely affected.
SALES OF AIRCRAFT AT PRICES BELOW AIRCRAFT APPRAISED VALUES
Airplanes Group believes that, due to current overcapacity in the aviation
industry, with respect to certain aircraft types such as certain turboprop,
Stage 2 and older widebody aircraft, the value of the Aircraft in the current
market (as compared with the "stable market environment with a reasonable
balance of supply and demand" and the other factors assumed in the determination
of Base Value) is less than, and is likely to be substantially less than, the
Appraised Value. Furthermore, neither the Appraised Value nor the value of the
Aircraft in the current market should be relied upon as a measure of the
realizable value of the Aircraft. If it were necessary to dispose of Aircraft in
a distress situation, and particularly if a large number of Aircraft were
required to be sold, the proceeds from such a sale of Aircraft would be
substantially less than the value in the current market. However, Airplanes
Group does not expect to have to sell Aircraft to provide for payment of
principal and interest on the Notes, and does not anticipate conducting any
distress sales. Nevertheless, following a Note Event of Default, there can be no
assurance that Aircraft, if sold, would not be sold at prices significantly less
than the Appraised Value of such Aircraft. In addition, prior to a Note Event of
Default, each Trust Indenture permits Airplanes Group to sell Aircraft at prices
below a specified target price in certain limited circumstances and in limited
aggregate amounts, which may adversely affect the amount and timing of principal
payments to certain Certificateholders and may, in turn, affect the average
lives of the Certificates. At January 23, 1998, Airplanes Group had sold ten
Aircraft (for an aggregate of $139 million) with an appraised value of $170
million (based on the February 25, 1997 appraisals) pursuant to such provisions
in the Trust Indentures (the sale of ten Aircraft gives effect to the delivery
of three DC8-71F aircraft to Emery as if such deliveries had all occurred prior
to January 23, 1998). See "Description of Securities -- The Notes and the
Guarantees -- Trust Indenture Covenants".
LESSEE DEFAULTS RESULTING IN LIENS ON AIRCRAFT
Liens which secure the payment of, among other things, airport taxes,
customs duties, air navigation charges (including charges imposed by
Eurocontrol), landing charges, crew wages, repairer's charges or salvage
("LIENS") are likely, depending on the jurisdiction in question, to attach to
the Aircraft in the normal course of operation. The sums which such Liens secure
may be substantial and may, with certain jurisdictions or limited types of Liens
(particularly fleet liens) exceed the value of the Aircraft in respect of which
the Lien is being asserted.
In some jurisdictions, aircraft Liens may give the holder thereof the right
to detain or, in limited cases, sell or cause the forfeiture of the Aircraft,
and, until discharged, such Liens could adversely affect the ability of
Airplanes Group to repossess, re-lease or sell the Aircraft. In particular,
under the laws of the United Kingdom, if a particular Lessee (whether or not it
is a European operator) defaults in payments to Eurocontrol of air navigation
charges (relating to navigation services provided within European airspace by
Eurocontrol), the Civil Aviation Authority of the United Kingdom (the "CAA") has
the right to detain, pending payment, any aircraft operated by the defaulting
operator at the time of detention when a relevant Aircraft is located at any
designated airport within the United Kingdom. Furthermore, if such charges are
not paid within a specified period, the CAA has the power to sell the detained
aircraft to satisfy the outstanding charges. These charges may also relate to a
period when the detained aircraft was being operated by a prior operator. A
similar form of "fleet lien" is granted to certain airport authorities under the
laws of the United Kingdom and in Ireland in relation to unpaid airport landing
fees.
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<PAGE> 41
Under each of the Existing Leases, the relevant Lessees are responsible
for, and are required to discharge, all such Liens arising during the term of
such Leases, with the exception of those arising by reason of, among others,
Airplanes Group's or the Lessor's own acts or those created by, or arising by
reason of, debts or liabilities of Airplanes Group's predecessors in title or
any previous operator. However, there can be no assurance that Future Leases
will contain such conditions or that the Lessees will comply with such
obligations. Any failure to remove Liens could adversely affect Airplanes
Group's ability to repossess, re-lease or sell an Aircraft if a Lessee defaults.
The Servicer is not obligated under the terms of the Servicing Agreement to
remove any Liens from Aircraft.
FAILURE TO MAINTAIN REGISTRATION OF AIRCRAFT
All of the Aircraft which are being operated must be duly registered at all
times with an appropriate aviation authority. Generally, failure to maintain the
registration of any Aircraft which is on lease would be a default under the
applicable Lease, entitling Airplanes Group to exercise its rights and remedies
thereunder. If an Aircraft were to be operated without a valid registration, the
Lessee operator or, in some cases, the owner or lessor, may be subject to
penalties which could constitute or result in a Lien being placed on such
Aircraft. Loss of registration could have other adverse effects, including
inability to operate the Aircraft and loss of insurance, which in turn could
have a material adverse effect on the ability of Airplanes Group to pay interest
and principal on the Notes. However, there can be no assurance that Future
Leases will contain such terms or that Lessees will comply with such terms.
TECHNOLOGICAL RISKS
Airplanes Group's ability to lease or sell the Aircraft may be adversely
affected to the extent that the availability for lease or sale of newer, more
technologically advanced aircraft or the introduction of increasingly stringent
noise or emissions regulations make the Aircraft less competitive. This risk,
which is common to all aircraft lessors, is particularly significant for
Airplanes Group given its need to repay principal and interest on the Notes over
a relatively long period, which will require that many of the Aircraft be leased
or sold close to the end of their useful economic life. Furthermore, the extent
to which Airplanes Group is able to manage these technological risks through
modifications to aircraft and sale of aircraft is expected to be limited and any
sales of aircraft will depend on Airplanes Group's ability to satisfy the
criteria set forth under "Description of Securities -- The Notes and the
Guarantees -- Trust Indenture Covenants".
AIRCRAFT TYPE CONCENTRATIONS
At January 23, 1998, two aircraft types contained in the Portfolio each
represented over 10% of the Portfolio by Appraised Value: Boeing 737-400s
constituted 15.40% and McDonnell Douglas MD83s constituted 12.99%. Also, at
January 23, 1998, narrowbody Aircraft (excluding turboprops) constituted 77.84%
of the Portfolio by Appraised Value.
At January 23, 1998, 15 Aircraft or 16.88% of the Portfolio by Appraised
Value, were widebody aircraft. These widebody Aircraft include four B767-300ERs
(6.78% of the Portfolio by Appraised Value), three MD11s (6.23% of the Portfolio
by Appraised Value), one B767-200ER (1.38% of the Portfolio by Appraised Value),
one B747-200 (0.98% of the Portfolio by Appraised Value), two A300-B4-200s
(0.65% of the Portfolio by Appraised Value), three A300-B4-100s (0.45% of the
Portfolio by Appraised Value) and one A300-C4-200 (0.42% of the Portfolio by
Appraised Value). The rental rates obtained by Airplanes Group from a new Lessee
in respect of the three MD-11 aircraft have recently been reduced by
approximately one-third as compared with the prior Leases. The decline in rental
rates received for the three MD-11s reflects the decision by McDonnell Douglas
to cease production of MD-11 aircraft and the subsequent merger between
McDonnell Douglas and Boeing. See "-- Risks Relating to the Leases -- Risk of
Decline in Rental Rates."
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<PAGE> 42
GOVERNMENT REGULATION
In addition to the general requirements regarding maintenance of the
Aircraft, aviation authorities from time to time issue Airworthiness Directives
("ADS") requiring the operators of aircraft to take particular maintenance
actions or make particular modifications with respect to all aircraft of certain
designated types. Certain manufacturer recommendations may also be issued. To
the extent that a Lessee fails to perform ADs required to maintain its
Certificate of Airworthiness or other manufacturer requirements in respect of an
Aircraft (whether or not currently subject to a Lease), Airplanes Group may have
to bear (or, to the extent required under the relevant Lease, share) the cost of
compliance. Other governmental regulations relating to noise and emissions
levels may be imposed not only by the jurisdictions in which the Aircraft are
registered, possibly as part of the airworthiness requirements, but also in
other jurisdictions where the Aircraft operate. A number of jurisdictions have
adopted, or are in the process of adopting, noise regulations which ultimately
will require all aircraft to comply with the most restrictive currently
applicable standards. Such regulations restrict the future operation of aircraft
that do not meet Stage 3 noise requirements and ultimately will prohibit the
operation of such aircraft in the relevant jurisdictions early in the next
century (December 31, 1999 in the case of the United States). As 6.56% of the
Aircraft by Appraised Value at January 23, 1998, did not meet the Stage 3
requirements, these regulations may adversely affect Airplanes Group.
Furthermore, there can be no assurance that no new ADs or noise or emissions
reduction requirements will not be adopted in the future that could result in
significant costs to Airplanes Group or adversely affect the value of, or its
ability to re-lease, Stage 2 or Stage 3 Aircraft. Certain organizations and
jurisdictions are now considering tightening noise and emissions certification
requirements for newly manufactured aircraft.
RISKS RELATING TO THE LEASES
EXPOSURE TO DOWNSIDE RISK AS OWNER OF AIRCRAFT
Most of the Existing Leases are operating leases, under which Airplanes
Group retains substantially all of the risks and rewards associated with
ownership of the Aircraft, including the Aircraft's residual value. Nine of the
Existing Leases are finance leases, which effectively transfer the benefits and
risks of ownership of the Aircraft from Airplanes Group to the finance lessee.
The Existing Leases are "net" leases pursuant to which the Lessees are obliged
to make Rental Payments and generally assume responsibility for, among other
things, (i) maintaining the Aircraft, (ii) ensuring proper operation of the
Aircraft, (iii) providing indemnification and insurance for losses resulting
from operation of the Aircraft, (iv) paying all costs of operating the Aircraft
and keeping the Aircraft free of liens (as defined in the relevant Lease) (other
than permitted liens under the relevant Lease) resulting from such operation and
(v) complying with all governmental licensing and other requirements, including
ADs (except in certain cases where the terms of the relevant Lease require the
Lessor to share the cost thereof). As of December 31, 1997, thirty out of the
then 79 Lessees were delinquent in their Lease payments. See "-- Risk of Lessee
Default".
INABILITY TO RE-LEASE AIRCRAFT ON FAVOURABLE TERMS
Upon termination of any Lease, the Servicer is obligated pursuant to the
terms of the Servicing Agreement to use commercially reasonable efforts on
behalf of Airplanes Group to re-lease the related Aircraft. There can be no
assurance, however, that Airplanes Group will be able to obtain Rental Payments
and lease terms (including maintenance and redelivery condition agreements) in
the future comparable to those contained in the Existing Leases. Airplanes
Group's ability to re-lease Aircraft, as well as its ability to obtain such
Rental Payments and such terms, may be adversely affected by, among other
things, restrictions imposed by the Trust Indentures, the economic condition of
the airline industry, the supply of competing aircraft, other matters affecting
the demand for particular aircraft types and competition from lessors offering
leases on more favorable terms than Airplanes Group.
The expected number of Aircraft that Airplanes Group must place with
Lessees through December 31, 2002 is made up of the sum of (i) Aircraft in
Airplanes Group's existing Portfolio that are currently available for marketing,
and (ii) Aircraft coming to the end of their Existing Lease terms before
December 31, 2002, less the aggregate of (a) Aircraft which are currently the
subject of a Lease extending through December 31, 2002, (b) Aircraft which are
the subject of a non-binding letter of intent to sell or lease and (c) any
Aircraft
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sold prior to December 31, 2002. Additional Aircraft may need to be re-leased if
such Aircraft become available through premature terminations of Leases or if
letters of intent do not result in Leases or if Aircraft subject to lease
agreements are not delivered. Airplanes Group's expected re-leasing requirements
from January 23, 1998 through the year 2002 are shown in the following table:
AIRPLANES GROUP LEASE PLACEMENT REQUIREMENT AT JANUARY 23, 1998
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Aircraft available for marketing(1)..................... 4 -- -- -- --
Contracted Lease expirations (including expirations of
Leases that are assumed to result from letters of
intent)(2)............................................ 78 35 48 30 29
Less Aircraft subject to contract or letter of
intent(2)(3).......................................... (23) -- (2) (5) (2)
-- -- -- --
---
Placement requirement(4)(5)............................. 59 35 46 25 27
=== == == == ==
</TABLE>
- ---------------
(1) Aircraft available for marketing consist of those Aircraft which were not in
revenue service with Lessees as of January 23, 1998.
(2) Excluded from these Aircraft are three DC8 Aircraft on lease to Emery which
Airplanes Group has contracted to sell and which are due for delivery by
March 16, 1998.
(3) Airplanes Group's Lease placement requirement assumes that letters of intent
will in due course be reflected in binding contracts. Although letters of
intent are not legally binding, most of GPA Group's and Airplanes Group's
letters of intent have, historically, resulted in lease agreements between
the parties thereto.
(4) Assumes that Aircraft coming to the end of currently contracted Lease terms
which are not, as of January 23, 1998, the subject of an additional
agreement or letter of intent need to be re-leased only once more before the
year 2002. See "Risk of Lessee Default -- Financial Condition of Lessee"
below.
(5) Assumes that no Existing Lease entered into by Airplanes Group terminates
prematurely and that there are no sales of Aircraft. See "Risk of Lessee
Default -- Inability to Terminate Leases or Repossess Aircraft" below.
There can be no assurance that, with significant numbers of Aircraft to
re-lease in the future, Airplanes Group will be able continually to re-lease
such Aircraft without significant periods of downtime or without any adverse
effect on the rental rates it is able to obtain, especially during downturns in
demand for aircraft on operating lease and that the ability of Airplanes Group
to make payments of interest, principal and premium, if any, on the Notes will
not be adversely affected thereby. See "Risk Factors -- Risks Relating to
Airplanes Group and Certain Third Parties."
REQUIREMENT FOR CERTAIN LICENSES AND APPROVALS
A number of Leases require specific licenses, consents or approvals for
different aspects of the Leases. These include consents from governmental or
regulatory authorities to certain payments under the Leases and to the import,
re-export or de-registration of the Aircraft. No assurance can be given that
such requirements may not be increased by subsequent changes in applicable law
or administrative practice or that a consent, once given, will not be withdrawn.
Furthermore, consents needed in connection with future re-leasing or sale of an
Aircraft may not be forthcoming. Any such event could have an adverse impact on
Airplanes Group's ability to re-lease or sell Aircraft.
RISK OF DECLINE IN RENTAL RATES
Future rental rates and the ability to re-lease Aircraft worldwide both
depend upon a number of factors that are not within the control of Airplanes
Group. See "-- Aircraft Risks -- Cyclicality of Supply of and Demand for
Aircraft; Risk of Decline in Aircraft Values" and "-- Failure to Perform
Aircraft Maintenance". Each of the bankruptcy of Fokker N.V., the manufacturer
of 6.78% of the Aircraft by Appraised Value, and the merger between Boeing and
McDonnell Douglas Corporation (McDonnell Douglas Corporation is the
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manufacturer of 31.24% of the Aircraft by Appraised Value), has adversely
affected the rental rates that Airplanes Group is able to obtain on Aircraft
manufactured by Fokker N.V. and McDonnell Douglas Corporation, and may adversely
affect its ability to make payments of interest and premium, if any, on, and
principal of, the Notes. The rental rates obtained by Airplanes Group from
Varig, S.A. ("VARIG") in 1997 in respect of three MD-11 Aircraft are
approximately one-third lower than the contracted rentals under the previous
lease agreements for these Aircraft and this will adversely affect Airplanes
Group's operating cash flows. In addition, the rental rates obtained by
Airplanes Group from TAM in October 1997 in respect of six Fokker 100 Aircraft
are approximately 24% lower than the contracted rentals under the previous lease
agreements for these Aircraft and this will also adversely affect Airplanes
Group's operating cash flows.
FAILURE TO PERFORM AIRCRAFT MAINTENANCE
The standards of maintenance observed by the various Lessees and the
condition of the Aircraft at the time of sale or lease may affect the future
values and rental rates for the Aircraft. Under the Leases, it is primarily the
responsibility of the relevant Lessee to maintain the Aircraft and to comply
with all governmental requirements applicable to the Lessee and the Aircraft,
including, without limitation, operational, maintenance, and registration
requirements and in most cases, manufacturer recommendations or ADs (although in
certain cases the relevant Lessor has agreed to share the cost of complying with
certain ADs or manufacturer recommendations). Failure of a Lessee to perform
required or recommended maintenance with respect to an Aircraft during the term
of the Lease could result in a grounding of such Aircraft and is likely to
require Airplanes Group to incur costs, which could be substantial, to restore
such Aircraft to an acceptable maintenance condition prior to re-leasing.
RISK OF MAINTENANCE LIABILITIES EXCEEDING MAINTENANCE RESERVES
At December 31, 1997, Airplanes Group had maintenance liabilities of $314
million (the "MAINTENANCE RESERVES"). At February 10, 1998 Airplanes Group held
$80 million in cash (the "MAINTENANCE RESERVE AMOUNT") specifically in respect
of maintenance reserve liabilities which, together with projected future
maintenance reserve payments under the leases, is believed by Airplanes Group,
following consultation with the Administrative Agent, to be sufficient, based on
an analysis of anticipated future maintenance expenses, to provide Airplanes
Group with sufficient liquidity to meet its maintenance liabilities. This amount
of cash has been determined to be appropriate for the funding of Airplanes
Group's maintenance reserve liabilities based on an analysis of Airplanes
Group's, GPA's and overall industry historical experience of the frequency and
cost of maintenance checks performed by lessees relative to the projected
maintenance payments to be made to Airplanes Group under the terms of the
Leases.
In addition, remaining cash balances held in the Expense Account and the
Collection Account at any date ($165.4 million at February 10, 1998) will, in
accordance with the priority of payments, be available to discharge maintenance
liabilities together with other Required Expense Amounts as they fall due for
payment.
There can be no assurance, however, that Airplanes Group's future
maintenance requirements will correspond to Airplanes Group's or GPA's
historical experience, or the industry's experience overall, particularly as the
Aircraft age. Furthermore, there can be no assurance that actual maintenance
payments by lessees and other cash received by Airplanes Group will not be
significantly less than projected. Actual maintenance payments by Lessees will
depend upon numerous factors including defaults and the ability of Airplanes
Group to obtain satisfactory maintenance terms in Leases. An increasing number
of Leases do not provide for any maintenance payments to be made by Lessees as
security for their maintenance obligations. Any significant variations in such
factors may materially adversely affect the ability of Airplanes Group to make
payments of interest, principal and premium, if any, on the Notes.
LIABILITY, LOSS AND INSURANCE
The Lessees are required under the Existing Leases to indemnify the related
lessor (and generally, if different, the owner) for, and insure against,
liabilities arising out of use and operation of the Aircraft, including third
party claims for death or injury to persons and damage to property for which
Airplanes Group
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may be deemed liable. Any insurance proceeds received by Airplanes Group in
respect of such claims shall be paid first to the applicable lessor in the event
of loss of the Aircraft, to effect repairs or in the case of liability
insurance, for indemnification of third party liabilities, with the balance,
after deduction for all amounts due and payable by the Lessee under the
applicable lease, to be paid to the Lessee. The Lessees are also required to
maintain public liability, property damage and hull all risks insurance on the
Aircraft at agreed levels subject to hull deductibles which generally range from
$250,000 to $1 million. Although Airplanes Group believes that the insurance
required under the Leases will be adequate to cover all likely claims, there can
be no assurance that one or more catastrophic events will not exceed coverage
limits. The Lessees are required under the Leases to provide evidence of
insurance, and the insurers must notify Airplanes Group if any Lessee insurance
is to be canceled or terminated. In such event, the Servicer is obligated
pursuant to the terms of the Servicing Agreement to use commercially reasonable
efforts to procure alternative insurance coverage to the extent commercially
available in the relevant insurance market. However, any inadequate insurance
coverage or default by the Lessees in fulfilling their indemnification or
insurance obligations will affect the proceeds that would be received upon an
event of loss under the respective Leases or claim under the relevant liability
insurance.
With respect to certain Existing Leases, the Lessor may arrange separate
political risk repossession insurance for its own benefit, covering (a)
confiscation, nationalization and requisition of title of the relevant aircraft
by the government of the country of registry and denegation and deprivation of
legal title and rights, and (b) the failure of the authorities in that country
to allow de-registration and export of the Aircraft, subject to the conditions
of the policies.
RISK OF WITHHOLDING TAX ON LEASE RENTALS
Airplanes Group endeavors to structure its Leases in such a way that either
no withholding taxes will be applicable to payments by the Lessees under the
Leases, or (in the event of such taxes being or becoming applicable) the Lessees
will be obliged to pay corresponding additional amounts. However, there can be
no assurances that Leases to which Airplanes Group may become a party as a
result of re-leasing the Aircraft will not result in the imposition of
withholding or other taxes in circumstances where the Lessee has not agreed to,
or is unable to, pay compensatory additional amounts.
RISK OF LESSEE DEFAULT
DETERIORATION IN FINANCIAL CONDITION OF LESSEES
The ability of each Lessee to perform its obligations under its Lease will
depend primarily on such Lessee's financial condition. A Lessee's financial
condition may be affected by various factors beyond the control of Airplanes
Group, including competition, fare levels, passenger demand, operating costs
(including the price and availability of jet fuel and labor costs), economic
conditions in the countries in which the Lessees operate and environmental and
other governmental regulation of or affecting the air transportation business.
Many of Airplanes Group's existing Lessees are in a relatively weak financial
position. There can be no assurance as to the extent to which Lessees will be
able to perform their financial and other obligations under the Leases.
As of December 31, 1997, amounts outstanding for a period greater than 30
days in respect of Rental Payments, Maintenance Reserves, and other
miscellaneous amounts due under the Leases (net of default interest and certain
cash in transit) amounted to approximately $18.2 million (of which $7.6 million
related to five previous lessees) in respect of 24 Lessees who had a combined
total of 72 Aircraft on lease at that date. Of the total $18.2 million, $2.4
million was in arrears for a period greater than 30 days, $1.7 million was in
arrears for a period greater than 60 days and $14.1 million was in arrears for a
period greater than 90 days. Certain of these Lessees as well as certain other
Lessees have consistently been significantly in arrears in their Rental Payments
and have recently experienced or are currently experiencing financial
difficulties. The Servicer, on behalf of Airplanes Group, entered into
restructuring agreements with three of these Lessees which account for $7.2
million of the $18.2 million outstanding for a period greater than 30 days.
Twenty-six Lessees account for the remaining $11 million overdue and recovery of
these amounts is being actively pursued. In addition to
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these amounts six further Lessees were being allowed formal deferrals of rent,
maintenance and miscellaneous payments totaling $16.1 million at December 31,
1997. Of the total $16.1 million, $0.4 million was in arrears for greater than
30 days, $0.1 million was in arrears for greater than 60 days and $15.6 million
was in arrears for greater than 90 days. Such Lessees are being allowed
deferrals of rentals, maintenance and miscellaneous payments for periods of up
to 70 months. See "The Aircraft, Related Leases and Collateral -- The Lessees".
There can be no assurance that more Lessees will not become in arrears or
in default for any reason.
RISK OF REGIONAL ECONOMIC DOWNTURNS AFFECTING LESSEE FINANCIAL CONDITION
European Concentration
At January 23, 1998, Airplanes Group leased 62 Aircraft representing
approximately 33.64% of the Portfolio by Appraised Value to twenty-six aircraft
operators in Europe.
The commercial aviation industry in European countries, as in the rest of
the world generally, is highly sensitive to general economic conditions. Because
a substantial portion of airline travel (business and especially leisure) is
discretionary, the industry has tended to suffer severe financial difficulties
during economic downturns. Accordingly, the financial prospects for European
Lessees can be expected to depend largely on the level of economic activity in
Europe generally and in the specific countries in which such Lessees operate. A
recession or other worsening of economic conditions in one or more of these
countries may have a material adverse effect on the ability of European Lessees
to meet their financial and other obligations under the Leases. In addition,
commercial airlines in Europe face, and can be expected to continue to face,
increased competitive pressures, in part as a result of the continuing
deregulation of the airline industry by the European Union (the "EU"). There can
be no assurance that competitive pressures resulting from such deregulation will
not have a material adverse impact on the operations of such Lessees.
Latin American Concentration
At January 23, 1998, the Lessees with respect to 33.64% of the Aircraft by
Appraised Value operated in Latin America, principally Brazil, Mexico, Colombia
and Chile. The prospects for Lessee operations in these countries can be
expected to be dependent in part on the general level of political stability and
economic activity and policies in those countries. Although certain countries in
Latin America have experienced substantial improvement in their economies in the
past several years, which has resulted in increased political stability and
overall increased economic growth, there can be no assurance that such progress
can be maintained or that further progress will be made. Future developments in
the political systems or economies of these countries or the implementation of
future governmental policies in these countries may have a material adverse
effect on Lessee operations in those countries.
The economy of the Latin American region as a whole and of particular Latin
American countries may be materially affected by developments in other countries
in Latin America and also by developments in countries in other regions of the
world that are perceived to demonstrate similar "emerging market"
characteristics. For example, in December 1994 a decrease in capital inflow to
Mexico coupled with a large current account deficit led to diminishing foreign
exchange reserves which ultimately forced Mexico to allow the peso to float
freely. The subsequent devaluation of the peso led to a currency crisis in
Mexico which dampened investor confidence and resulted in lower levels of
foreign investment in Latin America in general. More recently, Brazil has
experienced significant downturns in its financial markets, with large decreases
in Brazilian financial asset prices and considerable pressure for a devaluation
of the Brazilian currency. The loss of confidence in the Brazilian markets and
currency has been associated with the economic crises currently affecting
"emerging markets" in Asia. See "-- Asia Pacific Concentration" below. The
Brazilian government has responded to these pressures with a series of austerity
measures including increased interest rates, public spending cuts and tax
increases. This has led to widespread expectations that economic growth in
Brazil will be significantly reduced through at least 1998 with the real
possibility of a recession that would adversely affect the operations of
Airplanes Group's Brazilian customers.
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Airplanes Group has entered into rent deferral and restructuring
arrangements with certain significant Brazilian and Mexican Lessees who have
experienced difficulties due to overcapacity and adverse market conditions. See
"The Aircraft, Related Leases and Collateral -- The Lessees -- Latin America."
North American Concentration
At January 23, 1998, Airplanes Group leased 43 Aircraft representing
approximately 17.17% of its Portfolio by Appraised Value, to operators in North
America. Airline industry profitability in North America has enjoyed a sustained
improvement since 1993 due to a combination of traffic growth in line with the
overall expansion of the economy in that region and relatively small growth in
aircraft seat capacity leading to a significant increase in load factors.
In 1996 and early 1997 a number of significant new aircraft orders were
announced by North American airlines. However, even in the prevailing robust
industry environment some airlines are reporting losses or very low profits due
to either unsuccessful competitive initiatives in respect of fares and/or
capacity, or uncompetitive cost structures. In the next few years airline profit
margins are likely to come under pressure due to a combination of labor cost
increases and increased aircraft ownership costs as new aircraft are delivered
and a large number of Stage 2 aircraft are hush-kitted. In the early 1990s,
several North American airlines who are currently lessees of Airplanes Group
entered into plans of reorganization or sought the protection of bankruptcy,
insolvency or other similar proceedings. There can be no assurance that such
events will not re-occur in respect of these or other North American lessees of
Airplanes Group and adversely affect the ability of such lessees to make timely
and full Rental Payments under their respective leases.
Airplanes Group has entered into rent deferral and restructuring
arrangements with certain significant North American lessees. See "The Aircraft,
Related Leases and Collateral -- The Lessees -- North America."
Asian Concentration
At January 23, 1998, Airplanes Group leased 20 Aircraft representing
approximately 10.29% of its Portfolio by Appraised Value, to operators in Asia.
Trading conditions in the civil aviation industry in Asia have been adversely
affected by the severe economic and financial difficulties experienced recently
in the region. The economies of Indonesia, Thailand, Korea and Malaysia have
experienced particularly acute difficulties resulting in many business failures,
significant depreciation of local currencies against the dollar (the currency in
which Lease payments are payable), sovereign and corporate credit ratings
downgrades and internationally organized financial stability measures. This
downturn in the region's economies has undermined business confidence and has
had an adverse impact on the results of operations of Airplanes Group's lessees
in the region and consequently on Airplanes Group's revenues and cash flows.
Several airlines in the region have recently announced their intention to
reschedule their aircraft purchase obligations, reduce headcount and eliminate
certain routes. Since 1990, the market in this region for aircraft on operating
lease has demonstrated significant growth rates and the recessionary conditions
that are now expected to prevail in large parts of the region for a significant
period of time will have an adverse impact on global aircraft demand.
One Indonesian lessee was already experiencing financial difficulties prior
to the current regional economic difficulties and is currently in arrears in its
payment obligations which had been restructured in December 1996. See "The
Aircraft, Related Leases and Collateral -- The Lessees -- Asia."
INABILITY TO TERMINATE LEASES OR REPOSSESS AIRCRAFT
Airplanes Group's rights and remedies in the event of a default under each
Lease include the right of the relevant Lessor to terminate such Lease and to
repossess the related Aircraft. If a defaulting Lessee contests such termination
and repossession or is bankrupt or under court protection, however, it may be
difficult, expensive and time-consuming for Airplanes Group to enforce its
rights. With the large numbers of Aircraft in its Portfolio, it is likely that
Airplanes Group will encounter enforcement delays or difficulties in various
jurisdictions. Airplanes Group may incur direct costs associated with
repossession of an Aircraft which include legal and similar costs, the direct
costs of returning the Aircraft to an appropriate jurisdiction and any
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necessary maintenance to make the Aircraft available for re-leasing or sale.
Maintenance costs with respect to repossessed aircraft may be significant.
Repossession does not necessarily imply an ability to export or deregister and
profitably redeploy the Aircraft. In cases where a Lessee or other operator
flies only domestic routes, repossession may be more difficult, especially if
the jurisdiction permits the Lessee to resist deregistration and the Aircraft is
registered in such jurisdiction. In addition, in connection with the
repossession of an aircraft, the aircraft owner may also find it necessary to
pay debts secured by outstanding Liens as well as, in certain jurisdictions,
taxes to the extent not paid by the Lessee. Significant costs may also be
incurred in retrieving or recreating aircraft records in a repossession.
Aircraft records are generally required for obtaining a Certificate of
Airworthiness for the Aircraft.
Airplanes Group may suffer adverse consequences as a result of a Lessee
default and the related termination of the Lease and repossession of the related
Aircraft. Airplanes Group's exercise of its rights and remedies (including
repossession) upon a Lessee default also may be subject to the limitations and
requirements of applicable law, including the need to obtain a court order for
repossession of the Aircraft and/or to obtain consents or approvals for
deregistration or re-export of the Aircraft. When a defaulting Lessee is the
subject of a bankruptcy, protective administration, insolvency or similar event,
additional limitations and requirements may apply. Certain jurisdictions will
give rights to the trustee in bankruptcy or a similar officer to assume or
reject the Lease or to assign it to a third party, or will entitle the Lessee or
another third party to retain possession of the Aircraft (without performing the
obligations under the relevant Lease) for a period that cannot be determined in
advance. Accordingly, in such circumstances, Airplanes Group may be delayed in,
or prevented from, enforcing certain of its rights under a Lease and in
releasing the affected Aircraft. Further, the premature termination of Leases
may, in certain circumstances, lead Airplanes Group to incur substantial swap
breakage costs under its agreements with Swap Providers ("SWAP AGREEMENTS").
RISKS RELATING TO PAYMENTS ON THE 1998 REFINANCING CERTIFICATES
FACTORS AFFECTING THE AMOUNT AND TIMING OF PAYMENTS UNDER THE 1998
REFINANCING CERTIFICATES
The ability of Airplanes Group to re-lease Aircraft upon expiration or
termination of the related Leases, as well as other events outside of Airplanes
Group's control, will affect payments on, and the Weighted Average Lives of, the
1998 Refinancing Notes and, accordingly, the 1998 Refinancing Certificates, and
may therefore affect the yield on the 1998 Refinancing Certificates. Early
terminations, whether as a result of Lessee defaults or otherwise, may cause
Aircraft to be re-leased earlier and more frequently and at lower rental rates
than expected, and could adversely affect payments on the 1998 Refinancing
Certificates. The exercise of Purchase Options or the occurrence of termination
events cannot be predicted and may be influenced by a variety of economic and
other factors, including future interest rates and the availability and market
value of aircraft at future dates. See "Description of the Securities -- The
Certificates".
CASH FLOW FROM AIRCRAFT AND LEASES NOT PREDICTABLE; FAILURE OF ACTUAL
EXPERIENCE TO MATCH THE ASSUMPTIONS
The expected repayment of the 1998 Refinancing Notes described in this
Prospectus was arrived at on the basis of the Assumptions. It is highly unlikely
that the Assumptions will be consistent with Airplanes Group's experience for
numerous reasons. Any inability of Airplanes Group to find financially able and
willing Lessees of the Aircraft at acceptable rental rates will affect the
timing and amount of proceeds realized from Leases of Aircraft. In addition,
other economic and political factors, such as prevailing interest rates and the
availability of credit and market demand for aircraft rentals cannot be assured.
Rental Payments, insurance recoveries, maintenance reserve payments, expenses
and liabilities will often be dependent upon the actions of third parties, which
are difficult to predict and are generally not within Airplanes Group's control.
Accordingly, collections and other realizations with respect to certain Leases
and Aircraft could occur at substantially different times and levels than
anticipated and may not occur at all. As a result, there can be no assurance
that Airplanes Group will be able to repay the initial Outstanding Principal
Balance on the 1998 Refinancing Notes or any other class or subclass of the
Notes.
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SUBORDINATION PROVISIONS
The Expenses and certain other payments will be senior in priority of
payment to the 1998 Refinancing Notes and will be paid out of funds on deposit
in the Collection Account before any payments are made on the 1998 Refinancing
Notes.
EARLY REDEMPTION AND DEFEASANCE
Each subclass of the 1998 Refinancing Notes, and the corresponding 1998
Refinancing Certificates, may be redeemed on any Payment Date, in whole or in
part, at the applicable Redemption Price, plus accrued but unpaid interest;
provided, however, that there shall have been paid in full all accrued and
unpaid interest and other amounts with respect to all subclasses and classes of
Notes ranking equally with such subclass of the 1998 Refinancing Notes to be
redeemed on such Payment Date. In addition, each subclass of the 1998
Refinancing Notes may be redeemed in whole but not in part on any Payment Date,
without premium, upon the occurrence of certain adverse tax events affecting
Airplanes Group. Finally, each subclass of the 1998 Refinancing Notes may be
redeemed or defeased, in whole, at the applicable Redemption Price plus accrued
and unpaid interest, in connection with any sale of all or substantially all of
the assets of Airplanes Group. Certain classes or subclasses of the Notes may be
redeemed at such time as other classes or subclasses of the Notes are being
defeased. See "Description of Securities -- The Notes and the Guarantees --
Redemption" and "Description of Securities -- The Notes and the Guarantees --
Defeasance".
CAPITAL MARKETS RISKS
ABSENCE OF PUBLIC MARKET
There is currently no market for the 1998 Refinancing Certificates. The
Underwriters have advised Airplanes Group that they currently intend to make a
market in the 1998 Refinancing Certificates but they are under no obligation to
do so. Accordingly, there can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide 1998
Refinancing Certificateholders with liquidity of investment or that it will
continue.
INABILITY TO REFINANCE CERTAIN CERTIFICATES
The Subclass A-2, A-3, A-4 and A-6 Certificates and the corresponding
subclasses of Notes are expected to reach their Expected Final Payment Dates
before Airplanes Group has received sufficient Available Collections to pay all
of the principal on such Notes and the corresponding Certificates. Airplanes
Group will attempt to refinance each of the Subclass A-2, A-3, A-4 and A-6
Certificates with the net cash proceeds realized from public offerings and sales
by a trust of Refinancing Certificates. The Refinancing Certificates will rank
equally with the remaining outstanding subclasses of Class A Certificates but
their interest rate, average life, principal payment provisions, redemption
provisions and other economic terms will be determined
by the Directors of Airplanes Limited and the Controlling Trustees of Airplanes
Trust at the time of issuance and may be substantially different from those
applicable to the Certificates to be refinanced. No assurance can be given,
however, as to Airplanes Group's ability to refinance Certificates in this
manner. Any attempt to issue Refinancing Certificates may be adversely affected
by conditions in the capital markets generally or the market's then current
perception of the commercial aviation industry, the operating lease business or
Airplanes Group in particular. Any failure to sell Refinancing Certificates on
acceptable terms at the required times will result in failure to refinance the
Subclass A-2, A-3, A-4 or A-6 Certificates. This may increase the overall cost
of borrowing, may affect the liquidity and market prices of the Certificates
generally and may affect the timing of repayment of principal on the Subclass
A-5 and Subclass A-7 Certificates as a result of the need to make principal
payments on the Subclass A-2, A-3, A-4 or A-6 Certificates.
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CERTAIN BANKRUPTCY CONSIDERATIONS
IRISH BANKRUPTCY CONSIDERATIONS
Airplanes Group has taken steps to ensure that the assets and liabilities
of Airplanes Group are not consolidated with those of GPA in the event that GPA
were to become either voluntarily or involuntarily the subject of an application
for relief under applicable bankruptcy or insolvency laws. These steps include
(a) the creation of Airplanes Limited and Airplanes Trust as separate legal
entities outside Ireland, (b) the requirement that GPA hold none of Airplanes
Limited's issued equity or voting share capital other than 5% of the capital
stock of Holding Co. and not control the composition of the Board of Directors
of either of them (prior to any exercise by GE Capital of its option), and (c)
the inclusion in various transaction documents of provisions requiring that the
business and affairs of each member of Airplanes Group be at all times
identifiable and separate from and managed and controlled apart from and
independently of GPA.
Subject to certain qualifications and reservations and based on certain
assumptions set forth in an opinion issued to Airplanes Group by McCann
FitzGerald, Irish counsel have concluded that (a) in any examination of GPA
Group or any of its affiliates prior to any exercise by GE Capital of its option
to acquire at least 90% of GPA Group's ordinary share capital, an Irish examiner
would not be able to contend successfully that an examiner should be appointed
to any member of Airplanes Group on the grounds that, after the 1996 Closing
Date, such member is a "related company" of GPA Group or such affiliate, and (b)
an Irish court should not, prior to any exercise by GE Capital of such option,
treat GPA or any of its affiliates, on the one hand, and any member of Airplanes
Group, on the other, as a single entity in any winding up of GPA Group or such
affiliate and order (i) the pooling of any of the assets and liabilities of any
member of Airplanes Group with those of GPA or (ii) the contribution of any of
the assets of any member of Airplanes Group to the repayment of the debts of
GPA.
There can be no assurance, however, that the circumstances and assumptions
upon which counsel will base their opinion will not change, that a court of
competent jurisdiction would not decide differently from the views expressed in
such counsel's opinions or that such opinions will prove to be correct. Such
opinions represent only the best judgment of counsel and are not binding on the
courts. In particular, such opinions depend on certain factual assumptions and
the existence of different facts could lead a court to reach a different
conclusion.
U.S. BANKRUPTCY CONSIDERATIONS
If GPA, Inc. were to become a debtor in a proceeding under the U.S.
Bankruptcy Code and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to request a court to order that the assets and liabilities
of GPA, Inc. should be substantively consolidated with those of Airplanes Trust,
AeroUSA or AeroUSA 3, delays in payments on the Notes (and consequently on the
Certificates) could result. Should the bankruptcy court rule in favor of any
such creditor, trustee-in-bankruptcy or such debtor, such court could
substantively consolidate Airplanes Trust, AeroUSA and/or AeroUSA 3 with GPA,
Inc. or otherwise consider the AeroUSA Shares to be part of GPA, Inc.'s estate
or take other actions that would be adverse to the Certificateholders and that
could result in reductions in payments on the Certificates.
Davis Polk & Wardwell has delivered a reasoned opinion to GPA Group and
Airplanes Group to the effect that, based on various assumptions and
qualifications set forth in the opinion, notwithstanding the fact that there is
no case law directly on point and accordingly the issue is not free from doubt,
in a proceeding under the U.S. Bankruptcy Code relating to GPA, Inc., a court
properly presented with the facts and exercising reasonable discretion and
applying New York law would not grant an order consolidating the assets and
liabilities of Airplanes Trust, AeroUSA or AeroUSA 3 with those of GPA, Inc. The
assumptions and qualifications contained in this opinion include (i) an
assumption that the representations and warranties of Airplanes Trust, AeroUSA,
GPA Group, and GPA, Inc. set forth in the relevant Stock Purchase Agreement, the
Administrative Agency Agreement and the Cash Management Agreement continue to be
accurate and that the parties thereto will continue to be in compliance with
their obligations thereunder, and (ii) an assumption that the transfer of the
AeroUSA Shares did not constitute a fraudulent conveyance or other voidable
transfer under the U.S. Bankruptcy Code or other applicable state law.
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There can be no assurance, however, that a court would not decide
differently from the views expressed in counsel's opinions and such opinions
represent only the best judgment of counsel and are not binding on the courts.
In particular, such opinions depend on certain factual assumptions and the
existence of different facts could lead a court to reach a different conclusion.
TAX RISKS
Ownership of the 1998 Refinancing Certificates entails certain risks with
respect to the application of Irish tax laws, United States federal tax laws,
Jersey tax laws and the tax laws of the jurisdictions in which the Transferred
Companies and the Lessees are organized, reside or operate. In addition, the tax
consequences of the purchase of the 1998 Refinancing Certificates will depend to
some extent upon an investor's individual circumstances.
Airplanes Limited will receive an opinion of Mourant du Feu & Jeune, Jersey
tax counsel, that neither Airplanes Limited nor the 1998 Refinancing Trusts are
subject to Jersey income tax and that payments with respect to both the
Airplanes Limited 1998 Refinancing Notes and the 1998 Refinancing Certificates
will not be subject to Jersey withholding tax.
Airplanes Limited will also receive an opinion of McCann FitzGerald, Irish
tax counsel, that based on certain assumptions and subject to certain
restrictions, none of Airplanes Limited, Airplanes Trust, AeroUSA or the 1998
Refinancing Trusts are subject to Irish income tax on its income, and that
payments with respect to both the 1998 Refinancing Notes and the 1998
Refinancing Certificates will not be subject to Irish withholding tax. See "Tax
Considerations -- Irish Tax Considerations -- Irish Income and Withholding
Taxes".
Each prospective investor should be aware, however, that such opinions
represent only the best judgment of counsel and are not binding on the
applicable taxing authorities or the courts. Such opinions depend upon certain
factual assumptions and the existence of different facts could lead to
circumstances not anticipated by counsel. Moreover, investors should be aware
that the laws and regulations upon which an investor's treatment is based are
subject to change. In addition, there can be no assurance that the future
management of the Aircraft by the Servicer in accordance with the terms of the
Servicing Agreement will not expose Airplanes Limited, Holding Co. or the Irish
tax resident Transferred Companies to tax liabilities outside Ireland.
IMPOSITION OF INCOME TAX
Whether any of Airplanes Limited, Holding Co. or the Transferred Companies
will be subject to United States federal income tax may depend on the manner in
which the activities of the Servicer and Administrative Agent are performed for
Airplanes Limited, Holding Co. and the Transferred Companies and the application
of the recently ratified income tax treaty between the United States and Ireland
(the "TREATY"). There can be no assurance that the activities of the Servicer or
Administrative Agent will not expose Airplanes Limited, Holding Co. and the
Transferred Companies to United States federal income tax on their income.
Airplanes Limited, Holding Co. and the Transferred Companies, with the support
of the Irish authorities, have sought a ruling from the United States
authorities under the Treaty, to the effect that Airplanes Limited, Holding Co.
and the Transferred Companies would be deemed to meet certain requirements
necessary for eligibility for Treaty benefits. However, there can be no
assurance that Airplanes Limited, Holding Co. and the Transferred Companies
would not be subject to United States federal income tax on some or all of their
income under the Treaty and/or that their application to the United States
authorities will be successful.
Airplanes Limited, Airplanes Trust and AeroUSA do not intend to be (and
have taken steps designed to ensure that they will not be) treated as doing
business in Ireland and, therefore, do not expect to be subject to Irish income
tax. However, if the operations of Airplanes Limited, Airplanes Trust or AeroUSA
differ from those intended or expected, Airplanes Limited or Airplanes Trust
could become subject to Irish taxes.
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IMPOSITION OF WITHHOLDING TAX
Neither the Trustee nor Airplanes Group will make any additional payments
to Certificateholders in respect of any withholding or deduction required to be
made by applicable law with respect to payments made on either the Notes or the
Certificates. In the event that Airplanes Group is or will be required to make a
withholding or deduction, it will use reasonable efforts to avoid the
application of such withholding taxes and may in certain circumstances redeem
the Notes (which would result in repayment of the Certificates) in the event
such withholding taxes cannot be avoided. In the event any withholding taxes are
imposed with respect to the Notes and Airplanes Group does not redeem the Notes,
the net amount of interest received by the Trustee and passed through to the
Certificateholders will be reduced by the amount of the withholding or
deduction.
LOSS OF CERTAIN IRISH TAX BENEFITS
Airplanes Limited owns 95% of the capital stock of Holding Co. and the
remaining 5% is owned by GPA Group. The 5% shareholding by GPA Group is intended
to ensure that Holding Co. and certain other Transferred Companies will continue
to be entitled to certain corporate tax benefits for Shannon, Ireland certified
companies. If GPA Group were to be liquidated or GPA Group or GECAS were to
reduce or relocate their respective operations for any reason such that either
party failed to maintain, among other things, certain employment levels in
Ireland or GPA Financial or GECAS were to resign or be terminated in accordance
with the terms of the Administrative Agency Agreement and the Servicing
Agreement, respectively, then Holding Co. (and the other Irish tax resident
Transferred Companies) may become subject to Irish corporate taxation at general
Irish statutory rates (currently 32%) and may lose the ability to deduct
interest payments to Airplanes Limited from their income in computing their
liability to Irish tax. Such a loss of tax benefits would likely lead to a
downgrade in the then current ratings on the Certificates and would have a
materially adverse effect on Airplanes Limited's ability to pay interest,
principal and premium, if any, on the Notes issued by Airplanes Limited.
The Servicing Agreement sets out certain tax-related undertakings
(including maintaining minimum employment levels in Ireland) with respect to the
Servicer which are designed to maintain a favorable tax treatment in Ireland for
Holding Co. and the Irish tax resident Transferred Companies. In the event that
the Servicer fails to perform such undertakings and a material tax event occurs,
Airplanes Group's sole remedy will be to terminate the Servicing Agreement and
replace GECAS as the Servicer. In such circumstances, there is no assurance that
the Airplanes Group would be able to find a servicer to replace GECAS. See "Risk
Factors -- Tax Risks" and "Management of Airplanes Group -- The Servicer".
Upon the scheduled termination of the preferential tax rate on December 31,
2005, Holding Co. and the other Irish tax resident Transferred Companies will
become subject to Irish corporate tax on their net trading income at a 12 1/2%
rate as announced by the Minister for Finance of Ireland on December 3, 1997.
According to such announcement, non-trading income will be taxed at 25%. There
can be no assurance that the announced rates will be adopted as law in Ireland
or that, if adopted, such rates will not thereafter be changed. However,
assuming Holding Co. and the other Irish tax resident Transferred Companies
continue to be entitled to the benefit of the 10% corporate tax rate for
Shannon, Ireland certified companies until December 31, 2005, they will continue
to be able to deduct interest payments to Airplanes Limited in computing their
Irish income tax liability and will continue to be in a position to make such
interest payments without deduction for withholding beyond 2005.
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THE PARTIES
AIRPLANES LIMITED
Airplanes Limited is a special purpose limited liability company formed on
November 3, 1995 under the laws of Jersey for an unlimited duration for certain
limited purposes, including directly or indirectly acquiring, financing,
re-financing, owning, leasing, re-leasing, maintaining and modifying the
Aircraft. In addition, within the limits set forth in the Airplanes Limited
Trust Indenture, Airplanes Limited may sell the Aircraft. Airplanes Limited may
also guarantee the obligations of Airplanes Trust and the subsidiaries of
Airplanes Trust, enter into certain hedging contracts as described under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Interest Rate Management", and establish and provide loans or
guarantees to, or in respect of, its subsidiaries.
Airplanes Limited has one direct subsidiary, Holding Co., in which it holds
95% of the ordinary share capital. GPA Group holds the remaining 5% of the
ordinary share capital of Holding Co. The 5% shareholding by GPA Group is
intended to ensure that Holding Co. and certain of the other Transferred
Companies will continue to be entitled to certain corporate tax benefits for
Shannon certified companies. Airplanes Limited operates its business through its
direct and indirect subsidiaries. Airplanes Limited and its subsidiaries are
also permitted to lease Aircraft to or from, or sell Aircraft to or buy Aircraft
from, other members of Airplanes Group.
Airplanes Limited has an authorized share capital of 10,000 ordinary
shares, $1 par value per share, 30 of which have been issued. All of the issued
Capital Stock of Airplanes Limited is held by the Nominees for the benefit of
the Charitable Trusts. The holders of the issued Capital Stock are entitled
under the Articles of Association of Airplanes Limited to an annual fixed
cumulative preferential dividend of $4,500 (the "ANNUAL DIVIDEND AMOUNT"). The
Annual Dividend Amount will be paid only when Airplanes Limited has
distributable profits which may lawfully be so paid as dividends and no Event of
Default has occurred and is continuing.
Airplanes Limited has a Board of Directors but does not have and will not
have any employees or executive officers. Accordingly, the Board relies upon the
Servicer, the Administrative Agent, the Cash Manager and the other service
providers for all asset servicing, executive and administrative functions
pursuant to the respective service provider agreements. The Board consists of
five members (the "DIRECTORS"), one of whom is appointed by the holder or
holders of a majority in aggregate principal amount of the Class E Notes
(currently GPA) and four of whom are Independent Directors. Certain significant
transactions or proceedings of Airplanes Limited may only be approved by a
unanimous vote of all the Directors of Airplanes Limited. These transactions and
proceedings principally relate to certain insolvency proceedings, amendments to
Airplanes Limited's Memorandum or Articles of Association, mergers or, subject
to certain exceptions, sale of all or substantially all of Airplanes Limited's
assets. The succeeding Independent Directors generally will be appointed by a
majority of the then standing Directors. "INDEPENDENT DIRECTORS" will not be
officers, directors or employees of GPA Group, GECAS, GE Capital, any holder of
the Class E Notes or any affiliate of these persons.
GE Capital has the right to acquire at any time up to and including October
29, 2001, not less than 90% of the ordinary share capital of GPA Group (the
"CALL RIGHT"). If GE Capital were to exercise the Call Right and acquire 90% of
the ordinary share capital of GPA Group, GE Capital would pay between
approximately $59 million and approximately $108 million, depending on certain
events as stipulated in the terms governing the exercise of the Call Right. If
GE Capital exercises the Call Right, it will be obliged to make an offer to all
other ordinary shareholders to purchase their ordinary shares. Alternatively, GE
Capital may make a general offer to all ordinary shareholders on or before
October 29, 2001 (a "GENERAL OFFER"). If GE Capital were to acquire 100% of the
ordinary share capital of GPA Group pursuant to the above offers, GE Capital
would pay approximately $120 million if it were to do so on or before March 31,
1998 or approximately $65 million if GE Capital were to exercise its rights in
this regard after March 31, 1998. If GE Capital acquires 90% or more of the
ordinary share capital of GPA Group, the holder of a majority in aggregate
principal amount of the Class E Notes would be entitled to dismiss the
then-acting Directors and Controlling Trustees and to appoint new Directors and
Controlling Trustees; provided that (i) GE Capital guarantees the performance by
GECAS of
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<PAGE> 54
its obligations under the Servicing Agreement, if GECAS is then the Servicer,
(ii) GE Capital shall then have a rating of at least Aa1 or AA+ on its
long-term, senior unsecured debt obligations from Moody's or Standard & Poor's,
respectively, and (iii) each of Airplanes Limited and Airplanes Trust shall
continue to have at least three Independent Directors and Independent Trustees,
as applicable, who will form a committee to review and, if thought fit, approve,
by a vote of at least two of the three committee members, any transactions of
Airplanes Group (other than as described in the next paragraph) in which GE
Capital or any of its affiliates is an interested party. There can be no
assurance that GE Capital will elect to exercise its rights to acquire any
ordinary share capital of GPA Group.
At such time, if any, as the Directors and Controlling Trustees have been
appointed by the holder of a majority in aggregate principal amount of the Class
E Notes, then the Directors and Controlling Trustees shall have the authority,
acting on a simple majority vote, without any independent committee veto rights,
to cause Airplanes Group to sell, directly or indirectly, all of the assets of
the Airplanes Group, whether through a stock or an asset sale, to any person who
provides, as consideration therefor, any combination of cash, obligations of the
United States government or of corporate issuers rated at least AA+ or its
equivalent and Class E Notes which, through the payment of interest, principal
and premium, if any, in respect thereof, will be sufficient to repay or defease,
as the case may be, the Notes in accordance with their terms and the terms of
the Trust Indentures, discharge any Class E Notes not so transferred and pay,
with respect to Airplanes Limited, to the trustees of the Charitable Trusts an
amount (the "DISCOUNTED ANNUAL DIVIDEND AMOUNT") equal to the discounted present
value of the Annual Dividend Amount payable to the trustees of the Charitable
Trusts through the Final Maturity Date of the Class E Notes, plus any arrears of
the Annual Dividend Amount. See "Description of Securities -- The Notes and the
Guarantees -- Defeasance".
Neither Airplanes Limited nor any of its subsidiaries is involved in or
subject to any legal or arbitration proceedings relating to claims or amounts
which are material in the context of the issue of the 1998 Refinancing Notes nor
is Airplanes Limited aware that any such proceedings are pending or threatened.
See "-- GPA" below.
Airplanes Limited has no ownership or leasehold interest in any real
property. Airplanes Limited's registered and principal office is located at 22
Grenville Street, St. Helier, Jersey and its telephone number is
011-44-1534-609000.
AIRPLANES TRUST
Airplanes Trust is a business trust formed pursuant to the Airplanes Trust
Agreement dated November 29, 1995, as amended and restated as of March 11, 1996,
under the laws of Delaware for certain limited purposes, including acquiring,
financing, re-financing and owning the AeroUSA Shares. In addition, Airplanes
Trust may guarantee the obligations of Airplanes Limited, enter into certain
hedging contracts and establish and provide loans or guarantees in respect of
its subsidiaries.
Airplanes Trust has one direct subsidiary, AeroUSA. AeroUSA itself has one
direct subsidiary, AeroUSA 3. The shares of AeroUSA and AeroUSA 3 are held by
separate voting trusts with First Security Bank of Utah, National Association
acting as trustee in order to satisfy regulations of the U.S. Federal Aviation
Administration regarding the U.S. citizenship of the owners of U.S.-registered
aircraft. Airplanes Trust holds voting trust certificates representing shares of
AeroUSA. Airplanes Trust operates its business through AeroUSA. AeroUSA and its
subsidiaries are also permitted to lease Aircraft to or from or sell Aircraft
to, or buy aircraft from, other members of Airplanes Group.
GPA, Inc. holds the Airplanes Trust Residual Interest in all of the
property of Airplanes Trust, including the AeroUSA Shares. Upon repayment in
full of the Airplanes Trust Notes, the Airplanes Trust Class E Notes and the
Airplanes Trust Refinancing Notes, the AeroUSA Shares will be transferred back
to GPA, Inc. pursuant to its ownership of the Airplanes Trust Residual Interest.
The trustees of Airplanes Trust consist of Wilmington Trust Company, as
Delaware Trustee, and as controlling trustees (the "CONTROLLING TRUSTEES"), the
same individuals who act as Directors of Airplanes Limited. Airplanes Trust has
no and will have no employees or executive officers. Accordingly, the
Controlling
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<PAGE> 55
Trustees rely upon the Servicer, the Administrative Agent, the Cash Manager and
the other service providers for all asset servicing, executive and
administrative functions pursuant to the respective service provider agreements.
One member of the Board of Controlling Trustees is appointed by the holder of a
majority in aggregate principal amount of the Class E Notes (currently GPA) and
four are Independent Trustees. Any succeeding Independent Trustees will be
appointed by a majority of the then acting Independent Trustees. "INDEPENDENT
TRUSTEES" will not be officers, directors, employees or consultants of GPA
Group, GECAS, GE Capital, any holder of the Class E Notes or any affiliate of
these persons. Approval of certain significant transactions or proceedings with
respect to Airplanes Trust or AeroUSA may only be obtained by a unanimous vote
of all the Controlling Trustees of Airplanes Trust. These transactions and
proceedings principally relate to certain insolvency proceedings, amendments to
Airplanes Trust's or AeroUSA's constituent documents, mergers or, subject to
certain exceptions, sale of all or substantially all of Airplanes Trust's or
AeroUSA's assets. The composition of Airplanes Trust's Board of Controlling
Trustees, and its composition if GE Capital acquires 90% or more of the ordinary
share capital of GPA Group and elects to dismiss the then-acting Controlling
Trustees, will be determined in the same manner as the composition of the Board
of Directors of Airplanes Limited is determined. See "-- Airplanes Limited"
above. There can be no assurance that GE Capital will elect to exercise its
rights to acquire any ordinary share capital of GPA Group.
None of Airplanes Trust, AeroUSA or AeroUSA 3 is involved in or subject to
any legal or arbitration proceedings relating to claims or amounts which are
material in the context of the issue of the 1998 Refinancing Notes nor is
Airplanes Trust, AeroUSA or AeroUSA 3 aware that any such proceedings are
pending or threatened. See "-- GPA" below.
Airplanes Trust has no ownership or leasehold interest in any real
property. Airplanes Trust's principal office is located at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001 care of Wilmington
Trust Company and its telephone number is 1-302-651-1000.
THE TRUST AND TRUSTEE
Following the issue of the Subclass A-6 Certificates and the Subclass A-7
Certificates, the Trust will consist of nine separate trusts, each of which has
been organized under the laws of the State of New York pursuant to the Trust
Agreement among Airplanes Trust, Airplanes Limited and the Trustee on behalf of
the holders of each class or subclass of Certificates, for the purpose of
acquiring and holding the Notes and the Guarantees. The Trust has no significant
assets other than the Notes and the Guarantees. The Trust Agreement does not
permit the Trustee to engage in any activities with respect to any class or
subclass of Certificates other than holding the Notes and the Guarantees,
issuing the Certificates, acting as paying agent with respect thereto and
engaging in certain other activities related thereto.
The Trust Agreement provides that Airplanes Limited and Airplanes Trust
will pay the Trustee's fees and expenses. The Trust Agreement further provides
that the Trustee is entitled to indemnification by Airplanes Limited and
Airplanes Trust for, and will be held harmless against, any loss, liability or
expenses incurred by it (other than through its own wilful misconduct, bad faith
or negligence or by reason of a breach of any of its representations or
warranties set forth in the Trust Agreement), except to the extent that such
loss, liability or expense is for or in respect of taxes, in which case the
Trustee may be entitled to be reimbursed by the Trust.
Bankers Trust Company is the Trustee for each of the Trusts. The Trustee
and any of its affiliates may hold Certificates in their own names. With certain
exceptions, the Trustee makes no representations as to the validity or
sufficiency of the Trust Agreement, the Certificates, the Notes, the Guarantees
or the Trust Indentures. Bankers Trust Company is also the Indenture Trustee
under each of the Trust Indentures pursuant to which the Notes are issued. The
Trustee and various affiliates of the Trustee have provided various services to
GPA in the past and may continue to provide services in the future.
The Trustee may resign with respect to any or all of the Trusts at any
time, in which event Airplanes Limited and Airplanes Trust will be obligated to
appoint a successor pass through trustee and/or indenture trustee. If the
Trustee ceases to be eligible to continue as a trustee with respect to the
Trusts or any class or subclass of Certificates or becomes incapable of acting
as trustee under the Trust Agreement or becomes insolvent, Airplanes Limited and
Airplanes Trust may remove the Trustee, or any Certificateholder of the
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<PAGE> 56
applicable class or subclass who has been a bona fide Certificateholder for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor trustee. Any resignation or removal of the
Trustee with respect to a Trust and appointment of a successor trustee for such
Trust does not become effective until acceptance of the appointment by the
successor trustee. Pursuant to such resignation and successor trustee
provisions, it is possible that a different trustee could be appointed to act as
the successor trustee with respect to each Trust. All references in this
Prospectus to the Trustee are to the trustee acting in such capacity under each
of the Trusts and should be read to take into account the possibility that each
of the Trusts could have a different successor trustee in the event of such a
resignation or removal.
Pursuant to the Trust Indenture Act, if any class or subclass of
Certificates is outstanding and an Event of Default should occur with respect to
that class or subclass of Certificates, the existing Trustee would be required
either to resign as Trustee under the Trust Agreement with respect to such class
or subclass or to resign as Trustee under the Trust Agreement with respect to
all other classes or subclasses of Certificates within 90 days of such default
unless such default were cured, duly waived or otherwise eliminated.
As described above, each Trust corresponds to a separate class or subclass
of Certificates. Each class of Certificates has different priorities of payment
from Certificates of other classes. Each subclass of Certificates ranks equally
with each other subclass of the same class of Certificates, but may bear
different interest rates and may have different or potentially different
principal repayment schedules. Accordingly, Certificateholders of the Subclass
A-6 Certificates and the Subclass A-7 Certificates may have divergent or
conflicting interests from the Certificateholders of other classes or
subclasses.
GPA
INTRODUCTION
GPA Group, through wholly owned subsidiaries, provides administrative,
accounting, liability management, financial consulting and cash management
services to Airplanes Group in its capacity as Administrative Agent and Cash
Manager. GPA Group and its subsidiaries also hold substantially all of the Class
E Notes and, as such, are entitled to nominate one Director of Airplanes Limited
and one Controlling Trustee of Airplanes Trust. The GPA Group nominated Director
and Controlling Trustee is Edward Hansom, who is also a director of ALPS 94-1.
GPA is a significant lessor of modern commercial aircraft and is a
significant participant in the global commercial aviation industry. GPA leases
aircraft throughout the world almost exclusively by way of operating lease. At
December 31, 1997, GPA had 93 commercial aircraft in its portfolio, of which 88
were on lease to 37 lessees in 20 countries. The 67 aircraft classified as owned
by GPA include 29 aircraft leased-in pursuant to finance leases and six aircraft
leased out pursuant to finance leases. At December 31, 1997, GPA owned or
leased-in three aircraft types which represented over 10% each of its portfolio
by appraised value. Airbus A320 aircraft constituted approximately 18.8%,
B737-300 aircraft constituted approximately 14.2% and Boeing 737-400 aircraft
constituted approximately 12.5%. Overall, at December 31, 1997, narrowbody
aircraft (including turboprops) constituted approximately 88.6% of GPA's
portfolio by appraised value and Stage 3 aircraft (including turboprops)
constituted approximately 97.2% of GPA's portfolio by appraised value. At
December 31, 1997, 32.1% of GPA's portfolio (by appraised value) was on lease to
North American airlines, 26.3% was on lease to European based airlines, 19.4%
was on lease to Asian airlines and 16.2% was on lease to Latin American
airlines. Also at December 31, 1997, approximately 35.3% of GPA's portfolio was
on lease to three airlines, of which approximately 14.7% was on lease to one
U.S. airline, approximately 11.2% was on lease to one Chinese airline and
approximately 10% was on lease to one Brazilian airline, in each case by
appraised value.
In addition to its remaining, owned aircraft, GPA continues to have an
interest in the aircraft owned by Airplanes Group by virtue of its deeply
subordinated investment in Airplanes Limited and Airplanes Trust. Also, because
GPA has access to certain potential benefits arising from the aircraft owned by
ALPS 94-1, GPA continues to have an interest in such aircraft.
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<PAGE> 57
The following table indicates the maturities of GPA's expected remaining
indebtedness as of December 31, 1997.
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
--------------------------------------------------
1998 1999 2000 2001 2002 THEREAFTER
---- ---- ---- ---- ---- ----------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Secured facilities.................................. 4 26 35 140 20 156
Unsecured facilities................................ -- 106 1 -- 52 3
--- --- --- --- --- ---
Total(1)............................................ 4 132 36 140 72 159
=== === === === === ===
</TABLE>
- ---------------
(1) As of December 31, 1997, GPA had cash on hand of $322.5 million ($156.1
million of which were restricted cash balances).
At December 31, 1997, GPA employed 29 people who perform those functions
for which GPA has not delegated responsibility to GECAS pursuant to the Aircraft
Servicing Agreement between GPA and GECAS (the "GPA SERVICING AGREEMENT"). GPA
continues to manage all matters related to its continuing business, operations,
assets and liabilities and the assets and liabilities of certain of its
associated companies and subsidiaries, other than matters that are expressly the
responsibility of GECAS under the GPA Servicing Agreement. Matters with respect
to which GPA did not delegate responsibility to GECAS under the GPA Servicing
Agreement include (i) monitoring GECAS' performance under the GPA Servicing
Agreement; (ii) decisions with respect to GPA's orders and options for future
aircraft deliveries; (iii) management of GPA's assets not managed by GECAS; (iv)
the management of all of GPA's liabilities; (v) all finance functions not
specifically provided by GECAS, including all matters relating to secured and
unsecured financings and managing relationships with secured and unsecured
creditors and rating agencies; (vi) all treasury functions not specifically
provided by GECAS, including cash management, approval of cash disbursements and
currency and interest rate risk management; (vii) all accounting functions not
specifically provided by GECAS, including the monitoring of cash receipts and
disbursements and accounts payable and receivable, accounting policies and
decisions, preparation of financial statements and audits thereof; (viii) all
corporate secretarial activities; (ix) all shareholder matters; (x) all legal
and regulatory matters not specifically provided by GECAS; (xi) the arrangement
and procurement of insurance other than insurance relating to the assets managed
by GECAS and certain other GPA assets; (xii) GPA employee matters; and (xiii)
adoption of annual budgets.
In 1996, GE Capital was granted the right to acquire at any time up to
October 29, 2001, not less than 90% of the ordinary share capital of GPA Group.
If GE Capital were to exercise the Call Right and acquire 90% of the ordinary
share capital of GPA Group, GE Capital would pay between approximately $59
million and approximately $108 million, depending on certain events as
stipulated in the terms governing the exercise of the Call Right. If GE Capital
exercises the Call Right, it will be obliged to make an offer to all other
ordinary shareholders to purchase their ordinary shares. Alternatively, GE
Capital may make a General Offer on or before October 29, 2001. If GE Capital
were to acquire 100% of the ordinary share capital of GPA Group under the Call
Right or a General Offer, GE Capital would pay approximately $120 million if it
were to do so on or before March 31, 1998 or approximately $65 million if GE
Capital were to exercise its rights in this regard after March 31, 1998.
In connection with the Call Right, GPA and GE Capital entered into an
agreement (the "GENERAL AGREEMENT") in which GPA agreed, among other things, and
subject to certain exceptions, to various restrictions on its business and on
its ability to change its capital structure. GPA has also agreed to refrain from
taking certain other actions which have the effect of reducing the value of, or
imposing materially adverse conditions on the exercise of, the Call Right.
Additionally, under the General Agreement GPA has made comprehensive
representations and warranties and has agreed to indemnify GE Capital for losses
based on breaches of covenants, inaccuracies in representations and warranties
or for any liabilities of GPA. The General Agreement ceases upon the earlier of
exercise in full of the Call Right or its expiry on October 29, 2001.
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<PAGE> 58
On November 5, 1992, GPA obtained a preliminary injunction for repossession
and export of thirteen aircraft and three spare engines (the "REPOSSESSED
ASSETS") from VASP, a Brazilian airline, which had defaulted under its lease
agreements with GPA. On May 10, 1993, at a full hearing, the Brazilian courts
gave a decision fully validating the repossession injunction. VASP appealed this
decision to the High Court of the State of Sao Paolo (the "HIGH COURT"). On
December 18, 1996, the High Court found in favor of VASP in its appeal against
the court order granting GPA repossession and export of the Repossessed Assets.
GPA was instructed to return the Repossessed Assets for lease by VASP under the
terms of the original lease agreements between GPA and VASP within thirty days
of notification by VASP that it requires return of the assets. The decision of
the High Court was stayed pending a number of clarificatory motions by both
sides before the same court. In responding to those motions, the High Court
granted VASP the right to seek damages against GPA in lieu of the return of the
Repossessed Assets. GPA has sought leave to appeal the December 1996 decision
and the court's responses to the clarificatory motions to the Brazilian Superior
Court of Justice and the Federal Supreme Court. In addition, GPA has filed a
writ of mandamus to the High Court seeking to overturn the decision of the High
Court and has sought a stay of the High Court's decisions pending its appeals.
Seven of the thirteen aircraft which were repossessed by GPA from VASP
following the 1992 injunction and the 1993 decision are now owned by Airplanes
Group although none of them are habitually based in Brazil. However, a number of
these aircraft operate into Brazil from time to time. The judgment of the High
Court only applies to those assets which are the subject matter of the
proceedings.
VASP sought to serve GPA with the notice requiring return of the
Repossessed Assets within thirty days of the notice. However, the High Court has
referred all matters concerning the notice to a lower court. Should VASP
commence any action before the lower court in respect of the notice, GPA has
advised Airplanes Group that it will challenge a number of matters relating to
the notice including its validity. The only immediate risk to the Repossessed
Assets would arise if they were located in Brazil and if VASP were successful in
enforcing its judgment having sought repossession rather than damages.
GPA has informed Airplanes Group that it has been advised that the decision
of the High Court in this matter is incorrect as a matter of Brazilian law. GPA
has further informed Airplanes Group that it is actively pursuing all courses of
action that may be available to it, including appeals to superior courts and
intends to defend its position vigorously and to pursue each of its claims and
counter claims against VASP. GPA has advised Airplanes Group that it believes
the outcome of these matters will not have a material adverse effect on
Airplanes Group's liquidity, results of operations or financial condition.
GECAS
GECAS provides various services to Airplanes Group as Servicer under the
Servicing Agreement.
GECAS and its affiliates are the world's largest managers of commercial
aircraft. As of December 31, 1997, the GECAS Managed Portfolio consisted of
approximately 854 aircraft, which are on lease to more than 156 lessees in 53
countries throughout the world. GECAS announced in early 1996 that it had
entered into a multi-year order for five Boeing 777 and 102 Boeing 737 aircraft,
and options for 76 Boeing 737 aircraft, of which 18 Boeing 737 aircraft were
purchased in the period up to December 31, 1997. Under the agreement with
Boeing, GECAS also may purchase up to a further 76 Boeing 737 aircraft. In
addition, in the same period GECAS purchased two Boeing 737 aircraft, which were
not included in the order announced in 1996. On July 15, 1996, GECAS entered
into an order for a combination of 40 A319, A320 and A321 aircraft and five A340
aircraft, and options for a further 40 A319, A320 or A321 aircraft and five A340
aircraft. The first aircraft under this order was delivered in August 1997. As a
global commercial aviation financial services company, GECAS and its affiliates
(i) offer a broad range of financial products to airlines and aircraft
operators, aircraft owners, lenders and investors, including financing leases,
operating leases, tax-advantaged and other incentive-based financing and debt
and equity financing, and (ii) provide asset management, marketing and technical
support services to aircraft owners, lenders and investors, including GE
Capital, GPA and their respective affiliates, ALPS 94-1 and certain third
parties. GECAS, together with GECAS, Inc., has access to approximately 223
employees worldwide and has operations in Stamford, Connecticut; Shannon,
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<PAGE> 59
Ireland; San Francisco, California, and a number of other locations, including
Beijing, Dallas, Hong Kong, Miami and Singapore.
GECAS is headquartered in Shannon, Ireland and at December 31, 1997 had 120
employees.
One of GECAS's principal businesses is providing a broad range of financial
products to airlines and aircraft operators and to aircraft owners, lenders and
investors throughout the world. To meet the fleet financing needs of its airline
customers, GECAS and its affiliates offer such financing options as financing
leases (including both direct financing and leveraged leases), operating leases
and other structured finance transactions, as well as general corporate
financing, including direct debt (both senior and subordinated) and equity and
debtor-in-possession financing. In conjunction with this business, GECAS and its
affiliates are responsible for developing, negotiating and consummating
aircraft-related investment opportunities in the aviation industry for its
affiliate, GE Capital, including the acquisition of aircraft for GE Capital. On
behalf of GE Capital or its affiliates, GECAS will likely offer aircraft or
engine financing to customers of the GE Aircraft Engines Division, and will also
likely offer, on behalf of GE Group, other financial products to such customers,
including in connection with a restructuring or other modification of such
customer's existing financing provided by the GE Aircraft Engines Division, or
otherwise.
With respect to its owner, lender and investor customers, GECAS intends to
continue to market a range of products that are intended to allow financial
institutions and other investors to realize the benefits of aircraft ownership
while the aircraft are managed by GECAS. GECAS expects to arrange and negotiate
the sale of aircraft with operating leases in place, rental rates, tax benefits
and related assets from the portfolio it manages, as well as structured pooled
financings and other incentive-driven transactions.
GECAS offers a broad range of management services to aircraft owners,
lenders and investors, including collection of rental payments, arranging and
monitoring of aircraft maintenance performed by others, limited technical
inspection of aircraft, arranging and monitoring insurance, arranging for
aircraft valuations, registration and deregistration of aircraft, monitoring
compliance with lease agreements and enforcement of lease provisions against
lessees, confirming compliance with applicable ADs and facilitating delivery and
redelivery of aircraft. GECAS devotes substantial resources to marketing for
sale and re-lease the aircraft that it manages. Generally, to the extent an
aircraft is on lease at the time it is being marketed for sale, it is a more
attractive candidate to be sold to potential financial investors when compared
to an aircraft that is not currently under lease. GECAS arranges for its
customers, including GE Capital, GPA and their respective affiliates and certain
third parties, the sale of both unencumbered aircraft and aircraft that are
subject to operating leases to investors who seek a return on their investment
from a combination of future rental payments, the aircraft's residual value and,
in certain instances, tax benefits. GECAS identifies potential purchasers,
determines which aircraft satisfy the specific needs of a particular airline or
investor, negotiates commercial terms and executes the sale of such aircraft.
GECAS's lease marketing activities serve both its airline customer base and its
investor customer base. GECAS designs tax-advantaged transactions as well as
operating lease structures, both to meet the varying needs of its customers and
to facilitate the subsequent sale of the leased aircraft to financial investors.
The aircraft and lease marketing services provided by GECAS include planning,
negotiation and execution of leases and remarketing aircraft for re-lease prior
to expiration of a lease term.
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<PAGE> 60
The table below sets forth the different aircraft comprising the GECAS
Managed Portfolio as of December 31, 1997 by manufacturer and by whether the
aircraft are owned and managed by affiliates of GE Capital or simply managed for
third parties.
<TABLE>
<CAPTION>
GE CAPITAL OTHER MANAGED AIRPLANES
AIRCRAFT TYPE AND CLASS ALPS 94-1 FLEET(1) THIRD PARTIES GROUP TOTAL
- ---------------------------------------- --------- ---------- ------------- --------- -----
<S> <C> <C> <C> <C> <C>
Airbus
A300.................................. 1 19 -- 6 26
A310.................................. -- 8 -- -- 8
A319.................................. -- 8 -- -- 8
A320.................................. 4 21 5 12 42
Boeing
B727.................................. -- 19 2 2 23
B737-200.............................. -- 58 13 32 103
B737-300/400/500(2)................... 10 175 11 44 240
B747.................................. -- 24 1 1 26
B757-200/ER........................... 3 27 -- 3 33
B767-200ER/EM......................... -- 8 -- 1 9
B767-300ER............................ 3 24 -- 4 31
McDonnell Douglas
DC8................................... -- 9 2 25 36
DC9................................... -- 11 24 18 53
DC10.................................. -- 11 1 -- 12
MD11.................................. -- 2 3 5
MD82.................................. -- 20 6 2 28
MD83.................................. 3 20 5 23 51
MD87.................................. -- -- -- 1 1
MD88.................................. -- 14 -- -- 14
Fokker
F28................................... -- 4 -- -- 4
F100.................................. 3 -- 10 16 29
Other Jets.............................. -- 6 2 8
Turboprops.............................. -- 4 32 28 64
--
--- --- --- ---
Total.............................. 27 490 116 221 854
== === === === ===
Body Type:
Widebody.............................. 4 100 4 15 123
Narrowbody............................ 23 390 112 206 704
Stage Compliance:(3)
Stage 2............................... -- 96 19 52 161
Stage 3............................... 27 388 97 169 666
</TABLE>
- ---------------
(1) Certain aircraft included in the GE Capital fleet are owned by joint
ventures or pursuant to other arrangements in which unaffiliated parties
have interests.
(2) For purposes of this table, 9 B737 aircraft have been included in the GE
Capital fleet but both GPA and GE Capital are included in the lease chain.
(3) Turboprop aircraft have been classified as Stage 3 compliant.
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<PAGE> 61
USE OF PROCEEDS
The purpose of the Underwritten Offering is to refinance Airplanes Group's
Subclass A-1 Notes. The Subclass A-1 Notes have an interest rate of LIBOR +
.25%, an expected final payment date of March 15, 1998 and a final maturity date
of March 15, 2006.
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<PAGE> 62
THE AIRCRAFT, RELATED LEASES AND COLLATERAL
THE AIRCRAFT
The assets of Airplanes Group consist principally of the Aircraft. As of
January 23, 1998 Airplanes Group owned (i) 218 Aircraft (after giving effect to
the delivery of three aircraft to Emery as if all of such deliveries had
occurred prior to January 23, 1998); (ii) the rights under the related Leases;
and (iii) monies on deposit in the Collection Account. At February 10, 1998, the
Collection Account balance was $222.3 million (made up of the Liquidity Reserve
Amount of $174.4 million and other collections of $47.9 million). The balance in
the Expense Account on that date was $23.1 million. The Liquidity Reserve Amount
consisted of the Miscellaneous Reserve Amount of $40.0 million, the Maintenance
Reserve Amount of $80.0 million and the Security Deposit Reserve Amount of $54.4
million. As of January 23, 1998 the Aircraft had an Appraised Value of $3,813
million. The Appraised Value is equal to the average of the opinions of the
Appraisers as to the Base Value of each Aircraft as of January 23, 1998 without
taking into account the value of the Leases, Maintenance Reserves, Security
Deposits or other Related Collateral and on the basis of the Appraiser's
assumptions described herein.
PURCHASE OPTIONS
At January 23, 1998, Lessees with respect to 63 Aircraft have the benefit
of options to purchase Aircraft (each a "PURCHASE OPTION") at various dates
between 1998 and 2003 at prices generally at or above their estimated Appraised
Value at the exercise date. Five Lessees with respect to 18 Aircraft,
representing approximately 7.2% of the Portfolio by Appraised Value, have
options to purchase Aircraft at prices below either estimated fair market value
or Airplanes Group's estimated net book value at the option exercise date. (For
the purposes of this analysis, estimated fair market value has been arrived at
by deducting the estimated depreciation (as calculated by Airplanes Group's
existing depreciation policy) from January 23, 1998 to the option exercise date
from the Appraised Value of each Aircraft).
INSURANCE
In certain jurisdictions, liabilities for risks for which the Lessees are
required to provide insurance may also attach to the Lessors and Airplanes Group
as direct and indirect owners of the Aircraft, irrespective of fault. Under the
Leases, the Lessees are currently obliged to indemnify against such claims
certain named parties and, in most cases, their respective successors, assigns,
shareholders, employees, affiliates and agents. Most of the Leases require the
Lessee to maintain the liability insurance for a specified period between one
and three years after termination of such Lease to cover liabilities that may
have arisen prior to terminations but that only became known thereafter.
MAINTENANCE RESERVES
Many of the Leases require the Lessees to pay maintenance reserves or
"supplemental rent" amounts in respect of their obligation to maintain the
Aircraft. Generally, each such Lease in the Portfolio bears an associated
liability on the part of the Lessor to reimburse the Lessee for maintenance
performed on the Aircraft, engines or parts. The obligation of Airplanes Group
to Lessees with respect to maintenance is included within Expenses and thus
ranks in priority to any payments on the Notes. At December 31, 1997, Airplanes
Group recorded approximately $314 million of maintenance reserve liabilities. A
Liquidity Reserve Amount of approximately $174.4 million is currently maintained
in the Collection Account of which $80 million relates to the Maintenance
Reserve Amount. Airplanes Group and GPA Group believe that of this amount $80
million is considered necessary as the cash balance which together with
projected future maintenance payments under the Leases will be sufficient, based
on an analysis of anticipated future maintenance expenses, to provide Airplanes
Group with sufficient liquidity to meet its maintenance liabilities. This amount
of cash has been determined by Airplanes Group to be appropriate for the funding
of Airplanes Group's maintenance reserve liabilities based on an analysis of
Airplanes Group's, GPA's and overall industry historical experience of the
frequency and cost of maintenance checks performed by Lessees relative to the
projected maintenance payments to be made to Airplanes Group under the terms of
the Leases.
61
<PAGE> 63
There can be no assurance, however, that Airplanes Group's maintenance
requirements will correspond to historical experience, or the industry's
experience overall, particularly as the Aircraft get older. Furthermore there
can be no assurance that actual maintenance payments by Lessees and other cash
received by Airplanes Group will not be significantly less than projected.
Actual maintenance payments by Lessees will depend upon numerous factors
including defaults and the ability of Airplanes Group to obtain satisfactory
maintenance terms in Leases. An increasing number of Leases do not provide for
any maintenance payments to be made by Lessees as security for their maintenance
obligations. Any significant variations in such factors may materially adversely
affect the ability of Airplanes Group to make payments of interest, principal
and premium, if any, on the Notes.
APPRAISERS' REPORTS
The following summary is qualified in its entirety by reference to the
Appraisals, copies of which are filed as exhibits to the Registration Statement
of which this Prospectus is a part.
The Appraisers have provided Appraisals (without physical inspection) of
the value of each of the Aircraft at normal utilization rates in an open,
unrestricted and stable market as of January 23, 1998, adjusted to account for
the reported maintenance standard of the Aircraft. The Appraisals do not reflect
the value of the Leases, Maintenance Reserves, Security Deposits or other
Related Collateral, if any. The Appraisals explain the methodology used to
determine the values for the Aircraft. Based on the Appraisals, the aggregate
Base Values calculated by each of the three Appraisers for the Aircraft in the
Portfolio as of January 23, 1998 are $3,950 million in the case of BK
Associates, Inc., $3,934 million in the case of Aircraft Information Services,
Inc. and $3,597 million in the case of Airclaims Limited ($3,992 million, $3,980
million and $3,648 million, respectively, prior to giving effect to the delivery
of three aircraft to Emery as if such deliveries had occurred prior to January
23, 1998). The aggregate Appraised Value of the Aircraft is $3,813 million
($3,859 million prior to giving effect to the delivery of three aircraft to
Emery as if such deliveries had occurred prior to January 23, 1998), which is
approximately $14 million lower ($14 million lower prior to giving effect to the
delivery of three aircraft to Emery as if such deliveries had occurred prior to
January 23, 1998) than the average of the aggregate Base Values calculated by
the three Appraisers because Aircraft subject to finance leases have been
included in the computation of the Appraised Value of the Portfolio at Airplanes
Group's net book value (which represents the value of amounts payable by the
finance lessees) rather than the Aircraft's Base Value. Airplanes Group believes
that, due to current excess supply of certain aircraft in the market, including
in particular certain turboprop, Stage 2 and older wide-body aircraft, the value
of the Aircraft in the current market (as compared with the "stable market
environment with a reasonable balance of supply and demand" and the other
factors assumed in the determination of Base Value) is less than, and is likely
to be substantially less than, the Appraised Value. Furthermore, neither the
Appraised Value nor the value of the Aircraft in the current market should be
relied upon as a measure of the realizable value of the Aircraft. If it were
necessary to dispose of Aircraft in a distress situation, and particularly if a
large number of Aircraft were required to be sold, the proceeds from such a sale
would be substantially less than even the value in the current market. However,
Airplanes Group does not expect to have to sell Aircraft to provide for payment
of principal and interest on the Notes, and does not anticipate conducting any
distress sales. Nevertheless, there can be no assurance that Airplanes Group
would not have to sell one or more Aircraft in a distress sale situation at
prices significantly less than their Appraised Value.
Rental rates and aircraft values depend on a number of factors that are not
within the control of Airplanes Group. See "Risk Factors -- Aircraft Risks --
Cyclicality of Supply of and Demand for Aircraft" and "-- Risk of Decline in
Aircraft Values" and "-- Risks Relating to the Leases -- Risk of Decline in
Rental Rates".
The standards of maintenance observed by the Lessees and the condition of
the Aircraft at the time of sale may also affect the rental rates and values of
the Aircraft. Under each Existing Lease, it is the responsibility of the Lessee
to maintain the Aircraft and to comply with all governmental requirements
applicable to such Lessee or the Aircraft, including, without limitation,
operational, maintenance and registration requirements, and, in most cases,
manufacturer recommendations, although in certain cases the Lessor has agreed to
participate in the cost of certain required modifications to the Aircraft. For a
description
62
<PAGE> 64
of general economic and industry specific factors affecting rental rates and
aircraft values, as well as certain risks associated with a Lessee's failing to
perform its obligations under a Lease, see "Risk Factors -- Aircraft Risks --
Cyclicality of Supply of and Demand for Aircraft" and "-- Risk of Decline in
Aircraft Values" and "-- Risks Relating to the Leases -- Risk of Decline in
Rental Rates" and "-- Failure to Perform Aircraft Maintenance".
PORTFOLIO INFORMATION
THE AIRCRAFT
Aircraft representing 93.44% of the Appraised Value of the Aircraft at
January 23, 1998, hold or are capable of holding a noise certificate issued
under Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago Convention (the
"CHICAGO CONVENTION") or have been shown to comply with the Stage 3 noise levels
set out in Section 36.5 of Appendix C of Part 36 of the United States Federal
Aviation Regulations ("STAGE 3 AIRCRAFT") (assuming for this purpose that
turboprop Aircraft are Stage 3 aircraft). The remaining 6.56% of the Aircraft by
Appraised Value are of an aircraft type that holds or is capable of holding a
noise certificate issued under Chapter 2 of the Chicago Convention or has been
shown to comply with the Stage 2 noise levels ("STAGE 2 AIRCRAFT") and does not
comply with the requirements for a Stage 3 aircraft. Stage 2 aircraft are
noisier than Stage 3 aircraft. A number of jurisdictions have adopted, or are in
the process of adopting, noise regulations restricting the future operation of
aircraft that do not meet Stage 3 noise requirements.
The following table sets forth the exposure of Airplanes Group's Portfolio
by type of aircraft calculated by reference to the number of Aircraft at January
23, 1998 and the Appraised Value of the Aircraft as of January 23, 1998. For the
purpose of the following table, turboprop Aircraft are assumed to be Stage 3
aircraft.
<TABLE>
<CAPTION>
% OF PORTFOLIO
TYPE OF NUMBER OF ENGINE BY APPRAISED
MANUFACTURER AIRCRAFT AIRCRAFT BODY TYPE STAGE VALUE
- --------------------------------- -------------- --------- ---------- ------ --------------
<S> <C> <C> <C> <C> <C>
Boeing (45.51%).................. 727-200A 2 Narrowbody 2 0.21
737-200A 30 Narrowbody 2 4.46
737-200C 2 Narrowbody 2 0.44
737-300 11 Narrowbody 3 6.41
737-400 22 Narrowbody 3 15.40
737-500 11 Narrowbody 3 6.13
747-200BC(1) 1 Widebody 3 0.98
757-200 3 Narrowbody 3 3.32
767-200ER 1 Widebody 3 1.38
767-300ER 4 Widebody 3 6.78
McDonnell Douglas (31.24%)....... DC8-71F 21 Narrowbody 3 8.73
DC8-73CF 1 Narrowbody 3 0.52
DC9-14 2 Narrowbody 2 0.05
DC9-15 6 Narrowbody 2 0.12
DC9-32 6 Narrowbody 2 0.78
DC9-51 4 Narrowbody 2 0.49
MD11 3 Widebody 3 6.22
MD82 2 Narrowbody 3 0.95
MD83 23 Narrowbody 3 12.99
MD87 1 Narrowbody 3 0.39
Airbus (11.18%).................. A300-B4-100 3 Widebody 3 0.45
A300-B4-203 2 Widebody 3 0.65
A300-C4-203 1 Widebody 3 0.42
A320-200 12 Narrowbody 3 9.66
Fokker (6.78%)................... F100 16 Narrowbody 3 6.78
Bombardier De Havilland
(4.50%)........................ DHC8-100 5 Turboprop 3 0.82
DHC8-102 1 Turboprop 3 0.13
DHC8-300 13 Turboprop 3 3.09
DHC8-300C 2 Turboprop 3 0.46
</TABLE>
63
<PAGE> 65
<TABLE>
<CAPTION>
ENGINE % OF PORTFOLIO
TYPE OF NUMBER OF STAGE BY APPRAISED
MANUFACTURER AIRCRAFT AIRCRAFT BODY TYPE - VALUE
- --------------------------------- ---------- --- ---------- -----
<S> <C> <C> <C> <C> <C>
Other (0.79%).................... METRO-III 3 Turboprop 3 0.12
ATR42-300 3 Turboprop 3 0.49
ATR42-320 1 Turboprop 3 0.18
--- -----
218 100
=== =====
</TABLE>
- ---------------
(1) Currently undergoing conversion to freighter configuration.
The following table sets forth the exposure of the Portfolio to certain
individual Lessees calculated as of January 23, 1998 by reference to the
Appraised Value of the Aircraft at January 23, 1998.
<TABLE>
<CAPTION>
NUMBER OF % OF PORTFOLIO BY
LESSEE(1) AIRCRAFT APPRAISED VALUE
- ---------------------------------------------------------------- --------- ------------------
<S> <C> <C>
Varig........................................................... 4 6.70
Aerovias de Mexico S.A. de C.V. ("AEROMEXICO").................. 11 5.57
Canadian Airlines International Limited ("CANADIAN AIRLINES")... 13 5.51
Turk Hava Yollari A.O ("THY")................................... 7 4.74
Burlington Air Express, Inc. ("BURLINGTON AIR")................. 10 4.14
Aerovias Nacionales de Colombia S.A. ("AVIANCA")................ 5 3.55
Airtours International Airways Limited ("AIRTOURS")............. 4 3.30
Compania Mexicana de Aviacion S.A. de C.V ("MEXICANA").......... 8 2.83
Transbrasil..................................................... 2 3.02
Tam-Transportes Aereos Regionais S.A. ("TAM")................... 6 2.55
Air Espana S.A. ("AIR EUROPA").................................. 4 2.48
Malev........................................................... 7 2.37
Other (62 Lessees).............................................. 131 50.33
Off-Lease(2).................................................... 6 2.91
--- ------
Total...................................................... 218 100.00
=== ======
</TABLE>
- ---------------
(1) Total number of Lessees = 74
(2) Of the six Aircraft off-lease, one is now the subject of a lease contract
and four are the subject of non-binding letters of intent to lease and one
will be sold for scrap after March 31, 1998.
64
<PAGE> 66
The following table sets forth the exposure of the Portfolio as of January
23, 1998 to countries in which Lessees are domiciled calculated by reference to
the Appraised Value of the Aircraft at January 23, 1998.
<TABLE>
<CAPTION>
NUMBER OF % OF PORTFOLIO BY
COUNTRY(1) AIRCRAFT APPRAISED VALUE
- ---------------------------------------------------------------- --------- ------------------
<S> <C> <C>
Brazil.......................................................... 15 13.94
United States................................................... 27 10.99
Turkey.......................................................... 13 8.68
Mexico.......................................................... 27 8.59
Canada.......................................................... 16 6.18
United Kingdom.................................................. 9 4.65
Colombia........................................................ 8 4.59
Spain........................................................... 8 4.50
China........................................................... 6 3.56
Sweden.......................................................... 2 2.81
Chile........................................................... 10 2.92
Italy........................................................... 4 2.41
Ireland......................................................... 5 2.40
Other Countries (25 countries).................................. 62 20.87
Off-Lease(2).................................................... 6 2.91
--- ------
Total...................................................... 218 100.00
=== ======
</TABLE>
- ---------------
(1) Total number of countries = 38
(2) Of the six Aircraft off-lease, one is now subject to a lease contract and
four are the subject of non-binding letters of intent to lease and one will
be sold for scrap after March 31, 1998.
The following table sets forth the exposure of the Portfolio by regions in
which Lessees are domiciled calculated as of January 23, 1998 by reference to
number of Aircraft and the Appraised Value of the Aircraft as of January 23,
1998.
<TABLE>
<CAPTION>
NUMBER OF % OF PORTFOLIO BY
REGION AIRCRAFT APPRAISED VALUE
- ---------------------------------------------------------------- --------- -----------------
<S> <C> <C>
Latin America................................................... 77 33.64
Europe (excluding CIS Countries)................................ 62 33.64
North America................................................... 43 17.17
Asia & Far East................................................. 20 10.29
Africa.......................................................... 3 1.54
Others (including CIS Countries)................................ 3 0.51
Australia & New Zealand......................................... 4 0.30
Off-Lease(1).................................................... 6 2.91
--- ------
Total...................................................... 218 100.00
=== ======
</TABLE>
- ---------------
(1) Of the six Aircraft off-lease, one is now subject to a lease contract and
four are the subject of non-binding letters of intent to lease and one will
be sold for scrap after March 31, 1998.
65
<PAGE> 67
The following table sets forth the exposure of the Portfolio by year of
aircraft manufacture or conversion to freighter calculated as of January 23,
1998 by reference to the Appraised Value of the Aircraft as of January 23, 1998.
<TABLE>
<CAPTION>
NUMBER OF % OF PORTFOLIO BY
YEAR OF MANUFACTURE/FREIGHTER CONVERSION AIRCRAFT APPRAISED VALUE
- ---------------------------------------------------------------- --------- -----------------
<S> <C> <C>
1987............................................................ 3 1.55
1988............................................................ 15 5.03
1989............................................................ 9 4.39
1990............................................................ 21 10.40
1991............................................................ 43 23.15
1992............................................................ 54 39.33
1993............................................................ 7 3.30
Other........................................................... 66 12.86
--- ------
Total...................................................... 218 100.00
=== ======
</TABLE>
The following table sets forth the exposure of the Portfolio by seat
category calculated as of January 23, 1998 by reference to the Appraised Value
as of January 23, 1998. Passenger Aircraft are assumed to be configured with the
typical number of seats as set forth in Appendix 2.
<TABLE>
<CAPTION>
NUMBER OF % OF PORTFOLIO BY
SEAT CATEGORY AIRCRAFT TYPES AIRCRAFT APPRAISED VALUE
- -------------- ------------------------------------------------ --------- -----------------
<S> <C> <C> <C>
less than 51 DHC8, Metro-III, ATR42.......................... 28 5.29
51-90 DC9-14/15....................................... 8 0.17
91-120 B737-200, B737-500, DC9-30/50, MD87, F100....... 68 19.03
121-170 B727-200, B737-300/400, MD82/83, A320-200....... 72 45.62
171-240 B757-200, B767-200ER............................ 4 4.70
241-350 B767-300ER, DC10-30, MD11, A300................. 13 14.52
351 and above B747-200(1)..................................... 1 0.98
Freighter B737-200C, DC8-71F/73CF......................... 24 9.69
--- ------
218 100.00
=== ======
</TABLE>
- ---------------
(1) This Aircraft is currently undergoing conversion to freighter configuration.
Further particulars of the Portfolio as of January 23, 1998 are contained
in the table below.
AIRPLANES GROUP PORTFOLIO ANALYSIS
<TABLE>
<CAPTION>
APPRAISED
VALUE AT
DATE OF JANUARY 23,
AIRCRAFT ENGINE SERIAL MANUFACTURE/ 1998
REGION COUNTRY LESSEE TYPE CONFIGURATION NUMBER CONVERSION (US$000'S)
- ------------ --------------------- --------------------------- -------------- ---------------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Africa Tunisia Nouvelair Tunisie MD83 JT8D-219 49442 29-Apr-87 19,375
Tunisia Nouvelair Tunisie MD83 JT8D-219 49624 1-Aug-88 19,433
Tunisia Nouvelair Tunisie MD83 JT8D-219 49672 1-Jul-88 20,030
Asia & Far
East China China Southern B737-500 CFM56-3C1 24897 26-Feb-91 20,635
China China Southern B737-500 CFM56-3C1 25182 3-Feb-92 21,513
China China Southern B737-500 CFM56-3C1 25183 14-Feb-92 21,587
China China Southern B737-500 CFM56-3C1 25188 12-Mar-92 21,362
China China Southwest B757-200 RB211-635E4-37 26156 25-Nov-92 42,410
China Xiamen B737-200QC JT8D-17A 23066 9-Dec-83 8,382
India Jet Airways B737-400 CFM56-3C1 24345 1-Jun-89 24,412
India Jet Airways B737-400 CFM56-3C1 24687 25-May-90 26,572
India Jet Airways B737-500 CFM56-3C1 25191 10-Apr-92 21,267
Indonesia PT Mandala Airlines B737-200A JT8D-15 22396 1-Feb-81 6,727
Indonesia PT Mandala Airlines B737-200A JT8D-17A 23023 30-Mar-83 7,153
Indonesia Sempati F100 TAY650-15 11336 5-Jun-91 16,367
</TABLE>
66
<PAGE> 68
<TABLE>
<CAPTION>
APPRAISED
VALUE AT
DATE OF JANUARY 23,
AIRCRAFT ENGINE SERIAL MANUFACTURE/ 1998
REGION COUNTRY LESSEE TYPE CONFIGURATION NUMBER CONVERSION (US$000'S)
- ------------ --------------------- --------------------------- -------- -------- --------
-------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Indonesia Sempati F100 TAY650-15 11339 1-Jul-91 16,420
Indonesia Sempati F100 TAY650-15 11347 1-Oct-91 16,493
Indonesia Sempati(1) F100 TAY650-15 11266 17-Aug-90 11,889
Malaysia Air Asia B737-300 CFM56-3C1 24907 1-Mar-91 24,507
Pakistan Pakistan Int. Airline A300-B4-203 CF6-50C2 269 11-Aug-83 12,652
Philippines Philippine Airlines B737-300 CFM56-3B1 24770 1-Oct-90 22,962
South Korea Asiana Airlines B737-400 CFM56-3C1 24493 14-Jul-89 24,397
South Korea Asiana Airlines B737-400 CFM56-3C1 24520 21-Dec-89 24,802
Australia &
New Zealand Australia National Jet Systems DHC8-100 PW121 229 1-Sep-90 7,000
New Zealand Air Nelson METRO-III TPE331-11 705 1-Aug-88 1,483
New Zealand Air Nelson METRO-III TPE331-11 711 1-Mar-88 1,490
New Zealand Air Nelson METRO-III TPE331-11 712 1-Jun-88 1,467
Europe Austria Rheintalflug DHC8-300 PW123 307 1-Dec-91 8,977
France Air France A320-200 CFM56-5A3 203 1-Sep-91 29,520
France Air France A320-200 CFM56 220 1-Sep-91 29,757
Germany Estago Anlagen-Vermietungs MD83 JT8D-219 49620 1-Jul-88 19,772
Hungary Malev B737-200A JT8D-15 21735 1-Jun-79 5,922
Hungary Malev B737-200A JT8D-15 22090 1-May-80 6,455
Hungary Malev B737-200A JT8D-17A 22803 14-Feb-83 7,160
Hungary Malev B737-200A JT8D-17A 22804 1-Feb-83 7,120
Hungary Malev B737-200A JT8D-15 22979 1-Mar-83 6,940
Hungary Malev B737-400 CFM56-3C1 26069 2-Nov-92 28,337
Hungary Malev B737-400 CFM56-3C1 26071 13-Nov-92 28,298
Ireland Aer Lingus B737-400 CFM56-3C1 24689 3-Jul-90 26,202
Ireland Aer Lingus B737-400 CFM56-3C1 24690 1-Jul-90 26,655
Ireland Aer Lingus B737-400 CFM56-3C1 25180 21-Jan-92 27,480
Ireland Transaer International A300-B4-100 CF6-50C2 12 20-May-75 5,850
Ireland Transaer International A300-B4-100 CF6-50C2 20 1-Oct-75 6,150
Italy Air One SpA B737-300 CFM56-3C1 25179 12-Feb-92 26,107
Italy Air One SpA B737-300 CFM56-3C1 25187 14-Mar-92 25,767
Italy Eurofly MD83 JT8D-219 49390 1-Apr-86 19,250
Italy Eurofly MD83 JT8D-219 49631 14-Jun-89 20,765
Netherlands Schreiner Airways DHC8-300 PW123 232 20-Oct-90 8,163
Netherlands Schreiner Airways DHC8-300A PW123 276 13-May-91 8,853
Netherlands Schreiner Airways DHC8-300A PW123 283 1-Sep-91 8,963
Netherlands Schreiner Airways DHC8-300A PW123 298 1-Apr-92 9,202
Netherlands Schreiner Airways DHC8-300A PW123 300 1-Apr-92 9,275
Netherlands Transavia B737-300 CFM56-3C1 24905 1-Feb-91 24,723
Norway Wideroe's Flyveselskap a/s DHC8-300 PW123 293 1-Oct-91 9,077
Norway Wideroe's Flyveselskap a/s DHC8-300 PW123 342 1-Dec-92 10,435
Europe Spain Air Europa B737-300 CFM56-3B2 23749 1-May-87 20,337
Spain Air Europa B737-300 CFM56-3B2 23923 1-Apr-88 21,730
Spain Air Europa B737-400 CFM56-3C1 24906 24-Feb-91 26,300
Spain Air Europa B737-400 CFM56-3C1 24912 14-Jun-91 26,347
Spain IBERIA DC8-71F CFM56-2C1 45945 19-May-92 15,322
Spain Spanair MD83 JT8D-219 49626 22-Oct-88 19,378
Spain Spanair MD83 JT8D-219 49709 1-Dec-88 19,930
Spain Spanair MD83 JT8D-219 49938 1-Dec-90 22,325
Sweden Blue Scandinavia AB B757-200 RB2110-535E4-37 26151 23-Jul-92 42,303
Sweden SAS B767-300ER PW4060 25411 15-Jan-92 64,820
Switzerland Edelweiss Air AG MD83 JT8D-219 49935 26-Sep-90 22,175
Switzerland Edelweiss Air AG MD83 JT8D-219 49951 25-Aug-91 23,183
Turkey Istanbul B737-400 CFM56-3C1 24683 7-Aug-90 25,695
Turkey Istanbul B737-400 CFM56-3C1 24691 9-Aug-90 25,757
Turkey MNG Airlines A300-C4-203 CF6-50C2 83 1-May-79 16,145
Turkey Pegasus B737-400 CFM56-3C1 24684 1-Apr-90 25,677
Turkey Pegasus B737-400 CFM56-3C1 26081 10-Mar-93 29,003
Turkey Sun Express B737-400 CFM56-3C1 25190 7-Apr-92 27,992
Turkey Turk Hava Yollari B737-400 CFM56-3C1 24917 24-Jun-91 26,838
</TABLE>
67
<PAGE> 69
<TABLE>
<CAPTION>
APPRAISED
VALUE AT
DATE OF JANUARY 23,
AIRCRAFT ENGINE SERIAL MANUFACTURE/ 1998
REGION COUNTRY LESSEE TYPE CONFIGURATION NUMBER CONVERSION (US$000'S)
- ------------ --------------------- --------------------------- -------- -------- --------
-------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25181 3-Feb-92 27,658
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25184 2-Mar-92 27,748
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25261 9-Apr-92 27,807
Turkey Turk Hava Yollari B737-500 CFM56-3C1 25288 16-Jun-92 21,300
Turkey Turk Hava Yollari B737-500 CFM56-3C1 25289 12-Jun-92 21,297
Turkey Turk Hava Yollari B737-400 CFM56-3C1 26065 1-May-92 27,923
United Kingdom Airtours International A320-200 CFM56 294 2-Apr-92 31,642
United Kingdom Airtours International A320-200 CFM56 301 22-Apr-92 31,415
United Kingdom Airtours International A320-200 CFM56 348 17-Jun-92 31,157
United Kingdom Airtours International A320-200 CFM56-5A3 349 30-Oct-92 31,707
United Kingdom British Midland B737-500 CFM56-3C1 25185 18-Feb-92 21,207
United Kingdom Brymon Airways DHC8-300A PW123 296 1-Oct-91 9,283
United Kingdom Brymon Airways DHC8-300 PW123 334 8-Oct-92 9,920
United Kingdom Titan Airways ATR42-300 PW120 109 14-Oct-88 5,513
United Kingdom Titan Airways ATR42-300 PW120 113 18-Nov-88 5,537
Latin
America Antigua Liat DHC8-102 PW120-A 113 1-Sep-88 4,922
Antigua Liat DHC8-100 PW120-A 140 1-Mar-89 5,160
Antigua Liat DHC8-100 PW120-A 144 1-Mar-89 5,590
Antigua Liat DHC8-100 PW120-A 270 1-May-91 6,337
Argentina Aerolineas Argentinas B737-200A JT8D-17 21192 1-Mar-76 4,742
Argentina LAPA B737-200A JT8D-17 21193 1-Jul-76 4,628
Argentina LAPA B737-200A JT8D-17 21196 1-Jul-76 4,680
Argentina LAPA B737-200A JT8D-15 22278 19-Mar-80 6,048
Argentina LAPA B737-200A JT8D-15 22368 1-Sep-80 6,187
Argentina LAPA B737-200A JT8D-15 22369 1-Sep-80 6,468
Argentina LAPA B737-200A JT8D-15 22633 1-Mar-81 7,243
Argentina LAPA B737-200QC JT8D-17A 23065 15-Oct-96 8,263
Aruba Air Aruba MD83 JT8D-219 49950 1-Nov-91 23,552
Brazil Rio Sul B737-500 CFM56-3C1 25186 11-Mar-92 21,188
Brazil Rio Sul B737-500 CFM56-3C1 25192 14-Apr-92 21,158
Brazil Rio Sul B737-500 CFM56-3C1 26075 23-Oct-92 21,613
Brazil TAM F100 TAY650-15 11304 27-Feb-91 16,000
Brazil TAM F100 TAY650-15 11305 19-Apr-91 16,127
Brazil TAM F100 TAY650-15 11371 19-Dec-91 17,050
Brazil TAM (Meridionais) F100 TAY650-15 11284 31-Jul-90 15,683
Brazil TAM (Meridionais) F100 TAY650-15 11285 1-Aug-90 15,658
Brazil TAM (Meridionais) F100 TAY650-15 11348 6-Aug-91 16,553
Brazil Transbrasil B767-300ER PW4060 24948 19-Jul-91 62,190
Brazil Transbrasil B767-200ER PW4056 25421 14-Jan-92 52,783
Brazil VARIG MD11 CF6-80C2-D1F 48499 31-Dec-91 77,133
Latin
America Brazil VARIG MD11 CF6-80C2-D1F 48500 1-Mar-92 79,643
Brazil VARIG MD11 CF6-80C2-D1F 48501 1-Sep-92 80,740
Brazil VARIG(1) B737-300 CFM56-3B2 26852 20-Apr-92 17,846
Chile Fast Air DC8-71F CFM56-2C1 45810 9-Apr-92 15,865
Chile Fast Air DC8-71F CFM56-2C1 45970 15-Oct-92 15,532
Chile Fast Air DC8-71F CFM56-2C1 45976 10-Aug-91 16,482
Chile Fast Air DC8-71F CFM56-2C1 45996 29-Oct-92 15,983
Chile Fast Air DC8-71F CFM56-2C1 45997 7-Dec-93 15,388
Chile Lan Chile Airlines B737-200A JT8D-15 21960 1-Mar-80 6,007
Chile Lan Chile Airlines B737-200A JT8D-15 22397 1-Feb-81 6,418
Chile Lan Chile Airlines B737-200A JT8D-17A 22407 1-Sep-80 6,740
Chile Lan Chile Airlines B737-200A JT8D-15 22632 1-Feb-82 6,225
Chile Lan Chile Airlines B737-200A JT8D-17A 23024 1-May-83 6,707
Colombia ACES ATR42-320 PW121-5A1 284 1-Jan-92 6,943
Colombia Avianca B757-200 RB211-535E4-37 26154 22-Sep-92 41,807
Colombia Avianca MD83 JT8D-219 49939 26-Oct-90 22,422
Colombia Avianca MD83 JT8D-219 49946 18-Jul-91 23,077
Colombia Avianca MD83 JT8D-219 53120 29-Jul-92 23,957
Colombia Avianca MD83 JT8D-219 53125 2-Apr-92 24,037
</TABLE>
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<PAGE> 70
<TABLE>
<CAPTION>
APPRAISED
VALUE AT
DATE OF JANUARY 23,
AIRCRAFT ENGINE SERIAL MANUFACTURE/ 1998
REGION COUNTRY LESSEE TYPE CONFIGURATION NUMBER CONVERSION (US$000'S)
- ------------ --------------------- --------------------------- -------- -------- --------
-------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Colombia Tampa DC8-71F CFM56-2C1 45849 9-Mar-91 16,495
Colombia Tampa DC8-71F CFM56-2C1 46066 24-Apr-91 16,283
Mexico Aerocalifornia DC9-14 JT8D-7B 45736 1-Aug-66 983
Mexico Aerocalifornia DC9-14 JT8D-7B 45743 1-May-66 840
Mexico Aerocalifornia DC9-15 JT8D-7A 45785 1-Nov-66 892
Mexico Aerocalifornia DC9-15 JT8D-7B 45786 1-Mar-67 1,035
Mexico Aerocalifornia DC9-15 JT8D-7A 47059 1-May-67 887
Mexico Aerocalifornia DC9-15 JT8D-7A 47085 1-Jul-67 887
Mexico Aerocalifornia DC9-15 JT8D-7A 47122 1-Dec-67 853
Mexico Aerocalifornia DC9-15 JT8D-7A 47126 1-Oct-68 933
Mexico Aeromexico B767-300ER PW4060 26200 1-Sep-92 65,537
Mexico Aeromexico B767-300ER PW4060 26204 1-Oct-92 65,965
Mexico Aeromexico DC9-32 JT8D-17 48125 1-Apr-80 4,840
Mexico Aeromexico DC9-32 JT8D-17 48126 1-Apr-80 4,860
Mexico Aeromexico DC9-32 JT8D-17 48127 1-Jul-80 4,850
Mexico Aeromexico DC9-32 JT8D-17 48128 1-Aug-80 4,903
Mexico Aeromexico DC9-32 JT8D-17 48129 1-Nov-80 4,938
Mexico Aeromexico DC9-32 JT8D-17 48130 1-Dec-80 5,195
Mexico Aeromexico MD82 JT8D-217 49660 1-Mar-88 18,128
Mexico Aeromexico MD82 JT8D-217A 49667 21-Jan-88 18,065
Mexico Aeromexico MD87 JT8D-219 49673 1-Dec-88 15,048
Mexico Mexicana F100 TAY650-15 11309 16-May-91 16,007
Mexico Mexicana F100 TAY650-15 11319 5-Apr-91 15,962
Mexico Mexicana F100 TAY650-15 11374 20-Jan-92 16,920
Mexico Mexicana F100 TAY650-15 11375 1-Dec-92 16,977
Mexico Mexicana F100 TAY650-15 11382 1-Jan-93 16,970
Mexico Mexicana F100 TAY650-15 11384 1-Jan-93 17,030
Mexico Mexicana B727-200A JT8D-17R 21346 1-Oct-80 4,093
Mexico Mexicana B727-200A JT8D-17R 21600 1-Nov-80 4,062
Netherlands Antilles ALM DHC8-300C PW123 230 1-Feb-91 8,730
Netherlands Antilles ALM DHC8-300C PW123 242 1-Nov-90 8,633
Peru Aerosanta B737-200A JT8D-17 21206 26-Feb-76 4,940
Trinidad & Tobago BWIA International MD83 JT8D-219 49789 23-Sep-89 21,352
North
America Canada BOMBARDIER INC DHC8-300 PW123 244 1-Dec-90 8,075
Canada BOMBARDIER INC DHC8-300A PW123 266 20-Mar-91 8,717
Canada BOMBARDIER INC DHC8-300A PW123 267 4-Apr-91 8,772
Canada Canadian Airlines A320-200 CFM56-5A1 174 1-Apr-91 29,438
Canada Canadian Airlines A320-200 CFM56-5A1 175 1-Apr-91 29,422
Canada Canadian Airlines A320-200 CFM56-5A1 232 1-Oct-91 29,547
Canada Canadian Airlines A320-200 CFM56-5A1 284 9-Mar-92 30,552
North
America Canada Canadian Airlines A320-200 CFM56-5A1 309 13-May-92 30,457
Canada Canadian Airlines A320-200 CFM56-5A1 404 1-Jan-94 34,267
Canada Canadian Airlines(1) B737-200A JT8D-9A 20922 1-Aug-74 2,082
Canada Canadian Airlines(1) B737-200A JT8D-9A 20958 1-Jan-75 2,397
Canada Canadian Airlines(1) B737-200A JT8D-9A 20959 1-Nov-74 2,397
Canada Canadian Airlines(1) B737-200A JT8D-9A 21115 1-Dec-75 2,897
Canada Canadian Airlines(1) B737-200A JT8D-9A 21639 1-Nov-78 4,119
Canada Canadian Airlines(1) B737-200A JT8D-9A 21712 1-Feb-79 4,510
Canada Canadian Airlines(1) B737-200A JT8D-9A 22873 1-Jul-82 7,837
U.S.A. Emery Worldwide DC8-71F CFM56-2C1 45977 23-Nov-90 15,843
U.S.A. Emery Worldwide DC8-71F CFM56-2C1 45983 24-Jan-94 14,733
U.S.A. Emery Worldwide DC8-71F CFM56-2C1 46039 29-Oct-90 15,970
U.S.A. America West B737-300 CFM56-3B1 23499 1-Jun-86 20,983
U.S.A. America West B737-300 CFM56-3B1 23500 1-Jun-86 20,592
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45811 30-May-91 15,263
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45813 28-Apr-92 16,013
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45946 23-Apr-92 15,733
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45971 13-Feb-92 15,907
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45973 27-Feb-92 15,880
</TABLE>
69
<PAGE> 71
<TABLE>
<CAPTION>
APPRAISED
VALUE AT
DATE OF JANUARY 23,
AIRCRAFT ENGINE SERIAL MANUFACTURE/ 1998
REGION COUNTRY LESSEE TYPE CONFIGURATION NUMBER CONVERSION (US$000'S)
- ------------ --------------------- --------------------------- -------------- ---------------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45978 23-Apr-93 16,068
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45993 23-Jun-93 16,068
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45994 1-Sep-94 15,708
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 45998 21-May-93 15,273
U.S.A. Burlington Air Express DC8-71F CFM56-2C1 46065 12-Jan-92 16,107
U.S.A. Frontier B737-300 CFM56-3B1 23177 1-Apr-86 18,808
U.S.A. Hawaiian Airlines DC9-51 JT8D-17 47742 1-Jun-77 4,162
U.S.A. Hawaiian Airlines DC9-51 JT8D-17 47784 1-May-79 4,562
U.S.A. Hawaiian Airlines DC9-51 JT8D-17 47796 1-Apr-79 4,632
U.S.A. Hawaiian Airlines DC9-51 JT8D-17 48122 26-Jan-81 5,173
U.S.A. Idefix ATR42-300 PW120 249 1-Jun-91 6,997
U.S.A. Reno Air MD-83 JT8D-219 49941 1-Dec-90 22,170
U.S.A. Reno Air MD-83 JT8D-219 49949 5-Aug-91 23,100
U.S.A. SAT DC8-73CF CFM56-2C1 46091 1-Dec-89 19,723
U.S.A. Tower Air B747-200BC JT9D-7Q 21730 7-Jun-79 37,473
U.S.A. TWA MD83 JT8D-219 49575 1-Oct-87 19,363
U.S.A. US Air Express DHC8-100 PW121 258 1-Jan-91 6,700
Others Cyprus Fornax Aircraft Leasing B737-200A JT8D-17 21685 1-Jan-79 5,737
Lithuania Lithuanian Airlines B737-200A JT8D-15 22453 1-Mar-81 6,165
Ukraine Ukraine International B737-200A JT8D-17A 22802 1-Feb-83 7,373
Off Lease Off Lease A300-B4-100 CF6-50C2 9 26-Dec-74 5,200
Off Lease - Lease Transaer
(3) A300-B4-203 CF6-50C2 131 7-Feb-81 12,135
Off Lease - Lease LOI Air
Liberte S.A. (2) MD83 JT8D-219 49943 1-Jul-91 23,568
Off Lease - Lease LOI
Meridiana SpA (2) MD83 JT8D-219 49792 1-Nov-89 21,118
Off Lease - Lease LOI
Olympic (2) B737-400 CFM56-3C1 24911 1-Apr-91 26,843
Off Lease - Lease LOI
Spanair (2) MD83 JT8D-219 49936 6-Oct-90 22,012
---------
3,812,842
=========
</TABLE>
- ---------------
(1) Aircraft Lease Receivable Book Values are used for the Aircraft subject to
Finance Leases (9 in total) rather than the Appraised Values of these
Aircraft.
(2) "LEASE LOI" denotes Aircraft subject to non-binding Letter of Intent for
operating lease.
(3) This aircraft is subject to a lease contract and is scheduled for delivery
to the relevant lessee after January 23, 1998.
THE LEASES
GENERAL
All Leases are managed by the Servicer pursuant to the Servicing Agreement.
References in this Prospectus to "LESSOR" will mean the relevant subsidiary of
Airplanes Group which leases the Aircraft to the operator.
There is a reasonable degree of standardization in the Existing Lease
documentation although variations do exist as a result of Lessee negotiation.
Under substantially all of the Existing Leases, the Lessee is responsible for
all operating expenses, including routine maintenance, fuel, crews, airport and
navigation charges, taxes, licenses, registration and insurance, including
public liability insurance as described below.
Each Existing Lease requires the Lessee to make periodic Rental Payments
during the Lease term. The majority of Existing Leases have an original term in
excess of five years and certain Existing Leases include options for the Lessee
or the Lessor to extend the term of the Lease with Rental Payments either
similar to the rent payable during the original term or at future market rates.
Substantially all existing Lessees are required to make payments to the relevant
Lessor without set-off or counterclaim, and most Existing Leases include an
70
<PAGE> 72
obligation of the relevant Lessee to gross-up payments under such Lease where
payments are subject to withholding and other taxes.
Each Existing Lease specifies certain provisions regarding the rights and
remedies of the Lessor in the event of a default by the relevant Lessee in the
performance of its financial or other obligations under such Existing Lease.
These remedies include the right to terminate the Lease and/or to repossess the
Aircraft. Depending on the jurisdiction, the rights of the Lessor may be
significantly impaired if there is an event of default due to the relevant
Lessee's bankruptcy, as a result of, among other things, extended mandatory
waiting periods between default and repossession, or reductions in the amount
of, or delays in the receipt of, payments under the Lease. See "Risk Factors --
Risks of Lessee Default".
MAINTENANCE
The Existing Leases contain detailed provisions specifying maintenance
standards and the required conditions of Aircraft upon redelivery and these
conditions must generally be met at the Lessee's expense. During the term of
each Existing Lease, Airplanes Group requires the Lessee to maintain the
applicable Aircraft in accordance with a maintenance program approved by the
state of registration.
Certain of the Existing Leases require the Lessee to pay cash Maintenance
Reserves (approximately 56% of the Leases by Appraised Value) or to provide
maintenance letters of credit or guarantees (approximately 13% of the Leases by
Appraised Value) or a combination of both (approximately 3% of the Leases by
Appraised Value). With respect to other Existing Leases, there is a specific
redelivery condition whereby the Lessor relies on the credit of the Lessee and
the ability of the Lessee to comply with the maintenance requirements.
Substantially all Existing Leases provide for the Aircraft to be
redelivered in a specified condition upon expiration of the Existing Lease and
stipulate the payments to be made by the Lessee to the Lessor or, in certain
cases, by the Lessor to the Lessee to reflect the extent to which the actual
redelivery condition of the Aircraft falls below or exceeds the redelivery
condition specified in the Existing Lease.
Heavy maintenance on significant components of an aircraft, such as the
airframe and the engines, is generally required to be performed on a cycle of
several years and the cost of such maintenance may be material in relation to
the value of the Aircraft, with the overhaul of a single such component often
exceeding $1 million. Pursuant to the Existing Leases, if and when an Aircraft
is transferred from one Lessee to another between maintenance overhauls, the
transferring Lessee is generally required to pay for that portion of the
succeeding overhaul that can be attributed to its use of the Aircraft under its
Existing Lease.
INDEMNIFICATION AND INSURANCE
Under the terms of each Existing Lease, the Lessees are required to carry
the types of insurance which are customary in the air transportation industry,
including comprehensive liability insurance and aircraft hull insurance. The
Lessor (and generally, if different, the owner) is named as an additional
insured on hull and liability policies carried by the Lessees. The Lessees are
responsible for insurance for any liabilities arising out of the operation of
the Aircraft, including any liabilities for death or injury to persons and
damage to property that ordinarily would attach to the operator of the Aircraft,
subject to customary exclusions. The coverage is usually worldwide, subject to
limitations consistent with individual operators. Under the Servicing Agreement,
the Servicer is required to monitor the Lessee's performance of their respective
obligations with the insurance provisions of the applicable Existing Leases.
In certain jurisdictions, liabilities for risks for which the Lessees are
required to provide insurance may also attach to the Lessors and Airplanes Group
as direct and indirect owners of the Aircraft, irrespective of fault. Under the
Existing Leases, the Lessees are currently obliged to indemnify against such
claims certain named parties and, in most cases, their respective successors,
assigns, shareholders, employees, affiliates and agents. Under most Existing
Leases each Lessee is obliged to indemnify Airplanes Limited or Airplanes Trust,
as applicable, the Lessor, the relevant Aircraft Owning Company and the
Indenture Trustee as named indemnitees under the applicable Existing Lease.
Substantially all of the Existing Leases also require the
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<PAGE> 73
Lessee to maintain the liability insurance for a specified period between one
and three years after termination of such Existing Lease to cover liabilities
that may have arisen prior to terminations but that became known thereafter.
With respect to certain Existing Leases, the Lessor may arrange separate
political risk repossession insurance for its own benefit, covering (a)
confiscation, nationalization and requisition of title of the relevant Aircraft
by the government of the country of registry and denegation and deprivation of
legal title and rights, and (b) the failure of the authorities in that country
to allow de-registration and export of the Aircraft, subject to the conditions
of the policies.
THE LESSEES
As of January 23, 1998, there were 74 Lessees in 38 countries throughout
the world.
Despite the continued economic recovery in the air transport industry over
the last two years, a number of the Lessees remain in a relatively weak
financial position and there can be no assurance that the rate of Lessee
defaults will not increase in the future. As of December 31, 1997, amounts
outstanding for a period greater than 30 days in respect of Rental Payments,
Maintenance Reserves and other miscellaneous amounts due under the Leases (net
of amounts in respect of default interest and certain cash in transit) amounted
to $18.2 million (of which $7.6 million related to five previous lessees) in
respect of 24 Lessees who had a combined total of 87 Aircraft on lease as of
such date. Of the total $18.2 million, $2.4 million was in arrears for a period
greater than 30 days, $1.7 million was in arrears for a period greater than 60
days and $14.1 million was in arrears for a period greater than 90 days. Certain
of these Lessees, as well as certain other Lessees, have consistently been
significantly in arrears in their respective Rental Payments and/or are known to
be currently experiencing financial difficulties. At December 31, 1997 Airplanes
Group, through the efforts of GECAS, in its capacity as Servicer had entered
into restructuring agreements with three of the Lessees which account for $7.2
million of the above amount. Of these three Lessees, two Lessees account for
approximately $5.5 million of the outstanding obligation for periods greater
than 30 days and the third Lessee, which had returned the aircraft at December
31, 1997, accounts for $1.7 million which it has agreed to repay over an 11
month period. None of these three Lessees are currently complying with the terms
of their restructuring agreements. As of December 31, 1997, in addition to the
$18.2 million in respect of payments past due more than 30 days, six further
Lessees were being allowed deferrals of rent, maintenance and miscellaneous
payments totaling $16.1 million. Of the total $16.1 million, $0.4 million was in
arrears for greater than 30 days, $0.1 million was in arrears for greater than
60 days and $15.6 million was in arrears for greater than 90 days. Such Lessees
are being allowed deferrals of rentals, maintenance and miscellaneous payments
for periods of up to 70 months.
In the past, restructurings have typically involved delaying rental
payments for periods of up to 12 months. In certain circumstances, rescheduling
arrangements for periods between 12 months and 60 months have been agreed. In
addition, certain restructurings have involved voluntary terminations of Leases
prior to Lease expiration, the replacement of Aircraft with less expensive
aircraft and the arrangement of sub-leases from the Lessee to another aircraft
operator. In other cases, it has been necessary to repossess Aircraft from
Lessees which have defaulted and re-lease the Aircraft to other Lessees. The
premature termination of Leases may, in certain circumstances, lead Airplanes
Group to incur substantial swap breakage costs under its agreements with Swap
Providers. See "Management Discussion and Analysis of Financial Condition and
Results of Operations -- Interest Rate Management".
The most significant deferrals, rescheduled amounts and difficult accounts,
as of December 31, 1997, are referred to below.
Latin America
Lessees with respect to approximately 33.64% of the Aircraft by Appraised
Value operate in Latin America, principally Brazil, Mexico, Colombia and Chile.
The prospects for Lessee operations in these countries can be expected to be in
part dependent on the general level of political stability and economic activity
and policies in those countries. Although certain countries in Latin America
have experienced
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<PAGE> 74
substantial improvement in their economies in the past several years which has
resulted in increased political stability and overall increased economic growth,
there can be no assurance that such progress can be maintained or that further
progress will be made. Future developments in the political systems or economies
of these countries or the implementation of future governmental policies in
these countries may have a material effect on Lessee operations in those
countries.
Brazil
Recently, Brazil has experienced significant downturns in its financial
markets, with large decreases in financial asset prices and considerable
pressure for a devaluation of the Brazilian currency. The loss of confidence in
the Brazilian markets and currency has been associated with the economic crises
currently affecting "emerging markets" in Asia. See "-- Asia Pacific
Concentration" below. The Brazilian government has responded to these pressures
with a series of austerity measures including increased interest rates, public
spending cuts and tax increases. This has led to widespread expectations that
economic growth in Brazil will be significantly reduced through at least 1998
with the real possibility of a recession that would adversely affect the
operations of Airplanes Group's Brazilian customers.
At January 23, 1998, 15 Aircraft (or approximately 13.94% of Airplanes
Group's Portfolio by Appraised Value) were leased to four Brazilian Lessees. At
January 23, 1998, Airplanes Group had four Aircraft on lease to Varig (which
included three MD11s and one B737-300) representing 6.70% of the Portfolio by
Appraised Value. In 1994, GPA entered into a rescheduling agreement with Varig
to reschedule the repayment of $14 million in arrears over a 48 month period.
Airplanes Group assumed part of GPA's rights and obligations under such
agreement as part of the Acquisition. GPA signed this formal deferral agreement
in January 1995, under which all deferred obligations are due to be repaid by
April 1999. At December 31, 1997, the amounts outstanding for a period greater
than 90 days in respect of Varig's deferred obligations to Airplanes Group were
approximately $0.8 million. Also at December 31, 1997, there were amounts
outstanding of $0.5 million for a period greater than 30 days in respect of the
other three Brazilian Lessees (of which $0.3 million was outstanding for a
period greater than 60 days and $0.2 million was outstanding for a period
greater than 90 days). As at December 31, 1997, Airplanes Group had six Fokker
100 Aircraft on lease to a Brazilian lessee, with an average remaining lease
term of 29 months. During the month ended October 31, 1997 all six leases were
restructured. In consideration for an extension of the leases for 119 months,
the revised terms of the leases include rental rates reduced by approximately
24%, no maintenance reserve payments and the return of all previously paid
maintenance reserves by Airplanes Group within 12 months.
Mexico
Mexico continues to be a significant market for aircraft, and at January
23, 1998, 27 Aircraft representing approximately 8.59% of the Portfolio by
Appraised Value, were being operated by three Mexican aircraft operators. In
December 1996, a restructuring was completed with one Mexican lessee,
Aerocalifornia, which operates eight Aircraft representing approximately 0.19%
of the Portfolio by Appraised Value. These Aircraft are subject to operating
leases with options to purchase the Aircraft on lease expiry. Under the
restructuring agreement, all repayments were to be made over the six month
period ending June 30, 1997, after which title to the Aircraft would transfer to
the Lessee under the terms of the finance leases. The Lessee failed to comply
with its obligations under this agreement. A revised agreement was entered into
during January 1998 under which the Lessee agreed to repay the outstanding
balance by April 1998 (of which $1 million was paid on January 30, 1998). At
December 31, 1997, amounts outstanding for a period greater than 30 days in
respect of this Lessee were $1.6 million (all of which was outstanding for a
period greater than 90 days). In January 1996, a formal deferral arrangement was
signed with Mexicana, another Mexican Lessee which operates eight Aircraft
representing approximately 2.83% of the Portfolio by Appraised Value. Mexicana
has agreed to repay its obligations over the four year period ending December
31, 1999. At December 31, 1997, the amounts outstanding for a period greater
than 30 days in respect of Mexicana's deferred balance were $8.1 million (all of
which was outstanding for a period greater than 90 days). The third Mexican
Lessee has performed satisfactorily in the year ended December 31, 1997 and had
no amounts outstanding for a period greater than 30 days.
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<PAGE> 75
North America
North America is an important market for Airplanes Group's Aircraft with
approximately 17.17% of the Portfolio by Appraised Value being operated in this
region. At January 23, 1998, Airplanes Group had 27 Aircraft (or approximately
10.99% of the Portfolio by Appraised Value) on lease to 10 U.S.-based aircraft
operators and 16 Aircraft (or approximately 6.18% of the Portfolio by Appraised
Value) on lease to two Canadian aircraft operators. Airline industry
profitability in North America has enjoyed a sustained improvement since 1993
due to a combination of traffic growth in line with the overall expansion of the
economy in that region and relatively small growth in aircraft seat capacity,
leading to a significant increase in load factors. In 1996 and early 1997 a
number of significant new aircraft orders were announced by North American
airlines. However, even in the prevailing robust industry environment some
airlines are reporting losses or very low profits due to either unsuccessful
competitive initiatives in respect of fares and/or capacity, or uncompetitive
cost structures. In the next few years airline profit margins are likely to come
under pressure due to a combination of labor cost increases and increased
aircraft ownership costs as new aircraft are delivered and a large number of
Stage 2 aircraft are hush-kitted. In the early 1990s, several North American
airlines who are currently Lessees of Airplanes Group entered into plans of
reorganization or sought the protection of bankruptcy, insolvency or other
similar proceedings. There can be no assurance that such events will not
re-occur in respect of these or other North American Lessees of Airplanes Group
and adversely affect the ability of such Lessees to make timely and full Rental
Payments under their respective Existing Leases.
In December, 1996, Canadian Airlines, Airplanes Group's third largest
Lessee at December 31, 1997 by Appraised Value, approached its creditors
including Airplanes Group with proposals to reschedule its obligations. Canadian
Airlines indicated that this approach was part of a general plan designed to
address its financial difficulties. Airplanes Group has 13 aircraft on lease to
Canadian Airlines, consisting of six A320s on operating leases and seven
737-200A Aircraft on finance leases. After a series of negotiations between
GECAS, as Servicer to Airplanes Group, and Canadian Airlines, agreement in
principle was reached on a rescheduling plan which granted Canadian Airlines a
deferral of operating lease rentals for a three month period from December 1996
to February 1997 and a deferral of finance lease principal payments in respect
of six of the seven Aircraft on finance leases, for the six month period from
December 1996 to May 1997. The deferred payments are to be repaid with interest
over a two and a half year period commencing October 1998. The agreement in
principle resulted in a loss of cashflow to Airplanes Group of approximately
$6.4 million over the six months to May 1997.
Airplanes Group has its only B747 (approximately 1% of the Portfolio by
Appraised Value) on lease to Tower Air. In June 1997, Airplanes Group and Tower
Air entered into a rental deferral agreement which provides for the outstanding
balance to be repaid over a six month period from July 15, 1997 to January 15,
1998. The deferred rentals have been repaid in full. In addition, during
September 1997 in consideration for Tower Air extending the lease term to 180
months with revised rental rates, Airplanes Group agreed to a cargo conversion
of the aircraft at a cost of approximately $10 million (of which $7 million has
already been paid). The cargo conversion is expected to be completed by February
1998.
Asia
As of January 23, 1998, 20 Aircraft representing approximately 10.29% of
the Portfolio by Appraised Value were on lease to 10 aircraft operators in this
region. Trading conditions in the civil aviation industry in Asia have been
adversely affected by the severe economic and financial difficulties experienced
recently in the region. The economies of Indonesia, Thailand, Korea and Malaysia
have experienced particularly acute difficulties resulting in many business
failures, significant depreciation of local currencies against the dollar (the
currency in which Lease payments are payable), sovereign and corporate credit
ratings downgrades and internationally organized financial stability measures.
Several airlines in the region have recently announced their intention to
reschedule their aircraft purchase obligations, reduce headcount and eliminate
certain routes. Since 1990, the market in this region for aircraft on operating
lease has demonstrated significant growth rates and the recessionary conditions
that are now expected to prevail in large parts of the region for a significant
period of time will have an adverse impact on global aircraft demand.
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At January 23, 1998, six Aircraft (or approximately 1.97% of the Portfolio
by Appraised Value) were on lease to two aircraft operators in Indonesia. One
Indonesian Lessee was already experiencing financial difficulties prior to the
current regional economic difficulties. This Lessee is currently more than $1
million in arrears in its payment obligations which had been restructured as
recently as December 1996. This Lessee leases four Fokker 100 Aircraft
(representing approximately 1.60% of the Portfolio by Appraised Value) from
Airplanes Group, which have recently experienced significant reductions in
realizable rental rates with other Lessees. To the extent Fokker 100 Aircraft
are redelivered from this Indonesian Lessee, it may prove difficult to place
such aircraft types without a material reduction in rental rates. Also, if the
Aircraft were redelivered from this Lessee, the technical costs required to
ensure the Aircraft are in suitable condition for releasing could be
significant. Airplanes Group's other Indonesian Lessee has also fallen into
arrears with its payment obligations and has requested a partial deferral of its
rental.
Europe (excluding CIS)
As of January 23, 1998, 62 Aircraft representing approximately 33.64% of
the Portfolio by Appraised Value were on lease to twenty-six aircraft operators
in this region. The commercial aviation industry in European countries, as in
the rest of the world generally, is highly sensitive to general economic
conditions. Because a substantial portion of airline travel (business and
especially leisure) is discretionary, the industry has tended to suffer severe
financial difficulties during economic downturns. Accordingly, the financial
prospects for European Lessees can be expected to depend largely on the level of
economic activity in Europe generally and in the specific countries in which
such Lessees operate. A recession or other worsening of economic conditions in
one or more of these countries may have a material adverse effect on the ability
of European Lessees to meet their financial and other obligations under the
Leases. In addition, commercial airlines in Europe face, and can be expected to
continue to face, increased competitive pressures, in part as a result of the
continuing deregulation of the airline industry by the EU. There can be no
assurance that competitive pressures resulting from such deregulation will not
have a material adverse impact on the operations of such Lessees.
Additional Considerations
In addition, certain Lessees have experienced periodic difficulties in
meeting their maintenance obligations under the related Leases. Such
difficulties have arisen from, inter alia, the failure of the applicable Lessee
to have in place a sufficiently well established maintenance program, adverse
climate and other environmental conditions in the locations where such related
Aircraft are operated or financial and labor difficulties experienced by the
relevant Lessee. A continuous failure by a Lessee to meet its maintenance
obligations under the relevant Lease: (a) could result in a grounding of the
Aircraft; (b) in the event of a re-lease of such Aircraft would likely cause
Airplanes Group to incur costs, which may be substantial, in restoring such
Aircraft to an acceptable maintenance condition; and (c) would be likely
adversely to affect the value of the Aircraft.
DOWNTIME
At January 23, 1998, six Aircraft were off-lease. Of these Aircraft, one is
the subject of a lease contract, four are the subject of non-binding letters of
intent to lease and one will be sold for scrap after March 31, 1998.
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THE COMMERCIAL AIRCRAFT INDUSTRY
Commercial aviation is an important segment of the travel and tourism
industry.
The level of worldwide demand for air travel has been cyclical, and is
influenced by a number of factors, including global and regional political
stability, general economic, business and credit conditions, the impact of the
price and availability of jet fuel on airline costs and technological
developments in the field of transport and communications such as high-speed
rail travel and video-conferencing which provide partial substitutes for some
air travel.
Demand for air travel as measured by the number of fare paying passengers
carried multiplied by the distance flown in miles (revenue passenger miles, or
"RPMS") has increased since 1970 in every year but one, 1991, in which there was
a decline of 2.8% principally due to a worldwide economic slowdown exacerbated
by the Gulf War. This decline in demand together with a sharp increase in
surplus industry capacity led to widespread financial losses in the airline
industry. The average annual increase in RPMs from 1970 to 1995, taking into
account the decline in 1991, was approximately 7.0%. Historical growth in RPMs
has shown a correlation with growth in world GDP and the decrease in the cost of
air travel on an inflation-adjusted basis.
Demand has varied in different regions of the world. In the period since
1990 the highest rates of annual increase in RPMs have been on certain routes in
the Asia-Pacific region, although these growth rates are expected to suffer as a
result of the economic crises that have recently affected several Asian
economies. The lowest rates of annual increase in RPMs have been on domestic
routes within Europe and the United States.
Worldwide traffic grew by approximately 7.0% both in 1995 and 1996. There
can be no assurance that the worldwide demand for air travel will continue to
increase or that such worldwide demand will not decline.
WORLD TRAFFIC GROWTH
(EXCLUDING DOMESTIC CIS RPMS)
<TABLE>
<CAPTION>
ANNUAL GROWTH
WORLD TRAFFIC WORLD TRAFFIC
YEAR IN RPMS IN RPMS
- --------------------------------------------------------------- ------------- ----------------
(BILLIONS) %
<S> <C> <C>
1985........................................................... 870.1
1990........................................................... 1,212.7 6.9
1994........................................................... 1,457.2 4.7
1995........................................................... 1,558.6 7.0
1996........................................................... 1,668.0 7.0
</TABLE>
There can be no assurance that future rates of growth in the commercial
aviation industry will be consistent with recent annual rates of growth or, even
if achieved on average, that there will not be cyclical variations in certain
years. Furthermore, there can be no assurance that growth in RPMs will lead to
increases in the profitability of airline operations or demand for aircraft.
DEMAND FOR AIRCRAFT
Over time, an increase in RPMs will create a need for new aircraft capacity
to service the incremental demand for air travel over and above the existing
capacity provided by airlines. Growth in RPMs has been the principal long-term
factor affecting demand for aircraft. Another factor contributing to the demand
for aircraft is the need to replace aircraft that are retired at the end of
their useful economic lives or are written off for other reasons, including
casualties.
In addition to those factors which affect the demand for air travel, the
overall level of demand for commercial aircraft depends on a number of factors,
including changes in aircraft productivity; the supply of new and used or
replacement aircraft, which is affected by manufacturer production levels and
may be affected by bankruptcies of significant owners or operators of aircraft;
the ability of air transport infrastructure
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<PAGE> 78
to accommodate commercial air traffic levels; the cost and availability of jet
fuel; and governmental regulations and restrictions affecting the costs and
benefits of owning and operating aircraft.
The types of aircraft, jet or turboprop, required by an operator are
dictated principally by its existing and anticipated structure of routes and
traffic volume. An operator's specific choice of aircraft will also depend on a
number of additional factors, including the size and composition of its current
fleet, its ability to operate and maintain particular aircraft types based on
the training of its personnel and the capacity of its ground facilities, seating
capacity of the aircraft and operating costs. Approximately 70% of commercial
jet aircraft manufactured outside the Commonwealth of Independent States ("CIS")
are narrowbody aircraft with the balance being widebody aircraft. Increased
airport congestion and limitations on air traffic control systems may lead to a
relative increase in the number of widebody aircraft in the worldwide commercial
jet fleet. As of August 14, 1997, of the 9,204 narrowbody aircraft in operation,
approximately 20% were more than 25 years old while only approximately 2.9% of
the 3,574 widebody aircraft in service on that date were more than 25 years old.
It is difficult to predict whether any such increase in the number of widebody
aircraft will have a material effect on the relative demand for either type of
aircraft, as the demand for replacements for older narrowbody aircraft may equal
or exceed the demand for widebody aircraft. Within the widebody sector, the
availability of newer long-haul aircraft is likely to result in a continued weak
market for earlier models such as the A300-B4, A310, B747-100, B747-200 and
DC10. The newer models have lower operating costs and allow airlines to develop
new long-haul routes more efficiently as well as to increase service frequency
on established routes.
NEW AIRCRAFT SUPPLY
There are currently two major manufacturers of commercial jet aircraft
outside of the CIS (Boeing and Airbus Industrie G.I.E.) and three smaller
manufacturers (British Aerospace plc, Bombardier and Embraer) which produce
regional aircraft. The manufacturers of commercial jet aircraft in the CIS are
currently not a material factor in supplying the requirements of operators
outside the CIS and the former Eastern Bloc countries. There are three principal
manufacturers which, together with their affiliates, produce substantially all
commercial jet engines: General Electric Company, through the GE Aircraft
Engines Division; United Technologies International, Inc., through Pratt &
Whitney; and Rolls Royce. There are relatively more manufacturers of turboprop
aircraft and engines than jet aircraft and engines.
There has been a long-term trend toward consolidation of the commercial
aircraft manufacturing industry, evidenced by the merger between Boeing and
McDonnell Douglas, the creation of the Airbus Industrie consortium by four
European manufacturers (Aerospatiale, British Aerospace, Daimler-Benz and CASA)
and the exit of former participants such as Lockheed and Convair. The long lead
time, high capital cost and technological sophistication required to bring a new
aircraft model to the market create significant barriers to entry into the
industry, particularly for narrowbody and widebody jet aircraft.
Although most new aircraft are ordered under long-term, multi-aircraft
contracts, the volume of aircraft production has varied significantly over the
years, reflecting the changing state of the commercial aviation industry and the
economy in general. Manufacturers generally adjust production levels in response
to their customers' desires and financial capacity to take delivery of ordered
aircraft which in turn may be affected by the level of air traffic and the
availability of competitive used aircraft. Boeing and Airbus have both announced
and partially implemented increased production levels from the cyclical low
reached in 1995, with the result that new jet aircraft production levels are
likely to double by 1999 to over 900 aircraft. This level of production is above
the long-term requirement implied by industry forecasts, including those
published by Boeing and Airbus. The increase in production has been accompanied
by very aggressive pricing strategies in an effort by these companies to
maximise their market share. A continuation of current new aircraft production
and pricing trends is likely to have an adverse impact on Airplanes Group's
ability to generate cash flows in line with the Assumptions.
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<PAGE> 79
USED AIRCRAFT SUPPLY
The supply of used aircraft depends on the level of utilization of the
existing worldwide fleet and the net change in this fleet based on
manufacturers' production levels and aircraft retirements. Cyclical factors that
affect air travel demand also may affect the supply of used aircraft. According
to the Airclaims Limited CASE database, as of August 14, 1997 there were
approximately 692 commercial jet aircraft in storage of which approximately 52%
(359 aircraft) were Stage 2 aircraft and approximately 48% (333 aircraft) Stage
3 aircraft. The median ages of such aircraft in storage were approximately 26
and 18 years, respectively. According to third party industry sources, there was
a total of 392 commercial jet aircraft available for sale or lease, of which 179
were Stage 2 aircraft and 213 were Stage 3 aircraft. Approximately 32% of such
Stage 3 aircraft were narrowbodies and 68% widebodies. There are a number of
aircraft in storage that are not available for sale or lease; conversely, a
number of aircraft available for sale or lease are in service rather than in
storage. In general older aircraft are significantly more likely to be stored
than younger aircraft.
The weak growth of air travel in the 1990-1994 period combined with high
levels of new deliveries from manufacturers in the early 1990s resulted in low
levels of profitability or significant losses for many airlines and leasing
companies, a significant increase in the supply of used aircraft and decrease in
their value, especially for Stage 2 aircraft and older Stage 3 widebody
aircraft. There can be no assurance that such oversupply will diminish or that
any future downturn in the commercial aviation industry or the worldwide demand
for aircraft will not result in increased availability of used aircraft for
lease or sale in the future, particularly at the times Aircraft are being
marketed for lease by Airplanes Group.
OPERATING LEASING
Until the mid-1970s, almost all commercial aircraft were either owned by
their airline operators or leased under finance leases from financial
institutions, except for short-term leases of surplus aircraft from one airline
to another. Beginning in the mid-1970s, in contrast, leasing companies were
willing to purchase aircraft and undertake the risk of finding a buyer or lessee
for such aircraft.
Leasing companies acquire aircraft for lease through purchases of used
aircraft, often through sale-leaseback arrangements with the operators of such
aircraft. Also, in the mid-1980s a number of leasing companies started to
acquire new aircraft directly from manufacturers, with or without lease
commitments for such aircraft. Leasing companies and other financial
institutions have become significant purchasers of new aircraft and their jet
aircraft orders and options constituted approximately 18% of outstanding jet
orders as of August 14, 1997.
The number of airlines taking aircraft on operating and finance leases has
increased from 139 out of a worldwide total of 305 in 1980 (approximately 46% of
total airlines) to 463 out of a worldwide total of 672 in 1997 (approximately
69% of total airlines).
Many operating lessees are airlines that cannot independently finance the
purchase of aircraft, that desire greater flexibility in fleet planning or that
choose to take advantage of demand from leasing companies to acquire assets
through equipment sale-leaseback transactions.
ROLE OF GOVERNMENT
National governments play a major role in the regulation of air
transportation through the establishment of standards of aircraft certification,
airworthiness and operation, the regulation of airspace and the provision of
services, including navigational aids, air traffic control and search and
rescue. There is a general worldwide uniformity of standards because all nations
with any significant civil aviation industry are members of the International
Civil Aviation Organization (a United Nations agency) and apply the technical
standards developed by this agency as the basis of national aviation
regulations. In many countries, the national government regulates both domestic
routes and the pricing of air travel, although since the late 1980s there has
been a trend in certain jurisdictions, such as the European Union, Australia,
Mexico and Brazil, toward limited deregulation and the progressive opening up of
routes to competition, which could lead to developments similar to those which
have occurred in the United States since the enactment of the Airline
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<PAGE> 80
Deregulation Act of 1978. In particular, the European Union introduced a package
of liberalization measures in 1993 affecting the licensing of air carriers,
access to air routes within the European Union and fares and rates for air
transportation services.
National governments have also influenced the financial condition of the
commercial aviation industry in other ways. These include the ownership or
support of national and local airlines, often with direct subsidies although
there is currently a worldwide trend toward the complete or partial
privatization of many government-owned airlines. However, there have been recent
initiatives within the European Union intended to make more stringent the
conditions subject to which state aid may be given to airlines. Most governments
limit the extent to which foreign interests may own domestic airlines (although
this is no longer the case within the European Union with respect to the
nationals of other member states). Certain national governments also have
provided financial support of local commercial passenger jet manufacturing
industries. Indirect financial support is also provided to aircraft and engine
manufacturers through the issuance of credits and guarantees from national
export credit agencies.
There can be no assurance, however, that the recent trends toward
deregulation of routes and pricing of air travel and toward complete or partial
privatization of government-owned airlines will continue or will occur in the
manner announced by the relevant governments. Although such trends may result
initially in an increase in the number of airlines worldwide, they also may
result ultimately in a greater concentration of larger airlines due to the
failure of smaller, more thinly capitalized airlines. In any event, deregulation
and privatization may at times adversely affect the future market for aircraft,
including the Aircraft.
TECHNICAL REGULATION
In addition to general requirements regarding maintenance of aircraft,
aviation authorities from time to time issue ADs requiring the operators of
aircraft to take particular maintenance actions or make particular modifications
with respect to a number of aircraft of one or more designated types. ADs
normally specify a period of time in which to carry out the required action or
modification and generally enough time is allowed to permit the implementation
of the AD in connection with scheduled maintenance of the aircraft or engines.
The Initial Leases typically require the Lessees to bear the cost of compliance
with ADs issued by applicable aviation authorities and, in most cases, relevant
manufacturers' recommendations. In some cases, Airplanes Group may be required
to contribute a portion of such costs over a specified threshold. However, to
the extent that a Lessee fails to perform ADs required on an Aircraft, Airplanes
Group would bear the cost of compliance necessary for the Aircraft to maintain
its Certificate of Airworthiness. In such circumstances, funds in the Collection
Account and Lessee Funded Account will be available to Airplanes Group to
mitigate the costs of compliance, although such use would reduce the
availability of such amounts to cover the cost of scheduled maintenance. There
can be no assurance that such funds will be available at the time needed or that
any funds available will be sufficient for such purposes.
In addition to the foregoing requirements relating to airworthiness, other
governmental regulations may apply to the Aircraft, including requirements
relating to noise and emissions levels. Such regulations may be imposed not only
by the jurisdictions in which the Aircraft are registered, possibly in
connection with airworthiness requirements, but also in jurisdictions where the
Aircraft operate. Chapters 2 and 3 of Chicago Convention establish two
progressively restrictive noise level standards that correspond to the
requirements for Stage 2 and Stage 3 aircraft. A number of jurisdictions have
adopted, or are in the process of adopting, noise regulations which ultimately
will require all aircraft to comply with the most restrictive of these
standards. Such regulations restrict the future operation of aircraft that are
not Stage 3 aircraft and ultimately will prohibit the operation of such aircraft
in the relevant jurisdictions early in the next century (1999, in the case of
the United States). Since 6.56% of the Aircraft by Appraised Value were not
Stage 3 aircraft as of January 23, 1998, these regulations may affect Airplanes
Group adversely. In addition, local municipalities may have more stringent noise
regulations than those applicable to Stage 3 aircraft.
Volume 2 of Annex 16 of the Chicago Convention also contains standards and
recommendations regarding limitations on vented fuel and smoke and gaseous
emissions for aircraft. While a number of countries have adopted regulations
implementing these recommendations, such regulations generally have
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<PAGE> 81
been prospective in nature, requiring only that newly manufactured engines meet
particular standards after a particular date. To the extent that any such
regulations require modifications to the Engines owned by Airplanes Group, they
would receive the same treatment under the Leases as do ADs.
There can be no assurance, however, that new noise or emissions reduction
requirements will not be adopted in the future that would adversely affect the
value of some or all Stage 3 aircraft. Some organizations and jurisdictions have
already begun to discuss the tightening of noise and emissions certification
requirements for newly manufactured aircraft. There can be no assurance that any
such regulations, if adopted, would not adversely affect the value of the
Aircraft.
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MANAGEMENT OF AIRPLANES GROUP
The following description of the management of Airplanes Group is subject
to and is qualified in its entirety by reference to the Servicing Agreement, the
Administrative Agency Agreement, the Cash Management Agreement, Airplanes
Limited's Articles of Association, the Airplanes Trust Agreement and the
Secretarial Services Agreement, forms of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
Except to the limited extent described herein, particularly upon a Note
Event of Default, neither the Trustee nor any of the Certificateholders has any
right to participate in the management or affairs of Airplanes Group. In
particular, such parties cannot supervise the functions relating to the Leases
and the release of the Aircraft, which functions have generally been delegated
to the Servicer under the Servicing Agreement. See "Risk Factors -- Risks
Relating to Airplanes Group and Certain Third Parties -- Inability of
Certificateholders or Trustee to Participate in Management", "Description of
Securities -- The Notes and the Guarantees -- Trust Indenture Covenants" and "--
Note Events of Default and Remedies".
DIRECTORS AND CONTROLLING TRUSTEES
The Board is currently composed of five members. The holder or holders of a
majority in aggregate principal amount of the Class E Notes issued by Airplanes
Limited (currently GPA) have the right to appoint one Director of Airplanes
Limited while the Class E Notes are outstanding. The remaining Directors must be
Independent Directors subject to GE Capital's right to appoint new Directors as
set forth below. Independent Directors are appointed by a majority of the then
standing Directors. Edward Hansom has been appointed a Director by GPA as
majority holder of the Class E Notes. If no Independent Directors are serving on
the Board at any time, four new Independent Directors will be appointed in
accordance with Airplanes Limited's Articles of Association. Certain significant
transactions or proceedings of Airplanes Limited may only be approved by a
unanimous vote of all Directors. These transactions and proceedings principally
relate to certain insolvency proceedings, amendments to Airplanes Limited's
Memorandum or Articles of Association, mergers or, subject to certain
exceptions, the sale of all or substantially all of Airplanes Limited's assets.
Four Independent Trustees have been appointed who are the same individuals
as the Independent Directors of Airplanes Limited. Independent Trustees are
appointed by a majority of the then standing Controlling Trustees. The holders
of a majority in aggregate principal amount of the Class E Notes issued by
Airplanes Trust (currently GPA) have the right to appoint one of the Controlling
Trustees of Airplanes Trust, and Mr. Hansom has been appointed a Controlling
Trustee by GPA, as majority holder of the Class E Notes. The five trustees other
than the Delaware Trustee are the Controlling Trustees with the right to manage
Airplanes Trust. Approval of certain significant transactions or proceedings
with respect to Airplanes Trust or AeroUSA may only be obtained by a unanimous
vote of all Controlling Trustees. These transactions and proceedings principally
relate to certain insolvency proceedings, amendments to Airplanes Trust's or
AeroUSA's constituent documents, mergers or, subject to certain exceptions, sale
of all or substantially all of Airplanes Trust's or AeroUSA's assets.
The Directors and the Controlling Trustees, their respective ages and
principal activities are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICES HELD WITH THE REGISTRATION
- -------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Roy M. Dantzic........................ 53 Director, Airplanes Limited
Controlling Trustee, Airplanes Trust
William A. Franke..................... 60 Director and Chairman, Airplanes Limited
Controlling Trustee and Chairman, Airplanes Trust
Hugh R. Jenkins....................... 64 Director, Airplanes Limited
Controlling Trustee, Airplanes Trust
William M. McCann..................... 53 Director, Airplanes Limited
Controlling Trustee, Airplanes Trust
Edward J. Hansom...................... 39 Director, Airplanes Limited
Controlling Trustee, Airplanes Trust
</TABLE>
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<PAGE> 83
Roy Dantzic started his career with Coopers & Lybrand qualifying as a
chartered accountant in 1968. He moved into the City of London in 1970 and spent
the next 10 years in corporate advisory work, principally as a director of
Samuel Montagu. In 1980, the British Government appointed Mr. Dantzic as Finance
Director of British National Oil Corporation and he served in such capacity
until 1984. Between 1985 and 1989 he was a director of the corporate broking
division of Wood McKenzie. In 1989 he joined the board of Stanhope Properties
and served as its Finance Director from 1992 until the company was acquired in
1995. In August 1995, Mr. Dantzic became a director of the corporate broking
division of Merrill Lynch International Ltd. He has served as non-executive
director on the boards of Central Electricity Generating Board, British Nuclear
Fuels Limited, Saxon Oil Limited and Total Oil Holdings Ltd. Mr. Dantzic is
currently managing director of the property division of BG plc.
William Franke is Chairman and Chief Executive Officer of America West
Holdings Corporation since February 1997 and since 1992, Chairman of the Board
of its principal subsidiary, America West Airlines, Inc., an airline and was the
subsidiary's Chief Executive Officer from December 1993 until February 1997. Mr.
Franke was formerly chairman, president and chief executive officer of Southwest
Forest Industries, Inc., a Fortune 500 integrated forest products company based
in Phoenix. He was Chairman of the executive committee at Valley National Bank
(now Bank One, Arizona, N.A.) during its management restructuring and served as
Chairman of the Executive Committee, acting Chief Executive Officer and Chairman
of the special committee of directors of The Circle K Corporation during its
financial restructuring. Mr. Franke is owner and president of Franke & Company,
Inc., a financial advisory firm. He is currently a director of Central
Newspapers, Inc., publisher of the Phoenix and Indianapolis morning and evening
newspapers, of Phelps Dodge Corporation, a major mining and manufacturing
company and Beringer Wine Estates. He is also a director of the Air Transport
Association (ATA).
Hugh Jenkins has spent over 20 years in senior investment management
positions. Most recently with the Prudential Corporation Plc, a large life
insurance company where from 1989 to December 1995 he was an Executive Director
and Chairman/Chief Executive of its investment management subsidiary with
overall responsibility for the Group's investments worldwide. His previous
appointments included: 1986-1989 Group Investment Director of Allied Dunbar
Insurance Plc; 1985-1986 Director of Heron International, N.V. and from
1973-1985 as Director-General of Investments for the pension plans of the
National Coal Board. He is currently Chairman, Thorn Plc and a non-executive
Director of The Rank Organisation Plc, EMI Plc, Johnson Matthey Plc and Gartmore
European Investment Trust Plc.
William McCann, a chartered accountant, became a partner in Craig
Gardner/Price Waterhouse in 1972. From 1987 to 1995, he was the managing partner
of Craig Gardner/Price Waterhouse in the Republic of Ireland. From 1991 to 1995
he was a member of the Price Waterhouse World Board. Mr. McCann currently is
Chairman of the Electricity Supply Board, Ireland, Deputy Chairperson of the
Irish Takeover Panel and a Director of the Central Bank of Ireland. He is also a
director of Canada Life Assurance (Ireland) Limited, Murray Global Accumulation
Funds plc and is a director of a number of other companies. He is a Board Member
of the University College Dublin Graduate School of Business.
On March 28, 1996, Edward Hansom was appointed a Director of Airplanes
Limited and a Controlling Trustee of Airplanes Trust by GPA Group as majority
holder of the Class E Notes. Mr. Hansom is Chief Financial Officer of GPA Group.
He joined GPA Group in 1988 from the treasury division of Schroders. Prior to
taking up his current position in May 1997, Mr. Hansom was General Manager,
Treasury of GPA Group. Mr. Hansom is also a director of ALPS 94-1.
The Board of Directors and the Controlling Trustees of Airplanes Limited
and Airplanes Trust, respectively, are non-executive Directors and Controlling
Trustees, as the case may be. Further, as is common with many other special
purpose companies, neither Airplanes Limited nor Airplanes Trust has, or will
have, any employees or executive officers. Accordingly, the Board of Directors
and the Controlling Trustees each rely and will rely upon the Servicer, the
Administrative Agent, the Cash Manager and the other service providers for all
asset servicing, executive and administrative functions pursuant to the
respective service provider agreements. See "Risk Factors -- Risks Relating to
Airplanes Group and Certain Third Parties".
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Certain individuals other than the Directors and Controlling Trustees listed
above serve as directors of various subsidiaries of Airplanes Group.
If GE Capital acquires 90% or more of the ordinary share capital of GPA
Group, the holder of a majority in aggregate principal amount of the Class E
Notes, would be entitled to dismiss the Directors and the Controlling Trustees
and to appoint new Directors and Controlling Trustees, provided that (i) GE
Capital guarantees the performance by GECAS of its obligations under the
Servicing Agreement, if GECAS is then the Servicer, (ii) GE Capital shall then
have a rating of at least Aa1 or AA+ on its long-term, senior unsecured debt
obligations from Moody's or Standard & Poor's, respectively, and (iii) each of
Airplanes Limited and Airplanes Trust shall continue to have at least three
Independent Directors or Independent Trustees, as applicable, who will form a
committee to review and, if thought fit, approve, by a vote of at least two of
the three committee members, any transactions of Airplanes Group (other than as
described in the next paragraph) in which GE Capital or any of its affiliates is
an interested party. There can be no assurance that GE Capital will elect to
exercise its right to acquire any ordinary share capital of GPA Group. Neither
the Certificates nor the Notes are obligations of, or guaranteed by, or offered
for sale by, GE Capital, GECAS or any of their affiliates.
At such time, if any, as the Directors and Controlling Trustees have been
appointed by the holder of a majority in aggregate principal amount of the Class
E Notes, then the Directors and Controlling Trustees shall have the authority,
acting on a simple majority vote, without any independent committee veto rights
to cause Airplanes Group to sell, directly or indirectly, all of the assets of
the Airplanes Group, whether through a stock or an asset sale, to any person who
provides, as consideration therefor, any combination of cash, obligations of the
United States government or of corporate issuers rated at least AA+ or its
equivalent and Class E Notes which, through the payment of interest, principal
and premium, if any, in respect thereof, will be sufficient to repay or defease,
as the case may be, the Notes in accordance with their terms and the terms of
the Trust Indentures, discharge any Class E Notes not so transferred and pay,
with respect to Airplanes Limited, the Discounted Annual Dividend Amount, plus
any arrears of the Annual Dividend Amount. See "Description of Securities -- The
Notes and the Guarantees Defeasance".
All Directors and Controlling Trustees are compensated for travel and other
expenses incurred by them in the performance of their duties. Airplanes Limited
and Airplanes Trust pays each Independent Director and Independent Trustee, as
the case may be, an aggregate fee of $75,000 per annum for their services in
both capacities. The Chairman of Airplanes Limited and Airplanes Trust receives
an additional $50,000 per annum for his services in such capacity. Neither the
Director nor the Controlling Trustee appointed by the holder of a majority in
aggregate principal amount of the Class E Notes receives remuneration from
Airplanes Limited or Airplanes Trust for his services. In addition, Mr. Dantzic,
Mr. Jenkins and Mr. McCann receive $7,500, $2,500 and $7,500, respectively, per
annum for their services as directors of Holding Co. and certain of its
subsidiaries. Mr. Dantzic, Mr. Jenkins and Mr. McCann are also entitled to
receive an additional $1,000 in respect of each board meeting of the above
companies which they attend, subject to a maximum payment of $5,000 per annum
for each of them. Mr. Franke receives an aggregate of $2,500 per annum from
AeroUSA and AeroUSA 3 for his services as a director of those companies and is
also entitled to receive an additional $1,000 in respect of each board meeting
of these companies which he attends, subject to a maximum payment of $5,000 per
annum.
The Directors and the Controlling Trustees do not and will not receive any
additional cash or non-cash compensation (either in the form of stock options,
stock appreciation rights or pursuant to any long-term incentive plan, benefit
or actuarial plan or any other similar arrangements of any kind) as salary or
bonus for their services as Directors or Controlling Trustees. None of the
Directors or Controlling Trustees currently has an employment contract with
either Airplanes Limited or Airplanes Trust or serves as a member of a
compensation committee of either Airplanes Limited or Airplanes Trust. The
compensation of the Directors of Airplanes Limited is set forth in the Articles
of Association of Airplanes Limited and that of the Controlling Trustees is set
forth in the Airplanes Trust Agreement. None of the Directors or Controlling
Trustees has any beneficial ownership in any of the equity securities of
Airplanes Limited, Airplanes Trust or any of the subsidiaries of Airplanes
Limited or Airplanes Trust.
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None of the Directors, Controlling Trustees or any member of their
families, or any person owning more than five percent of Airplanes Limited's
Capital Stock, has been a party to any transaction, or is party to any currently
proposed transaction, with either of Airplanes Limited or Airplanes Trust or any
of their respective subsidiaries. Nor has any Director or Controlling Trustee or
any member of his family, or any corporation, organization or trust in which
such Director or Controlling Trustee is an executive officer, partner, trustee
or has a beneficial interest, been indebted in any amount to Airplanes Limited
or Airplanes Trust.
Neither Airplanes Limited nor Airplanes Trust knows of any arrangement,
other than GE Capital's right to elect to acquire at least 90% of the ordinary
share capital of GPA Group, the exercise of which could result in a change in
control of either Airplanes Limited or Airplanes Trust. There can be no
assurance that GE Capital will elect to exercise its right to acquire any
ordinary share capital of GPA Group.
BENEFICIAL OWNERSHIP OF AIRPLANES LIMITED
<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
- ----------------------- ---------------------------------------- ---------------- ----------------
<S> <C> <C> <C>
Common Stock........... Mourant & Co. Trustees Limited, 10 Shares 33 1/3%
as trustee of Holdings Trust I
22 Grenville Street
St. Helier
Jersey, Channel Islands
Common Stock........... Mourant & Co. Trustees Limited, 10 Shares 33 1/3%
as trustee of Holdings Trust II
22 Grenville Street
St. Helier
Jersey, Channel Islands
Common Stock........... Mourant & Co. Trustees Limited, 10 Shares 33 1/3%
as trustee of Holdings Trust III
22 Grenville Street
St. Helier
Jersey, Channel Islands
</TABLE>
Pursuant to the Shareholders Agreement entered into by Mourant & Co.
Trustees Limited as trustee of the Charitable Trusts (the "CHARITABLE TRUST
TRUSTEES"), Juris Limited and Lively Limited and the Airplanes Limited Indenture
Trustee (the "SHAREHOLDERS AGREEMENT"), the Charitable Trust Trustees have
agreed that, as long as the Airplanes Limited Notes are outstanding, they will
not, without the prior written approval of the Airplanes Limited Indenture
Trustee and all the Directors, transfer any part of the Capital Stock or any
interest therein unless the transferee (a) is a trustee of a trust formed for
charitable purposes substantially identical to those for which the Charitable
Trusts are established and (b) enters into an agreement substantially identical
to the Shareholders Agreement in favor of the Airplanes Limited Indenture
Trustee. Pursuant to the instruments of trust establishing Holdings Trust I,
Holdings Trust II and Holdings Trust III, a certificate given by the Directors
to the Charitable Trust Trustees that their voting of the Capital Stock in a
specified manner is in the best commercial interests of Airplanes Limited shall,
for the purposes of the exercise of the Charitable Trust Trustees' discretion,
be conclusive that any such action is in the best commercial interests of
Airplanes Limited.
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BENEFICIAL OWNERSHIP OF AIRPLANES U.S. TRUST
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PERCENTAGE
TITLE OF CLASS NAME AND ADDRESS OF NOTES OF CLASS
- ----------------------- -------------------------------------------- ---------------- ----------
<S> <C> <C> <C>
Class E Notes.......... GPA, Inc., a wholly owned subsidiary of $ 53,000,000 100%
GPA Group plc
c/o Lee Farm Corporate Park
83 Wooster Heights Road
Danbury, CT
United States
</TABLE>
GPA, Inc. holds the Airplanes Trust Residual Interest in all of the
property of Airplanes Trust, including the AeroUSA Shares. Upon repayment in
full of the Airplanes Trust Notes, the Airplanes Trust Class E Notes and the
Airplanes Trust Refinancing Notes, the AeroUSA Shares will be transferred back
to GPA, Inc. pursuant to its ownership of the Airplanes Trust Residual Interest.
THE SERVICER
The Servicer and its affiliates have not assumed and are not responsible
for, or guarantors of, and shall not assume or be responsible for, or guarantors
of, any liabilities of Airplanes Limited, Airplanes Trust, Holding Co. or any of
their affiliates, including, without limitation, any payments due with respect
to the Notes.
The Servicer provides services pursuant to the terms of the Servicing
Agreement on behalf of Airplanes Group (except in certain circumstances
described below where a substitute servicer may perform such services). The
Servicing Agreement (a) sets forth the various duties of the Servicer with
respect to the management and administration of the Aircraft and the Leases, (b)
sets forth certain aircraft marketing activities to be performed by the Servicer
and (c) sets forth certain Aircraft management-related obligations of the
Servicer in connection with offers and sales by Airplanes Group of Refinancing
Certificates or Additional Certificates.
The Servicer provides the services in accordance with the express terms of
the Servicing Agreement, which, among other things, provides that the Servicer
will act in accordance with applicable law and with directions given by Holding
Co., on behalf of Airplanes Limited, AeroUSA and Holding Co., from time to time
in accordance with the Servicing Agreement. In addition, under the Servicing
Agreement, the Servicer agrees to perform its services in accordance with the
GECAS Services Standard and the GECAS Conflicts Standard.
The duties and obligations of the Servicer are limited to those expressly
set forth in the Servicing Agreement and the Servicer does not have any
fiduciary or other implied duties or obligations to the Airplanes Group or any
other person, including any Certificateholder. Under the terms of the Servicing
Agreement, Airplanes Group has directed the Servicer to, and the Servicer is
obliged to, perform its services in a manner that is intended to be consistent
with maximizing the cash flows derived from the Leases relating to the Aircraft
over time, subject to the constraints imposed by the Trust Indentures and the
Servicing Agreement and by seeking to achieve a balanced and diversified
portfolio (including with respect to lessees, geography and lease term lengths),
in all cases taking into account the then-existing and anticipated market
conditions affecting the operating lease of used aircraft and the commercial
aviation industry generally. As part of the terms of the Servicing Agreement,
Airplanes Group has acknowledged the inherent uncertainty in determining market
conditions at any point in time as well as the inherent limitations in
anticipating market conditions from time to time. The Servicing Agreement states
that these provisions of the Servicing Agreement do not impose any higher or
different standard of care or liability than the GECAS Services Standard or the
standard of liability contained in the Servicing Agreement.
In addition to managing the Aircraft, GECAS also manages aircraft assets
owned by ALPS 94-1 and GE Group and other third parties, including GPA. In the
course of conducting such activities, GECAS will
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<PAGE> 87
from time to time have conflicts of interest in performing its obligations on
behalf of Airplanes Group. Under certain circumstances, the Servicer may resign
from the performance of its duties pursuant to the Servicing Agreement in
relation to all the Aircraft generally or, in certain circumstances, one or more
Aircraft individually, provided in either case that a replacement servicer has
been appointed that complies with certain criteria. With respect to the
negotiation of certain conflicts of interest, the Servicer may withdraw from
representing Airplanes Group, which shall be required to appoint an independent
representative to represent Airplanes Group as to such negotiation, and the
Servicer shall be entitled to act on behalf of itself or any of its affiliates
with respect to such negotiation. See "Risk Factors -- Conflicts of Interest of
GECAS".
Pursuant to the Servicing Agreement, the Servicer is not liable or
accountable to any person, other than Airplanes Limited, AeroUSA and Holding Co.
to the limited extent described below, under any circumstances, for any Losses
and Airplanes Limited, AeroUSA and Holding Co. jointly and severally indemnify
the Servicer and its affiliates on an after-tax basis for any Losses, unless
such Losses are finally adjudicated to have resulted directly from the
Servicer's gross negligence or wilful misconduct in respect of its obligation to
apply the GECAS Services Standard or the GECAS Conflicts Standard in respect of
its performance of the services under the Servicing Agreement. Airplanes
Limited, AeroUSA and Holding Co. also jointly and severally indemnify the
Servicer and its affiliates on an after-tax basis for any losses that may be
imposed on, incurred by or asserted against, the Servicer or any of its
affiliates, directly or indirectly, arising out of, in connection with or
related to, the Servicer or any of its affiliates' involvement (or alleged
involvement) in connection with the structuring or implementation of any aspect
of the Acquisition. Airplanes Limited, Holding Co. and AeroUSA are entitled
jointly to terminate the Servicing Agreement if the Servicer fails to perform in
any material respect any material service thereunder to either the GECAS
Services Standard or the GECAS Conflicts Standard and such failure has a
material adverse effect on Airplanes Group taken as a whole. See "Risk Factors
- -- Limitation of Liability on the Part of the Servicer".
Notwithstanding anything to the contrary stated above, the Servicer is not
obligated to take or refrain from taking any action that it believes is
reasonably likely to (i) violate any applicable law with respect to GECAS or its
affiliates, (ii) violate any established written policies of GE, in effect from
time to time, applicable to GE Group related to business practices with respect
to legal, ethical and social matters ("GE POLICY") or (iii) lead to an
investigation by any governmental authority.
AIRCRAFT SERVICES
Pursuant to the Servicing Agreement, the Servicer has, among other things,
undertaken:
- to grant Airplanes Group and its agents, including the Administrative
Agent, access to certain information and personnel of the Servicer under
specified circumstances to enable Airplanes Group to monitor the
Servicer's compliance with the Servicing Agreement and otherwise for the
purposes of Airplanes Group's business
- not to commingle with its own funds any funds of Airplanes Group.
The main categories of services being provided by the Servicer pursuant to
the Servicing Agreement in respect of the Aircraft (the "SERVICES") are:
- Lease marketing services, including, subject to the terms of the
Indentures and the Servicing Agreement, remarketing, Lease negotiation
and execution (including, without limitation, negotiating final Lease
terms)
- Aircraft assets management services, including Lease rent collection,
Aircraft maintenance, insurance, contract compliance of, and enforcement
against, Lessees, and accepting delivery and redelivery of Aircraft
- Aircraft sales services as, when and to the extent directed by Airplanes
Group
- monitoring of maintenance and provision of records and information with
respect to the Aircraft
- arranging for valuations and monitoring regulatory developments
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<PAGE> 88
- using commercially reasonable efforts to keep Airplanes Group in
compliance with certain covenants under the Notes directly relating to
the operation of the Aircraft
- providing to Airplanes Group certain data and information relating to
the Aircraft
- certain limited Aircraft-related assistance in connection with the
public or private offerings of Refinancing Certificates, including
consenting to public disclosure relating to the Servicer and its
affiliates contained in any prospectus, certain limited Aircraft-related
participation in marketing activities solely with respect to the
Aircraft and the Servicer and the Services, and providing Airplanes
Group, underwriters, rating agencies and/or other advisors with the
reasonable opportunity to conduct due diligence with respect to the
Servicer as it relates to the Aircraft
- legal and other professional services in relation to the Aircraft (other
than in relation to litigation not arising in the ordinary course of the
operating lease business by or against Airplanes Group, or any of its
affiliates)
- periodic reporting of operational information relating to the Aircraft
OPERATING GUIDELINES
Under the Servicing Agreement, the Servicer is entitled to exercise such
authority as is necessary to give it a practicable and working autonomy in
performing the Services, while at the same time Holding Co., acting on behalf of
Airplanes Group through the Administrative Agent and in its own capacity, has
established monitoring and control procedures which are expected to enable it
properly to manage the business and assets of the Airplanes Group.
Pursuant to the terms of the Servicing Agreement, the Servicer is required
to comply with the GECAS Services Standard and the GECAS Conflicts Standard in
the performance of the Services. All transactions to be entered into by the
Servicer on behalf of Airplanes Group (other than with other persons within
Airplanes Group) are required to be at arm's length and on fair market value
terms unless otherwise agreed or directed by Airplanes Group. Certain
transactions or matters with respect to Aircraft require the specific approval
of Airplanes Group, including:
- sales of Aircraft (other than as required by a Lease)
- the entering into of any Leases (including renewals or extensions,
unless any such Lease had originally been approved) if the Lease does
not comply with any applicable operating covenants set forth under
"Description of Securities -- The Notes and the Guarantees -- Operating
Covenants"
- terminating any Lease or Leases (without substitution of, or replacement
by, another substantially similar lease) to any single Lessee with
respect to Aircraft then having an aggregate depreciated net book value
in excess of $200 million
- unless provided for in the applicable budget, entering into any contract
for the modification or maintenance of Aircraft where the costs to be
incurred (A) exceed the greater of (i) the estimated aggregate cost of a
heavy maintenance check for similar aircraft and (ii) available
Maintenance Reserves or other collateral under the related Lease or (B)
are outside the ordinary course of Airplanes Group's business
- issuing any guarantee on behalf of, or otherwise pledging the credit of,
other than with respect to trade payables in the ordinary course of
business, Airplanes Limited, Airplanes Trust, Holding Co. or any of
their subsidiaries (other than in connection with entering into a Lease
with respect to an Aircraft)
- any transaction with GE Capital or any of its affiliates not
contemplated in the Servicing Agreement.
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<PAGE> 89
BUDGETS
Holding Co. adopts an annual budget each year with respect to all Aircraft
owned by Airplanes Group. Under the Servicing Agreement, the Servicer has
undertaken to use reasonable commercial efforts to attempt to achieve the budget
each year.
MANAGEMENT FEES
Airplanes Limited, AeroUSA and Holding Co. are jointly and severally
obligated to pay a fee (the "ASSET BASED SERVICING FEE") to the Servicer,
pursuant to the Servicing Agreement, in a per annum amount equal to
approximately 0.495% of an agreed value of each Aircraft payable monthly in
arrears on a pro rata basis for the period such Aircraft is under management.
Airplanes Group is obliged to pay for certain expenses incurred or approved by
the Servicer on behalf of Airplanes Group in connection with the Servicer's
performance of the Services. These expenses include, among other expenses,
Aircraft maintenance costs and insurance, outside professional advisory fees
(including legal fees) and other out of pocket expenses, all of which in the
aggregate may constitute a significant additional component of Airplanes Group's
total overhead costs. In the year ended March 31, 1997 Aircraft Maintenance
Reserve expenditures amounted to $89 million and other expenses, including
outside professional advisory fees, insurance and other out of pocket expenses
amounted to $21 million. The Servicer is also entitled to certain additional
fees based on (i) the aggregate annual cash flow generated by the Leases in
excess of certain cash flow targets and (ii) sales of Aircraft at the direction
of Airplanes Group. Such fees are subject to a mandatory aggregate annual
minimum fee in the amount of $1.5 million. In the year ended March 31, 1997, the
Servicer was paid $1.5 million in such additional fees.
In addition, the Servicer is entitled to certain additional fees in
connection with various Aircraft management-related services required to be
provided by the Servicer pursuant to the Servicing Agreement in connection with
any offerings and sales by the Airplanes Group of Refinancing Certificates.
TERM AND TERMINATION
The Servicing Agreement is for a non-cancellable initial term expiring on
the earlier of (i) March 28, 2014 or (ii) payment in full of all amounts
outstanding to be paid under the Notes. Each party has the right to terminate
the Servicing Agreement under certain circumstances. The Servicer has the right
to terminate the Servicing Agreement if, among other things:
- Airplanes Limited, AeroUSA and/or Holding Co. fails to pay when due (i)
any servicing fees if not paid within five days of notice of such
failure, or (ii) any other amount payable by Airplanes Limited, AeroUSA
or Holding Co. to the Servicer if not paid within ten days of notice of
such failure
- Airplanes Limited, AeroUSA, Holding Co. or any of their subsidiaries
fails to perform or observe or violates in any material respect any
material term, covenant, condition or agreement to be performed or
observed by it under the Servicing Agreement
- any material representation or warranty by any person within the
Airplanes Group pursuant to the Servicing Agreement or any other related
document shall be false or misleading in any material respect and such
misrepresentation or breach of warranty is reasonably likely to have a
material adverse effect on the Servicer or its rights and obligations
under the Servicing Agreement
- an involuntary proceeding is commenced in respect of Airplanes Limited,
Airplanes Trust, AeroUSA, Holding Co. or any Significant Subsidiary of
any of such entities under applicable bankruptcy, insolvency,
receivership or similar law, and such proceeding shall continue
undismissed for 75 days or any such person shall go into liquidation,
suffer a receiver or mortgagee to take possession of all or
substantially all of its assets or a voluntary proceeding is commenced
in respect of Airplanes Limited, Airplanes Trust, AeroUSA, Holding Co.
or any Significant Subsidiary of any of such entities under bankruptcy,
insolvency, receivership or similar law or any such person shall make a
general assignment for the benefit of its creditors
- no person within Airplanes Group owns any aircraft
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<PAGE> 90
- the Trust Indentures shall cease to be in full force and effect
- any guarantee in favor of the Servicer by any person within Airplanes
Group ceases to be legal, valid and binding.
Airplanes Limited, AeroUSA and Holding Co. have the right to terminate the
Servicing Agreement upon:
- the Servicer ceasing to be at least 75% owned, directly or indirectly,
by GE Capital or GE
- the Servicer failing in any material respect to perform any material
services required pursuant to the Servicing Agreement in accordance with
the GECAS Services Standard or the GECAS Conflicts Standard and such
failure having a material adverse effect on Airplanes Group taken as a
whole
- commencement of an involuntary proceeding in respect of GE, GE Capital
or the Servicer under bankruptcy, insolvency, receivership or similar
law, if such proceeding continues undismissed for 75 days or any such
person shall go into liquidation, suffer a receiver or mortgagee to take
possession of all or substantially all of its assets or commencement of
a voluntary proceeding in respect of GE, GE Capital or the Servicer
under bankruptcy, insolvency, receivership or similar law or any such
person shall make a general assignment for the benefit of its creditors.
The Servicer may resign from performing the services pursuant to the
Servicing Agreement if it reasonably determines that directions given, or
services required, would, if carried out (i) be unlawful under applicable law,
(ii) be in violation of GE Policy, (iii) be likely to lead to an investigation
by any governmental authority, (iv) expose the Servicer to liabilities for which
adequate indemnity has not been provided or (v) place the Servicer in a conflict
of interest with respect to which, in the Servicer's good faith opinion, the
Servicer could not continue to perform its obligations under the Servicing
Agreement in accordance with its terms.
The Servicer may not resign from its obligations under the Servicing
Agreement nor may the Servicing Agreement be terminated, except upon expiration
of the Servicing Agreement at the end of the term thereof, unless a replacement
servicer has been appointed and accepted such appointment and the Rating
Agencies have confirmed to Airplanes Group that no lowering or withdrawal of the
then current ratings of any Certificates will result from such appointment. In
the event that a replacement servicer has not been appointed within 90 days
after any termination of the Servicing Agreement or resignation by the Servicer,
the Servicer may petition any court of competent jurisdiction for the
appointment of a replacement servicer. Notwithstanding any other term to the
contrary, the Servicer may terminate the Servicing Agreement, whether or not a
replacement servicer has been appointed and accepted such appointment, in the
event that Airplanes Limited, AeroUSA or Holding Co. have failed, after the
applicable cure periods, to pay amounts due to the Servicer.
TAX STATUS
By virtue of GPA Group's ownership of 5% of the issued and outstanding
ordinary share capital of Holding Co. and the continued ability of GPA Group and
GECAS to satisfy certain employment levels in Shannon, Ireland, it is intended
that the Irish tax resident Transferred Companies will continue to benefit from
their status as Shannon certified companies. As a result of this status, the
Irish tax resident Transferred Companies are intended to enjoy reduced rates of
corporation tax and advance corporation tax together with improved entitlements
to capital allowances. In addition, the benefits include the right to pay
interest, in certain circumstances, without paying Irish withholding tax and to
deduct payments of interest in computing liability for corporate tax. There can
be no assurance that the future management of the Aircraft by the Servicer in
accordance with the terms of the Servicing Agreement will not expose Holding Co.
or the Irish tax resident Transferred Companies to tax liabilities outside
Ireland. The Servicing Agreement sets out certain tax-related undertakings with
respect to the Servicer which are designed to maintain a favorable tax treatment
in Ireland for Holding Co. and the Irish tax resident Transferred Companies.
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These tax-related undertakings include the following:
- maintaining minimum levels of employment in Ireland, if required for
Holding Co. or the Irish tax resident Transferred Companies to maintain
their Shannon licences and tax certification
- holding meetings of the board of directors of the Servicer in Shannon no
less frequently than quarterly and only occasionally outside Shannon
- the Servicer's transaction approval committee (meeting in Shannon not
less frequently than monthly and meeting outside Ireland only
occasionally) shall be comprised of at least five persons, a majority of
whom will be employees of the Servicer, and such committee shall have
and regularly exercise the power to approve contracts
- except in certain circumstances, contracts entered into by the Servicer
with respect to the purchase, sale, lease or other disposition of
Aircraft shall either be signed in Ireland or signed outside of Ireland
pursuant to a limited power of attorney
- the managing director (but not necessarily the chairman of the board of
directors) of the Servicer shall be an officer and employee of the
Servicer based in Shannon
- the Servicer shall not itself maintain an office outside Shannon
- the Servicer shall compensate any of its affiliates for services
provided outside Ireland to the Servicer to the extent services are
provided by express agreement in respect of the Aircraft.
In the event that the Servicer breaches a tax-related undertaking as a
result of its gross negligence or wilful misconduct and Airplanes Group
experiences a material tax event (broadly defined as incurrence of aggregate
liability for taxes of $28 million in any one or more years during the term of
the Servicing Agreement, provided that, if the aggregate liability for any one
year does not exceed $4 million, it will not be taken into account), Airplanes
Group's sole remedy, upon six months' prior written notice, will be to terminate
the Servicing Agreement. Subject to compliance with certain procedural
guidelines set forth in the Servicing Agreement, the Servicer has the right for
any good faith commercial reason, as determined in its sole discretion, to
modify the tax-related undertakings. Any such modification could lead to a loss
of any favorable tax treatment afforded to Holding Co. and other Irish tax
resident Transferred Companies in Ireland. See "Risk Factors -- Tax Risks".
ASSIGNMENT OF SERVICING AGREEMENT
The Servicing Agreement and the rights and obligations of the Servicer, on
the one hand, and Airplanes Limited, Holding Co. and AeroUSA, jointly and
severally, on the other hand, are not assignable by any of such parties other
than with the prior consent of the other parties. However, the Servicer may
delegate any portion, but not all, of its duties to GE Capital or GE or any 75%
or more owned subsidiary of GE Capital or GE.
PRIORITY PAYMENT OF SERVICING FEES AND REIMBURSABLE EXPENDITURES
The fees and expenses of the Servicer rank senior in priority of payment to
all payments of interest, principal and premium, if any, on the Notes.
The joint and several obligations of Airplanes Limited, Holding Co. and
AeroUSA under the Servicing Agreement have been guaranteed for the benefit of
the Servicer by each entity within Airplanes Group.
CORPORATE MANAGEMENT
With regard to the corporate affairs of Airplanes Group, management
services are provided by four entities: the Administrative Agent, the Cash
Manager, the Company Secretary and the Delaware Trustee.
ADMINISTRATIVE AGENT
GPA Financial acts as the Administrative Agent of Airplanes Group.
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The Administrative Agent is responsible for providing administrative and
accounting services to the Directors and Controlling Trustees. The
Administrative Agent's duties include:
(a) monitoring the performance of the Servicer (including the Servicer's
compliance with the Servicing Agreement) and reporting on such
performance to Airplanes Group;
(b) assisting Airplanes Group in establishing a program for compliance by
the Servicer with the Servicing Agreement;
(c) acting as liaison with the Rating Agencies to confirm the rating
impact of certain decisions and coordinating responses to Rating
Agency questions;
(d) the maintenance on behalf of Airplanes Group of accounting ledgers and
the provision on a quarterly and annual basis of draft accounts on a
combined basis for Airplanes Group as well as, on a quarterly and
annual basis, on an individual company basis for certain companies.
However, Airplanes Group retains responsibility for the ledgers and
accounts including all discretionary decisions and judgments relating
to the preparation and maintenance thereof, and Airplanes Group
retains responsibility for, and prepares, its financial statements;
(e) preparing annual budgets and presenting them to Airplanes Group for
approval;
(f) authorizing payment of certain bills and expenses;
(g) to the extent required by Airplanes Group or the parties thereto,
coordinating any amendments to the transaction agreements, subject to
the terms of such agreements and approval by Airplanes Group;
(h) supervising outside counsel and coordinating legal advice received by
Airplanes Group other than with respect to the Servicer's performance
under the Servicing Agreement;
(i) preparing and coordinating reports to investors (including preparing
press releases and managing investor relations) and to the Commission
with the assistance of outside counsel and auditors, if appropriate;
(j) preparing for the approval of Airplanes Group and filing all required
tax returns with the assistance of outside counsel and auditors, if
appropriate;
(k) maintaining, or monitoring the maintenance of, the books and records
of Airplanes Group other than those maintained by the Company
Secretary and the Delaware Trustee;
(l) preparing an agenda and any required papers for meetings of the
governing bodies of the entities within Airplanes Group;
(m) assisting Airplanes Group in developing and implementing its interest
rate management policy and developing financial models, cash flow
projections and forecasts, to the extent required by Airplanes Group,
and in making aircraft lease, sale and capital investment decisions;
(n) advising Airplanes Group as to the appropriate levels of the Liquidity
Reserve Amount; and
(o) providing additional services upon the request of Airplanes Group upon
terms to be agreed at the time of any such request.
The Administrative Agent also provides other administrative services,
including (a) assistance in arranging refinancings of all or a portion of the
Notes, (b) assistance in filing and making effective a shelf registration
statement on behalf of Airplanes Group with the Commission relating to certain
of the Certificates, and (c) undertaking an effort to avoid any adverse change
in the tax status of the various members of Airplanes Group. Airplanes Limited,
AeroUSA and Holding Co. are, jointly and severally, obligated to pay a fee (the
"ADMINISTRATIVE FEE") to the Administrative Agent in a per annum amount equal to
$6 million, payable monthly in arrears. The Administrative Agent is also
entitled to an additional fee (the "REDUCING FEE") in an amount equal to $2
million per annum, payable monthly in arrears, which is reduced by certain
agreed amounts in the event that Airplanes Group sells, retires or disposes of
76 or more of
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the Aircraft. Both the Administrative Fee and the Reducing Fee will, from time
to time, be adjusted for inflation. The Administrative Agent is also entitled to
be reimbursed for certain expenses incurred in connection with the performance
of its services under the Administrative Agency Agreement. The Administrative
Agent may resign on 60 days' written notice in certain circumstances. Airplanes
Group may remove the Administrative Agent on 120 days' written notice with or
without cause, as long as Airplanes Group has, with the consent of the Servicer,
engaged another person or entity to perform the services that were being
provided by the Administrative Agent.
CASH MANAGER
GPA Cash Manager acts as the Cash Manager. The Cash Manager provides cash
management and related services to Airplanes Group. In the ordinary course of
Airplanes Group's business, the Cash Manager informs the Servicer and the
Administrative Agent of the aggregate deposits in the Accounts as required and
provides such other information as shall be required in connection with the
Accounts. Subject to certain limitations and at the direction of Airplanes
Group, the Cash Manager is authorized to invest the funds held by Airplanes
Group in the Collection Account and the Lessee Funded Account in certain
prescribed investments (the "PERMITTED ACCOUNT INVESTMENTS") on permitted terms.
Permitted Account Investments include short-term U.S. government securities,
bank deposits, commercial paper and certain other highly rated short-term debt
instruments. At all times, the Accounts will be maintained in the name of the
Security Trustee, except that certain Rental Accounts which, for certain legal
or other regulatory reasons, cannot be established in the name of the Security
Trustee, will be maintained in the names of such parties as are specified in the
relevant Leases and maintained with another bank that has a rating of AA or the
equivalent or higher or any other responsible or reputable bank.
In addition, the Cash Manager receives certain data provided by the
Servicer with respect to the Aircraft and Leases of Airplanes Group and
calculates certain monthly payments and makes all other calculations as required
under the Cash Management Agreement. The Cash Manager also provides the Trustee
with such information as is required by the Trustee to provide its reports to
the Certificateholders.
The Cash Manager is required to exercise the same level of skill, care and
diligence in the performance of its services as a prudent business person would
in administering such services on its own behalf. The Cash Manager receives a
fee of $1 million per annum from Airplanes Group in respect of its services to
Airplanes Group. The Cash Manager is entitled to indemnification by Airplanes
Group for, and is held harmless against, any loss or liability incurred by the
Cash Manager (other than through its own deceit, fraud, wilful default or gross
negligence (or simple negligence in the handling of funds) or that of its
officers, directors, agents and employees).
The Cash Manager may resign on 30 days' written notice as long as Airplanes
Group has engaged another person or entity to perform the services that were
being provided by the Cash Manager. Airplanes Group may remove the Cash Manager
at any time with or without cause.
COMPANY SECRETARY
The Company Secretary (with respect to any company, the entity which
provides its secretarial services, the "COMPANY SECRETARY") maintains company
books and records, including minute books and stock transfer records. It makes
available telephone, telecopy, telex and post office box facilities and
maintains a registered office in the relevant jurisdictions.
Mourant & Co. Secretaries Limited acts as Company Secretary for Airplanes
Limited.
DELAWARE TRUSTEE
Wilmington Trust Company maintains the books and records, including minute
books and records and trust certificate records, of Airplanes Trust. It makes
available telephone, telecopy, telex and post office box facilities and
maintains its principal place of business in Delaware.
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SELECTED COMBINED FINANCIAL DATA
The selected combined financial data set out below for each of the years in
the five-year period ended March 31, 1997 have been extracted or derived from
the audited Financial Statements of Airplanes Limited and Airplanes Trust
included elsewhere in this Prospectus, which have been audited by KPMG --
Dublin, Ireland, independent chartered accountants. See "Experts". These
financial statements have been prepared in accordance with U.S. GAAP. The
selected financial data set forth below as of December 31, 1997 and for the nine
month periods ended December 31, 1996 and December 31, 1997 have not been
audited but in the opinion of management reflect all adjustments, consisting
only of normal and recurring adjustments, necessary to present a fair statement
of the information presented therein.
The selected combined financial data set forth below are presented on the
basis that the Aircraft have been operated separately from GPA within Airplanes
Group for all periods presented or from the date of acquisition by GPA, as
appropriate. Investors should note, however, that Airplanes Group has conducted
independent business operations only since March 28, 1996. Accordingly, for
periods prior to March 28, 1996 adjustments and allocations have been made of,
among other items, historical indebtedness, net interest expense, selling,
general and administrative expenses and tax amounts, as further described in
Note 2 to the Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations". While Airplanes Group believes
that the selected combined financial data set forth below are an appropriate
presentation, such data for the period prior to March 28, 1996 are not
necessarily indicative of the financial results that might have occurred had
Airplanes Group been an independently financed and managed group during the
periods up to March 28, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
The selected combined financial data set forth below combine the operating
results, assets, liabilities and cash flows of each of Airplanes Limited and
Airplanes Trust. The separate balance sheets, statements of operations,
statements of changes in shareholders' deficit/net liabilities and statements of
cash flows of Airplanes Limited and Airplanes Trust are contained in the
Combining Financial Statements included elsewhere in this Prospectus, and
investors should note that the Notes and the Guarantees comprise obligations of
two different legal entities owning different assets. The Directors of Airplanes
Limited and the Controlling Trustees of Airplanes Trust believe that a combined
presentation is most appropriate because, among other things, the assets of
Airplanes Limited and Airplanes Trust are managed on the basis of one combined
aircraft fleet, and each of Airplanes Limited and Airplanes Trust has fully and
unconditionally guaranteed the performance of the other under their respective
Notes. The Guarantees have been structured to ensure that no payments are made
on a junior class of Notes of Airplanes Trust or Airplanes Limited, as the case
may be, before any amounts due and payable on a more senior class of Notes of
Airplanes Limited or Airplanes Trust, respectively, are paid pursuant to the
Guarantees.
The selected combined financial data should be read in conjunction with,
and are qualified in their entirety by reference to, the Financial Statements of
Airplanes Group and the Notes thereto, which are included elsewhere in the
Prospectus.
As GPA holds substantially all of the Class E Notes through which it has
access to certain of the benefits inherent in the Aircraft, aircraft assets are
stated on the predecessor cost basis (i.e., reflecting GPA's historical cost
less accumulated depreciation). The difference between such predecessor cost
basis and the amount of Airplanes Group's indebtedness is a significant
component of Total Shareholders' Deficit in the Combined Balance Sheet Data.
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<PAGE> 95
COMBINED STATEMENT OF OPERATIONS DATA(1)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------ ------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
($ MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues(2)
Aircraft leasing.......................... 413 526 608 616 604 459 450
Aircraft sales............................ -- -- -- -- -- -- 94
Expenses
Cost of aircraft sales.................... -- -- -- -- -- -- (90)
Depreciation and amortization............. (230) (185) (208) (207) (223) (155) (146)
Net interest expense(3)(4)................ (203) (252) (348) (368) (383) (286) (308)
Provision for maintenance................. (83) (71) (88) (97) (91) (72) (70)
Bad and doubtful debts.................... (31) (20) (33) 28 -- -- --
Provision for loss making leases and
downtime, net(5)....................... (33) (27) (5) 15 12 14 7
Other lease costs......................... (28) (19) (17) (21) (21) (30) (22)
Selling, general and administrative
expenses............................... (22) (26) (34) (35) (38) (27) (29)
Income tax benefit.......................... 32 13 16 13 10 -- 2
----- ----- ----- ----- ----- ----- -----
Net loss.................................... (185) (61) (109) (56) (130) (97) (112)
===== ===== ===== ===== ===== ===== =====
</TABLE>
COMBINED BALANCE SHEET DATA(1)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------------------------------------- ------------
1994 1995 1996 1997 1997
------ ------ ------ ------ ------------
($ MILLIONS)
<S> <C> <C> <C> <C> <C>
Aircraft, net, and net investment in
capital and sales type leases........... 4,332 4,181 3,965 3,731 3,481
------- ------- ------- ------- -------
Total assets.............................. 4,561 4,386 4,236 4,048 3,860
======= ======= ======= ======= =======
Indebtedness(3)......................... (4,583) (4,602) (4,634) (4,397) (4,224)
Provision for maintenance............... (217) (268) (311) (313) (314)
Total liabilities......................... (5,169) (5,228) (5,252) (5,194) (5,118)
======= ======= ======= ======= =======
Net liabilities........................... (608) (842) (1,016) (1,146) (1,258)
</TABLE>
COMBINED STATEMENT OF CASH FLOWS AND OTHER DATA(1)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------------------- ------------
1993 1994 1995 1996 1997 1996 1997
------ ---- ---- ---- ---- ---- ----
($ MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash paid in respect of interest(3)(4).... 178 222 303 323 265 200 190
EBITDA(6)................................. 222 369 440 514 483 356 352
Net cash provided by operating activities
(after payment of interest)............. 164 189 177 216 224 182 177
Net cash (used in)/provided by investing
activities.............................. (1,282) (514) (23) 13 19 13 103
Net cash (used in)/provided by financing
activities.............................. 1,118 325 (154) (144) (238) (175) (175)
------- ----- ----- ----- ----- ----- -----
Net Movements in cash..................... NIL NIL NIL 85 5 20 105
======= ===== ===== ===== ===== ===== =====
</TABLE>
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SELECTED RATIOS(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
----------------------------------------- ----------------
1993 1994 1995 1996 1997 1996 1997
----- ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Deficiency of Combined Earnings to
Combined Fixed Charges(7) ($
millions)............................ (217) (74) (125) (69) (140) (97) (114)
EBITDA(6) to cash paid in respect of
interest(3)(4)....................... 1.25 1.66 1.45 1.59 1.82 1.78 1.85
Indebtedness, less the Class E Note
Portion, to EBITDA(3)(6)(8) (interim
period EBITDA amounts annualized).... 15.10 10.51 8.85 7.87 7.88 8.15 7.74
</TABLE>
- ---------------
(1) The financial statements of Airplanes Group are stated in U.S. dollars which
is the principal operating currency of Airplanes Group and the aviation
industry.
(2) Revenues include Maintenance Reserve receipts. See Note 16 to the Financial
Statements.
(3) For all periods and dates prior to March 28, 1996, net interest expense,
indebtedness and cash paid in respect of interest have been based on certain
assumptions as described more fully in Note 2 to the Financial Statements.
For all periods and dates since March 28, 1996, net interest expense,
indebtedness and cash paid in respect of interest have reflected the actual
terms of the Existing Notes and Airplanes Group's Class E Notes.
(4) Net interest expense is significantly higher than cash paid in respect of
interest in all periods reflecting the high interest rate accruing on the
Class E Notes (20% adjusted for inflation) relative to the lower amount of
cash interest payable on the Class E Notes for so long as the Notes remain
outstanding. Net interest expense is stated after crediting interest income
of $6 million in 1993 and 1994, $9 million in 1995, $8 million in 1996, $17
million in 1997, $12 million in the nine months ended December 31, 1996 and
$12 million in the nine months ended December 31, 1997.
(5) A lease agreement is deemed to be "loss making" in circumstances where the
contracted rental payments are insufficient to cover depreciation and
interest attributable to the Aircraft plus certain direct costs attributable
to the lease over its term. Following the adoption of FAS 121 with effect
from April 1, 1996, Airplanes Group no longer makes separate provisions for
downtime costs. See Note 4(b) to the Financial Statements.
(6) EBITDA represents operating results before provision for income taxes and
before interest expense and depreciation and amortization. EBIDTA as defined
by Airplanes Group is not necessarily comparable to similarly capitioned
measures reported by other entities. Investors should not rely on EBIDTA as
an alternative to operating income (as determined in accordance with U.S.
GAAP) as an indication of Airplanes Group's operating performance, or as an
alternative to cash flow from operating activities (as determined in
accordance with U.S. GAAP) as a measure of Airplanes Group's liquidity, but
rather to provide additional information related to Airplanes Group's
ability to service the Notes. Airplanes Group believes, however, that EBITDA
provides significant information with respect to Airplanes Group's capacity
to make payments on the Notes because it indicates the amount of non-cash
charges against earnings, including depreciation and amortization expenses,
which would have been available to pay Airplanes Group's obligations during
the years indicated, which information is not indicated by the "Deficiency
of earnings to fixed charges" ratio. Investors should consider carefully,
however, that there are significant uses to which Airplanes Group's cash
flows will need to be applied before any cash will be available to make
payments on the Notes, including payment of Expenses (including payments of
taxes, certain required financing costs and expenses, such as service
provider fees, trustee fees and other charges and certain investing costs),
which rank prior to the Notes. The amount of Expenses which will be incurred
by Airplanes Group cannot be estimated with certainty and there can be no
assurance that Airplanes Group will not incur Expenses to such an extent as
to jeopardize its ability to make future payments on the Notes.
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<PAGE> 97
(7) Represents the amount by which Airplanes Group's loss before income taxes
and fixed charges exceeded fixed charges. Fixed charges consists of interest
expense. Because Airplanes Group's fixed charges exceeded earnings for all
periods presented, a ratio of earnings to fixed charges is not presented.
(8) For the period from March 28, 1996, the Class E Note Portion equals that
amount of Airplanes Group's total indebtedness which is actually represented
by the Class E Notes (equal to $591 million at March 31, 1997). The Class E
Note Portion in the period until March 28, 1996 equals 15% of Airplanes
Group's indebtedness.
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<PAGE> 98
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion and analysis of Airplanes Group's financial
condition and results of operations is presented as though the Aircraft have
been operated and financed separately from GPA within the Airplanes Group in all
periods under review or from their date of acquisition by GPA, as appropriate.
It should be noted, however, that Airplanes Group only acquired the aircraft on
March 28, 1996 and, therefore, has not conducted any business operations in the
periods under review prior to March 28, 1996. Accordingly, adjustments and
allocations have been made with respect to, among other things, historical
indebtedness, net interest expense, selling, general and administrative expenses
and tax amounts as further described below and in Note 2 to the Financial
Statements for periods prior to March 28, 1996. While Airplanes Group believes
that the following discussion and analysis is an appropriate presentation, it is
not necessarily indicative of the financial results that might have occurred had
Airplanes Group been an independently financed and managed group during the
period to March 28, 1996.
The following discussion and analysis is based primarily on the combined
operating results of Airplanes Limited and Airplanes Trust and not on their
results reported as individual entities. It should be noted, however, that the
Notes and the Guarantees comprise obligations of two different legal entities
owning different assets. The Directors and the Controlling Trustees believe that
a combined discussion is the most appropriate basis of presentation because,
among other things, Airplanes Limited and Airplanes Trust are not intended to be
regarded as separate businesses but rather on the basis of one combined aircraft
fleet and each of Airplanes Limited and Airplanes Trust has fully and
unconditionally guaranteed the performance of the other under their respective
Notes. The Guarantees have been structured to ensure that no payments are made
on a junior class of Notes of Airplanes Trust or Airplanes Limited, as the case
may be, before any amounts due and payable on a more senior class of Notes of
Airplanes Limited or Airplanes Trust, respectively, are paid pursuant to the
Guarantees.
GENERAL
Substantially all of Airplanes Group's future business is expected to
consist of aircraft operating lease activities. Airplanes Group may also engage
in aircraft sales subject to certain limitations and guidelines. Airplanes
Group's revenues and operating cash flows are determined by a number of
significant factors including (i) trading conditions in the civil aviation
industry and, in particular, the market for aircraft on operating leases, (ii)
the mix, relative age and popularity of the various aircraft types in the
Portfolio and (iii) Airplanes Group's financial resources and liquidity position
relative to its competitors who may possess substantially greater financial
resources.
The effect of changes in currency rates on Airplanes Group is minimal
because Airplanes Group conducts its business almost entirely in U.S. dollars.
RESULTS OF OPERATIONS -- NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH NINE
MONTHS ENDED DECEMBER 31, 1996.
Airplanes Group results of operations for the nine months ended December
31, 1997 reflected a continuation of reasonably favourable industry conditions
for the period notwithstanding the fact that certain of its lessees continued to
experience difficult trading conditions. Overall there was a net increase in
cash of $105 million in the nine months to December 31, 1997 compared to a net
increase of $20 million in the same period of the previous year. The net
increase in cash in the nine month period to December 31, 1997 was primarily
attributable to the proceeds received of $94 million in respect of the sale of
seven Aircraft, (three DC8-71Fs, two DC10-30Fs and two DC10-30s) the prepayment
of one year's rentals in the amount of $15 million by one South American Lessee
and a reduction in maintenance claims paid for the nine months ended December
31, 1997.
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<PAGE> 99
Overall, there was an increase in the net loss to $112 million for the nine
months to December 31, 1997 compared to $97 million for the nine months to
December 31, 1996 primarily attributable to an increase to net interest expense
due to additional interest of $24 million being charged on accrued but unpaid
Class E Note interest.
LEASING REVENUES
There was a $9 million decrease in leasing revenues for the nine months
ended December 31, 1997 to $450 million (Airplanes Limited: $394 million;
Airplanes Trust: $56 million) compared with $459 million (Airplanes Limited:
$405 million; Airplanes Trust: $54 million) for the nine months ended December
31, 1996. The decrease in 1997 was primarily attributable to the reduced rental
rates for three MD11 Aircraft on lease to Varig which are approximately
one-third lower than the contracted rentals received under such Aircraft's
previous lease agreements which were in effect during the period to December 31,
1996. Leasing revenues were also adversely affected by the restructuring of
leases in respect of six Fokker 100 Aircraft on lease to a Brazilian Lessee with
an average remaining lease term of 29 months. In consideration for an extension
of the leases for 119 months the revised terms of the leases included rental
rates reduced by approximately 24% and no maintenance reserve payments. Finally,
there was a reduction in the number of Aircraft on lease primarily due to the
Aircraft sold in the period ended December 31, 1997. At December 31, 1997
Airplanes Group has 215 of its 221 owned Aircraft on lease (Airplanes Limited:
192 Aircraft; Airplanes Trust: 23 Aircraft) compared to 223 of its 229 owned
Aircraft (Airplanes Limited: 199 Aircraft; Airplanes Trust: 24 Aircraft) at
December 31, 1996. These factors were partially offset by a marginally higher
interest rate environment (which impacts the pricing of certain lease rentals).
AIRCRAFT SALES
Sales revenues of $94 million (Airplanes Limited: $46 million; Airplanes
Trust: $48 million) in respect of the sale of seven Aircraft were received in
the nine months ended December 31, 1997. No Aircraft were sold in the same
period of the previous year. The net book value of these Aircraft at the date of
sale was $90 million (Airplanes Limited: $41 million; Airplanes Trust: $49
million).
DEPRECIATION AND AMORTIZATION
The charge for depreciation and amortization in the nine months ended
December 31, 1997 amounted to $146 million (Airplanes Limited: $129 million;
Airplanes Trust: $17 million) compared with $155 million (Airplanes Limited:
$136 million; Airplanes Trust: $19 million) for the comparative period in 1996.
The decrease arose as a result of the depreciation charge being calculated on
the aircraft book values net of all valuation provisions required, in addition
to a reduction in the number of Aircraft owned by Airplanes Group.
NET INTEREST EXPENSE
Net interest expense amounted to $308 million (Airplanes Limited: $278
million; Airplanes Trust: $30 million) in the nine month period ended December
31, 1997 compared to $286 million (Airplanes Limited: $260 million; Airplanes
Trust: $26 million) in the nine month period ended December 31, 1996. The
increase in net interest expense was primarily due to additional interest being
charged on accrued but unpaid Class E Note interest of $24 million, in addition
to a marginally higher interest rate environment during the nine months to
December 31, 1997. This was partially offset by lower average debt in the nine
months to December 31, 1997 including, in particular, a reduction in the
principal amount of the Subclass A-5 Notes.
The weighted average interest rate on the Class A-D Notes during the nine
months to December 31, 1997 was 6.83% and the average debt in respect of the
Class A-D Notes outstanding during the period was $3,723 million. The Class E
Notes accrue interest at a rate of 20% per annum (as adjusted by reference to
the U.S. consumer price index, effective March 28, 1996). The weighted average
interest rate on the Class A-D
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<PAGE> 100
Notes during the nine months to December 31, 1996 was 6.60% and the average debt
in respect of the Class A-D Notes outstanding during the period was $3,963
million.
The difference between Airplanes Group's $308 million of net interest
expense for the nine months ended December 31, 1997 (Airplanes Limited: $278
million; Airplanes Trust: $30 million) and Airplanes Group's cash paid in
respect of interest of $190 million (Airplanes Limited: $173 million; Airplanes
Trust: $17 million) is substantially accounted for by the fact that Airplanes
Group accrues interest on the Class E Notes at a rate substantially higher than
the per annum rate of 1% actually paid in the period ended December 31, 1997.
Furthermore, as a result of the greater than expected decrease in Aircraft
appraised values as at February 25, 1997 as compared to the Initial Appraised
Values, no interest payments on the Class E Notes were made from February 17,
1997 until July 15, 1997.
Net interest expense is stated after deducting interest income earned
during the relevant period. In the nine months ended December 31, 1997,
Airplanes Group earned interest income (including lessee default interest) of
$12 million (Airplanes Limited: $11 million; Airplanes Trust: $1 million)
comparable to $12 million in the nine months ended December 31, 1996 (Airplanes
Limited: $12 million; Airplanes Trust: nil).
BAD DEBT AND LOSS-MAKING LEASE PROVISIONS
Airplanes Group's practice with respect to bad debts is to provide
specifically for any amounts due but unpaid by Lessees based primarily on an
assessment of the amount due in excess of security held and also taking into
account the financial strength and condition of a lessee and the economic
conditions existing in the Lessee's operating environment. While a small number
of Airplanes Group's Lessees failed to meet their contractual obligations in the
nine month period ended December 31, 1997, resulting in the requirement for
additional provisions in respect of bad and doubtful debts in respect of these
Lessees, the credit exposure with regard to certain other carriers improved in
the period. Overall, there was no net provision required in respect of bad and
doubtful debts in the nine months ended December 31, 1997 comparable with no net
charge required for the nine months ended December 31, 1996. While there was no
overall net charge required in the nine months ended December 31, 1997 there was
a requirement for provisions against receivable balances due from two Turkish
Lessees and one Peruvian Lessee. These, however, were offset by a reduction in
the provisions required in respect of two Mexican Lessees.
A lease agreement is deemed to be "loss making" in circumstances where the
contracted rental payments are insufficient to cover the depreciation and
allocated interest attributable to the aircraft plus certain direct costs, such
as legal fees and registration costs, attributable to the lease over its term.
For these purposes, interest is allocated to individual Aircraft based on the
weighted average interest cost of the remaining principal balance of the Class
A-E Notes (with Class E Note interest assumed to be 11%) or, in periods prior to
March 28, 1996, with indebtedness from GPA equivalent to the appraised value of
such Aircraft at October 31, 1995. In the nine months to December 31, 1997,
there was an overall net "loss making leases" provision utilized of $7 million
(Airplanes Limited: $5 million; Airplanes Trust: $2 million) compared with a net
"loss making leases" provision utilized of $14 million (Airplanes Limited: $9
million; Airplanes Trust: $5 million) in the nine month period to December 31,
1996. The net provision utilized of $7 million in the nine months ended December
31, 1997 is due to the fact that the only significant provisions required were
in respect of leases signed in the three months ended December 31, 1997. Six
Fokker 100 Aircraft on lease to a Brazilian Lessee were restructured in the
three months ended December 31, 1997. The reduced rentals payable under the
revised terms of these Leases required an additional "loss making" lease
provision of approximately $13 million in the three months ending December 31,
1997. In addition, a provision of $4 million was required in respect of one A300
Aircraft which was leased to a Turkish Lessee during November 1997 for five
years.
OTHER LEASE COSTS
Other lease costs in the nine months ended December 31, 1997 amounted to
$22 million (Airplanes Limited: $21 million; Airplanes Trust: $1 million)
compared to other lease costs of $30 million (Airplanes Limited: $23 million;
Airplanes Trust: $7 million) in the nine months to December 31, 1996. The
reduction in
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<PAGE> 101
the charge in the nine months to December 31, 1997, was primarily due to the
fact that in the nine months to December 31, 1996, other lease costs included
provisions for maintenance and other costs of $15 million in respect of two
DC10-30 Aircraft, which were sold on April 4, 1997 and November 10, 1997,
respectively. This was partially offset by an increase in technical costs of $5
million which relate primarily to two B737-200 Aircraft which were redelivered
to Airplanes Group in the three months ended June 30, 1997 and a provision
required of $4 million (including $3 million relating to potential costs payable
to Eurocontrol, the European air traffic control regulator) in respect of three
MD83 Aircraft which were on lease to a Turkish Lessee which ceased to trade on
October 3, 1997. All three MD83 Aircraft have since been de-registered and are
subject to non-binding letters of intent for lease by new operators with
delivery dates during March and April 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the nine month period to
December 31, 1997 amounted to $29 million (Airplanes Limited: $27 million;
Airplanes Trust: $2 million). This is a comparable expense to that incurred in
the nine months to December 31, 1996 of $27 million (Airplanes Limited: $24
million; Airplanes Trust: $3 million).
The most significant element of selling, general and administrative
expenses is the aircraft servicing fees paid to GECAS. Substantially all of
these amounts represent asset based fees calculated as an annual percentage of
agreed values of Aircraft under management pursuant to a servicing agreement.
Selling, general and administrative expenses of $29 million in the nine months
to December 31, 1997 include $20 million (Airplanes Limited: $19 million;
Airplanes Trust: $1 million) relating to GECAS servicing fees as compared to the
expense incurred in respect of GECAS servicing fees in the comparative period to
December 31, 1996 of $18 million (Airplanes Limited: $16 million; Airplanes
Trust: $2 million). The increase is largely attributable to a cashflow incentive
fee.
A further significant element of Airplanes Group's actual selling, general
and administrative expenses reported in the period to December 31, 1997 was $7
million (Airplanes Limited: $6 million; Airplanes Trust: $1 million) in respect
of administrative agency and cash management fees payable to GPA, which is
similar to the charge of $7 million for the period to December 31, 1996
(Airplanes Limited: $6 million; Airplanes Trust: $1 million).
OPERATING LOSS
The operating loss for the nine months ended December 31, 1997 was $114
million (Airplanes Limited: $105 million; Airplanes Trust: $9 million) compared
with an operating loss of $97 million for the nine months ended December 31,
1996 (Airplanes Limited: $86 million; Airplanes Trust: $11 million). Airplanes
Limited and Airplanes Trust expect to continue to report substantial losses in
the future.
TAXES
There was an overall deferred tax benefit of $2 million in the nine months
to December 31, 1997 (Airplanes Limited: $2 million; Airplanes Trust: nil),
compared with no overall tax charge in the same period in 1996 (Airplanes
Limited: a charge of $1 million; Airplanes Trust: a benefit of $1 million).
NET LOSS
The net loss after taxation for the nine months ended December 31, 1997 was
$112 million (Airplanes Limited: $103 million; Airplanes Trust: $9 million)
compared with a net loss after taxation for the nine months ended December 31,
1996 of $97 million (Airplanes Limited: $87 million; Airplanes Trust: $10
million).
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The net increase in cash for the nine months to December 31, 1997 was $105
million compared to $20 million for the nine months to December 31, 1996. The
increase in the net cash generated is primarily as a result of the seven
Aircraft sales and the related increase in the net cash provided by investing
activities.
RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 1997 COMPARED WITH YEAR ENDED
MARCH 31, 1996
During the year ended March 31, 1997 there was a continuation of the
recovery in the air transport industry which had affected Airplanes Group's
results of operations positively in 1996. There was no net increase in the
provision for bad debts in the year ended March 31, 1997 and the number of
aircraft off-lease at March 31, 1997 was six compared with eleven at March
31,1996. In general, however, in each of 1996 and 1997, there was no material
increase in lease rates. The older widebody aircraft (which include A300s, DC10s
and a B747) as well as turboprops (which include ATR42s, Metro-IIIs and DHC8s)
remain problematic in respect of the ability to place the aircraft with lessees,
the lease rates achievable and used aircraft values. At March 31, 1997, of the
six aircraft off lease, two were DC10s and one was an A300. The majority of
older widebody aircraft on lease at March 31, 1997 were loss-making, with the
result that approximately 41% of the loss making lease provision required for
Airplanes Group as a whole was in respect of four A300s and a B747. Furthermore,
the rental rates obtained by Airplanes Group from Varig for three MD-11 Aircraft
were approximately one third lower than the contracted rentals under the
previous lease agreements for these Aircraft and this will adversely affect
Airplanes Group's operating cashflows.
When comparing the results for each of the two entities of Airplanes Trust
and Airplanes Limited, it should be noted that two MD83 aircraft were
transferred from Airplanes Limited to Airplanes Trust in the quarter ending June
30, 1997.
REVENUES
There was a small reduction in revenues for the year ended March 31, 1997
which were $604 million (Airplanes Limited: $532 million; Airplanes Trust: $72
million) compared with $616 million (Airplanes Limited: $556 million; Airplanes
Trust: $60 million) for the year ended March 31, 1996. The small reduction is a
result of marginally lower interest rates in 1997 (which impacts the pricing of
certain lease rentals) partially offset by a greater number of aircraft on
lease. At March 31, 1997, Airplanes Group had 223 Aircraft on lease (Airplanes
Limited: 199 Aircraft; Airplanes Trust: 24 Aircraft) compared with 218 Aircraft
on lease at March 31, 1996 (Airplanes Limited: 197 Aircraft; Airplanes Trust: 21
Aircraft). Maintenance Reserve receipts, which Airplanes Group receives from
certain of its lessees to provide against the future cost of maintaining leased
Aircraft, are included in revenues.
DEPRECIATION AND AMORTIZATION
The charge for depreciation and amortization in the year ended March 31,
1997 amounted to $223 million (Airplanes Limited: $191 million; Airplanes Trust:
$32 million) compared with $207 million (Airplanes Limited: $183 million;
Airplanes Trust: $24 million) for the year ended March 31, 1996. The increased
charge is primarily as a result of additional depreciation (Airplanes Limited:
$9 million; Airplanes Trust: $6 million) required, as a result of the
application of FAS 121, in respect of two DC10 Aircraft. The adoption of FAS 121
did not have a material impact on the results for the year ended March 31, 1997.
These two DC10 Aircraft were sold subsequent to March 31, 1997.
NET INTEREST EXPENSE
Net interest expense amounted to $383 million in the year ended March 31,
1997 (Airplanes Limited: $343 million; Airplanes Trust: $40 million) compared
with $368 million for the year ended March 31, 1996 (Airplanes Limited: $335
million; Airplanes Trust: $33 million). In the period to March 28, 1996, net
interest expense has been determined on the basis set out in Note 2 to the
Financial Statements. This essentially assumes that until March 28, 1996,
Airplanes Group's debt was assumed to be owed to GPA and was approximately equal
to the appraised value of the Aircraft at October 31, 1995 plus the value of
certain receivables acquired from GPA by Airplanes Group. No repayment of
principal was assumed but any excess
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cash generated in Airplanes Group's business while part of GPA was deemed to be
distributed back to GPA. At March 28, 1996, the actual aggregate amount of all
classes of Notes issued was $4,652 million. Of the $604 million Class E Notes
issued, $13 million were cancelled in July 1996 under the terms of the
transaction relating to certain purchase price adjustments. It has been assumed
that the indebtedness assumed owed to GPA at March 28, 1996 was repaid from the
proceeds of the Existing Notes issued. The interest charge has been calculated
until March 28, 1996 based on the assumption that all of the debt accrued
interest at an assumed historic rate (based on GPA's assumed average cost of
debt) of 8.2% in the year ended March 31, 1996.
The interest charge for the year ended March 31, 1997 is based on the
actual debt outstanding during the period and the actual terms of the Existing
Notes and the Class E Notes. The weighted average interest rate on the Class A-D
Notes during the year to March 31, 1997 was 6.61% and the average principal
amount of debt in respect of the Class A-D Notes outstanding during the year was
$3,936 million. The Class E Notes together with accrued and unpaid Class E Note
interest accrue interest at a rate of 20% per annum (as adjusted by reference to
the U.S. consumer price index).
The difference in Airplanes Group's net interest expense and cash paid in
respect of interest in the year to March 31, 1996 is substantially accounted for
by the assumption that Airplanes Group paid cash interest only at the per annum
rate of 1% on the portion of indebtedness to GPA which was assumed, for the
purpose of the financial statements, to be refinanced by the Class E Notes (the
Class E Note Portion). The Class E Note Portion was assumed to represent
approximately 15% of total indebtedness to GPA in each period under review prior
to March 28, 1996.
The difference in Airplanes Group's net interest expense and cash paid in
respect of interest in the year ended March 31, 1997 is substantially accounted
for by the fact that Airplanes Group accrues interest on the Class E Notes at a
rate substantially higher than the per annum rate of 1% actually paid in cash in
the period. Furthermore, as a result of the greater than expected decrease in
Appraised Values (as at February 25, 1997) compared to the Initial Appraised
Values, no cash interest was paid on the Class E Notes from February 17, 1997 to
July 15, 1997.
Net interest expense is stated after deducting interest income earned
during the relevant period. In the year ended March 31, 1997, Airplanes Group
earned interest income (including lessee default interest) of $17 million
(Airplanes Limited: $17 million; Airplanes Trust: nil) compared with $8 million
in the year ended March 31, 1996 (Airplanes Limited: $7 million; Airplanes
Trust: $1 million). The increase is primarily attributable to cash balances in
the year ended March 31, 1997 being higher than those assumed in the period to
March 31, 1996 and a higher level of default interest being earned in the year
to March 31, 1997.
The overall increase in net interest expense for the year ended March 31,
1997, despite marginally lower interest rates, a lower average principal amount
of Class A-D Notes outstanding and higher interest income, is primarily due to
the accrual of interest on outstanding and unpaid accrued Class E Note interest.
BAD DEBT, DOWNTIME AND LOSS-MAKING LEASE PROVISIONS
While certain of Airplanes Group's lessees continued to experience
financial difficulties in the year ended March 31, 1997, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
respect of these lessees, the credit exposure with regard to certain other major
carriers improved in the period reflecting a somewhat improved trading
environment in certain regions. Overall there was no charge required in respect
of the provision for bad and doubtful debts in the year ended March 31, 1997.
This arose principally as a result of the release of provisions in respect of
one Mexican lessee and the use of a provision made in respect of one Indonesian
lessee following the conclusion of a restructuring agreement with the lessee
during 1997. These factors were offset by an increase in the provisions required
in respect of one Indian lessee, one Canadian lessee and one Peruvian lessee.
This is compared with a net credit in respect of bad and doubtful debts for the
year ended March 31, 1996 of $28 million (Airplanes Limited: $27 million;
Airplanes Trust $1 million), primarily as a result of a reduction in significant
provisions required in respect of two Brazilian lessees and one Mexican lessee.
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Following the adoption of FAS 121, with effect from April 1, 1996,
Airplanes Group no longer makes separate provisions in respect of downtime costs
because under FAS 121, Airplanes Group's assessment of the need for downtime
provisions is incorporated in its impairment assessment. (See Note 4(b) to the
Financial Statements). Downtime provisions at March 31, 1996 of $7 million
(Airplanes Limited: $4 million; Airplanes Trust: $3 million) were released
during the year to March 31, 1997. In the year to March 31, 1996, the net
provision released was also $7 million (Airplanes Limited: a release of $8
million; Airplanes Trust: a charge of $1 million).
Due to the continuation of the recovery of the industry during the year
ended March 31, 1997, the provision for loss-making leases at March 31, 1997 had
decreased by $5 million as compared to the provision at March 31, 1996. Overall,
however, the net provision released of $5 million (Airplanes Limited: $1
million; Airplanes Trust: $4 million) in the year to March 31, 1997, was a
reduction compared to the net provision released in the year to March 31, 1996,
of $8 million (Airplanes Limited: $10 million; Airplanes Trust a net charge of
$2 million) which can be primarily attributed to the level of provisions
required in respect of two loss-making leases (one A300 and the B747-200) signed
in the year to March 31, 1997.
OTHER LEASE COSTS
Other lease costs in the year ended March 31, 1997 amounted to $21 million
(Airplanes Limited: $20 million; Airplanes Trust: $1 million) compared with $21
million in 1996 (Airplanes Limited: $20 million; Airplanes Trust: $1 million).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the year to March 31, 1997
amounted to $38 million (Airplanes Limited: $35 million; Airplanes Trust: $3
million). This is slightly higher than selling, general and administrative
expenses incurred in the year to March 31, 1996 of $35 million (Airplanes
Limited: $32 million; Airplanes Trust: $3 million).
The most significant element of selling, general and administrative
expenses is the aircraft servicing fees paid to GECAS. Substantially all of
these amounts represent asset based fees calculated as an annual percentage of
agreed values of Aircraft under management pursuant to a servicing agreement.
Selling, general and administrative expenses of $38 million in the year to March
31, 1997 include $26 million (Airplanes Limited: $24 million; Airplanes Trust:
$2 million) relating to the GECAS servicing fee compared to $22 million
(Airplanes Limited: $20 million; Airplanes Trust: $2 million) for the year ended
March 31, 1996. The increase is largely attributable to a cashflow incentive
fee.
A further significant element of Airplanes Group's actual selling, general
and administrative expenses reported in the period to March 31, 1997 was $9
million (Airplanes Limited: $8 million; Airplanes Trust: $1 million) in respect
of administrative agency and cash management fees payable to GPA. Arrangements
with GPA in respect of administrative agency services and cash management
services only became effective on March 28, 1996.
OPERATING LOSS
The operating loss for the year ended March 31, 1997 was $140 million
(Airplanes Limited: $122 million; Airplanes Trust: $18 million) compared with an
operating loss of $69 million for the year ended March 31, 1996 (Airplanes
Limited: $48 million; Airplanes Trust: $21 million).
TAXES
Tax provisions and deferred tax assets and liabilities have been calculated
as if Airplanes Limited and Airplanes Trust were separate taxable entities from
GPA. There was a tax benefit of $10 million in 1997, primarily as a result of
overprovision of deferred tax in prior years, (Airplanes Limited: $10 million;
Airplanes Trust: nil) compared with a tax benefit of $13 million in 1996
(Airplanes Limited: $5 million; Airplanes Trust: $8 million), as a result of
continuing operating losses.
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NET LOSS
The net loss for 1997 after taxation was $130 million (Airplanes Limited:
$112 million; Airplanes Trust: $18 million) compared with a net loss for the
year ended 1996 of $56 million (Airplanes Limited: $43 million; Airplanes Trust:
$13 million).
RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 1996 COMPARED WITH YEAR ENDED
MARCH 31, 1995
Certain of Airplanes Group's lessees continued to experience difficult
trading conditions in 1995 and to a lesser extent in 1996 and these had an
adverse effect on Airplanes Group's operations for the years ending March 31,
1995 and 1996. There were, however, some signs of improvement in the industry
and certain other significant lessees recorded generally improved trading
performances resulting in the reversal in 1996 of some provisions previously
made in respect of bad and doubtful debts.
REVENUES
Revenues for the year ended March 31, 1996 remained relatively unchanged at
$616 million (Airplanes Limited: $556 million; Airplanes Trust: $60 million)
compared with $608 million (Airplanes Limited: $547 million; Airplanes Trust:
$61 million) for the year ended March 31, 1995, reflecting the relatively
similar portfolio in the periods. At March 31, 1996, Airplanes Group had 218
Aircraft on lease (Airplanes Limited: 197 Aircraft; Airplanes Trust: 21
Aircraft) compared with 221 Aircraft on lease at March 31, 1995 (Airplanes
Limited: 199 Aircraft; Airplanes Trust: 22 Aircraft). Maintenance Reserve
receipts, which Airplanes Group receives from certain of its lessees to provide
against the future cost of maintaining leased Aircraft, are included in
revenues.
DEPRECIATION AND AMORTIZATION
The charge for depreciation and amortization in the year ended March 31,
1996 amounted to $207 million (Airplanes Limited: $183 million; Airplanes Trust:
$24 million) compared with $208 million (Airplanes Limited: $183 million;
Airplanes Trust: $25 million) for the year ended March 31, 1995. The marginally
reduced depreciation in 1996 reflects certain additional valuation provisions
made in 1995, partly offset by depreciation costs for the full twelve month
period to March 31, 1996 in respect of Aircraft which were acquired by GPA in
1995 (and not therefore reflected in results for the entire year ended March 31,
1995).
NET INTEREST EXPENSE
The interest charge has been calculated until March 28, 1996 based on the
assumption that all of the debt bears interest at assumed historic rates (based
on GPA's assumed average cost of debt) of 7.83% and 8.25% in the years ended
March 31, 1995 and 1996, respectively. In the period from March 28, 1996 to
March 31, 1996, interest expense has been based on the terms of the Existing
Notes issued.
On the basis assumed, net interest expense amounted to $368 million in the
year ended March 31, 1996 (Airplanes Limited: $335 million; Airplanes Trust: $33
million) compared with $348 million for the same period ending March 31, 1995
(Airplanes Limited: $317 million; Airplanes Trust $31 million). The increase in
1996 was primarily attributable to the increase in the assumed rates. The
difference in Airplanes Group's net interest expense and cash paid in respect of
interest is substantially accounted for by the assumption that Airplanes Group
paid cash interest of only 1% on the portion of indebtedness to GPA which was
originally assumed for the purposes of the Financial Statements to be refinanced
by the Class E Notes (originally assumed to represent approximately 15% of total
indebtedness to GPA in each period under review until March 28, 1996).
BAD DEBT, DOWNTIME AND LOSS-MAKING LEASE PROVISIONS
While certain of Airplanes Group's lessees continued to experience
financial difficulties in the year ended March 31, 1996, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
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respect of these lessees, the credit exposure with regard to certain other major
carriers improved in the period reflecting a somewhat improved trading
environment in certain regions. Overall, as a result of the improved payment
performance of certain lessees and also reflecting the conclusion of
restructuring arrangements with certain other lessees, there was a net credit in
respect of bad and doubtful debts of $28 million (Airplanes Limited: $27
million; Airplanes Trust: $1 million) in the year ended March 31, 1996 primarily
as a result of a reduction in the significant provisions required in respect of
two Brazilian lessees and one Mexican lessee. This is compared with a net charge
in respect of bad and doubtful debts for the year ended March 31, 1995 of $33
million (Airplanes Limited: $34 million; Airplanes Trust: a credit of $1
million).
Prior to the year ended March 31, 1997, Airplanes Group provided for
downtime costs based on an estimated re-lease date of the particular Aircraft
off-lease. Downtime costs included depreciation, allocated interest (determined
as set forth below in the context of provisions for "loss-making" leases) and
any other directly attributable costs for the specific Aircraft for the
estimated off-lease period. Downtime provisions released for the year to March
31, 1996, were $7 million (Airplanes Limited: $8 million; Airplanes Trust: a net
charge of $1 million) as compared to the provision required of $9 million
(Airplanes Limited: $9 million; Airplanes Trust: nil) for the year to March 31,
1995. This is a reflection of the recovery of the industry during the year to
March 31, 1996.
The recovery of the air transport industry during the year ended March 31,
1996 was also reflected in the provision required for loss-making leases which
decreased by $8 million compared to the provision at March 31, 1995. The net
provision released of $8 million (Airplanes Limited: $10 million released;
Airplanes Trust: a net charge of $2 million) in the year ended March 31, 1996,
was an increase compared to the $4 million released (Airplanes Limited: $5
million released; Airplanes Trust: a net charge of $1 million) in the year ended
March 31, 1995.
OTHER LEASE COSTS
Other lease costs in the year ended March 31, 1996 amounted to $21 million
(Airplanes Limited: $20 million; Airplanes Trust: $1 million) compared with $17
million in 1995 (Airplanes Limited: $16 million; Airplanes Trust: $1 million).
This increase is substantially attributable to increased maintenance related
costs arising from default by certain lessees during 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The most significant element of selling, general and administrative
expenses is the aircraft management fees paid to GECAS. For purposes of the
Financial Statements, substantially all of these amounts represent asset based
fees calculated as an annual percentage of agreed values of Aircraft under
management. The balance of Airplanes Group's selling, general and administrative
expenses has been based on GPA's historic overhead (but excluded any of GPA's
restructuring or litigation costs) and apportioned between GPA and Airplanes
Group in the same proportion that lease rental revenues generated by the
Aircraft in the period under review bears to lease rental revenues generated by
GPA's aircraft that were not sold to Airplanes Group. On this basis, selling,
general and administrative expenses of $35 million in 1996 (Airplanes Limited:
$32 million; Airplanes Trust: $3 million) include $22 million (Airplanes Group:
$20 million; Airplanes Trust: $2 million) relating to GECAS management fees.
This is a similar charge to that incurred in the year ended March 31, 1995.
Selling, general and administrative expenses for the year ended March 31, 1995
were $34 million (Airplanes Limited: $31 million; Airplanes Trust: $3 million).
OPERATING LOSS
The operating loss for the year ended March 31, 1996 was $69 million
(Airplanes Limited: $48 million; Airplanes Trust: $21 million) compared with an
operating loss of $125 million for the year ended March 31, 1995 (Airplanes
Limited: $112 million; Airplanes Trust: $13 million).
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TAXES
Tax provisions and deferred tax assets and liabilities have been calculated
as if Airplanes Limited and Airplanes Trust were separate taxable entities from
GPA. There was a tax benefit of $13 million in 1996 (Airplanes Limited: $5
million; Airplanes Trust: $8 million) compared with a tax benefit of $16 million
in 1995 (Airplanes Limited: $11 million; Airplanes Trust: $5 million),
reflecting the lower operating losses in 1996.
NET LOSS
The net loss for 1996 after taxation was $56 million (Airplanes Limited:
$43 million; Airplanes Trust: $13 million) compared with a net loss for the year
ended 1995 of $109 million (Airplanes Limited: $101 million; Airplanes Trust: $8
million). The reduction in the net loss for the year ended March 31, 1996 was
significantly affected by the reduction in provisions for bad and doubtful debts
made during the period reflecting the improved trading performance of certain
lessees.
FINANCIAL RESOURCES AND LIQUIDITY
OVERVIEW
Prior to the 1996 Offering, Airplanes Group had not operated as a separate
business and consequently, had not been financed as such. GPA managed its cash
resources centrally and cash generated by the subsidiaries of Airplanes Limited
and Airplanes Trust was assumed to be transferred to GPA for the purpose of
servicing GPA's indebtedness.
LIQUIDITY
Airplanes Group's Statements of Cash Flows prior to the period ended March
28, 1996 have been prepared on the assumption that Airplanes Group maintained
constant cash balances of approximately $135 million. The cash balances at
December 31, 1997 amounted to $330 million (Airplanes Limited: $324 million;
Airplanes Trust $6 million) compared to cash balances at December 31, 1996 of
$240 million (Airplanes Limited: $234 million; Airplanes Trust: $6 million).
OPERATING ACTIVITIES
Operating cash flows depend on many factors including the performance of
lessees and Airplanes Group's ability to re-lease Aircraft, the average cost of
the Notes, the efficacy of Airplanes Group's interest rate hedging policies, the
ability of Airplanes Group's swap providers to perform under the terms of their
swap and similar obligations and whether Airplanes Group will be able to
refinance certain subclasses of Notes that have not been repaid with lease cash
flows.
Nine Months Ended December 31, 1997 Compared with Nine Months Ended December 31,
1996
Net cash provided by operating activities in the nine months ended December
31, 1997 amounted to $177 million (Airplanes Limited: $186 million; Airplanes
Trust: $(9) million) compared with $182 million in the nine months ended
December 31, 1996 (Airplanes Limited: $169 million; Airplanes Trust: $13
million). This reflects cash paid in respect of interest of $190 million in the
nine months to December 31, 1997 (Airplanes Limited: $173 million; Airplanes
Trust: $17 million) compared with $200 million in the nine months to December
31, 1996 (Airplanes Limited: $182 million; Airplanes Trust $18 million). The
decrease in cash from operations generated in the nine month period to December
31, 1997 is primarily attributable to the increase in both maintenance claims
and technical costs for the nine months ended December 31, 1997 as compared to
the nine months ended December 31, 1996. In addition, in the period to December
31, 1996 there was a receipt from GPA of $13 million pursuant to the purchase
price adjustment provisions of Airplanes Group's agreement to acquire certain
subsidiaries of GPA Group resulting in an increase in the cash provided by
operating activities during 1996. These factors were partially offset by the
prepayment during December 1997 of one year's rentals in the amount of $15
million by one South American Lessee.
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Year Ended March 31, 1997 Compared With Year Ended March 31, 1996
Net cash provided by operating activities amounted to $224 million in the
fiscal year ended March 31, 1997 (Airplanes Limited: $214 million; Airplanes
Trust: $10 million), compared with $216 million in the fiscal year ended March
31, 1996 (Airplanes Limited: $196 million; Airplanes Trust: $20 million). This
reflects cash paid in respect of interest of $265 million in the fiscal year
ended March 31, 1997 (Airplanes Limited: $237 million; Airplanes Trust: $28
million), compared with $323 million in the fiscal year ended March 31, 1996
(Airplanes Limited: $294 million; Airplanes Trust: $29 million). See above for a
discussion of the basis upon which Airplanes Group's interest charge and cash
paid in respect of interest has been calculated. In addition, depreciation and
amortization amounted to $223 million in the fiscal year ended March 31, 1997
(Airplanes Limited: $191 million; Airplanes Trust: $32 million), compared with
$207 million in the fiscal year ended March 31, 1996 (Airplanes Limited: $183
million; Airplanes Trust: $24 million). The decrease in net Aircraft maintenance
cash flows (included in net cash provided by operating activities), which were
$43 million in the year ended March 31, 1996 compared to $2 million in the year
ended March 31, 1997, is primarily attributable to a refund of $18 million of
maintenance receipts to a lessee which were replaced by letters of credit and
the balance consists of maintenance claims.
The cash provided by operating activities in the year ended March 31, 1997
also reflects an increase in accruals and other liabilities of $21 million which
relates primarily to an increase in deposits, unearned revenue and other
accruals due to the timing of payments during the year ended March 31, 1997
compared to the year ended March 31, 1996. The cash provided by operating
activities in the year ended March 31, 1996 reflects a decrease in accruals and
other liabilities of $19 million primarily relating to the change from assumed
accruals and other liabilities in the year ended March 31, 1995 to an actual
level of accruals and other liabilities following March 28, 1996.
INVESTING AND FINANCING ACTIVITIES
In the year ended March 31, 1996, no use of cash to repay indebtedness was
assumed other than distributions and transfers back to GPA of cash in amounts
required to restore Airplanes Group's cash balance to $220 million at March 31,
1996. These distributions and transfers back have been treated as increases in
Airplanes Group's net liabilities and amounted to $176 million in 1996
(Airplanes Limited: $147 million; Airplanes Trust: $29 million).
In the year ended March 31, 1997, Airplanes Group repaid $238 million
(Airplanes Limited: $216 million; Airplanes Trust: $22 million) of Subclass A-5
Notes and Class B Notes.
Cash flows from investing activities in the nine months to December 31,
1997 primarily reflect the proceeds from the sale of seven aircraft. These
aircraft consist of three DC8-71F aircraft sold to Emery, two DC10-30F aircraft
sold to Varig under the early exercise of purchase options and two DC-10
aircraft, one of which was sold to DAS Air Cargo and the other to Gemini Air
Cargo. In addition, the insurance proceeds in respect of one DC-9 aircraft,
formerly on lease to a Mexican Lessee, which suffered a constructive total loss
during October 1997, were received in December 1997. Cash flows from financing
activities in the nine months to December 31, 1997 primarily reflect the
repayment of $175 million of principal on Subclass A-5 and Class B Notes by
Airplanes Group (Airplanes Limited: $159 million; Airplanes Trust: $16 million)
compared to $175 million of principal on Subclass A-5 and Class B Notes repaid
by Airplanes Group (Airplanes Limited: $163 million; Airplanes Trust: $12
million) in the nine months to December 31, 1996.
Cash flows from investing activities are expected to be significantly
greater in the three months ended March 31, 1998 as a result primarily of
Airplanes Group's recent agreement with Emery for the sale of nine DC8 Aircraft
to Emery for an aggregate price that meets the aggregate Note Target Price.
INDEBTEDNESS
General
Airplanes Group's indebtedness consisted of the Class A-E Notes in the
amount of $4,112 million (Airplanes Limited: $3,742 million; Airplanes Trust:
$370 million) at February 17, 1997. Airplanes Group
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had $591 million in Class E Notes outstanding at February 16, 1997. In order to
repay principal on the Subclass A-2, A-3, A-4 and A-6 Notes on their Expected
Final Payment Dates, Airplanes Group will have to refinance such Notes in the
capital markets. In order to avoid stepped up interest costs, $750 million of
Subclass A-2 Notes, $500 million of Subclass A-3 Notes, $200 million of Subclass
A-4 Notes and $ million of Subclass A-6 Notes will have to be
refinanced through the sale of further pass-through certificates in 1999, 2001,
2003 and respectively. There can be no assurance that the Trust will
be able to sell further pass-through certificates in the amounts and at the
times required and any failure to do so may have the impact of increasing
Airplanes Group's borrowing costs.
1998 Aircraft Value Appraisals
Under the terms of the Notes, Airplanes Group is required annually to
commission an appraisal of the Aircraft. The purpose of the appraisal is to
redirect, when appropriate, excess cash flow to the Class A Notes and to
maintain and reduce the loan to value ratios for each class of Notes. Reductions
in appraised values cannot affect interest payments to be made on the Class A-D
Notes, but can cause the suspension of scheduled principal payments on the Class
C and D Notes (which are scheduled to commence in May 1998 and 1999,
respectively) and interest payments on the Class E Notes.
Updated appraisals of the Aircraft were obtained by Airplanes Group on
January 23, 1998. On the basis of these three updated appraisals, the average
appraised Base Value of the Aircraft in the Portfolio at January 23, 1998 was
approximately $3,813 million ($3,859 million prior to giving effect to the
delivery of three aircraft to Emery as if such deliveries had occurred prior to
January 23, 1998) compared with $4,034 million ($4,085 million prior to giving
effect to the delivery of three aircraft to Emery as if such deliveries had
occurred prior to January 23, 1998) based on the February, 1997 appraisals. This
decrease was approximately $83 million more ($84 million more prior to giving
effect to the delivery of three aircraft to Emery as if such deliveries had
occurred prior to January 23, 1998) than the expected decrease implied by the
aircraft depreciation schedules that form part of the terms of the Notes.
Greater than assumed decreases in value occurred across the Portfolio with
significant impacts resulting from decreases in values of Fokker 100s and, to a
lesser extent, MD11s and MD83s. These greater than expected decreases were due
primarily, in the case of the Fokker 100s, to Fokker exiting the industry, and
in the case of the MD11s and MD83s, to the Boeing/McDonnell Douglas merger.
Airplanes Group also suffered greater than expected decreases in value of its
B767 300ER Aircraft due in part to the competition this aircraft type now faces
from the relatively new A330-200 aircraft. Finally, greater than expected
decreases also occurred with respect to the values of A320-200s and
B737-300/400/500s due primarily to continued price discounting by Boeing and
Airbus.
Although the decrease in appraised base values was approximately $84
million greater than the depreciation assumed under the terms of the Notes,
Airplanes Group's cashflow generation since March 28, 1996 (the date of issue of
the Notes) has also exceeded original assumptions and a Class A Principal
Adjustment Amount of only $7 million is expected to be required to be made on
the February 17, 1998 Payment Date. See "Cashflow Performance Relative to March
1996 Assumptions" below. Accordingly, there will be no suspension of payments
ranking more junior to the Class A Principal Adjustment Amount, such as Class C
Scheduled Principal and Class E Minimum Interest, as a result of the 1998
Aircraft appraisals.
Cashflow Performance Relative to March 1996 Assumptions
The March 28, 1996 prospectus relating to the Certificates and underlying
Notes contained various assumptions (the "1996 ASSUMPTIONS") regarding Airplanes
Group's future revenues and cash inflows. In the period from March 28, 1996 to
the January 9, 1998 Calculation Date, Airplanes Group generated cashflows of
$172 million in excess of the 1996 Assumptions.
Lease revenues have exceeded the Assumptions by $36 million primarily as
the downtime and default experience of Airplanes Group has been better than
assumed in March 1996 and also because of the prepayment in December 1997 by one
South American lessee of one year's rental in the amount of $15 million. Lease
revenues have been greater than assumed in March 1996 partially as a result of a
higher interest rate environment than was reflected in the 1996 Assumptions. Net
maintenance reserve cashflows
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have exceeded the 1996 Assumptions by approximately $28 million (the 1996
Assumptions assumed that net maintenance cashflows would be zero). The most
significant factor contributing to the greater cashflow generation relative to
the Assumptions, however, was sales proceeds of $94 million from the sale of
seven Aircraft (three DC8-71Fs, two DC10-30Fs and two DC10-30s). The 1996
Assumptions reflected no sales of Aircraft. Airplanes Group's cashflows in the
period have been positively affected by the receipt of cash from other sources
which the 1996 Assumptions had assumed would be cash neutral such as purchase
price adjustment payments from GPA ($13 million), default interest paid by
Lessees ($5 million), net Lessee security deposits retained ($4 million) and
Aircraft insurance proceeds from insurers ($3 million). A number of other items,
including interest earnings on cash balances, resulted in gross revenues
exceeding the 1996 Assumptions for the period to January 9, 1998 by
approximately $9 million.
The positive contributions to Airplanes Group's cashflows relative to the
1996 Assumptions were partially offset by other leasing costs being
approximately $10 million greater than assumed in March 1996 primarily as a
result of technical costs arising on conversion of one B747 Aircraft. In
addition, as a result of considerable costs incurred in the repossession of
Aircraft from a number of lessees, repossession costs were $3 million greater
than those contained in the 1996 Assumptions. Finally, the 1996 Assumptions
reflected a receipt of $4 million in respect of a finance lease but this cash
was not received due to the restructuring of the lease.
In the period of January 9, 1998, Airplanes Group's actual selling, general
and administrative expenses and net interest rate swap payments were
approximately the same as those reflected in the 1996 Assumptions. With respect
to the Notes and Class E Notes, the increase in gross revenues compared with the
1996 Assumptions resulted in greater than assumed distributions of principal to
the Subclass A-5 Certificate holders ($123 million greater than assumed) and to
the Class B Certificate holders ($9 million greater than assumed). There were
also higher interest payments to the floating rate Class A and Class B
Certificate holders as a result of the higher interest rate environment that
actually prevailed in the period to January 9, 1998 compared with the interest
rate levels reflected in the 1996 Assumptions. The impact of generally higher
than assumed interest rates was partially offset, however, by the lower
principal balances outstanding due to the greater than assumed principal
amortisation. In addition, payments of $3 million in respect of the minimum and
supplemental hedge amounts in the period were not assumed in March 1996.
These factors were partially offset by lower distributions of interest to
the Class E Note holders in the amount of $2 million as a result of the
cancellation of $13 million of Class E Note Principal due to the purchase price
adjustment and the deferral of the Class E Note coupon during the period from
February to July 1997 as a result of a fall in the February 25, 1997 Aircraft
appraisals.
As at the January 9, 1998 Calculation Date, Airplanes Group retained $23
million in the Collection and Expense Accounts more than anticipated in the 1996
Assumptions. Included in this $23 million is an amount in respect of costs
(including underwriting fees) expected to be incurred in the refinancing of the
Subclass A-1 Certificates which is expected to occur in March 1998.
INTEREST RATE MANAGEMENT
The leasing revenues of Airplanes Group are generated primarily from Lease
rental payments which are either fixed or floating. In the case of floating rate
Leases, an element of the rental varies in line with changes in LIBOR, generally
six-month LIBOR. Some Leases carry fixed and floating rental payments for
different rental periods. Slightly more than half of the Leases are fixed rate
Leases and there has been an increasing tendency for fixed rate Leases to be
written.
In general, an interest rate exposure arises to the extent that Airplanes
Group's fixed and floating interest obligations in respect of the Class A-D
Notes do not correlate to the mix of fixed and floating rental payments for
different rental periods. This interest rate exposure can be managed through the
use of interest rate swaps. The Class A and B Notes bear floating rates of
interest and the Class C and D Notes bear fixed rates of interest. The mix of
fixed and floating rental payments contains a higher percentage of fixed rate
payments than the percentage of fixed rate interest payments on the Notes,
including as a result of the fact that the reset periods on floating rental
payments are generally longer than the monthly reset periods on the Floating
Rate Notes. In order to correlate the contracted fixed and floating rental
payments to the fixed and floating interest
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payments on the Notes, Airplanes Group enters into interest rate swaps (the
"SWAPS"). Under the Swaps, Airplanes Group pays fixed amounts and receives
floating amounts on a monthly basis. The Swaps amortize having regard to the
expected paydown schedule of the Class A and B Notes, the expiry dates of the
leases under which lessees are contracted to make fixed rate rental payments and
the LIBOR reset dates under the floating rate leases. At least every three
months, and in practice more frequently, GPA Financial, as Airplanes Group's
Administrative Agent seeks to enter into additional swaps or sell at market
value or unwind part or all of the Swaps and any future swaps in order to
rebalance the fixed and floating mix of interest obligations and the fixed and
floating mix of rental payments. At December 31, 1997, Airplanes Group had
unamortized Swaps with an aggregate notional principal balance of $2,680
million. The aggregate notional principal balance of these Swaps will be reduced
to $1,880 million by the fiscal year ended March 31, 1998. These Swaps will be
further reduced to an aggregate notional principal balance of $785 million by
the year ended March 31, 1999, to an aggregate notional principal balance of
$385 million by the year ended March 31, 2000 and to an aggregate notional
principal balance of $115 million by the year ended March 31, 2001. None of the
Swaps have maturity dates extending beyond August 2001. The fair values of the
Swaps at December 31, 1997 was a negative $2.8 million.
Additional interest rate exposure will arise to the extent that Lessees
owing fixed rate rental payments default and interest rates have declined
between the contract date of the Lease and the date of default. This exposure is
managed through the purchase of options on interest rate swaps ("SWAPTIONS").
Airplanes Group purchases Swaptions which, if exercised, will allow Airplanes
Group to enter into interest rate swap transactions under which it will pay
floating amounts and receive fixed amounts. These Swaptions can be exercised in
the event of defaults by Lessees owing fixed rate rental payments in
circumstances where interest rates have declined since the contract date of such
Leases. Because not all Lessees making fixed rate rental payments are expected
to default and not all Lessee defaults are expected to occur following a decline
in interest rates, Airplanes Group purchases Swaptions in a notional amount less
than the full extent of the exposure associated with the Lessees making fixed
rate rental payments. This notional amount (the "TARGET HEDGE") will be varied
from time to time to reflect, among other things, changes in the mix of payments
bases under future leases and in the prevailing level of interest rates. On each
Payment Date Airplanes Group purchases Swaptions with an aggregate notional
amount equal to the quotient of (i) the difference, if positive, between the
Target Hedge and aggregate notional amount of Swaptions owned by Airplanes Group
immediately prior to such purchase divided by (ii) the number of Payment Dates
remaining until the Payment Date in May 1998 or, after May 15, 1998, one. The
payment of premium for any such Swaptions may be made at two points in the
Priority of Payments. Fifty percent of any such payment for any month is a
"MINIMUM HEDGE PAYMENT" and is paid in the order of priority of payments set
forth under "Description of Securities -- The Notes and the Guarantees --
Priority of Payments". The other 50% of any such premium payable is expended as
a "SUPPLEMENTAL HEDGE PAYMENT" and is paid in the order of priority of payments
set forth under "Description of Securities -- The Notes and the Guarantees --
Priority of Payments". If there are not sufficient amounts available for
distribution, with the result that a Supplemental Hedge Payment would not be
made, then Airplanes Group will reduce the aggregate notional amount of the
Swaptions bought in any given month to reflect the amount that can be bought for
the premium payable as a Minimum Hedge Payment. From time to time the
Administrative Agent may also sell at market value or unwind part or all of the
initial and any future Swaptions, for example, to reflect any decreases in the
Target Hedge.
In the period from March 28, 1996 to December 31, 1997, Airplanes Group
purchased Swaptions with an aggregate notional principal balance of $177 million
and sold Swaptions with an aggregate notional principal balance of $25 million.
The net aggregate notional principal balance of Swaptions at December 31, 1997
therefore amounted to $152 million. The fair value of the Swaptions at December
31, 1997 was $1.5 million and because the Swaptions do not qualify for hedge
accounting under U.S. GAAP, this amount has been included in income for the nine
months ended December 31, 1997.
Through the use of Swaps, Swaptions and other interest rate hedging
products, it is Airplanes Group's policy not to be adversely exposed to material
movements in interest rates. There can be no assurance, however, that Airplanes
Group's interest rate risk management strategies will be effective in this
regard.
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The Directors of Airplanes Limited and the Controlling Trustees of
Airplanes Trust are responsible for reviewing and approving the overall interest
rate management policy and transaction authority limits. Specific hedging
contracts are approved by officers of the Administrative Agent acting within the
overall policies and limits. Counterparty risk is monitored on an ongoing basis.
Counterparties are subject to the prior approval of the Directors of Airplanes
Limited and the Controlling Trustees of Airplanes Trust. Airplanes Group's
counterparties consist of the affiliates of major U.S. and European financial
institutions whose credit ratings are consistent with maintaining the ratings of
the Class A Certificates.
YEAR 2000 ISSUE
Many existing computer systems use only two digits to identify a year in
the date field. These systems were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. Airplanes Group has recently begun a process of assessing the potential
impact of this issue (the "YEAR 2000 ISSUE") on its operations. Because all of
its operational functions have been delegated to the Servicer, Administrative
Agent and Cash Manager in accordance with the terms of their respective service
agreements, Airplanes Group has no information systems of its own. Airplanes
Group may, however, suffer a material adverse impact on its business and results
of operations if information technology upon which the Servicer, Administrative
Agent and Cash Manager rely is not Year 2000 compliant. The Servicer,
Administrative Agent and Cash Manager are in the process of reviewing their Year
2000 exposure and identifying the steps that will need to be taken to ensure
that their systems are Year 2000 compliant.
Airplanes Group may also suffer an adverse impact on its business and
results of operations if its suppliers, financial institutions, technical
advisors, Lessees and others with which it conducts business are not Year 2000
compliant. The Servicer is currently preparing a survey of the third parties
with which it deals on behalf of Airplanes Group to determine the extent of such
third parties' exposure to the Year 2000 Issue and the status of their Year 2000
compliance efforts.
In addition, aircraft and air traffic control infrastructure depend heavily
upon microprocessors and software technology. Major manufacturers, including
Boeing, have begun a Year 2000 review of the systems employed on their aircraft
and are expected to advise owners, operators and service providers of the steps
to be taken to address any Year 2000 problems that are identified. Among the
aircraft systems that have been identified as being susceptible to Year 2000 are
certain on-board aircraft management and navigation systems. The Servicer is
also preparing a survey of aircraft and aircraft parts manufacturers and
suppliers to determine the extent to which their products are Year 2000
compliant. These review programs are still at a relatively early stage and thus,
the nature and the extent of the risks posed by the potential failure of
aircraft and aircraft control systems as a result of Year 2000 problems has not
been fully determined. Any failure of the systems employed by Airplanes Group's
Aircraft to be Year 2000 compliant could have a material adverse effect on
Airplanes Group's business and results of operations. Moreover, it is currently
not clear whether or to what extent manufacturers, owners or lessees will be
responsible for the costs necessary to bring aircraft systems into Year 2000
compliance.
Because the assessment of the Year 2000 risks relevant to Airplanes Group
is still at an early stage, Airplanes Group is currently not able to make any
estimate of the amount, if any, it may be required to spend to remediate Year
2000 issues. Such expenditures could, however, have a material adverse impact on
the ability of Airplanes Group to make payments on the Notes.
THE ACCOUNTS
Substantially all of Airplanes Group's cash inflows and outflows occur
through certain bank accounts prescribed by the Trust Indentures and the
Security Trust Agreement, which the Cash Manager, acting on behalf of the
Security Trustee, has established. The accounts are as follows: (i) the
Collection Account, (ii) the Lessee Funded Account, (iii) the Expense Account
and (iv) the Rental Accounts. Each of the Collection Account, the Expense
Account, most of the Rental Accounts and the Lessee Funded Account have been
established at a bank having (i) a long-term unsecured debt rating of not less
than AA, or the equivalent,
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by certain rating agencies or (ii) a certificate of deposit rating of A-1+ by
Standard & Poor's, P-1 by Moody's and that is acceptable to other relevant
rating agencies. Where required by the terms of the relevant leases, certain
Rental Accounts may be established at banks having ratings of less than AA, or
the equivalent, by certain rating agencies or a certificate of deposit rating of
less than A-1+ by Standard & Poor's and P-1 by Moody's. Except where local legal
or regulatory reasons do not permit, all of such accounts are held in the names
of the Security Trustee, who has sole dominion and control over the Accounts,
including, among others, the sole power to direct withdrawals from or transfers
among such accounts. Subject to certain conditions set forth in the Cash
Management Agreement, the Security Trustee has delegated such authority over the
Accounts to the Cash Manager; provided that the Security Trustee is not
responsible for the acts or omissions of the Cash Manager.
For as long as any Notes remain outstanding, funds on deposit in the
Accounts will be invested and reinvested at Airplanes Group's written direction
(which direction may be delegated, at Airplanes Group's discretion, to the Cash
Manager pursuant to the terms of the Cash Management Agreement) in one or more
investments permitted under the Trust Indentures, maturing, in the case of the
Collection Account and Expense Account, such that sufficient funds shall be
available to make required payments on the first succeeding scheduled interest
payment date on the Notes after such investments are made; provided that
investment and reinvestment of funds in the Lessee Funded Account must be made
in a manner and with maturities that conform to the requirements of the related
leases. Investment earnings on funds deposited in any Account, net of losses and
investment expenses, will, to the extent permitted by the terms of such related
leases in the case of such funds in the Lessee Funded Account, be deposited in
the Collection Account and treated as collections.
RENTAL ACCOUNTS
The Lessees make all payments under the Leases directly into the applicable
Rental Accounts. Pursuant to the Cash Management Agreement, the Cash Manager
transfers, or causes to be transferred, all funds deposited into the Rental
Accounts into the Collection Account as collections within one business day of
receipt thereof (other than certain limited amounts, if any, required to be left
on deposit for local legal or regulatory reasons).
THE COLLECTION ACCOUNT
Collections include all amounts received by Airplanes Group, including (i)
Rental Payments, (ii) payments under any letter of credit, letter of comfort,
letter of guarantee or other assurance in respect of a Lessee's obligations
under a Lease, (iii) the Liquidity Reserve Amount in the Collection Account,
(iv) amounts received in respect of claims for damages or in respect of any
breach of contract for nonpayment of any of the foregoing (including any amounts
received from any Airplanes Group subsidiary, whether by way of distribution,
dividend, repayment of a loan or otherwise and any proceeds received in
connection with a Lessee's restructuring), (v) net proceeds of any Aircraft sale
or amounts received under certain agreements or purchase options under which a
person acquires or is entitled to acquire legal title, or the economic benefits
of ownership of an Aircraft, (vi) proceeds of any insurance payments in respect
of any Aircraft or any indemnification proceeds, (vii) certain amounts
transferred from the Lessee Funded Account to the Collection Account, (viii) net
payments to Airplanes Group under any Swap Agreement, (ix) investment income, if
any, on all amounts on deposit in the accounts (in each case to the extent
consistent with the terms of applicable related leases) and (x) any other
amounts received by any member of Airplanes Group other than certain funds
required to be segregated from Airplanes Group's other funds, certain funds to
be applied in connection with a redemption, certain funds received in connection
with a refinancing issue of Notes and certain amounts required to be paid over
to any third-party (collectively, the "COLLECTIONS").
Collections on deposit in the Collection account are calculated by the Cash
Manager on the fourth business day immediately preceding each interest payment
date. The portion of the Airplanes Group Expenses that are due and payable or
anticipated to become due and payable over the next interest accrual period on
the Notes (the "REQUIRED EXPENSE AMOUNT") and that have not been paid directly
by the Cash Manager to Expense payees is transferred into the Expense Account on
each interest payment date and the Cash Manager
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may, from time to time, transfer other amounts into the Expense Account in
respect of unanticipated Expenses falling due and payable within such interest
accrual period. To the extent funds are available therefor on any interest
payment date, the Cash Manager also transfers amounts in respect of expenses and
costs that are not regular, monthly recurring expenses but are anticipated to
become due and payable in any future interest accrual period ("PERMITTED
ACCRUALS"). Amounts received in respect of certain segregated Security Deposits
and Maintenance Reserves are transferred directly into the Lessee Funded
Account.
LIQUIDITY RESERVE AMOUNT
All Collections received by Airplanes Group are either transferred to
another Account as described above and below, paid to the appropriate third
party on behalf of Airplanes Group or held in the Collection Account as a part
of the "LIQUIDITY RESERVE AMOUNT", a balance required to be held by Airplanes
Group in the Collection Account pursuant to the Cash Management Agreement and
each Trust Indenture. The Liquidity Reserve Amount is (i) the Maintenance
Reserve Amount, currently equal to $80 million as of December 31, 1997, (ii) a
"SECURITY DEPOSIT RESERVE AMOUNT", equal to approximately $59.4 million as of
December 31, 1997, and (iii) a "MISCELLANEOUS RESERVE AMOUNT", equal to $40
million as of December 31, 1997.
The Liquidity Reserve Amount at February 10, 1998 equaled approximately
$174.4 million and may be increased or decreased from time to time by an action
of the Board of Directors or Board of Controlling Trustees in light of
significant changes in, among other things, the condition of the Aircraft, the
terms and conditions of future leases, the financial condition of the lessees or
prevailing industry conditions; provided that the Airplanes Group will obtain
confirmation in advance in writing from the applicable rating agencies that any
such proposed reduction in the Liquidity Reserve Amount (other than a reduction
attributable solely to a decrease in the Security Deposit Reserve Amount as a
result of Airplanes Group entering into future leases requiring lower security
deposits than expired leases) will not result in a lowering or withdrawal by any
such rating agencies of their respective ratings of any class of Certificates.
If the balance of funds on deposit in the Collection Account should fall below
the Liquidity Reserve Amount at any time (including as a result of Airplanes
Group's determination that the Liquidity Reserve Amount should be increased, as
required by the applicable rating agencies or otherwise), Airplanes Group may
continue to make all payments, including required payments on the Notes, which
rank prior to, or equally with, payments of accrued and unpaid interest on the
Class D Notes and any Permitted Accruals, provided that the balance of funds in
the Collection Account does not fall below the sum of the Maintenance Reserve
Amount and the Miscellaneous Reserve Amount at their then current levels.
However, the balance of funds in the Collection Account may fall below the sum
of the Maintenance Reserve Amount and the Miscellaneous Reserve Amount, at their
then current levels, and Airplanes Group may continue to make payments of (i)
all accrued and unpaid interest on, and, on the final maturity date of any class
or subclass thereof, principal of such class or subclass of, the most senior
class of Notes then outstanding to avoid a Note Event of Default; and (ii)
payments under Airplanes Group's swap agreements.
At such time as the aggregate outstanding principal balance of the Notes is
less than or equal to the Liquidity Reserve Amount, the balance of funds, if
any, in the Collection Account will be distributed in accordance with the
priority of payments established for the Notes.
THE LESSEE FUNDED ACCOUNTS
Pursuant to the terms of the Leases, certain Lessee Security Deposits and
supplemental rent payments to provide for Maintenance Reserves may be required
to be segregated from other Airplanes Group funds. Amounts received from Lessees
in respect of such Security Deposits and maintenance obligations are held in the
Lessee Funded Account. Amounts on deposit in the Lessee Funded Account are
accounted for, and, if required by any Lease, segregated, on a per Lease basis.
Funds on deposit in the Lessee Funded Account are used to make certain
maintenance and security deposit repayment related payments (or such other
payments as may be required or permitted under the terms of the relevant Leases)
or may be applied against maintenance-related payments otherwise required to be
made by the Lessee during the term of the related Lease and will not be used to
make payments in respect of the Notes or the Certificates at any time, including
after a Note Event of Default. In certain circumstances where lessees relinquish
their rights to receive certain
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maintenance and security deposit payments upon the expiration of a lease,
surplus funds may be credited from the Lessee Funded Account to the Collection
Account.
THE EXPENSE ACCOUNT
On each Payment Date on the Notes, the Cash Manager withdraws from the
funds deposited in the Collection Account an amount equal to the Required
Expense Amount, which amount is then used to pay the Expenses. To the extent
that the Required Expense Amount has not been paid directly by the Cash Manager
to Expense payees, the Required Expense Amount is deposited into the Expense
Account. In addition, in the period between interest payment dates on the Notes,
the Cash Manager may make further withdrawals of cash from the Collection
Account in order to satisfy Expenses due and payable prior to the next interest
payment date on the Notes that were not previously anticipated to become so due
and payable on the previous interest payment date. If funds on deposit in the
Collection Account are less than the Required Expense Amount on any Payment Date
on the Notes, Airplanes Group will be unable to pay the Required Expense Amount
in full on such date, which may lead to a default under one or more of Airplanes
Group's various service agreements or other contracts under which the Expenses
arise.
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DESCRIPTION OF SECURITIES
The following summary is qualified in its entirety by reference to the
Trust Indentures, the Cash Management Agreement, the Reference Agency Agreement,
the Administrative Agency Agreement, the Airplanes Trust Agreement, the Notes,
the Secretarial Services Agreement, the Security Trust Agreement, the Servicing
Agreement, the Stock Purchase Agreements, the Swap Agreements and the Trust
Agreement and any supplements thereto (collectively, the "RELATED DOCUMENTS"),
forms of which have been filed as exhibits to the Registration Statement of
which this Prospectus is a part, and the provisions of the Trust Indenture Act
of 1939, as amended (the "TRUST INDENTURE ACT").
GENERAL
In connection with the Offering, the 1998 Refinancing Trusts will be formed
under the laws of the State of New York to be referred to collectively with each
other trust formed and existing with respect to each other Class or Subclass of
Certificates (the "EXISTING TRUSTS") as the "TRUST" and each of such trusts
shall be referred to individually as a Trust. Each subclass of the 1998
Refinancing Certificates will be issued pursuant to a related supplement to the
Trust Agreement (collectively, together with the Trust Agreements for the other
classes or subclasses of Airplanes Group's Notes, the "TRUST AGREEMENT"), among
Airplanes Limited and Airplanes Trust (each, an "ISSUER" or a "RELEVANT ISSUER")
and the Trustee.
The Trust will have no significant assets other than corresponding classes
and subclasses of Airplanes Limited Notes and Airplanes Trust Notes (together,
the "CORRESPONDING NOTES"), the corresponding Guarantees, and funds from time to
time on deposit in the Certificate Accounts.
The Trust Agreement provides that each Relevant Issuer will pay the fees
and expenses of the Trustee in proportion to the initial aggregate principal
amount of Notes issued by such Relevant Issuer and held by the Trustee, and
further provides that the Trustee will be entitled to indemnification by such
entity for, and will be held harmless against, any loss, liability or expenses
incurred by the Trustee (other than through its own wilful misconduct, bad faith
or negligence or by reason of a breach of any of its representations or
warranties set forth in the Trust Agreement).
The Trustee may resign with respect to any Trust at any time upon at least
90 days' prior written notice, in which event Airplanes Group will be obligated
to appoint a successor trustee for such Trust or Trusts. Certificateholders of
each class or subclass may have divergent or conflicting interests from both the
Certificateholders of other classes or subclasses and the Trust, as holder of
the Notes. As a result, the occurrence of certain circumstances, including the
occurrence of an Event of Default under one or more of the Trust Agreements, may
give rise to a potential conflict of interest on the part of the Trustee in its
capacity as trustee of Trusts in respect of more than one class or subclass of
Certificates, upon which event the Trustee may be compelled to resign as trustee
of any Trust in respect of more than one class or subclass of Certificates. In
addition, the occurrence of certain circumstances including a Note Event of
Default under one or both of the Trust Indentures may give rise to a potential
conflict of interest on the part of the Trustee in its capacity as trustee of
more than one class or subclass of Certificates. If the Trustee ceases to be
eligible to continue as trustee with respect to any Trust under the Trust
Agreement, becomes incapable of acting as Trustee or becomes insolvent,
Airplanes Group may remove such Trustee, or any Certificateholder of the
applicable class or subclass who has been a bona fide Certificateholder for at
least six months may, on behalf of itself and all other Certificateholders of
the same class or subclass, petition any court of competent jurisdiction for the
removal of such Trustee and the appointment of a successor trustee. In addition,
Certificateholders evidencing not less than a majority in aggregate Outstanding
Principal Balance of the Certificates of any class or subclass may at any time
remove the Trustee with respect to the applicable Trust without cause by
delivering written notice of such removal in writing to Airplanes Group, the
Cash Manager, the Trustee and the Indenture Trustees. Any resignation or removal
of the Trustee and appointment of a successor trustee for the applicable Trust
will not become effective until acceptance of the appointment by the successor
trustee. Pursuant to such resignation, removal and successor trustee provisions,
it is possible that a different trustee could be appointed to act as the
successor trustee with respect to each Trust. All references in this Prospectus
to the "Trustee" should be read to include the 1998 Refinancing Trustee and the
Trustee for the Existing Notes as well as any
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successor trustee appointed in the event of such a resignation or removal. All
references in this Prospectus to the Trustee are, unless the context otherwise
requires, references to the "applicable Trustee".
THE CERTIFICATES
The Certificates of each class or subclass, as the case may be, represent
undivided beneficial interests in each of two corresponding classes or
subclasses of Notes and the corresponding Guarantees. The Certificates are not
secured by the Aircraft or the Leases, do not represent an interest in, and,
other than the Guarantees of Airplanes Limited and Airplanes Trust, are not
guaranteed by, any Lessee, Airplanes Limited, Airplanes Trust, the Trustee,
either Indenture Trustee, GPA, or any affiliate of any of the foregoing. In
addition, the Certificates are not obligations of, or guaranteed by, or offered
for sale by, GE Capital, GECAS or any of their affiliates.
Each subclass of the Class A Certificates and each class of Class B, Class
C and Class D Certificates are issued by a separate Trust. The terms and
conditions governing each Trust are substantially similar, except that the
subordination provisions, principal amounts, interest rates, timing of payments
of principal, Expected Final Payment Dates and Final Maturity Dates applicable
to the Notes held by each Trust differ.
The four classes of Certificates have been issued in fully registered form
only. The Class A Notes will, upon completion of the Offering, be subdivided
into a total of six subclasses (Subclasses A-2, A-3, A-4, A-5, A-6 and A-7).
Each Certificate of any class or subclass will represent a fractional undivided
interest in the two corresponding classes or subclasses of Notes, the
corresponding Guarantees and all monies received thereon and funds from time to
time deposited in the Certificate Accounts. All payments and distributions with
respect to each Certificate shall be made only to the extent of the assets of
the applicable Trust. The Certificates are issued in minimum denominations of
$100,000 and integral multiples of $1,000 in excess thereof; provided that a
single Certificate of each class or subclass may be issued in a denomination of
less than $100,000.
Each subclass of the 1998 Refinancing Certificates will bear interest at
the floating rate per annum borne by the corresponding subclass of 1998
Refinancing Notes. Interest on the 1998 Refinancing Notes will be calculated on
the basis of a 360-day year and the actual number of days elapsed in an Interest
Accrual Period. Payments of interest, principal and premium, if any, on any
subclass of the 1998 Refinancing Notes are required to be passed through by the
corresponding Trust to holders of the corresponding subclass of 1998 Refinancing
Certificates at the times and in the manner described herein.
The Existing Certificates currently trade in the over-the-counter
institutional debt markets.
Ratings
Each class or subclass of the Existing Certificates is rated as follows:
<TABLE>
<CAPTION>
RATING AGENCIES
-------------------------------------
DCR MOODY'S STANDARD & POOR'S
--- ------- -----------------
<S> <C> <C> <C>
Subclass A-2 Certificates................................ AA Aa2 AA
Subclass A-3 Certificates................................ AA Aa2 AA
Subclass A-4 Certificates................................ AA Aa2 AA
Subclass A-5 Certificates................................ AA Aa2 AA
Class B Certificates..................................... A A2 A
Class C Certificates..................................... BBB Baa2 BBB
Class D Certificates..................................... BB Ba2 BB
</TABLE>
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It is a condition to issuance of the 1998 Refinancing Certificates that
each subclass of 1998 Refinancing Certificates be rated as follows:
<TABLE>
<CAPTION>
RATING AGENCIES
--------------------------------------
DCR MOODY'S STANDARD & POOR'S
--- ------- ------------------
<S> <C> <C> <C>
Subclass A-6 Certificates................................ AA Aa2 AA
Subclass A-7 Certificates................................ AA Aa2 AA
</TABLE>
The Rating Agencies define the ratings for the 1998 Refinancing Notes as
follows:
- DCR AA RATING: High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
- MOODY'S AA2 RATING: Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities. Moody's
applies numerical modifiers 1, 2 and 3 in each rating classification:
the modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range
ranking and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
- STANDARD & POOR'S AA RATING: An obligation rated 'AA' differs from the
highest rated obligations only in small degree. The obligor's capacity
to meet its financial commitment on the obligation is very strong.
The ratings of the Certificates address the likelihood of the timely
payment of interest and the ultimate payment of principal and premium, if any,
on the Certificates. Payments of principal and interest on all classes or
subclasses of the Notes will be payable only after any Expenses and certain
other amounts have been paid in full or provided for and only to the extent that
Available Collections are sufficient therefor in accordance with the priority of
payments established for the Notes. In addition, Airplanes Group's ability to
pay Step-Up Interest or principal in full on any class or subclass of the Notes
on the Expected Final Payment Date for the corresponding class or subclass of
Certificates (or on any other date prior to the Final Maturity Date) has not
been rated by any of the Rating Agencies. The ratings assigned to the
Certificates do not address the imposition of any withholding tax on any
payments under the Leases, the Notes, the Guarantees, the Certificates or
otherwise. See "Tax Considerations".
A rating is not a recommendation to buy, sell or hold Certificates inasmuch
as ratings do not comment as to market price or suitability for a particular
investor and may be subject to revision or withdrawal at any time by the
assigning Rating Agency. In the event that the rating initially assigned to any
class or subclass of the Certificates is subsequently lowered, suspended or
withdrawn for any reason, no person or entity is obliged to provide any
additional support or credit enhancement with respect to the Certificates.
Payments and Distributions
The Trustee with respect to each 1998 Refinancing Trust is scheduled to
receive on each Payment Date, commencing April 15, 1998, payments of interest,
principal and, in certain limited circumstances described herein, premium on,
the corresponding subclass of 1998 Refinancing Notes held by such Trust. The
amounts paid with respect to each class or subclass of Notes will be determined
from time to time in accordance with the provisions described below under "--
The Notes and the Guarantees -- Priority of Payments".
On each Payment Date, the applicable Trustee will distribute (or will
instruct a paying agent appointed in Luxembourg to distribute) to the applicable
Certificateholders all payments of interest, principal and premium, if any, on
each of the pair of corresponding Notes of such class or subclass (other than
payments received following a Note Event of Default in respect of any class or
subclass of Notes), the receipt of which is confirmed by such Trustee or paying
agent by 1:00 p.m. (New York time) on such Payment Date or, if such receipt is
confirmed after 1:00 p.m. (New York time) on such Payment Date, then on the
following Business
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<PAGE> 119
Day. Each distribution on any Payment Date other than the Final Payment Date
with respect to any Certificate will be made by the Trustee or paying agent to
the Certificateholders as of the Record Date immediately preceding such Payment
Date. If a payment of interest, principal or premium, if any, on any class or
subclass of the Notes (other than a payment received following a payment default
in respect of such class or subclass of Notes) is not received by the Trustee or
paying agent on a Payment Date but is received within five Business Days
thereafter, it will be distributed to such Certificateholders on the date
receipt thereof is confirmed by such Trustee or paying agent, if such receipt is
confirmed by such Trustee or paying agent before 1:00 p.m. (New York time) or,
if such receipt is confirmed after 1:00 p.m. (New York time), then on the
following Business Day. If such payment is received by such Trustee or paying
agent after such five Business Day period, it will be treated as a payment
received following a payment default in respect of such class or subclass of
Notes and will be distributed as described below. The final distribution with
respect to any Certificate, however, will be made only upon presentation and
surrender of such Certificate by the Certificateholder or its agent (including
any holder in street name) at the office or agency of the applicable Trustee or
paying agent specified in the notice given by such Trustee or paying agent with
respect to such final payment. So long as the Certificates are listed on the
Luxembourg Stock Exchange, Airplanes Group shall appoint and maintain a paying
agent in Luxembourg.
The Expected Final Payment Date for the Subclass A-6 Certificates is
and the Expected Final Payment Date for the Subclass A-7 Certificates
is . The Expected Final Payment Date represents the date on which the
final payment of principal of and interest on the Subclass A-6 Certificates or
the Subclass A-7 Certificates is expected to be made based on the Assumptions.
The Final Maturity Date for the 1998 Refinancing Certificates is March 15, 2019.
The Final Maturity Date for the Subclass A-6 Certificates and the Subclass A-7
Certificates represents the date on which all principal not previously paid, if
any, on the Subclass A-6 Notes and Subclass A-7 Notes is due and payable. The
actual final payment date for the Subclass A-6 Certificates and the Subclass A-7
Certificates is likely to occur earlier or later than the Expected Final Payment
Date as a result of numerous factors, including that the Assumptions are
unlikely to correspond to actual experience. For a description of certain
Redemption events and other factors which could cause the Subclass A-6 Notes or
the Subclass A-7 Notes to be paid prior to the Expected Final Payment Date
applicable to such Certificates, see "-- The Notes and the Guarantees --
Redemption". In addition, the Subclass A-6 Certificates and the Subclass A-7
Certificates may be repaid later than the Expected Final Payment Date as a
result of, among other things, increased levels of Aircraft downtime, reduced
Rental Payments, early termination of Leases and, in the case of the Subclass
A-6 Certificates, any inability of Airplanes Group to issue Refinancing Notes
for the purpose of refinancing the Subclass A-6 Certificates. See "Risk Factors
- -- Risks Relating to Payments on the Certificates". Holders of each of the
Subclass A-2, A-3, A-4 and A-6 Certificates will receive payments of Step-Up
Interest in respect of any amounts Outstanding on and after the Expected Final
Payment Date for such subclass. Holders of the Subclass A-5 and A-7 Certificates
will be entitled to payments of Step-Up Interest for any period in which Step-Up
Interest is accruing on any other subclass of Class A Notes.
Each supplement to the Trust Agreement requires that each Trustee establish
and maintain for the benefit of the Certificateholders of such class or subclass
of Certificates, a separate non-interest bearing account (each a "CERTIFICATE
ACCOUNT") for the deposit of payments on the Notes or the Guarantees held in
such Trust. Pursuant to the terms of each Trust Agreement, each Trustee is
required to deposit any payments received by it in respect of the applicable
class or subclass of Notes in the corresponding Certificate Account. All amounts
so deposited will be distributed by such Trustee to Certificateholders of the
applicable class or subclass on each Payment Date unless a different date for
distribution of such amount is specified in the corresponding Trust Agreement.
At such time, if any, as the Certificates of any class or subclass are
issued in the form of Definitive Certificates, distributions by the applicable
Trustee from the applicable Certificate Account on a Payment Date will be made
by check mailed to each Certificateholder of a Definitive Certificate on the
applicable Record Date at its address appearing on the register maintained with
respect to such class or subclass. Alternatively, upon application in writing to
the Trustee, not later than the applicable Record Date, by a Certificateholder
of one or more Definitive Certificates of such class or subclass having an
aggregate principal
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<PAGE> 120
amount of not less than $1,000,000, any such distribution will be made by wire
transfer to an account designated by such Certificateholder at a financial
institution in New York, New York; provided that the final distribution for each
class or subclass of Certificates will be made only upon presentation and
surrender of the Definitive Certificates of such class or subclass by the
Certificateholder or its agent (including any holder in street name) at the
office or agency of the Trustee specified in the notice of such final
distribution given by such Trustee. Such Trustee will mail such notice of the
final distribution of such class or subclass to each of the Certificateholders
of such class or subclass, specifying the date and amount of such final
distribution.
If any Payment Date or other date specified herein for distribution of any
payments to Certificateholders is not a Business Day, distributions scheduled to
be made on such Payment Date or other date may be made on the next succeeding
Business Day.
Events of Default
An event of default with respect to any class of Certificates (an "EVENT OF
DEFAULT") is defined as the occurrence and continuance of a Note Event of
Default under either Trust Indenture. Holders of a class of Notes (other than
the Class A Notes) will not be permitted to deliver a default notice ("DEFAULT
NOTICE") with respect to any Note Event of Default or to exercise any remedy in
respect of such Note Event of Default until all amounts with respect to Notes of
each class ranking senior to such class of Notes have been paid in full. Similar
restrictions will apply to Certificateholders.
The Trust Agreement provides that if an Event of Default shall have
occurred and be continuing with respect to any class of Certificates, the
Trustee, subject to the limitations described above, (i) may vote all of the
corresponding class of Notes to declare due and payable the outstanding
principal balance (the "OUTSTANDING PRINCIPAL BALANCE") of, and any accrued but
unpaid interest on, such corresponding class of Notes, and (ii) upon the
direction of Certificateholders representing not less than 25% of the
Outstanding Principal Balance of such class of Certificates, shall vote a
corresponding amount of such corresponding class of Notes to direct the
Indenture Trustees with respect to such class of Notes to declare the
Outstanding Principal Balance of, and any accrued but unpaid interest on, such
corresponding class of Notes to be due and payable; provided that the Trustee
and any such Certificateholders will not be permitted to direct the Indenture
Trustees until all amounts due and payable with respect to the Notes of each
class ranking senior to such corresponding class of Notes have been paid in
full.
As an additional remedy, if any Event of Default shall have occurred and be
continuing, the applicable Trust Agreement provides that the Trustee may, and
upon the direction of the Certificateholders representing not less than 25% of
the Outstanding Principal Balance of such class of Certificates shall, sell all
or part of each of the two corresponding classes of Notes and Guarantees held in
such Trust for cash to any person. Any proceeds received by such Trustee upon
any such sale will be deposited in the Certificate Account for such class
(allocated, in the case of the Class A Notes, among subclasses on a equal basis
and pro rata in relation to the Outstanding Principal Balances, if any, on each
subclass) and will be distributed to the applicable Certificateholders on the
next Payment Date. The market for any class of Notes and the related Guarantees
in default would necessarily be very limited; therefore, there can be no
assurance that such Notes and Guarantees could be sold for an amount sufficient
to pay the Outstanding Principal Balance, interest and premium, if any, on the
Notes. If the Trustee sells any class of Notes and Guarantees for less than the
Notes' respective aggregate Outstanding Principal Balances, the
Certificateholders of the corresponding class will receive a smaller amount of
principal distributions than anticipated and will have no claim for the
shortfall against the Relevant Issuer or the applicable Trustee.
Any funds representing payments with respect to the corresponding class of
Notes in default received by the Trustee (including any payment under the
applicable Guarantee) and any proceeds from the sale by the Trustee of such
corresponding class of Notes shall, to the extent practicable, be invested and
reinvested by such Trustee, at the direction of the Senior Trustee pursuant to
the terms of the Cash Management Agreement, in Permitted Account Investments,
pending distribution of such funds to Certificateholders.
The Trust Agreement provides that, within 30 days of the occurrence of an
Event of Default in respect of any class of Certificates, the Trustee will give
to the Certificateholders of such class notice, transmitted by
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<PAGE> 121
mail, of all uncured or unwaived defaults under the Trust Agreement known to it
on such date. For the purposes of the Trust Agreement and each Trust Indenture,
the term "default" shall mean the occurrence of any event which is, or after
notice or lapse of time, or both, would constitute an Event of Default or a Note
Event of Default, as the case may be.
The Trust Agreement contains a provision entitling the Trustee, subject to
the duty of such Trustee during a default to act with the required standard of
care, to be indemnified by the holders of the applicable class or subclass of
Certificates before proceeding to exercise any right or power under the Trust
Agreement at the request or direction of such Certificateholders.
In certain cases, Certificateholders representing not less than a majority
of the Outstanding Principal Balance of such class or subclass of Certificates
may, on behalf of all of the Certificateholders of such class or subclass, waive
any past default or Event of Default under the applicable Trust Agreement with
respect to such class or subclass of Certificates and thereby annul any previous
direction given by the applicable Trustee with respect thereto, except (i) a
default in the deposit or distribution of any payment required to be made on the
Certificates of such class or subclass, (ii) a payment default on any of the
corresponding class or subclass of Notes and (iii) a default in respect of any
covenant or provision of the applicable Trust Agreement that cannot by the terms
thereof be modified or amended without the consent of each Certificateholder
affected thereby. Each Trust Indenture provides that, with exceptions
corresponding to those in the Trust Agreement, holders representing not less
than a majority of the Outstanding Principal Balance of the senior class of
Notes issued thereunder or the Senior Trustee may waive, on behalf of all
holders of such class of Notes, any default or Note Event of Default thereunder.
In the event of a waiver under the Trust Agreement as described in the first
sentence of this paragraph, a corresponding majority of the Outstanding
Principal Balance of Notes held by the related Trust will be counted as having
voted for a waiver of such past default or a Note Event of Default.
Voting of the Notes
The Trustee, as sole initial holder of the applicable class or subclass of
Notes in each Trust, has the right to vote and give consents and waivers in
respect of such class or subclass and to certain provisions of the Related
Documents. The Trust Agreement sets forth the circumstances in which the Trustee
shall direct any action or cast any vote as the holder of the related class or
subclass of Notes held in the applicable Trust on instructions from the
Certificateholders of such class or subclass. In circumstances in which the
Trustee is required to seek instructions from Certificateholders of the related
Trust with respect to any action or vote, the Trustee shall take such action or
vote for or against such proposal in proportion to the principal amount of
Certificates of such class or subclass, as applicable, held by
Certificateholders taking the corresponding position.
Termination of the Trust
The respective obligations of Airplanes Limited, Airplanes Trust and the
applicable Trustee with respect to each class or subclass of Certificates will
terminate upon (i) the distribution to Certificateholders of such class or
subclass of the property of the related Trust created by the applicable Trust
Agreement and the disposition of all property held in such Trust and (ii) final
payments having been made in respect of the Notes. The applicable Trustee will
mail to each Certificateholder of such Trust notice of the termination of such
Trust, the amount of the proposed final payment and the proposed date for the
distribution of such final payment for such Trust. The final distribution to any
Certificateholder of such Trust will be made only upon surrender of such
Certificateholder's Certificates at the office or agency of the applicable
Trustee specified in such notice of termination.
Modification of Agreements
In the event that any Trustee, as holder of the Notes of any class or
subclass held in the related Trust, receives a request for its consent to an
amendment, modification or waiver under the related Trust Indenture, such Notes
or any Related Document relating to such Notes, such Trustee shall mail a notice
of such
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<PAGE> 122
proposed amendment, modification or waiver to each Certificateholder of such
class or subclass as to whether or not to consent to such amendment,
modification or waiver. The applicable Trustee shall vote or consent with
respect to such Notes in such Trust in the same proportion as the Certificates
of such class or subclass were actually voted by the holders thereof by a
certain date.
Governing Law
The 1998 Refinancing Certificates are to be governed by and construed in
accordance with the laws of the State of New York. Each of Airplanes Limited,
Airplanes Trust and each applicable Trustee has submitted to the jurisdiction of
the United States Federal and New York State courts located in The City of New
York for all purposes of, or in connection with, the Certificates and the
applicable Trust Agreement, and each has designated a person in The City of New
York to accept service of any process on its behalf.
Notices to Certificateholders
(a) Save as provided below, any notice to the Certificateholders shall be
validly given (i) by publication in the Luxemburger Wort or, if such
newspaper shall cease to be published or timely publication therein
shall not be practicable, in such English language newspaper or
newspapers as the Trustee shall approve having a general circulation
in Europe, (ii) by either of (a) the information contained in such
notice appearing on the relevant page of the Reuters Screen or such
other medium for the electronic display of data as may be approved by
the Trustee and notified to Certificateholders or (b) publication in
the Financial Times and The Wall Street Journal (National Edition) or,
if such newspaper shall cease to be published or timely publication
therein shall not be practicable, in such English language newspaper
or newspapers as the Trustee shall approve having a general
circulation in Europe and the United States and (iii) until such time
as any Definitive Certificates are issued and, so long as the
Certificates are registered with Euroclear and/or Cedel Bank, delivery
of the relevant notice to DTC, Euroclear and/or Cedel Bank for
communication by them to Certificateholders.
(b) The Trustee shall be at liberty to sanction some other method of
giving notice to the Certificateholders if, in its opinion, such other
method is reasonable, having regard to the number and identity of the
Certificateholders and/or to market practice then prevailing, is in
the best interests of the Certificateholders and will comply with the
rules of the Luxembourg Stock Exchange or such other stock exchange
(if any) on which the Certificates are then listed, and any such
notice shall be deemed to have been given on such date as the Trustee
may approve; provided that notice of such method is given to the
Certificateholders in such manner as the Trustee shall require.
Notwithstanding the above, any notice specifying the rate, amount or
Payment Date in respect of any Floating Rate Certificates or in respect of any
repayment of principal on any Notes or Certificates shall, for so long as the
Certificates are listed on the Luxembourg Stock Exchange and so long as the
rules of the Luxembourg Stock Exchange so require, be given to the Luxembourg
Stock Exchange; provided that such requirement shall be satisfied until such
time as any Definitive Certificates are issued and so long as the Notes and
Certificates are held by Cedel Bank and Euroclear by delivery of the relevant
notice to Cedel Bank and Euroclear for communication by them to the Noteholders
and Certificateholders without the need for publication in the Luxemburger Wort.
Any such notice shall be deemed to have been given on the first day on which any
of such conditions shall have been met.
Assumptions
The Assumptions and tables set forth below represent possible revenue
scenarios designed to illustrate certain payment characteristics of the 1998
Refinancing Certificates and are not intended to be projections, estimates,
forecasts or forward-looking statements. The tables have been developed by
fixing certain of the Assumptions and by varying other Assumptions and certain
other factors which affect Airplanes Group's revenues and costs and expenses.
The Assumptions do not represent a complete list of factors which may affect
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<PAGE> 123
the revenues and costs and expenses of Airplanes Group, but rather indicate
those factors which are likely to significantly affect the performance of
Airplanes Group in future years. In addition, the range of possible outcomes
with respect to each Assumption and the combinations of Assumptions set forth
above do not indicate a comprehensive set of possible results for Airplanes
Group. In particular, more severe stresses may lead to payments of principal on
the Notes being delayed or decreased, or in certain cases, an Event of Default.
Accordingly, investors should understand that the following tables are
intended merely to illustrate certain, but not all, payment sensitivities of the
1998 Refinancing Certificates to certain, but not all, market and economic
stresses. Airplanes Group does not intend to update or revise the information
presented to reflect changes occurring after February 10, 1998. As of the date
of this Prospectus, however, Airplanes Group is not aware of events or
circumstances since February 10, 1998 that would cause the Assumptions to be
unreliable. It is highly likely that actual experience will vary from the
Assumptions and the possible revenue scenarios represented by the tables. The
principal factors that could cause Airplanes Group's actual revenues to differ
materially from such scenarios are the Stresses and certain "Risk Factors" as
set out herein.
The Expected Final Payment Date, Expected Maturity, Weighted Average Life
and yield of the 1998 Refinancing Certificates have been based on the
Assumptions.
REVENUE ASSUMPTIONS
(i) One month LIBOR remains constant at % per annum.
(ii) Six month LIBOR (the most common reference rate for the floating
rate Leases) remains constant at % per annum, reflecting the
blended effect of six month LIBOR at January 31, 1998 and Airplanes
Group's outstanding swaps portfolio (see "Management's Discussion
and Analysis of Financial Condition and Results of Operations --
Interest Rate Management").
(iii) Funds on deposit in the Collection Account and Expense Account earn
interest at a rate of one month LIBOR;
(iv) Aircraft coming off-lease in the future are assumed to be re-leased
at a monthly rate that is a function of the current contracted
monthly lease rate as of February 10, 1998 for, and age of, such
Aircraft. Lease rates are assumed to remain constant at the monthly
lease rate for the first 60% of an Aircraft's expected useful life,
thereafter declining on a straight-line basis to 40% of such lease
rate over the remainder of its expected useful life (the "FUTURE
LEASE RATE"). Aircraft which are not currently on-lease are assumed
to be leased at a rate based upon lease rates currently being
received for Aircraft of a similar age and type. The table below
sets forth the expected useful life assumed for each aircraft type
in the Portfolio.
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<PAGE> 124
<TABLE>
<CAPTION>
EXPECTED
AIRCRAFT TYPE USEFUL LIFE
----------------- -----------
(YEARS)
<S> <C> <C>
Jet Aircraft.................................... A300 25
A320-200 25
B727-200A 22.5
B737-200A/C 20-25
B737-300/400/500 25
B747-200BC(1) 25
B757-200 25
B767-200ER/300ER 25
DC8-71F/73CF 20(2)
DC9-14/15 22.5-25
DC9-32/51 22.5-25
F100 25
MD11 25
MD82/3/7 25
Turboprops...................................... ATR42-300 22.5
DHC8-100/300 22.5
METRO-III 22.5
</TABLE>
- ---------------
NOTES:
(1) Airplanes Group's one B747-200BC Aircraft is currently undergoing
conversion to freighter configuration.
(2) Years from the date of conversion to freighter service.
(v) Aircraft are assumed to have no scrap value at the end of their
expected useful life.
(vi) All contracted and assumed future payments in respect of the Leases
are timely received by Airplanes Group on the due date therefor. All
payments under restructured Leases, where the Lessee is complying
with the terms of such Lease, are made in accordance with their
contractual terms. Where a Lessee under a restructured Lease is not
complying with the terms of such Lease it is assumed that no further
cash flows are received.
(vii) All net swap cash flows occur in accordance with the contractual
terms of the swap agreements. No Swaptions are exercised.
(viii) Future Lease terms are assumed to be five years.
(ix) No new Purchase Options with respect to the Aircraft are granted to
Lessees by Airplanes Group and the only existing Purchase Options
exercised are those associated with finance leases or their
equivalent.
(x) No new Lease termination or extension options are granted to Lessees
by Airplanes Group and no existing termination or extension options
are exercised.
(xi) With the exception of any Aircraft sales assumed pursuant to a
Purchase Option as detailed in paragraph (ix) above and any Aircraft
which Airplanes Group has agreed to sell as of February 10, 1998,
Airplanes Group sells no Aircraft.
The above Assumptions (i) to (xi) are used to determine the assumed gross
monthly revenue to Airplanes Group before interest payments, principal payments,
Swap Payments, selling, general and administrative expenses and before lost
rental payments and expenditures required due to Aircraft downtime, Lessee
defaults, aircraft repossession costs, bad debts and operating costs incurred in
the ordinary course of the operating lease business ("GROSS REVENUE"). See
Appendix 3 for further data regarding Gross Revenue.
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<PAGE> 125
INTEREST, EXPENSE AND OPERATING COST ASSUMPTIONS:
(xii) The Notes consist of the Classes and Subclasses with aggregate
principal amounts and coupons as set forth in the following table
and payments are made in accordance with the order of priorities
set forth under "Description of Securities -- The Notes and the
Guarantees -- Priority of Payments".
<TABLE>
<CAPTION>
CLASS OR SUBCLASS AMOUNT COUPON
-------------------------------------------- ------------ ----------------------
($ MILLIONS)
<S> <C> <C>
A-2......................................... 750 1 Month LIBOR+.32%
A-3......................................... 500 1 Month LIBOR+.47%
A-4......................................... 200 1 Month LIBOR+.62%
A-5......................................... 1 Month LIBOR+.35%
A-6......................................... 1 Month LIBOR+ %
A-7......................................... 1 Month LIBOR+ %
B........................................... 1 Month LIBOR+1.10%
C........................................... 375 8.15%
D........................................... 400 10.875%
E........................................... 591 *
-----
$
=====
</TABLE>
- ---------------
*Stated Interest Rate of 20% (adjustable for inflation); The "CLASS E
NOTE MINIMUM INTEREST AMOUNT" is 1%; The "CLASS E NOTE SUPPLEMENTAL
INTEREST AMOUNT" is 10%. The Class E Note Minimum Interest Amount and
the Class E Note Supplemental Interest Amount are payable on the
initial Outstanding Principal Balance of each Class E Note.
(xiii) Refinancing Notes are assumed to be issued and sold on the
respective Expected Final Payment Dates of the Subclass A-2, A-3,
A-4 and A-6 Notes (and on each subsequent expected final payment
date of any Refinancing Notes) on the same terms with respect to
priority, coupon, issuance expenses and redemption as the Notes
being refinanced and with maturities and amortization schedules
paid with the application of the Minimum and Supplemental Principal
Payment Amounts.
(xiv) Airplanes Group realizes no actual liabilities in respect of
contingent liabilities of the Transferred Companies.
(xv) Selling, general and administrative expenses in the amount of $
million per annum are deducted from Gross Revenue and include fees to
the Servicer, Administrative Agent and Cash Manager and other general
and administrative expenses of Airplanes Group.
(xvi) Gross Revenues are reduced each year by 2% to account for certain
operating costs incurred in the ordinary course of the operating
lease business including insurance expenses, Aircraft related costs
and leasing transaction expenses.
ASSUMED CASE STRESS SCENARIO:
(xvii) Gross Revenues are assumed to be reduced by 6% per annum in respect
of lost rental payments and expenditures required due to Aircraft
downtime (known in the industry as "aircraft on ground") ("AOG"),
Lessee defaults, aircraft repossession costs and bad debts
("STRESSES"). The following set of Stresses are presented for
illustrative purposes and only represent an example of a combination
of Stresses which result in approximately a 6% reduction in Gross
Revenues. Other Stress combinations could result in Gross Revenue
reductions which exceed 6%.
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<PAGE> 126
<TABLE>
<S> <C> <C>
A: Weighted Average Portfolio Turnover: 20% per annum (Assumption (viii))
B: Average Re-marketing Time: 6 weeks (.115 years)
C: Weighted Average Default Rate: 4% per annum
D: Average Repossession Time: 18 weeks (.346 years)
E: Average Repossession Cost: $500,000 per Aircraft
F: Weighted Average Bad Debt Expense: 1% per annum
AOG = (A X B) + (C X (B + D))
Annual Repossession Expense ("ARE") = (C X (E/Average
Monthly Gross Revenue per Aircraft)) (See Appendix 3)
AOG = (20% X .115 yrs) + (4% X (.115 yrs + .346 yrs)) 4.2%
ARE = (4% X 21%) 0.8
Bad Debt Expense +1.0
---
Stress Related Gross Revenue Reduction 6.0%
Operating costs (see Assumption (xvi)) +2.0
---
Gross Revenue Reduction in the Assumed Case 8.0%
===
</TABLE>
Increasing the above Stresses would result in a greater reduction in annual
Gross Revenues. The following table shows the effect upon Gross Revenues of
doubling the severity of each Stress (other than Average Repossession Cost)
outlined in the above example (in each case holding other Stresses unchanged).
<TABLE>
<CAPTION>
GROSS REVENUE
STRESS SEVERITY REDUCTION
------------------------------------------ -------------- -------------
<S> <C> <C>
Portfolio Turnover 40% per annum 10.3%
Re-marketing Time 12 weeks 10.8%
Default Rate 8% per annum 10.7%
Repossession Time 36 weeks 9.4%
Bad Debt Expense 2% per annum 9.0%
</TABLE>
It is highly likely that actual experience will differ from the Assumptions
and the Stresses and, therefore, principal payments on certain Notes will likely
occur earlier or later, and may occur significantly earlier or later, than
assumed.
PRINCIPAL REPAYMENTS UNDER THE ASSUMED CASE
The table below shows, for each Payment Date presented, the percentage of
the initial Outstanding Principal Balance of each subclass of Class A
Certificates and the aggregate Class A Certificates, including Refinancing
Certificates, expected to be Outstanding on such Payment Date based on the
Assumptions. It is highly unlikely that the Assumptions will correspond to
actual experience. Therefore, principal payments on the Notes and the
corresponding Certificates may occur earlier or later than as set forth in the
table. The failure of Airplanes Group to pay principal of any class or subclass
of the Notes prior to the Final Maturity Date of such class or subclass because
funds are not available therefor in accordance with the priorities described
under "The Notes and the Guarantees -- Priority of Payments" will not of itself
constitute an Event of Default or a Note Event of Default.
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PERCENT OF INITIAL OUTSTANDING PRINCIPAL BALANCE OF THE
CERTIFICATES BASED ON THE ASSUMED CASE
<TABLE>
<CAPTION>
AGGREGATE
CLASS A
CERTIFICATE
INCLUDING
PAYMENT DATE REFINANCING
OCCURRING IN MARCH A-2 A-3 A-4 A-5 A-6 A-7 CERTIFICATES
- ----------------------------------------- ---- ---- ---- --- --- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 (Closing Date)...................... 100% 100% 100% % % % %
1999..................................... 0% 100% 100% % % % %
2000..................................... 0% 100% 100% % % % %
2001..................................... 0% 0% 100% % % % %
2002..................................... 0% 0% 100% % % % %
2003..................................... 0% 0% 0% % % % %
2004..................................... 0% 0% 0% % % % %
2005..................................... 0% 0% 0% % % % %
2006..................................... 0% 0% 0% % % % %
2007..................................... 0% 0% 0% % % % %
2008..................................... 0% 0% 0% % % % %
2009..................................... 0% 0% 0% % % % %
2010..................................... 0% 0% 0% % % % %
2011..................................... 0% 0% 0% % % % %
2012..................................... 0% 0% 0% % % % %
Weighted Average Life (years)(1)......... 3.0 5.0 7.0
</TABLE>
- ---------------
(1) The Weighted Average Life ("WEIGHTED AVERAGE LIFE") of a Certificate equals
(i) the sum of the products on each Payment Date of (A) the Principal
Distribution Amount on such Payment Date and (B) the number of years from
the date of issuance of such Certificate to such Payment Date (ii) divided
by the initial Outstanding Principal Balance of such Certificate.
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<PAGE> 128
DECLINING BALANCES OF THE CERTIFICATES AND EXPECTED PORTFOLIO VALUE
BASED ON THE ASSUMED CASE
The graph under this heading will show the declining balances of the
Certificates and the Expected Portfolio Value based on the Assumptions from
March of 1998 through March of 2018.
In each of the following tables, "EXPECTED MATURITY" means the period
(expressed in years) from (i) the Closing Date in the case of the 1998
Refinancing Certificates and (ii) March 28, 1996 in the case of any other
Certificates through the expected final payment of principal of the relevant
Certificates.
EFFECT OF INABILITY TO REFINANCE SUBCLASS A-2 CERTIFICATES THROUGH SUBCLASS
A-4 CERTIFICATES AND SUBCLASS A-6 CERTIFICATES
The table below is based on the Assumptions, except that no further
Refinancing Notes are assumed to be issued and sold and the Subclass A-2, A-3,
A-4 and A-6 Certificates are assumed to amortize according to the Priority of
Payments. If such Refinancings do not occur, the Expected Maturities ("EXP") and
Weighted Average Lives ("AVG") of each subclass of the 1998 Refinancing
Certificates would be as set forth below.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF 1998 REFINANCING CERTIFICATES
<TABLE>
<CAPTION>
EXPECTED MATURITY/
WEIGHTED AVERAGE LIFE
-------------------------------
NO
ASSUMED CASE REFINANCINGS
------------- -------------
EXP AVG EXP AVG
---- ---- ---- ----
(YEARS) (YEARS)
<S> <C> <C> <C> <C>
Subclass A-6 Certificates.....................................
Subclass A-7 Certificates.....................................
</TABLE>
MINIMUM REVENUE PERCENTAGE REQUIRED TO RETIRE CERTIFICATES
The table below indicates the minimum percentage of Gross Revenue that will
be necessary to repay all interest and principal on the Class A Certificates by
their respective Final Maturity Dates. If the actual revenue received by
Airplanes Group were to fall below the percentages of Gross Revenue indicated
below and all of the other Assumptions were to occur as assumed, Airplanes Group
would be unable to meet its required payment obligations for the classes of
Notes and corresponding classes of Certificates, which would constitute an Event
of Default with respect to the Certificates.
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<PAGE> 129
PERCENTAGE OF GROSS REVENUE NECESSARY TO REPAY THE
CERTIFICATES BY THE APPLICABLE FINAL MATURITY DATE ASSUMING ACTUAL
EXPERIENCE CORRESPONDS TO THE ASSUMED CASE UNTIL THE BEGINNING OF THE YEAR
STATED
<TABLE>
<CAPTION>
CLOSING DATE YEAR 3 YEAR 6 YEAR 10
----- ------ ------ -------
<S> <C> <C> <C> <C>
Aggregate Class A Certificates(1).............................
</TABLE>
- ---------------
(1) Including all Refinancing Certificates
EFFECT OF A PERMANENT CHANGE IN GROSS REVENUE
The tables below have been prepared based on the Assumptions, except that
the revenue received by Airplanes Group varies from Gross Revenues by the
indicated percentages, beginning in years 3 and 6. If the actual revenues
received by Airplanes Group were to vary as indicated below and all of the other
Assumptions were to occur as assumed, then the Expected Maturities and Weighted
Average Lives of the 1998 Refinancing Certificates would be as set forth below.
EXPECTED MATURITY AND WEIGHTED AVERAGE LIFE OF 1998 REFINANCING CERTIFICATES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE, BEGINNING IN YEAR 3
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
-------------------------------------------------------------------
+10% 0% -8%* -15% -20%
----------- ----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(YEARS) (YEARS) (YEARS) (YEARS) (YEARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-6 Certificates............
Subclass A-7 Certificates............
</TABLE>
- ---------------
* Assumed case
EXPECTED MATURITY AND WEIGHTED AVERAGE LIFE OF 1998 REFINANCING CERTIFICATES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE, BEGINNING IN YEAR 6
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
-------------------------------------------------------------------
+10% 0% -8%* -15% -20%
----------- ----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(YEARS) (YEARS) (YEARS) (YEARS) (YEARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-6 Certificates............
Subclass A-7 Certificates............
</TABLE>
- ---------------
* Assumed case
EFFECT OF PERMANENT DECLINE IN PORTFOLIO VALUE
To the extent that the Adjusted Portfolio Value is less than the Expected
Portfolio Value, the Principal Adjustment Amount may be paid from time to time
to holders of Class A Certificates. Such payments may shorten the Weighted
Average Lives of the Class A Certificates and lengthen the Weighted Average
Lives of the Class B, Class C and Class D Certificates. The following tables
show the Expected Maturity and Weighted Average Life of the 1998 Refinancing
Notes if the Adjusted Portfolio Value were to permanently decline to a given
percentage of the Expected Portfolio Value, beginning in years 1 and 5,
respectively.
128
<PAGE> 130
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS PERCENTAGE OF
EXPECTED PORTFOLIO VALUE BEGINNING IN YEAR 1
-----------------------------------------------------
100%* 90% 80% 70%
----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
(YEARS) (YEARS) (YEARS) (YEARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-6 Certificates.......................
Subclass A-7 Certificates.......................
</TABLE>
- ---------------
* Assumed case
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS PERCENTAGE OF
EXPECTED PORTFOLIO VALUE BEGINNING IN YEAR 5
-----------------------------------------------------
100%* 90% 80% 70%
----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
(YEARS) (YEARS) (YEARS) (YEARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-6 Certificates.......................
Subclass A-7 Certificates.......................
</TABLE>
- ---------------
* Assumed case
129
<PAGE> 131
THE NOTES AND THE GUARANTEES
The Notes and the Guarantees are solely the obligations of Airplanes
Limited and Airplanes Trust and are not obligations of, or guaranteed by, any
Lessee, any Trustee, either Indenture Trustee, GPA Group or any affiliate of any
of the foregoing. In addition, the Notes and the Guarantees are not obligations
of, or guaranteed by, or offered for sale by, GE Capital, GECAS or any of their
affiliates.
GENERAL
Each of Airplanes Limited and Airplanes Trust have issued or, in the case
of the 1998 Refinancing Notes, will issue the Airplanes Limited Notes and the
Airplanes Trust Notes, respectively. Pursuant to the Trust Indentures, Airplanes
Limited has fully and unconditionally guaranteed or, in the case of the 1998
Refinancing Guarantees, will fully and unconditionally guarantee (the "AIRPLANES
LIMITED GUARANTEE") the payment of principal, interest and premium, if any, on
the Airplanes Trust Notes issued by Airplanes Trust and Airplanes Trust has
fully and unconditionally guaranteed or, in the case of the 1998 Refinancing
Guarantees, will fully and unconditionally guarantee (the "AIRPLANES TRUST
GUARANTEE" and, together with the Airplanes Limited Guarantee, the "GUARANTEES")
the payment of interest, principal of and premium, if any, on the Airplanes
Limited Notes.
Pursuant to the terms of the Leases, the Lessees are obliged to make rental
payments and certain other payments (collectively, the "RENTAL PAYMENTS") to
certain subsidiaries of Airplanes Limited or Airplanes Trust. Pursuant to the
terms of the Leases, all Rental Payments and Related Collateral amounts are made
directly to the Rental Accounts held in the names of the Security Trustee on
behalf of the Secured Parties and then transferred, within one Business Day of
receipt thereof, to the Collection Account, except for certain limited amounts,
required to be left on deposit for local legal reasons. Unsegregated amounts
received by Airplanes Group in respect of the assets of Airplanes Group are
transferred directly to the Collection Account pursuant to the Trust Indentures
and the Cash Management Agreement. Amounts received by Airplanes Group which are
required to be segregated are transferred to the Lessee Funded Account. On the
basis of the Assumptions, such Rental Payments, together with such other
amounts, are expected to be sufficient to pay the principal, interest and
premium, if any, on the Notes and all other amounts payable by Airplanes Group
to the creditors referred to in the Cash Management Agreement, including the
Servicer, holders of the Class E Notes, the Trustees, the Indenture Trustees,
the Cash Manager, the Administrative Agent, the Company Secretary and each Swap
Provider in each case when and as due.
The Notes constitute direct, unsecured obligations of Airplanes Limited and
Airplanes Trust and are subordinated to the Expenses and certain obligations and
equal or senior to certain other obligations specified in the Trust Indentures.
The only source of payment for the Notes, the Guarantees and the obligations of
Airplanes Group to its creditors will be (i) the payments made by the Lessees
under the Leases, (ii) proceeds from dispositions, if any, of the assets of
Airplanes Group, (iii) net payments, if any, under the Swap Agreements or
disposals of the Notes by the Indenture Trustees under certain circumstances
and, (iv) net cash proceeds received from the sale of Refinancing Certificates.
Each class and subclass of the Notes and the corresponding Guarantees have
the priority set forth in the respective Trust Indentures, the Notes and the
Guarantees. Payment in full of the Expenses and certain other amounts rank in
priority to payments due on the Notes, in each case, as set forth under "--
Priority of Payments"; provided that, upon the occurrence of a Note Event of
Default, the priority of Airplanes Group's payment obligations will be as set
forth under "-- Priority of Payments following a Default Notice".
Pursuant to the subordination provisions of the Trust Indentures and the
various classes and subclasses of Notes and the Guarantees, no payment of
principal, interest and premium, if any, on any class or subclass of Notes may
be made on any Payment Date unless certain required payments have been made in
respect of the Notes of each class ranking prior to such class or subclass of
Notes on such Payment Date. In addition, any amendment to or modification of the
subordination provisions in each Trust Indenture with respect to any class or
subclass of Notes issued thereunder will require the consent of each holder of
the class or subclass of Notes affected thereby and each holder of any class or
subclass of Notes ranking senior to such Notes if such amendment or modification
would affect the rights of such holders or any Swap Provider; provided that in
no
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<PAGE> 132
event will the provisions relating to the priority of the Expenses and certain
payments to Swap Providers in each Trust Indenture be amended or modified.
Each Indenture Trustee may resign as to all or any of the classes or
subclasses of the Notes at any time without cause by giving at least 30 days'
prior written notice to the Relevant Issuer, the Cash Manager and the holders of
such class or subclass of Notes. Holders of a majority of the Outstanding
Principal Balance of any class or subclass of the Notes may at any time remove
the Indenture Trustee as to such class or subclass without cause by an
instrument in writing delivered to the Relevant Issuer, the Cash Manager, the
Security Trustee, the Senior Trustee and such Indenture Trustee. Upon the giving
of notice by the Indenture Trustee, Airplanes Group will be obligated to appoint
a successor Indenture Trustee. In addition, the occurrence of certain
circumstances, including a Note Event of Default under one or both of the Trust
Indentures, may give rise to a potential conflict of interest on the part of one
or both of the Indenture Trustees in their respective capacities as trustees in
respect of the Notes of the Relevant Issuers.
In addition, the Administrative Agent, on behalf of the Issuer, may replace
the bank at which the Accounts are located (1) if such bank fails to maintain
either a short-term unsecured debt rating of A1+ (or the equivalent) or better
by each Rating Agency (or A1 (or the equivalent) or better if the amount on
deposit at anytime in any Accounts held with such bank does not exceed 20% of
the Outstanding Principal Balance of the Notes for any period in excess of 30
days), (2) if such bank is adjudged a bankrupt or an insolvent, (3) if a
receiver or public officer takes charge of such bank or its property or (4) if
such bank becomes incapable of acting.
Holders of each class of Notes (other than Class A Notes) will not be
permitted to give a Default Notice with respect to any Note Event of Default or
to exercise any remedy in respect of such Note Event of Default until all
amounts with respect to Notes of each class ranking senior to such class of
Notes have been paid in full.
THE GUARANTEES
Each of the Issuers has fully and unconditionally guaranteed the
obligations of the other under each class or subclass of Notes. Pursuant to the
terms of the Guarantees, the obligations of Airplanes Trust under the Airplanes
Trust Guarantee with respect to each Airplanes Limited Note will rank equally
with Airplanes Trust's obligation under the corresponding class or subclass of
Airplanes Trust Notes, and the obligation of Airplanes Limited under the
Airplanes Limited Guarantee with respect to each Airplanes Trust Note will rank
equally with Airplanes Limited's obligation under the corresponding Airplanes
Limited Notes. In addition, the obligations of Airplanes Trust and Airplanes
Limited under their respective Guarantees will be limited under the terms of the
Trust Indentures so as not to constitute a fraudulent conveyance under
applicable laws.
INTEREST
Each Note bears interest on the Outstanding Principal Balance thereof,
payable monthly in arrears on each Payment Date. The initial Interest Accrual
Period for the 1998 Refinancing Notes is the period commencing on and including
the Closing Date and ending on but excluding the first Payment Date. Each
subsequent Interest Accrual Period will include each period from and including
the last preceding Payment Date and to but excluding the next succeeding Payment
Date. The final Interest Accrual Period with respect to each class or subclass
of Notes will end on but exclude the Final Maturity Date, or, if earlier, the
date upon which all principal, interest and premium, if any, on such class or
subclass of Notes is paid in full. Each subclass of Notes offered hereby will
bear interest for each Interest Accrual Period at the rate per annum set forth
on the cover page of this Prospectus.
Interest on any class or subclass of Floating Rate Notes will be calculated
on the basis of a 360-day year and the actual number of days elapsed in an
Interest Accrual Period. Interest on any class of Fixed Rate Notes will be
calculated on the basis of one-twelfth of an annual interest payment on the
Outstanding Principal Balance and in the case of an incomplete Interest Accrual
Period on the basis of a 360-day year consisting of twelve 30-day months.
131
<PAGE> 133
The interest rate borne by the Subclass A-2, A-3, A-4 and A-6 Notes will
increase after the Expected Final Payment Date for the corresponding subclass of
Certificates, to the extent such Notes are then Outstanding, by the amount of
Step-Up Interest. The interest rate borne by the Subclass A-5 and A-7 Notes will
increase with respect to any period in which Step-Up Interest is payable on any
other subclass of Class A Notes.
REFERENCE AGENCY AGREEMENT
For the purpose of calculating the rate of interest payable on the Floating
Rate Notes, Airplanes Group has entered into the Reference Agency Agreement with
the Indenture Trustees, Bankers Trust Company as reference agent (the "REFERENCE
AGENT") and the Cash Manager. The Reference Agent will determine LIBOR for the
1998 Refinancing Notes for the Initial Interest Accrual Period two Business Days
prior to the Closing Date and, for each Interest Accrual Period following the
Initial Interest Accrual Period, on a Reference Date. The Reference Agent will
determine LIBOR in accordance with the following provisions of the Reference
Agency Agreement:
(a) On each Reference Date, the Reference Agent will determine LIBOR as
the per annum offered rate for deposits in U.S. dollars for a period
of one month that appears on the display designated as page "3750" on
the Telerate Monitor (or such other page or service as may replace it
for the purpose of displaying LIBOR of major banks for U.S. dollar
deposits) at approximately 11:00 a.m. (London time).
(b) If the offered LIBOR rate so appearing is replaced by the
corresponding rates of more than one bank then paragraph (a) above
shall be applied, with any necessary consequential changes, to the
arithmetic mean of the rates (being at least two) which so appear, as
determined by the Reference Agent. If for any other reason such
offered rate does not so appear, or if the relevant page is
unavailable, the Reference Agent will request that each of the banks
whose offered rates would have been used for the purposes of the
relevant page if the event leading to the application of this sentence
had not happened or any duly appointed substitute reference bank
acting in each case through its principal London office (the
"REFERENCE BANKS"), to provide the Reference Agent with its offered
quotation to prime banks for dollar deposits in London for the next
Interest Accrual Period concerned as at 11:00 a.m. (London time) on
the applicable Reference Date. The floating rates of interest for such
Interest Accrual Period for each class or subclass of Floating Rate
Notes shall be the aggregate of the arithmetic mean of such quotations
(or of such of them, being at least two, as are so provided), as
determined by the Reference Agent, plus the applicable interest rate
spread over LIBOR (for the 1998 Refinancing Notes such spread is as
set forth on the cover page of this Prospectus for the 1998
Refinancing Certificates), plus the Step-Up Interest, if any, on any
subclass of the Class A Notes.
(c) If, on any Reference Date, one only or none of the Reference Banks
provides such quotation, the floating rate of interest for the next
Interest Accrual Period shall be the rate per annum which the
Reference Agent determines to be the aggregate of the arithmetic mean
of the U.S. dollar lending rates which New York City banks selected by
the Reference Agent are quoting on the relevant Reference Date to
leading European banks for the next Interest Accrual Period, plus the
applicable interest rate spread over LIBOR set forth, for the 1998
Refinancing Certificates representing an interest in the 1998
Refinancing Notes, on the cover page of this Prospectus, plus, if
applicable, any Step-up Interest on any subclass of the Class A Notes,
except that, if the banks so selected by the Reference Agent are not
quoting as mentioned above, the floating rate of interest shall be the
floating rate of interest in effect for the last preceding Interest
Accrual Period.
Once having obtained LIBOR or its substitute, the Reference Agent will
calculate the interest rate for each class or subclass of Floating Rate Notes
and the amount of interest payable on the relevant Payment Date in respect of
each class or subclass of Floating Rate Notes. The interest amount for each such
class or subclass of Floating Rate Notes will be calculated by the Reference
Agent by multiplying the rate of interest for such class or subclass for the
relevant Interest Accrual Period by the estimated Outstanding Principal
132
<PAGE> 134
Balance of such class or subclass of Floating Rate notes on the first day of
such Interest Accrual Period and by multiplying the product by the actual number
of days in such Interest Accrual Period divided by 360 and rounding the
resulting amount to the nearest cent (with half a cent being rounded upwards).
The Reference Agent's determination of LIBOR, the interest rate and the interest
amount for each such class or subclass of Floating Rate Notes (in the absence of
negligence, wilful default, bad faith or manifest error) will be conclusive and
binding upon all parties, including the holders of the Floating Rate
Certificates.
As promptly as is practicable after the determination thereof, the
Reference Agent will give notice of applicable LIBOR, the Payment Date, the
interest rate for each class or subclass of Floating Rate Notes for the relevant
Interest Accrual Period and the amount of interest on each class or subclass of
Floating Rate Notes to Airplanes Limited, Airplanes Trust, the listing agent for
the Luxembourg Stock Exchange and the Cash Manager.
If the Reference Agent does not determine the interest rate for each class
or subclass of Floating Rate Notes or calculate the amount of interest on each
class or subclass of Floating Rate Notes for the relevant interest Accrual
Period in accordance with the provisions described above, the Cash Manager will
determine such rate of interest or calculate such interest amount in accordance
with the provisions described above, and each such determination or calculation
will be deemed to have been made by the Reference Agent.
Each of Airplanes Limited and Airplanes Trust reserve the right to
terminate the appointment of the Reference Agent at any time on 30 days' notice
and to appoint a replacement reference agent in its place. Notice of any such
termination will be given to the holders of Floating Rate Certificates. The
Reference Agent may not be removed or resign its duties without a successor
having been appointed.
PRINCIPAL
The principal repayment provisions of the Notes are intended to produce
increasing levels of "collateralization" with respect to each class of Notes as
the Portfolio ages and the value of the Aircraft declines and to ensure that the
principal amount of each class of subclass of Notes is repaid in full prior to
the Final Maturity Date thereof. There can be no assurance, however, that
Airplanes Group will receive sufficient revenues from leasing or selling the
Aircraft for the principal repayment provisions to achieve increasing levels of
"collateralization" or will be able to repay the initial Outstanding Principal
Balance on any class or subclass of the Notes. As used in this "Description of
Securities", the term "collateralization" refers to the difference between the
Outstanding Principal Balance of the various classes of Notes relative to the
Initial Appraised Value of the Aircraft, the Expected Portfolio Value and the
Adjusted Portfolio Value, as applicable, and as described further below. The
obligations of Airplanes Group to pay interest, principal and premium, if any,
will not, in fact, be secured by the Aircraft or the Leases of Airplanes Group.
The Subclass A-2, A-3, A-4 and A-6 Notes. The terms of the Subclass A-2,
A-3, A-4 and A-6 Notes (the "SOFT BULLET NOTES") will not require repayment of
principal on any Payment Date prior to the date (the "AMORTIZATION COMMENCEMENT
DATE") that is the earlier of (i) their respective Expected Final Payment Dates
and (ii) in the case of the Subclass A-3 Notes, the date of repayment in full of
the Subclass A-2 Notes (other than through an issue of Refinancing Notes), in
the case of the Subclass A-4 Notes, the date of repayment in full of the
Subclass A-3 Notes (other than through an issue of Refinancing Notes) and in the
case of the Subclass A-6 Notes, the date of repayment in full of the Subclass
A-4 Notes (other than through an issue of Refinancing Notes). On or prior to the
Expected Final Payment Date of the Soft Bullet Notes, Airplanes Group intends to
refinance 100% of the Outstanding Principal Balance of each such subclass by
issuing Refinancing Notes to a new trust. Such trust will finance the purchase
of these Refinancing Notes through the issuance and sale of a corresponding
amount and subclass of Refinancing Certificates. Issuance and sale of such
Refinancing Certificates will be subject to market conditions. Failure to repay
any Soft Bullet Note in full at its Expected Final Payment Date will not result
in a Note Event of Default under the Trust Indentures. If any subclass of the
Soft Bullet Notes is not repaid in full on its Amortization Commencement Date,
such subclass of Notes will convert automatically into a subclass of amortizing
Notes having a principal repayment schedule intended to ensure that the
remaining Outstanding Principal Balance of such subclass will be repaid in full
on or before its Final Maturity Date. In addition, after its Expected Final
Payment Date, each
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<PAGE> 135
Soft Bullet Note which remains Outstanding will accrue interest at a rate equal
to its stated interest rate, plus Step-up Interest.
The Subclass A-5, A-7 and the Class B Notes. The terms of the Subclass A-5
and the Class B Notes require amortization of the Outstanding Principal Balance
thereof, to the extent there are funds available therefor in accordance with "--
Priority of Payments", on each Payment Date. Following the date of repayment in
full of the Subclass A-5 Notes, the Subclass A-7 Notes will require amortization
of the Outstanding Principal Balance thereof, to the extent there are funds
available therefor in accordance with "-- Priority of Payments", on each Payment
Date. The Subclass A-5 and A-7 Notes and the Class B Notes are referred to
herein as the "AMORTIZING NOTES".
PRINCIPAL AMORTIZATION OF FLOATING RATE NOTES
With respect to each class and subclass of the Subclass A-5 or A-7 and
Class B Notes and, following their respective Amortization Commencement Dates,
if applicable, each subclass of the Soft Bullet Notes, there may be distributed
on any Payment Date, to the extent there are sufficient funds in the Collection
Account, the sum of the Minimum Principal Payment Amount, if any, the
Supplemental Principal Payment Amount, if any, and with respect to the Class A
Notes only, the Principal Adjustment Amount, if any (the sum of those amounts,
if applicable and to the extent paid in respect of any class or subclass, the
"PRINCIPAL DISTRIBUTION AMOUNT").
To the extent that any Minimum Principal Payment Amount, Principal
Adjustment Amount or Supplemental Principal Payment Amount is required to be
made with respect to the Class A Notes, and sufficient funds are available
therefor, such amounts will be applied to repay first, any amount Outstanding
under the Subclass A-2 Notes, then the Subclass A-3 Notes, then the Subclass A-4
Notes, then the Subclass A-6 Notes, then, in the order of ascending numerical
designation by subclass, all amounts Outstanding under any other Airplanes Group
Class A Refinancing Notes that are Soft Bullet Notes, but in each case only
following their respective Amortization Commencement Dates, and then such
amounts will be applied to repay any amount Outstanding under the Subclass A-5
Notes and, following repayment in full of the Subclass A-5 Notes, the Subclass
A-7 Notes, then, in the order of ascending numerical designation by subclass,
all amounts Outstanding under any other Class A Refinancing Airplanes Group
Notes that are Amortizing Notes. Any subclass of Refinancing Notes issued to
refinance a subclass of Class A Notes will not receive any payments of principal
before there has been repaid in full the Outstanding Principal Balance of each
subclass of Class A Notes then Outstanding which (i) was issued prior to the
issuance of such subclass of Refinancing Notes and (ii) has passed its
Amortization Commencement Date.
Minimum Principal Payment Amount. With respect to (i) the Subclass A-5
Notes (or, following repayment in full of the Subclass A-5 Notes, the Subclass
A-7 Notes) and the Class B Notes and (ii) following their respective
Amortization Commencement Dates, if applicable, each subclass of the Soft Bullet
Notes to the extent that any amount remains Outstanding thereon, the "MINIMUM
PRINCIPAL PAYMENT AMOUNT" for each class of Notes with respect to any Payment
Date will equal the difference, if positive, between the Outstanding Principal
Balance of such class and the Target Principal Balance on such Payment Date;
provided, that, with respect to the Class A Notes only, if on any Payment Date
the Outstanding Principal Balance of the Class A Notes is greater than the
Adjusted Portfolio Value, then the Class A Minimum Principal Payment Amount
shall be equal to the difference between the Outstanding Principal Balance of
the Class A Notes and the Adjusted Balance of the Class A Notes.
On each Payment Date, the "TARGET PRINCIPAL BALANCE" for each class of
Notes will equal the product of (i) the applicable "TARGET LOAN TO VALUE RATIO"
(as set forth in Appendix 5 to this Prospectus) and (ii) the Expected Portfolio
Value (as set forth in Appendix 4 to this Prospectus), on such Payment Date.
On each Payment Date, the "EXPECTED PORTFOLIO VALUE" will equal the sum of
the products of (A) the Initial Appraised Value of each Aircraft then in the
Portfolio and (B) the quotient obtained by dividing the applicable Depreciation
Factor for such Aircraft (as set forth below) on such Payment Date by the
Depreciation Factor for such Aircraft on March 28, 1996. The Depreciation
Factors produce a "depreciation
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<PAGE> 136
curve" that assumes an accelerating decline in the value of Aircraft of
increasing age. The accelerating annual decline in aircraft values that is
assumed by the depreciation curve has been expressed as an equation below:
<TABLE>
<S> <C> <C> <C>
Depreciation Factor = [1 - (kn)] * (1 + g)n
Where:
n = age of the aircraft expressed in years
1
--------------------------------------------------------------------
k = 25 years for commercial passenger Aircraft and 15 years for Aircraft
converted to freighters
g = 0.03
</TABLE>
The applicable depreciation factor (each, a "DEPRECIATION FACTOR"), and
consequently the assumed decline in aircraft value, for any Aircraft on any
Payment Date will be determined by reference to (i) for purposes of calculating
a Minimum Principal Payment Amount or a Supplemental Principal Payment Amount
(as discussed below), the period of time between March 28, 1996 and the relevant
Payment Date and (ii) for purposes of calculating a Principal Adjustment Amount
(as discussed below), the period of time between the most recent appraisal of
the Aircraft and the relevant Payment Date.
Principal Adjustment Amount. With respect to the Subclass A-5 Notes (or,
following repayment in full of the Subclass A-5 Notes, the Subclass A-7 Notes)
only and, following their Amortization Commencement Date, if applicable, the
Soft Bullet Notes, there may also be paid on any Payment Date a Principal
Adjustment Amount. This amount is intended to adjust the principal amortization
schedule established on March 28, 1996 by the Depreciation Factors for declines
in the value of the Aircraft which, at the time of any subsequent appraisal of
the Aircraft, are in excess of the decline in value assumed by the Depreciation
Factors. The Principal Adjustment Amount for the Subclass A-5 Notes (or,
following repayment in full of the Subclass A-5 Notes, the Subclass A-7 Notes)
or following their respective Amortization Commencement Dates, any subclass of
Soft Bullet Notes, with respect to any Payment Date will equal the difference,
if positive, between the Outstanding Principal Balance of the Class A Notes
(after giving effect to payment of the Minimum Principal Payment Amount, if any,
for such Payment Date) and the Adjusted Balance of the Class A Notes (the
"PRINCIPAL ADJUSTMENT AMOUNT").
The "ADJUSTED BALANCE" of the Class A Notes on each Payment Date will equal
the product of; (i) the Target Loan to Value Ratio of the Class A Notes and (ii)
the Adjusted Portfolio Value. On any Payment Date, the "ADJUSTED PORTFOLIO
VALUE" will equal the sum of the products of (A) the Adjusted Base Value of each
Aircraft then in the Portfolio and (B) the quotient obtained by dividing the
applicable Depreciation Factor for such Aircraft on such Payment Date by the
Depreciation Factor for such Aircraft as of the Relevant Appraisal. The
"ADJUSTED BASE VALUE" of each Aircraft will be the Base Value of such Aircraft
as determined in the most recent Appraisal (the "RELEVANT APPRAISAL") preceding
such Payment Date.
Supplemental Principal Payment Amount. With respect to (i) the Subclass
A-5 Notes (or, following repayment in full of the Subclass A-5 Notes, the
Subclass A-7 Notes) and the Class B Notes and (ii) following their respective
Amortization Commencement Dates, if applicable, each subclass of the Soft-Bullet
Notes to the extent that any amount remains Outstanding, the "SUPPLEMENTAL
PRINCIPAL PAYMENT AMOUNT" for each class of Notes with respect to any Payment
Date will equal the difference, if positive, between the Outstanding Principal
Balance of such class (after giving effect to the payment of the Minimum
Principal Payment Amount and, with respect to the Class A Notes only, any
Principal Adjustment Amount to be made on such Payment Date) and the
Supplemental Principal Balance on such Payment Date.
On each Payment Date, the "SUPPLEMENTAL PRINCIPAL BALANCE", for each class
of Floating Rate Notes will equal the product of (i) the applicable
"SUPPLEMENTAL LOAN TO VALUE RATIO" (as set forth in Appendix 6 to this
Prospectus) and (ii) the Expected Portfolio Value on such Payment Date.
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SCHEDULED PRINCIPAL REPAYMENT OF FIXED RATE NOTES
With respect to each class of Fixed Rate Notes, there may be distributed on
any Payment Date to the extent there are sufficient funds available therefor,
the Scheduled Principal Payment Amount, if any, for such class.
Scheduled Principal Payment Amount. For any Payment Date, the "SCHEDULED
PRINCIPAL PAYMENT AMOUNT" on the Fixed Rate Notes will equal the difference, if
positive, between the Outstanding Principal Balance of each such class of Notes
immediately prior to such Payment Date and the product of (i) the initial
aggregate Outstanding Principal Balance of each such class of Notes and (ii) the
"TARGET POOL FACTOR" for each such class of Notes on such date (as set forth in
Appendix 7 and subject to recomputation to reflect any redemption of principal
as set forth below).
The "ACTUAL POOL FACTOR" of each class of Notes on any Payment Date (as
reported monthly in the Report to Certificateholders) is computed by dividing
(i) the Outstanding Principal Balance after giving effect to any payment of
principal on the Notes of such class on such Payment Date by (ii) the initial
aggregate Outstanding Principal Balance of the Notes of such class (and rounded
to the seventh decimal place). The Pool Factor for the Class C and Class D Notes
was 1.0000000 on the March 28, 1996 before repayments of principal on each such
class of Notes. The amount of a Noteholder's pro rata interest of a class of
Notes can be determined by multiplying the original denomination of such
Holder's Notes of such class by the Actual Pool Factor for such class as of the
applicable Payment Date. The Actual Pool Factor for each class of Fixed Rate
Notes will be mailed to Certificateholders of such class on each Payment Date.
In the event of a partial redemption of such Class of Notes, the applicable
Target Pool Factor and the Outstanding Principal Balance of each such class will
be recomputed and notice thereof will be mailed to the Certificateholders of
such Notes. Each class of Fixed Rate Notes will have a separate Target Pool
Factor.
REDEMPTION
Airplanes Group may redeem any class or subclass of the Notes out of
amounts available for such purpose, if any, on any Payment Date (any such date,
a "REDEMPTION DATE"), in whole or in part, at the Redemption Price plus accrued
but unpaid interest thereon. The Redemption Price on the Subclass A-2, A-3, A-4
and A-6 Notes redeemed (i) prior to the applicable Premium Expiration Date (as
indicated below for such subclass of Notes, the "PREMIUM EXPIRATION DATE") will
equal 102% or, in the case of the Subclass A-6 Notes, % of the Outstanding
Principal Balance of such subclass being redeemed and (ii) on or after the
Premium Expiration Date, will equal the Outstanding Principal Balance of such
subclass of Notes being redeemed, without premium (the "FLOATING RATE REDEMPTION
PRICE"). The Subclass A-5, A-7 and Class B Notes are redeemable at a price equal
to the Outstanding Principal Balance of such class or subclass, without premium.
The Redemption Price on any Fixed Rate Notes will be (i) if such redemption
occurs prior to March 15, 2001, the Make-Whole Price or (ii) if such redemption
occurs on or after March 15, 2001, the product of the applicable Fixed Price
Premium (as indicated below for each class of Notes, the "FIXED PRICE PREMIUM")
and the Outstanding Principal Balance of such class of Notes or portion thereof
being redeemed (the "FIXED RATE REDEMPTION PRICE" and, together with the
Floating Rate Redemption Price, the "REDEMPTION PRICE").
It is a condition of any such redemption that on the Redemption Date, all
payments of interest and other amounts due on or prior to the Redemption Date in
respect of all Notes ranking equally with or prior to the Notes to be redeemed
shall have been paid or will be paid on the Redemption Date. In addition,
Airplanes Group will be required on each Payment Date to redeem Notes to the
extent of any Available Collections in excess of the Principal Distribution
Amount, with respect to the Floating Rate Notes, and the Scheduled Principal
Payment Amounts, with respect to the Fixed Rate Notes, in the manner described
in "Principal Amortization" above and "Priority of Payments" below at the
Redemption Price plus accrued but unpaid interest thereon. Within each class of
Fixed Rate Notes being redeemed in part, the amount of the Outstanding Principal
Balance being prepaid will be applied in each case pro rata among all Fixed Rate
Notes of such class to the pro rata reduction of the remaining expected
principal payments thereof.
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Without limiting the foregoing, each class or subclass of the Notes may
also be redeemed on any Payment Date, in whole, at the Redemption Price, plus
accrued but unpaid interest, in connection with any sale of all or substantially
all of the assets of the Airplanes Group. Certain classes or subclasses of Notes
may be redeemed at such time as other classes or subclasses of Notes are being
defeased. See "Management of Airplanes Group" and "-- Defeasance".
No premium will be payable on Notes redeemed on or after the Premium
Expiration Date therefor.
The following table sets forth the Premium Expiration Date for the Subclass
A-2 to A-4 and A-6 Notes.
<TABLE>
<CAPTION>
CLASS OR SUBCLASS OF NOTES PREMIUM EXPIRATION DATE
- ---------------------------------------------------------------------- -----------------------
<S> <C>
A-2................................................................... March 15, 1998
A-3................................................................... March 15, 1998
A-4................................................................... March 15, 1999
A-6...................................................................
</TABLE>
The following table sets forth the applicable Fixed Price Premium for the
Class C and Class D Notes.
<TABLE>
<CAPTION>
FIXED PRICE PREMIUM
-------------------
FIXED PRICE REDEMPTION DATE CLASS C CLASS D
- ------------------------------------------------------------------------- ------- -------
<S> <C> <C>
On or after March 15, 2001 but prior to March 15, 2002................... 105% 107%
On or after March 15, 2002 but prior to March 15, 2003................... 104% 106%
On or after March 15, 2003 but prior to March 15, 2004................... 103% 105%
On or after March 15, 2004 but prior to March 15, 2005................... 102% 104%
On or after March 15, 2005 but prior to March 15, 2006................... 101% 103%
On or after March 15, 2006 but prior to March 15, 2007................... 100% 102%
On or after March 15, 2007 but prior to March 15, 2008................... 100% 101%
On or after March 15, 2008............................................... 100% 100%
</TABLE>
The Make-Whole Price (the "MAKE-WHOLE PRICE") will equal the higher of (i)
the discounted present value of Scheduled Principal Payment Amounts and interest
from the Redemption Date through, but not including, March 15, 2001, plus the
Fixed Rate Redemption Price for the scheduled Outstanding Principal Balance on
March 15, 2001 of the Notes being redeemed, discounted at a rate equal to the
Treasury Yield plus a spread equal to, in the case of the Class C Notes, 0.50%
and, in the case of the Class D Notes, 1.00% (the "MAKE-WHOLE SPREAD") and (ii)
the Outstanding Principal Balance of the Notes being redeemed.
"TREASURY YIELD" means a per annum rate (expressed as a monthly equivalent
yield) determined to be the per annum rate equal to the semiannual yield to
maturity of the 7 3/4% United States Treasury Notes maturing on February 15,
2001.
The "REMAINING WEIGHTED AVERAGE LIFE" of each class of Certificates will be
determined by (i) multiplying each scheduled future payment of principal of such
class of Certificates (including the final principal payment to be made on the
Expected Final Payment Date) by the number of months remaining until such
payment date, (ii) calculating the sum of the resulting products and (iii)
dividing such sum by the aggregate amount of principal Outstanding on such Fixed
Price Redemption Date.
Redemption for Taxation Purposes. All payments of principal, interest and
premium, if any, made by Airplanes Limited and Airplanes Trust in respect of the
Notes or the Guarantees or any inter-company payments supporting the obligations
under the Notes or the Guarantees will be made without withholding or deduction
for or on account of any present or future taxes or duties of whatever nature
unless required by law. Should such withholding or deduction be required by law,
neither Airplanes Limited nor Airplanes Trust will be obliged to pay any
additional amounts in respect of such withholding or deduction. If at any time:
(a) Airplanes Limited or Airplanes Trust is, or on the next Payment Date
will be, required to make any withholding or deduction under the laws
or regulations of any applicable tax authority with respect to any
payment in respect of any class or subclass of Notes; or
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(b) Airplanes Limited or Airplanes Trust is or will be subject to any
circumstance (whether by reason of any law, regulation, regulatory
requirement or double-taxation convention, or the interpretation or
application thereof, or otherwise) leading to the imposition of a tax
(whether by direct assessment or by withholding at source) or other
similar imposition by any jurisdiction which would (i) materially
increase the cost to Airplanes Limited or Airplanes Trust of making
payments in respect of any class or subclass of Notes or of complying
with its obligations under or in connection with the Notes; (ii)
materially increase the operating or administrative expenses of
Airplanes Limited or Airplanes Trust, as the case may be, or the
Charitable Trusts under which the ordinary share capital of Airplanes
Limited is held; or (iii) otherwise obligate Airplanes Limited or
Airplanes Trust or any subsidiary of either of them to make any
material payment on, or calculated by reference to, the amount of any
sum received or receivable by Airplanes Limited or Airplanes Trust, as
the case may be, or by the Cash Manager on behalf of Airplanes Group
as contemplated by the Cash Management Agreement;
then Airplanes Limited or Airplanes Trust or both, will inform the Trustee at
such time of any such requirement or imposition and shall use its or their best
efforts to avoid the effect of the same; provided that no actions shall be taken
by either Airplanes Limited or Airplanes Trust to avoid such effects unless each
Rating Agency has confirmed that such action will not cause an impairment in the
rating of Certificates of any class or subclass. If, after using its best
efforts to avoid the adverse effect described above, Airplanes Limited or
Airplanes Trust, or both, or any subsidiary of either of them has not avoided
such effects, each of Airplanes Limited and Airplanes Trust may, at its
election, redeem the Notes of any or all classes or subclasses to which such
withholding or deduction applies in whole with accrued and unpaid interest but
without premium on any Payment Date. However, any such redemptions may not occur
more than 30 days prior to such time as the requirement or imposition described
in (a) or (b) above is to become effective.
Method of Redemption. In respect of any redemption of any class or
subclass of Notes to be made out of amounts available for such purposes, if any,
other than Collections on any Payment Date, at least 20 days but not more than
60 days before such Redemption Date, the Indenture Trustee will give notice of
such redemption (a "NOTICE OF REDEMPTION") to each holder of such class or
subclass of Notes; provided that such Indenture Trustee shall have determined in
advance of giving any such notice that funds are or will, on the Redemption
Date, be available therefor. If a redemption is of less than all of the Notes of
any class or subclass, Notes of such class or subclass to be redeemed will be
repaid principal pro rata, to the extent moneys are available therefor. In the
case of any redemption in whole (other than a redemption resulting from taxation
reasons), Airplanes Limited and Airplanes Trust will deposit, or will cause to
be deposited, in the Defeasance/Redemption Account an amount equal to the
Redemption Price, together with an amount sufficient to pay or provide for all
of the accrued and unpaid interest as of the Redemption Date. In the case of any
required redemption by Airplanes Group from Collections on any Payment Date
pursuant to the Priority of Payments, such redemptions will be made only in
conformance with the order of payments set forth under "Priority of Payments",
and no Notice of Redemption will be sent. Each Notice of Redemption will state
(i) the applicable Redemption Date, (ii) the Indenture Trustee's arrangements
for making payments due, (iii) the redemption price of the Notes to be redeemed,
(iv) in the case of redemptions in whole, that Notes of the class or subclass to
be redeemed must be surrendered (which action may be taken by any holder of the
Notes or its authorized agent) to the applicable Indenture Trustee to collect
the Redemption Price and accrued and unpaid interest on such Notes, and (v) in
the case of redemptions in whole, that, unless Airplanes Limited or Airplanes
Trust defaults in the payment of the Redemption Price and any accrued and unpaid
interest thereon, interest on the class of Notes called for redemption will
cease to accrue on and after the Redemption Date. Once a Notice of Redemption in
respect of a redemption in whole is mailed, each class or subclass of Notes to
which such Notice of Redemption applies will become due and payable on the
Redemption Date stated in such Notice of Redemption at their Redemption Price,
together with accrued and unpaid interest thereon.
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DEFEASANCE
Airplanes Limited and Airplanes Trust at any time may terminate all of
their respective obligations under the Notes and the Trust Indentures ("LEGAL
DEFEASANCE"), except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or exchange of the
Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a
register in respect of the Notes. Airplanes Limited or Airplanes Trust at any
time may terminate their respective obligations under the covenants described
under "Trust Indenture Covenants" and "Operating Covenants" and the events of
default described under "Note Events of Default and Remedies" other than clauses
(a), (b), (c), (f) (solely with respect to Airplanes Limited and Airplanes
Trust) and (g) (solely with respect to Airplanes Limited and Airplanes Trust)
set forth under "-- Note Events of Default and Remedies" ("COVENANT
DEFEASANCE").
Airplanes Limited and Airplanes Trust may exercise their respective legal
defeasance options notwithstanding their prior exercise of the covenant
defeasance option. If Airplanes Limited and Airplanes Trust exercises their
respective legal defeasance options, payment of the Notes may not be accelerated
because of a Note Event of Default with respect thereto. If Airplanes Limited
and Airplanes Trust exercise their respective covenant defeasance options,
payment of the Notes may not be accelerated because of the events of default
described under "Note Events of Default and Remedies" other than clauses
(a),(b),(c),(f) (solely with respect to Airplanes Limited and Airplanes Trust)
and (g) (solely with respect to Airplanes Limited and Airplanes Trust) set forth
under "-- Note Events of Default and Remedies".
In order to exercise either defeasance option, Airplanes Limited and
Airplanes Trust must irrevocably deposit in trust (the "DEFEASANCE TRUST") with
the Indenture Trustee any combination of money, obligations of the U.S.
Government or obligations of corporate issuers (which corporate obligations
shall be rated AA+ or its equivalent or higher and shall not have a maturity of
longer than three years from the date of defeasance) for the payment of
principal, premium (if any), and interest on the Notes to redemption or
maturity, as the case may be, and must comply with certain other conditions,
including delivering to the Indenture Trustee an opinion of counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such opinion of counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
PRIORITY OF PAYMENTS
Pursuant to the terms of each Trust Indenture and the Cash Management
Agreement, on each Payment Date, the Cash Manager will withdraw all amounts on
deposit in the Collection Amount and distribute such amounts in the order of
priority set forth below but, in each case, only to the extent that all amounts
ranking prior thereto have been paid in full.
(i) First, to the Expense Account, or in certain cases directly to the
relevant Expense payees, an amount equal to the Required Expense
Amount and then to the relevant Expense payees;
(ii) Second, in no order of priority among themselves, but pro rata, (A)
pro rata, to the holders of the Class A Notes, all accrued and
unpaid interest excluding the Step-Up Interest, if applicable, on
such subclass of Class A Notes; and (B) pro rata, to any Swap
Provider, an amount equal to any payment due from Airplanes Limited
or Airplanes Trust pursuant to any Swap Agreement;
(iii) Third, retain in the Collection Account, an amount (the "FIRST
COLLECTION ACCOUNT TOP-UP"), if positive, equal to (A) the sum of
the Maintenance Reserve Amount and the Miscellaneous Reserve Amount
less (B) the amount then on deposit in the Collection Account;
(iv) Fourth, to any Swap Provider an amount not in excess of the Minimum
Hedge Payment;
(v) Fifth, to the holders of the Class A Notes, in the order of priority
by subclass set forth under "Description of the Notes and the
Guarantees -- Principal", an amount equal to the aggregate Minimum
Principal Payment Amount with respect to each subclass of such Class
A Notes;
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<PAGE> 141
(vi) Sixth, to the holders of the Class B Notes, all accrued and unpaid
interest on the Class B Notes;
(vii) Seventh, to the holders of the Class B Notes, an amount equal to the
aggregate Minimum Principal Payment Amount with respect to such
Class B Notes;
(viii) Eighth, to the holders of the Class C Notes, all accrued and unpaid
interest on the Class C Notes;
(ix) Ninth, to the holders of the Class D Notes, all accrued and unpaid
interest on the Class D Notes;
(x) Tenth, retain in the Collection Account, an amount (the "SECOND
COLLECTION ACCOUNT TOP-UP"), if positive, equal to (A) the Liquidity
Reserve Amount less (B) the amount then on deposit in the Collection
Account;
(xi) Eleventh, in the order of priority by subclass set forth under
"Description of the Notes and the Guarantees -- Principal", to the
holders of the Class A Notes, an amount, if any, equal to the Class
A Principal Adjustment Amount with respect to each such subclass;
(xii) Twelfth, to the holders of the Class C Notes, an amount equal to the
Class C Scheduled Principal Payment Amount;
(xiii) Thirteenth, to the holders of the Class D Notes, an amount equal to
the Class D Scheduled Principal Payment Amount;
(xiv) Fourteenth, to the Permitted Accruals balance in the Expense Account,
an amount equal to any Modification Payments (or any part thereof);
(xv) Fifteenth, to the holders of each subclass of the Class A Notes
entitled thereto pro rata, an amount equal to all accrued and unpaid
Step-Up Interest on such subclasses, if any;
(xvi) Sixteenth, to the holders of Class E Notes an amount equal to the
Class E Note Minimum Interest Amount for the current Interest Accrual
Period, without accruals from prior Interest Accrual Periods;
(xvii) Seventeenth, to any Swap Provider an amount not in excess of the
Supplemental Hedge Payment;
(xviii) Eighteenth, to the holders of Class B Notes, an amount equal to the
Class B Supplemental Principal Payment Amount;
(xix) Nineteenth, in the order of priority by subclass set forth under
"Description of the Notes and the Guarantees -- Principal", to the
holders of the Class A Notes, an amount equal to the Class A
Supplemental Principal Payment Amount with respect to each subclass;
(xx) Twentieth, to the holders of Class D Notes, an amount equal to the
Redemption Price of the Outstanding Principal Balance, if any, on,
the Class D Notes;
(xxi) Twenty-first, to the holders of Class C Notes, an amount equal to the
Redemption Price of the Outstanding Principal Balance, if any, on,
the Class C Notes;
(xxii) Twenty-second, to the holders of the Class E Notes, an amount equal
to the Class E Note Supplemental Interest Amount for the current
Interest Accrual Period, without accruals from prior Interest
Accrual Periods;
(xxiii) Twenty-third, to the holders of Class B Notes, an amount equal to
the Redemption Price of the Outstanding Principal Balance, if any,
on, the Class B Notes;
(xxiv) Twenty-fourth, in the order of priority by subclass set forth under
"Description of the Notes and the Guarantees -- Principal", to the
holders of the Class A Notes, an amount equal to the Redemption
Price of the Outstanding Principal Balance, if any, on, each such
subclass;
(xxv) Twenty-fifth, payments to Swap Providers which are subordinated in
accordance with the relevant Swap Agreement ("SUBORDINATED SWAP
PAYMENTS");
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(xxvi) Twenty-sixth, to the holders of the Class E Notes, an amount equal
to all accrued and unpaid interest on the Class E Notes and any
amount equal to the Liquidity Reserve Amount then on deposit in the
Collection Account; and
(xxvii) Twenty-seventh, on a pari passu basis to the holders of the Class E
Notes, an amount equal to the Outstanding Principal Balance of the
Class E Notes and to the trustees of the Charitable Trusts, an
amount equal to any arrears of the Annual Dividend Amount not
previously paid.
In addition to the above payments, Airplanes Limited will pay annually to
the trustees of the Charitable Trusts, to the extent that there are
distributable profits in any fiscal year, the Annual Dividend Amount and any
arrears of the Annual Dividend Amount to the extent not paid in respect of
previous fiscal years.
PRIORITY OF PAYMENTS FOLLOWING A DEFAULT NOTICE
Following delivery to Airplanes Limited, Airplanes Trust or the Cash
Manager of a Default Notice, the allocation of payments described above will not
apply and all amounts on deposit in the Collection Account will be applied in
the following order of priority:
(i) First, to the Expense Account, or in certain cases directly to the
relevant Expense payees, an amount equal to the Required Expense
Amount and then to the relevant Expense payees;
(ii) Second, in no order of priority among themselves, but pro rata in
respect of amounts payable on such date, (A) pro rata to the holders
of each subclass of the Class A Notes, all accrued and unpaid
interest (including Step-Up Interest) on, and all Outstanding
principal of, the Class A Notes and (B) pro rata to any Swap
Provider, such amounts as are required to make any payments due to
such Swap Provider pursuant to any Swap Agreement;
(iii) Third, to the holders of the Class B Notes, all accrued and unpaid
interest on and all Outstanding principal of the Class B Notes;
(iv) Fourth, to the holders of the Class C Notes, all accrued and unpaid
interest on and all Outstanding principal of the Class C Notes;
(v) Fifth, to the holders of the Class D Notes, all accrued and unpaid
interest on and all Outstanding principal of the Class D Notes;
(vi) Sixth, to the holders of the Class E Notes all accrued and unpaid
interest on and all Outstanding principal of the Class E Notes; and
(vii) Seventh, with respect to Airplanes Limited only, to the Charitable
Trusts, all accrued and unpaid dividends payable to the Charitable
Trusts.
TRUST INDENTURE COVENANTS
No Release of Obligations. The Relevant Issuer will not take, or knowingly
permit any subsidiary to take, any action which would amend, terminate (other
than any termination in connection with the replacement of such agreement with
an agreement having substantially similar terms) or discharge or prejudice the
validity or effectiveness of the Trust Indentures (other than as permitted
therein), the Security Trust Agreement, the Cash Management Agreement, the
Administrative Agency Agreement or the Servicing Agreement or permit any party
to any such document to be released from such obligations, except, in each case,
as permitted or contemplated by the terms of such document, and provided that
such actions may be taken or permitted, and such releases may be permitted, if
such Relevant Issuer shall have first obtained an authorizing resolution of the
Directors, in the case of Airplanes Limited, or a resolution of the Controlling
Trustees, in the case of Airplanes Trust, determining that such action,
permitted action or release does not materially adversely affect the interests
of the Noteholders, and provided further, that in any case (i) the Relevant
Issuer will not take any action which would result in any amendment or
modification to the conflicts standard or duty of care in such agreements and
(ii) there must be at all times an administrative agent, a cash
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<PAGE> 143
manager and, unless the Servicer resigns prior to the appointment of a
replacement servicer as a result of Airplanes Group's failure to pay amounts due
and owing to it, a servicer.
Limitation on Encumbrances. Under the terms of each Trust Indenture, the
Relevant Issuer will not, and will not permit any subsidiary to, create, incur,
assume or suffer to exist any mortgage, pledge, lien, encumbrance, charge or
security interest (in each case, an "ENCUMBRANCE"), including, without
limitation, any conditional sale, any sale with recourse against the seller or
any affiliate of the seller, or any agreement to give any security interest over
or with respect to any of such Relevant Issuer's or subsidiary's assets
(excluding Segregated Funds) including, without limitation, all ordinary shares
and preferred shares, any options, warrants and other rights to acquire such
shares of capital stock ("STOCK") and any Indebtedness of any subsidiary held by
such Relevant Issuer or a subsidiary thereof.
Notwithstanding the foregoing, the Relevant Issuer may create, incur,
assume or suffer to exist (i) any Permitted Encumbrance, (ii) any security
interest created or required to be created under the Security Trust Agreement,
(iii) Encumbrances over rights in or derived from leases, upon confirmation from
the Rating Agencies in advance that such action or event will not result in the
lowering or withdrawal of any rating assigned by any Rating Agency to any of the
Certificates, provided that any transaction or series of transactions resulting
in such Encumbrance, taken as a whole, does not materially adversely affect the
amount of Collections that would have been received by the Relevant Issuer from
such Lease had such Encumbrance not been created or (iv) any other Encumbrance
the validity or applicability of which is being contested in good faith in
appropriate proceedings by the Relevant Issuer or any of its subsidiaries;
provided that if such proceedings continue for a period exceeding 12 months,
such continuing proceedings, together with continuing proceedings related to
Aircraft under the Trust Indenture relating to the Guarantor of the Relevant
Issuer, do not relate to claims exceeding 2% of the Initial Appraised Value of
the Portfolio.
As used in this Prospectus, "AFFILIATE" means, with respect to any person,
any other person that, directly or indirectly, controls, is controlled by or is
under common control with, such person or is a director or officer of such
person; "CONTROL" of a person means the possession, direct or indirect, of the
power to vote 5% or more of the voting Stock of such person or to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting Stock, by contract or otherwise; and "PERMITTED
ENCUMBRANCE" means (i) any lien for taxes, assessments and governmental charges
or levies not yet due and payable or which are being contested in good faith by
appropriate proceedings; (ii) in respect of any Aircraft, any liens of a
repairer, carrier or hanger keeper arising in the ordinary course of business by
operation of law or any engine or parts-pooling arrangements or other similar
lien; (iii) any permitted lien or encumbrance on any Aircraft, Engines or Parts
as defined under any Lease thereof (other than liens or encumbrances created by
the relevant lessor); (iv) any liens created by or through or arising from debt
or liabilities or any act or omission of any Lessee in each case either in
contravention of the relevant Lease (whether or not such Lease has been
terminated) or without the consent of the relevant Lessor (provided that if such
Lessor becomes aware of any such lien, such Lessor shall use commercially
reasonable efforts to have any such liens lifted); (v) any head lease, lease,
conditional sale agreement or Purchase Option existing as of March 28, 1996 or
Aircraft Agreement meeting the requirements of (iii) (B) of the second paragraph
under the "Limitation on Aircraft Sales" covenant; (vi) any lien for air
navigation authority, airport tending, gate or handling (or similar) charges or
levies; (vii) any lien created in favor of the Relevant Issuer, or any of its
subsidiaries or the Security Trustee; and (viii) any lien not referred to in (i)
through (vii) above which would not adversely affect the owner's rights and does
not exceed the greater of $2,000,000 in the aggregate for the Portfolio or
$250,000 per Aircraft.
Limitation on Restricted Payments. Under the terms of each Trust
Indenture, the Relevant Issuer will not, and will not permit any of its
subsidiaries to (i) declare or pay any dividend or make any distribution on its
Stock held by persons other than the Relevant Issuer or any of its subsidiaries;
provided that as long as no Note Event of Default shall have occurred and be
continuing and Airplanes Limited has distributable profits which may lawfully be
paid as dividends, Airplanes Limited may, subject to the provisions set forth
under "Description of the Securities -- The Notes and the Guarantees", pay the
Annual Dividend Amount; (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Stock of such Relevant Issuer or any of its subsidiaries
held by and on behalf of persons other than such Relevant Issuer, any of its
subsidiaries or to
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other Persons permitted under the requirements of (ii)(B) under the "Limitation
on the Issuance, Delivery and Sale of Capital Stock" covenant; (iii) make any
interest, principal or premium payment on the Notes or make any voluntary or
optional repurchase, defeasance or other acquisition or retirement for value of
Indebtedness of such Relevant Issuer or any of its subsidiaries that is not owed
to such Relevant Issuer or any of its subsidiaries other than in accordance with
"Description of the Securities -- The Notes and the Guarantees" or (iv) make any
investments (other than Permitted Account Investments, investments permitted
under the "Limitation on Engaging in Business Activities" covenant and allowed
Restructurings) provided that no investment by any Airplanes Limited Member in
any Airplanes Trust Member or by any Airplanes Trust Member in any Airplanes
Limited Member shall be made if such investment would materially adversely
affect the Noteholders. "AIRPLANES LIMITED MEMBER" means Airplanes Limited and
any of its subsidiaries. "AIRPLANES TRUST MEMBER" means Airplanes Trust and any
of its subsidiaries.
The term "INVESTMENT" for purposes of the above restriction shall mean any
loan or advance to a person or entity, any purchase or other acquisition of any
capital stock, warrants, rights, options, obligations or other securities of
such person or entity, any capital contribution to such person or entity or any
other investment in such person or entity.
Limitation on Dividends and Other Payment Restrictions. Under the terms of
each Trust Indenture, the Relevant Issuer will not, and will not permit any of
its subsidiaries to, create or otherwise suffer to exist any consensual
encumbrance or restriction of any kind on the ability of any subsidiary to (i)
declare or pay dividends or make any other distributions permitted by applicable
law, or purchase, redeem or otherwise acquire for value, the Stock of such
Relevant Issuer or such subsidiary, as the case may be, (ii) pay any
Indebtedness owed to such Relevant Issuer or such subsidiary, (iii) make loans
or advances to such Relevant Issuer or such subsidiary or (iv) transfer any of
its property or assets to such Relevant Issuer or any other subsidiary thereof.
The foregoing provisions shall not restrict any consensual encumbrances or
other restrictions: (i) existing as of March 28, 1996 under any Related
Document, and any amendments, extensions, refinancings, renewals or replacements
of such documents; provided that such consensual encumbrances and restrictions
in any such amendments, extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the holders of the Notes than those
previously in effect and being amended, extended, refinanced, renewed or
replaced; or (ii) in the case of clause (iv) in the preceding paragraph, (A)
that restrict in a customary manner the subletting, assignment or transfer of
any property or asset that is a lease, license, conveyance or contract or
similar property or asset or (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or consensual
encumbrance on, any property or assets of the Relevant Issuer or any subsidiary
not otherwise prohibited by the Trust Indenture. Nothing contained in this
covenant shall prevent such Relevant Issuer or any subsidiary from creating,
incurring, assuming or suffering to exist any Encumbrances not otherwise
prohibited under the Trust Indenture.
Limitation on Engaging in Business Activities. Under the terms of each
Trust Indenture, the Relevant Issuer will not, and will not permit any
subsidiary to, engage in any business or activity other than:
(i) (A) purchasing or otherwise acquiring, directly or indirectly, from
GPA Group and its affiliates the stock of the Transferred Companies
(including purchases of stock of affiliates of the companies
organized in the Isle of Man (the "IOMCOS") who were parties to
aircraft sales agreements in connection with the Acquisition), and
(B) owning, holding, converting, maintaining, modifying, managing,
operating, leasing, re-leasing and, subject to the limitations set
forth in the "Limitations on Aircraft Sales" covenant, selling or
otherwise disposing of the Aircraft and entering into all contracts
and engaging in all related activities incidental thereto, including
from time to time accepting, exchanging, holding or permitting any
of its subsidiaries to accept, exchange or hold (an "ALLOWED
RESTRUCTURING") promissory notes, contingent payment obligations or
equity interests, of Lessees or their affiliates issued in
connection with the bankruptcy, reorganization or other similar
process, or in settlement of delinquent obligations or obligations
anticipated to be delinquent, of such Lessees or their respective
affiliates in the
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ordinary course of business and (C) acquiring, directly or indirectly,
from an IOMCo any Aircraft that was subject on March 28, 1996 to an
existing sales agreement;
(ii) providing loans to, and guaranteeing or otherwise supporting the
obligations and liabilities of, any Airplanes Group member, in each
case on such terms and in such manner as the Directors or
Controlling Trustees, as the case may be, see fit and (whether or
not the Relevant Issuer or such subsidiaries derive a benefit
therefrom) so long as such loans, guarantees or other supports are
provided in connection with the purposes set forth in clause (i) of
this covenant; provided that no such loan, guarantee or other
support of the obligations or liabilities of any Airplanes Limited
Member by any Airplanes Trust Member or of any Airplanes Trust
Member by any Airplanes Limited Member shall be made if it would
materially adversely affect the Noteholders;
(iii) financing or refinancing the business activities described in clause
(i) of this covenant through the offer, sale and issuance of any
securities of Airplanes Limited or Airplanes Trust, upon such terms
and conditions as the Directors or Controlling Trustees, as the case
may be, see fit, for cash or in payment or in partial payment for
any property purchased or otherwise acquired by the Relevant Issuer;
(iv) engaging in currency and interest rate exchange transactions for the
purposes of avoiding, reducing, minimizing, hedging against or
otherwise managing the risk of any loss, cost, expense or liability
arising, or which may arise, directly or indirectly, from any change
or changes in any interest rate or currency exchange rate or in the
price or value of any of the property or assets of such Relevant
Issuer or any of its subsidiaries within limits determined by the
Directors or the Controlling Trustees from time to time and
submitted to the Rating Agencies, including but not limited to
dealings, whether involving purchases, sales or otherwise, in
foreign currency, spot and forward interest rate exchange contracts,
forward interest rate agreements, caps, floors and collars, futures,
options, swaps, and any other currency, interest rate and other
similar hedging arrangements and such other instruments as are
similar to, or derivatives of, any of the foregoing;
(v) (A) establishing, promoting and aiding in promoting, constituting,
forming or organizing companies, syndicates or partnerships of all
kinds in any part of the world for the purposes set forth in clause
(i) above, (B) acquiring, holding and disposing of shares, securities
and other interests in any such company, syndicate or partnership and
(C) disposing of shares, securities and other interests in, or
causing the dissolution of, any existing subsidiary other than
Holding Co. or AeroUSA, provided that any such disposition which
results in the disposition of an Aircraft meets the requirements set
forth under the "Limitation on Aircraft Sales" covenant; and
(vi) taking out, acquiring, surrendering and assigning policies of
insurance and assurances with any insurance company or companies
which the Relevant Issuer or any of its subsidiaries may think fit
and to pay the premiums thereon.
Limitation on Indebtedness. Under the terms of each Trust Indenture, the
Relevant Issuer will not, and will not permit any of its subsidiaries to, incur,
create, issue, assume, guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise,
whether present or future (in any such case, to "INCUR"), Indebtedness.
For the purposes of the Trust Indentures, "INDEBTEDNESS" means, with
respect to any person at any date of determination (without duplication), (i)
all indebtedness of such person for borrowed money, (ii) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto), (iv) all
the obligations of such person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of purchasing such property or service or taking delivery and title thereto
or the completion of such services, and payment deferrals arranged primarily as
a method of raising finance or financing the acquisition of such property or
service, (v) all obligations of such person under a lease of (or other agreement
conveying the right to use) any property, whether real, personal or mixed, that
is required to be classified and accounted
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for as a capital lease obligation under U.S. GAAP, (vi) all Indebtedness (as
defined in clauses (i) through (v) of this paragraph) of other persons secured
by a lien on any asset of such person, whether or not such Indebtedness is
assumed by such person, and (vii) all Indebtedness (as defined in clauses (i)
through (v) of this paragraph) of other persons guaranteed by such person.
Notwithstanding the foregoing, the Relevant Issuer and any subsidiary may
incur each and all of the following: (i) Indebtedness in respect of any Note,
Class E Note or Guarantee, (ii) Indebtedness in respect of any Refinancing
Notes; provided that (A) the Refinancing Certificates corresponding to such
Refinancing Notes receive ratings from the Rating Agencies at the close of such
refinancing equal to or higher than those of the class or subclass being
refinanced (determined at the date of incurrence), (B) taking into account such
refinancing, the Relevant Issuer receives confirmation prior to such refinancing
from the Rating Agencies that such refinancing will not result in the lowering
or withdrawal of any rating assigned by any Rating Agency to any of the
Certificates corresponding to each class or subclass of Notes Outstanding at
such time, (C) such refinancing does not extend the Remaining Weighted Average
Life of any other class or subclass of Notes then Outstanding by more than three
months and (D) the net proceeds of any such refinancing shall be used only to
repay the Outstanding Principal Balance of the class or subclass of the Notes
being so refinanced; and provided further, that, in the case of any refinancing
of Notes other than the Soft Bullet Notes, the Remaining Weighted Average Life
and Expected Final Payment Date of such Refinancing Notes, determined as of the
date of incurrence, does not exceed by more than three months (x) with respect
to the Fixed Rate Notes, the Remaining Weighted Average Life or Expected Final
Payment Date, as the case may be, of such class or subclass of Notes to be so
refinanced, and (y) with respect to the Floating Rate Notes, the Expected Final
Payment Date of such class or subclass of Notes to be refinanced; (iii)
Indebtedness in respect of guarantees by the Relevant Issuer or any subsidiary
of any other member of Airplanes Group, provided that no such Indebtedness in
respect of any member of Airplanes Group other than of the Relevant Issuer or
any subsidiary of the Relevant Issuer shall be incurred if it would materially
adversely affect the Noteholders; (iv) obligations to each seller under the
Stock Purchase Agreement and the related lease assignment and assumption
agreements and the documents related thereto, (v) indebtedness in respect of any
issuance of Class E Notes payable in connection with any purchase price
adjustment under the Stock Purchase Agreements, (vi) Indebtedness to GPA under
intercompany loans or any agreement between the Relevant Issuer or any of its
subsidiaries and any other members of Airplanes Group (each an "INTERCOMPANY
LOAN"); provided that no such Indebtedness incurred by an Airplanes Limited
Member in favor of an Airplanes Trust Member or incurred by an Airplanes Trust
Member in favor of an Airplanes Limited Member shall be incurred if it would
materially adversely affect the Noteholders and (vii) any subordinated,
non-interest paying indebtedness issued in accordance with the terms of the Tax
Sharing Agreement.
As used in this Prospectus, "GUARANTEE" means any obligation, contingent or
otherwise, of any person directly or indirectly guaranteeing any Indebtedness or
other obligation of any other person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other person or (ii)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided that the
term "guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "guarantee" when used as a verb has a
corresponding meaning.
Limitation on Aircraft Sales. Under the terms of each Trust Indenture, the
Relevant Issuer will not, and will not permit any of its subsidiaries to, sell,
transfer or otherwise dispose of any Aircraft or any interest therein.
Notwithstanding the foregoing, the Relevant Issuer and any of its
subsidiaries will be permitted to sell, transfer or otherwise dispose of,
directly or indirectly, (a) any engines being sold pursuant to the Stock
Purchase Agreements on March 28, 1996 or any replacements thereof ("ENGINES") or
parts installed in or attached to any Aircraft other than Engines ("PARTS"), or
(b) one or more Aircraft or an interest therein (i) pursuant to a Purchase
Option or other agreements of a similar character existing on March 28, 1996,
(ii) within or among the Relevant Issuer and its subsidiaries without
limitation, and among the Relevant
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Issuer or any of its subsidiaries and any member of Airplanes Group if such
sale, transfer or disposition, as the case may be, would not materially
adversely affect the Noteholders, (iii) pursuant to any Aircraft Agreement;
provided that such sale does not result in an Event of Default under "Operating
Covenants -- Concentration Limits", and the net present value of the cash Net
Sale Proceeds is not less than the Note Target Price, (iv) pursuant to receipt
of insurance proceeds in connection with an event of loss or (v) having an
aggregate Initial Appraised Value of no more than $50 million per annum and no
more than $500 million in aggregate, in each case for Airplanes Group taken as a
whole, from March 28, 1996 until the termination of the Trust Indentures by
their terms, provided that (x) the Directors of Airplanes Limited or the
Controlling Trustees of Airplanes Trust, as applicable, unanimously confirm that
each such sale is in the best interests of such Relevant Issuer and the
Noteholders, (y) all of the consideration received in respect of such sale shall
be in cash and (z) such sale does not result in a Note Event of Default under
"Operating Covenants -- Concentration Limits"; provided, however, that this
covenant will not apply to any sale, transfer or other disposition of any
Aircraft or any interest therein effected as part of a single transaction
providing for the redemption or defeasance of the Notes and the Class E Notes in
accordance with the terms thereof as described under "-- Redemption" or "--
Defeasance", respectively.
For the purpose of this covenant, the net present value of the cash Net
Sale Proceeds of any sale, transfer or other disposition of any aircraft shall
mean the present value of all payments received or to be received by the
Relevant Issuer or one of its subsidiaries from the date of execution or option
granting date, as the case may be, of the relevant Aircraft Agreement through
and including the date of transfer of title to such Aircraft, discounted back to
the date of execution or option granting date, as the case may be, of such
Aircraft Agreement at the weighted average cost of funds of Airplanes Group
(based on the cost of funds on the Payment Date immediately preceding such date
(excluding for such purpose any interest paid or accrued on the Class E Notes
other than the Class E Note Minimum Interest Amount, but taking into account any
Swap Agreements)).
The "NOTE TARGET PRICE" means, in respect of any Aircraft, an amount equal
to 105% of the aggregate Outstanding Principal Balance of the Notes allocable to
such Aircraft on the date of the sale agreement or purchase option granting
date, as the case may be. On any date, the Outstanding Principal Balance of
Notes allocable to an Aircraft will equal the product of (i) (A) the Adjusted
Base Value of such aircraft divided by (B) the Adjusted Portfolio Value and (ii)
the aggregate Outstanding Principal Balance of the Notes, in each case on the
most recent Payment Date.
"AIRCRAFT AGREEMENT" means any lease, sub-lease, conditional sale
agreement, hire purchase agreement or other agreement (other than an agreement
for sale not providing for possession by the purchaser, or an agreement relating
to maintenance, modification or repairs) or any purchase option granted to a
person other than the Relevant Issuer or its subsidiaries to purchase an
Aircraft pursuant to a purchase option agreement, in each case pursuant to which
any person acquires or is entitled to acquire legal title, or the economic
benefits of ownership of, such aircraft.
"NET SALE PROCEEDS" means, with respect to any sale or other disposition of
any assets, the aggregate amount of cash received from time to time (whether as
initial or deferred consideration) by or on behalf of the seller in connection
with such transaction after deducting therefrom (without duplication) (a)
reasonable and customary brokerage commissions and other similar fees and
commissions and (b) the amount of taxes payable in connection with or as a
result of such transaction, in each case to the extent, but only to the extent,
that the amounts so deducted are, at the time of receipt of such cash, actually
paid to a person that is not an affiliate of the seller and are properly
attributable to such transaction or to the asset that is the subject thereof.
Limitation on Modification Payments and Capital Expenditures. Under the
terms of each Trust Indenture, the Relevant Issuer will not, and will not permit
any of its subsidiaries to, make any capital expenditures for the purpose of
effecting any optional improvement or modification of any Aircraft, for the
optional conversion of any Aircraft from a passenger aircraft to a freighter or
mixed-use aircraft, or for the purpose of purchasing or otherwise acquiring any
Engines or Parts outside of the ordinary course of business (each such
expenditure, a "MODIFICATION PAYMENT"). Notwithstanding the foregoing, the
Relevant Issuer may, and may permit any of its subsidiaries to, make
Modification Payments; provided that (i) each
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Modification Payment, together with all other Modification Payments made after
the Closing Date pursuant to the covenant with respect to any single Aircraft,
do not exceed the aggregate amount of funds that would be necessary to perform
heavy maintenance (as described in the Servicing Agreement) on such Aircraft,
including the airframe and the related Engines thereof; (ii) any improvements
made as a result of such Modification Payment do not detract from the value of
the affected Aircraft; (iii) such Modification Payment is included in the annual
operating budget of Airplanes Group and approved by the Directors or Controlling
Trustees, as the case may be; (iv) the amount of funds necessary to make such
Modification Payment shall have been accrued in advance as a Permitted Accrual
in the Expense Account through transfers into the Expense Account pursuant to
the Trust Indentures or otherwise allowed to be paid under Permitted
Indebtedness; and (v) the aggregate amount of all Modification Payments made by
members of Airplanes Group, taken as a whole, pursuant to this covenant after
March 28, 1996, including such Modification Payment, shall not exceed
$200,000,000.
Limitation on Consolidation, Merger and Transfer of Assets. Under the
terms of each Trust Indenture, the Relevant Issuer will not, and will not permit
any subsidiary to, consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of its property and assets (as an entirety
or substantially an entirety in one transaction or in a series of related
transactions) to, any other person, or permit any other person to merge with or
into the Relevant Issuer or any subsidiary, unless (i) the resulting entity is a
special purpose corporation, the charter of which is substantially similar to
the Memorandum of Association of Airplanes Limited, the Trust Agreement pursuant
to which Airplanes Trust is organized, or the equivalent charter document of
such subsidiary, as the case may be, and, after such consolidation, merger,
sale, conveyance, transfer, lease or other disposition, payments from such
resulting entity to the Noteholders do not give rise to any withholding tax
payments less favorable to the Noteholders than the amount of any withholding
tax payments which would have been required had such event not occurred, (ii) in
the case of consolidation, merger or transfer by the Relevant Issuer, the
surviving successor or transferee entity shall expressly assume all of the
obligations of the Relevant Issuer in the relevant Trust Indenture, the Notes
and each other Related Document to which such Relevant Issuer is then a party,
(iii) the Directors or the Controlling Trustees as the case may be shall have
obtained confirmation in advance that such action or event will not result in
the lowering or withdrawal of any rating assigned by any Rating Agency to any of
the Certificates, (iv) immediately after giving effect to such transaction, no
Note Event of Default shall have occurred and be continuing, and (v) the
Relevant Issuer delivers to the applicable Indenture Trustee an officers'
certificate or trustee's certificates as the case may be, and an opinion of
counsel, in each case stating that such consolidation, merger or transfer and
such supplemental indenture comply with the above criteria and, if applicable,
the "Limitation on Aircraft Sales" covenant and that all conditions precedent
provided for in the related Trust Indenture relating to such transaction have
been complied with; provided that this covenant shall not apply to any such
consolidation, merger, sale, conveyance, transfer, lease or disposition (a)
within and among the Relevant Issuer and any of its subsidiaries and among
Airplanes Group if such consolidation, merger, sale, conveyance, transfer, lease
or disposition, as the case may be, would not materially adversely affect the
Noteholders, (b) complying with the terms of the "Limitation on Aircraft Sales"
covenant or (c) effected as part of a single transaction providing for the
redemption or defeasance of the Notes and the Class E Notes in accordance with
the terms thereof as described under "-- Redemption" or "-- Defeasance",
respectively.
Limitation on Transactions with Affiliates. Under the terms of each Trust
Indenture, the Relevant Issuer will not, and will not permit any subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any affiliate of such Relevant Issuer or
any subsidiary, except upon fair and reasonable terms no less favorable to such
Relevant Issuer or such subsidiary than could be obtained, at the time of such
transaction or at the time of the execution of the agreement providing therefor,
in a comparable arm's-length transaction with a person that is not such an
affiliate.
The foregoing limitation does not limit, and shall not apply to, (i) any
transaction pursuant to the terms of the Related Documents; (ii) any transaction
within and among the Relevant Issuer or any of its subsidiaries and any other
member of Airplanes Group, provided, that no such transaction, other than
between the
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Relevant Issuer and any of its subsidiaries, shall be consummated if it would
materially adversely affect the Noteholders; (iii) the payment of reasonable and
customary regular fees to, and the provision of reasonable and customary
liability insurance in respect of, Directors of Airplanes Limited or Controlling
Trustees of Airplanes Trust; (iv) any payments or other transactions pursuant to
the Tax-Sharing Agreement; (v) any contracts between the Relevant Issuer and any
employee of Airplanes Group pursuant to which the aggregate value of payments
does not exceed $200,000 per year; (vi) any payments of the types referred to in
clauses (i) or (ii) of the "Limitation on Restricted Payments" covenant and not
prohibited thereunder; (vii) payments under any contract for the re-acquisition
of an Aircraft from an IOMCo. of a price not exceeding the amount paid therefor
by such IOMCo under a conditional sale agreement existing on the date hereof or
(viii) entering into any transaction effected as part of a single transaction
providing for the redemption or defeasance of the Notes and the Class E Notes in
accordance with the terms thereof as described under "-- Redemption" or "--
Defeasance", respectively.
Limitation on the Issuance, Delivery and Sale of Capital Stock. Under the
terms of each Trust Indenture, the Relevant Issuer will not (i) issue, deliver
or sell any shares, interests, participations or other equivalents (however
designated, whether voting or non-voting, other than such shares, interests,
participations or other equivalents existing on March 28, 1996) in equity,
including without limitation, all ordinary shares of Airplanes Limited and the
Airplanes Trust Residual Interest, as the case may be, or (ii) sell, or permit
any subsidiary, directly or indirectly, to issue, deliver or sell, any shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting, other than such shares, interests, participations or other
equivalents existing on March 28, 1996) in equity except (A) to the Charitable
Trust Trustees, (B) issuances or sales of shares of Stock of foreign
subsidiaries of the Relevant Issuer to nationals in the jurisdiction of
incorporation or organization of such subsidiary, as the case may be, to the
extent required by applicable law or necessary in the determination of the Board
of Directors or the Controlling Trustees, as the case may be, to avoid an
adverse tax consequence in any such jurisdiction, (C) the pledge of the shares
pursuant to the Security Trust Agreement, (D) the sale, delivery or transfer of
any Stock of any member of Airplanes Group in connection with the redemption or
defeasance of the Notes and the Class E Notes in accordance with the terms set
forth under "-- Redemption" or "-- Defeasance", respectively and (E) the sale of
any Stock in connection with any sale of Aircraft in compliance with the terms
of the "Limitation on Aircraft Sales" covenant.
In addition, under the terms of the Shareholders Agreement, the Charitable
Trust Trustees have agreed that while the Airplanes Limited Notes are
outstanding they will not, without prior written approval of the Airplanes
Limited Indenture Trustee and all of the Directors, take any action in their
capacity as shareholders of Airplanes Limited to alter the share capital or
issue any additional shares of Airplanes Limited.
Bankruptcy and Insolvency. Under the terms of each Trust Indenture, the
Relevant Issuer (i) will promptly provide the Indenture Trustee and the Rating
Agencies with notice of the institution of any proceeding by or against such
Relevant Issuer or any of its subsidiaries, as the case may be, seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief or composition
of their debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking entry of an order for relief or
the appointment of a receiver, trustee or other similar official for either or
for any substantial part of their property and (ii) each Relevant Issuer will
not, without an affirmative unanimous written resolution of the Directors or the
Controlling Trustees, as applicable and confirmation from the Rating Agencies in
advance that such action or event will not result in the lowering or withdrawal
of any rating assigned by any Rating Agency to any of the Certificates, take any
action to waive, repeal, amend, vary, supplement or otherwise modify its charter
documents.
In addition, under the terms of the Shareholders Agreement, the Charitable
Trust Trustees have agreed that while the Airplanes Limited Notes are
outstanding they will not, without prior written approval of the Airplanes
Limited Indenture Trustee and all of the Directors, take any action in their
capacity as shareholders of Airplanes Limited (i) to cause Airplanes Limited to
institute any proceeding seeking liquidation or insolvency (or similar
proceeding), (ii) in the case of any such proceeding instituted against
Airplanes Limited, to authorize or consent to such proceedings, (iii) to
terminate Airplanes Limited's corporate
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existence, (iv) to waive or amend the Memorandum and Articles of Association of
Airplanes Limited or (v) to transfer any part of the capital stock of Airplanes
Limited or any interest therein unless the transferee (a) is a trustee of a
trust formed for charitable purposes substantially identical to those for which
the Charitable Trusts are established and (b) enters into an agreement
substantially identical to the Shareholders Agreement in favor of the Airplanes
Limited Indenture Trustee.
Maintenance of Taxation Status. Under the terms of each Trust Indenture,
the Relevant Issuer shall not, and shall not permit any of its subsidiaries to,
take any action or omit to take any action which is inconsistent with the
preservation of the certification with respect to taxation of Airplanes Group
issued by the Irish Department of Finance (or any similar treatment in other
jurisdictions) in connection with business operations in Shannon, Ireland or
similar certification for other tax-advantaged zones in Ireland or such other
jurisdictions and the taxation treatment awarded to the subsidiaries of
Airplanes Group as a consequence thereof.
OPERATING COVENANTS
Concentration Limits. Unless the Directors or Controlling Trustees obtain
prior written confirmation from each of the Rating Agencies that no lowering or
withdrawal of the then current rating of any class or subclass of Certificates
will result, the Relevant Issuer will not permit any of its subsidiaries to
lease or re-lease any Aircraft if entering into such proposed lease would cause
the Portfolio to exceed any of the concentration limits set forth below (the
"CONCENTRATION LIMITS"); provided that each Trust Indenture will permit breaches
of such Concentration Limits upon any renewal, extension or restructuring of any
Lease.
LESSEE COVENANTS
<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
APPRAISED VALUE OF PORTFOLIO
-------------------------------
<S> <C>
Single Lessee...................................................... 10%
Five largest Lessees............................................... 35%
</TABLE>
COUNTRY COVENANTS
<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
COUNTRY RATING APPRAISED VALUE OF PORTFOLIO(2)
- ------------------------------------------------------------------- -------------------------------
<S> <C>
A -- (or the equivalent) or better(1).............................. 20%
Other.............................................................. 15%
</TABLE>
REGION COVENANTS
<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
APPRAISED VALUE OF PORTFOLIO(3)
-------------------------------
<S> <C>
Africa............................................................. 5%
Asia............................................................... 45%
Australia.......................................................... 10%
Europe (including Turkey, but excluding the CIS and Eastern
Europe).......................................................... 45%
Middle East........................................................ 15%
North America...................................................... 45%
Latin America (including South America, the Caribbean and
Mexico).......................................................... 35%
Other (including CIS and Eastern Europe)........................... 10%
</TABLE>
- ---------------
(1) Based on the sovereign foreign currency debt rating assigned by the Rating
Agencies to the country in which a Lessee is habitually based at the time
the relevant Lease is executed.
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(2) Percentage to be obtained by dividing the aggregate most recent Appraised
Values of all Aircraft operated or to be operated by Lessees habitually
based in the applicable country by the aggregate most recent Appraised
Values of all Aircraft then owned by Airplanes Group.
(3) Percentage to be obtained by dividing the aggregate most recent Appraised
Values of all Aircraft operated or to be operated by Lessees habitually
based in the applicable region by the aggregate most recent Appraised Values
of all Aircraft then owned by Airplanes Group.
In addition, each Trust Indenture will not permit the Relevant Issuer or
any subsidiary to lease Aircraft operated or to be operated by Lessees domiciled
in (i) certain countries and (ii) certain other countries without procuring
political risk insurance. The list of prohibited countries and countries with
respect to which political risk insurance must be procured may be modified from
time to time upon the approval of the Directors of Airplanes Limited or the
Controlling Trustees of Airplanes Trust, as the case may be, after consultation
with the Administrative Agent.
The Trust Indentures contain no limitations with respect to the country or
region where any sublessees of Aircraft operated or to be operated are domiciled
if (i) such sublease is permitted under the relevant Lease (including by reason
of consent or waiver, if applicable) or renewed Lease (including by reason of
consent or waiver, if applicable) and (ii) the relevant Lessee is either a
signatory to a Lease or a renewed Lease.
Compliance with Law, Maintenance of Permits. Under the terms of each Trust
Indenture, the Relevant Issuer will (i) comply, and cause each of its
subsidiaries to comply, in all material respects with all applicable laws, (ii)
obtain, and cause each of its subsidiaries to obtain, all material governmental
(including regulatory) registrations, certificates, licenses, permits and
authorizations required for such person's use and operation of the Aircraft,
including, without limitation, a current certificate of airworthiness for each
Aircraft (issued by the applicable aviation authority and in the appropriate
category for the nature of operations of such Aircraft), except that (A) no
certificate of airworthiness shall be required for any Aircraft (x) during any
period when such Aircraft is undergoing maintenance, modification or repair, (y)
following the withdrawal or suspension by such applicable aviation authority of
certificates of airworthiness in respect of all aircraft of the same model or
period of manufacture as such Aircraft (in which case the Relevant Issuer shall
comply, and cause each of its subsidiaries to comply, with all directions of
such applicable aviation authority in connection with such withdrawal or
suspension), (B) no registrations, certificates, licenses, permits or
authorizations required for the use or operation of any Aircraft need be
obtained with respect to any period when such Aircraft is not being operated and
(C) no such registrations, certificates, licenses, permits or authorizations
shall be required to be maintained for any Aircraft that is not the subject of a
Lease, except to the extent required under applicable laws, (iii) not cause or
knowingly permit, directly or indirectly, through any of its subsidiaries, any
Lessee to operate any Aircraft under any Lease in any material respect contrary
to any applicable law and (iv) not knowingly permit, directly or indirectly,
through any of its subsidiaries, any Lessee not to obtain all material
governmental (including regulatory) registrations, certificates, licenses,
permits and authorizations required for such Lessee's use and operation of any
Aircraft under any operating Lease except as provided, mutatis mutandis, in
clauses (ii)(A) and (ii)(B) above.
The foregoing covenant shall not be deemed to have been breached by virtue
of any act or omission of a Lessee or sub-lessee, or of any person which has
possession of the Aircraft or any Engine for the purpose of repairs,
maintenance, modification or storage, or by virtue of any requisition, seizure,
or confiscation of the Aircraft (other than seizure or confiscation arising from
a breach by the Relevant Issuer or a subsidiary of such covenant) (each, a
"THIRD PARTY EVENT"); provided that (i) no member of Airplanes Group consents or
has consented to such Third Party Event; and (ii) the member of Airplanes Group
which is the lessor or owner of such Aircraft promptly and diligently takes such
commercially reasonable actions as a leading international aircraft operating
lessor or owner would reasonably take in respect of such Third Party Event,
including, as deemed appropriate (taking into account, among other things, the
laws of the jurisdictions in which the Aircraft are located), seeking to compel
such Lessee or other relevant person to remedy such Third Party Event or seeking
to repossess the relevant Aircraft or Engine.
Appraisal of Portfolio. Under the terms of each Trust Indenture, the
Relevant Issuer will, no earlier than 90 nor later than 30 days prior to March
31 of each year, deliver to the Trustee appraisals of the Base
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Value of each of the Aircraft, from at least three independent appraisers that
are members of the International Society of Transport Aircraft Trading or any
similar organization, each such appraisal to be dated within 30 days prior to
its delivery to the Trustee.
Maintenance of Assets. Under the terms of each Trust Indenture, the
Relevant Issuer will (i) with respect to each Aircraft and Engine that is
subject to a Lease, cause directly or indirectly, through any of its
subsidiaries, such Aircraft and Engine to be maintained in a state of repair and
condition consistent with the reasonable commercial practice of leading
international aircraft operating lessors with respect to similar aircraft under
lease, taking into consideration, among other things, the identity of the
relevant Lessee (including the credit standing and operating experience
thereof), the age and condition of the Aircraft and the jurisdiction in which
such Aircraft will be operated or registered under such Lease, and (ii) with
respect to each Aircraft that is not subject to a Lease, maintain, and cause
each of its subsidiaries to maintain, such Aircraft in a state of repair and
condition consistent with the reasonable commercial practice of leading
international aircraft operating lessors with respect to aircraft not under
lease. No breach of this covenant, however, shall be deemed to have occurred by
virtue of any Third Party Event; provided that (i) no member of Airplanes Group
consents or has consented to such Third Party Event; and (ii) the member of
Airplanes Group which is the lessor or owner of such Aircraft promptly and
diligently takes such commercially reasonable actions as a leading international
aircraft operating lessor would reasonably take in respect of such Third Party
Event, including as deemed appropriate, seeking to compel such Lessee or other
relevant person to remedy such Third Party Event or seeking to repossess the
relevant Aircraft or Engine.
Notification of Indenture Trustee, Cash Manager and Administrative
Agent. Under the terms of each Trust Indenture, the Relevant Issuer will notify
the Indenture Trustee, Cash Manager and Administrative Agent as soon as such
Relevant Issuer or any of its subsidiaries becomes aware of any loss, theft,
damage or destruction to any Aircraft or Engine if the potential cost of repair
or replacement of such asset (without regard to any insurance claim related
thereto) may exceed $2,000,000.
Leases. Under the terms of each Trust Indenture, the Relevant Issuer shall
adopt and has agreed to cause the Servicer to utilize the pro forma lease
agreement or agreements then used by the Servicer in connection with its
aircraft operating leasing services business generally, as such pro forma lease
agreement or agreements may be revised from time to time by the Servicer (the
"SERVICER'S PRO FORMA LEASE"), for use by the Servicer on behalf of each member
of Airplanes Group as a starting point in the negotiation of Future Leases with
persons who are not members of Airplanes Group; provided, that with respect to
any Future Lease entered into in connection with (x) the renewal or extension of
an Existing Lease, (y) the leasing of an Aircraft to a person that is or was a
Lessee under an Existing Lease or (z) the leasing of an Aircraft to a person
that is or was a lessee under an operating lease of an aircraft that is being
managed or serviced by the Servicer (such Future Lease, a "RENEWAL LEASE"), a
form of lease substantially similar to such Existing Lease or operating lease (a
"PRECEDENT LEASE"), as the case may be, may, in lieu of the Servicer's Pro Forma
Lease, be used by the Servicer on behalf of any member of Airplanes Group as a
starting point in the negotiation of such Future Lease with persons who are not
members of Airplanes Group; and provided further, however, that if the Directors
or Controlling Trustees, as the case may be, determine, in an annual review of
the Servicer's Pro Forma Lease, that any revision to the Servicer's Pro Forma
Lease made from time to time since the preceding review by such Directors or
Controlling Trustees is substantially inconsistent with the core lease
provisions of the Relevant Issuer set forth in the Administrative Agency
Agreement (as such provisions may be amended from time to time, the "CORE LEASE
PROVISIONS") in a manner and to such a degree as to have a material adverse
effect on the Noteholders, taking into consideration, among other things, such
revision and any risk that the Aircraft might not be able to be leased on terms
inconsistent with the relevant provisions in the Servicer's Pro Forma Lease,
then such Directors or Controlling Trustees shall direct the Servicer not to
include such revision in the Servicer's Pro Forma Lease to be used thereafter as
the starting point in the negotiation of any Future Lease with respect to the
Aircraft. With respect to any such revisions as to which such Directors or
Controlling Trustees have not made such determination, such Directors or
Controlling Trustees, as the case may be, shall, to the extent relevant, amend
the applicable Core Lease Provisions. It shall not be deemed a violation of this
covenant if the terms of any Future Lease deviate from the terms of the
Servicer's Pro Forma Lease or a Precedent Lease, as applicable, so long as the
Servicer's Pro Forma Lease or
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the applicable Precedent Lease was the starting point for the negotiation of
such Future Lease. The foregoing covenant shall not be applicable to any
negotiation with respect to, or the execution of, any Future Lease of an
Aircraft where such negotiation commenced on or prior to March 28, 1996.
On the Payment Date occurring three months after each year subsequent to
March 28, 1997, the Relevant Issuer shall certify to the Indenture Trustee that,
based upon any and all factors considered by it to be relevant and taking into
account any advice received from its agents, including the Administrative Agent
and the Servicer, the Future Leases executed by or on behalf of the Relevant
Issuer or its subsidiaries during the preceding year ending on such anniversary
with Persons who are not members of Airplanes Group, having regard to deviations
from the Core Lease Provisions in effect as of such anniversary (or, with
respect to any Renewal Leases, having regard to deviations from the provisions
corresponding to the Core Lease Provisions which had been previously
incorporated in the applicable Precedent Leases), taken as a whole, should not
be reasonably expected to have a material adverse effect on the Noteholders. If
the Relevant Issuer cannot make such certification, then it shall deliver to the
Indenture Trustee a Core Lease Provision certificate which sets forth
information specifying the nature of the deviations from the Core Lease
Provisions or, with respect to the Renewal Leases, such corresponding provisions
of the Future Leases executed by or on behalf of the Issuer during the preceding
year which should reasonably be expected to have a material adverse effect on
the Noteholders. In addition, the Issuer shall furnish an annual report to the
Rating Agencies (with a copy to the Indenture Trustee) setting forth the
rationale (including, if applicable, trends in the international operating
leasing market) for any changes in the Core Lease Provisions during the
preceding year.
Opinions. Under the terms of each Trust Indenture, the Relevant Issuer
will not enter into, and will not permit any of its subsidiaries to enter into,
any Future Lease with any person that is not a member of Airplanes Group or
change the jurisdiction of registration of any Aircraft that is subject to a
Lease, unless, upon entering into such Future Lease or changing the jurisdiction
or registration of such Aircraft (or within a commercially reasonable period
thereafter), the Servicer obtains such legal opinions, if any, with regard to
compliance with the registration requirements of the relevant jurisdiction,
enforceability of the Future Lease and such other matters customary for such
transactions to the extent that receiving such legal opinions is consistent with
the reasonable commercial practice of leading international aircraft operating
lessors.
Insurance. Under the terms of each Trust Indenture, the Relevant Issuer
will maintain or cause, directly or indirectly through its subsidiaries, to be
maintained with reputable and responsible insurers or with insurers that
maintain relevant reinsurance with reputable and responsible reinsurers (i)
airline hull insurance for each Aircraft in an amount at least equal to the Note
Target Price for such Aircraft (or the equivalent thereof from time to time if
such insurance is denominated in a currency other than U.S. dollars), (ii)
airline liability insurance for each Aircraft and occurrence in an amount at
least equal to the relevant amounts set forth in the Trust Indentures for each
model of aircraft and (iii) airline political risk insurance ("PRI") for each
Aircraft subject to a Lease and habitually based in a jurisdiction determined in
accordance with the PRI guidelines, as set forth in the Indentures and as
amended from time to time by the Directors or Controlling Trustees, in an amount
at least equal to the Note Target Price (or the equivalent thereof from time to
time if such insurance is denominated in a currency other than U.S. dollars) for
such Aircraft; provided, however, that, with respect to any such insurance for
any Aircraft, such insurance may be subject to (x) deductibles and
self-insurance in an amount not exceeding $10,000,000 in the aggregate in
respect of any one occurrence in respect of such Aircraft that is subject to a
Lease (or sale agreement) with any Lessee (or purchaser) whose long-term
unsecured debt obligations are rated not less than A, or its equivalent, by at
least one of the Rating Agencies, or (y) commercially reasonable deductible and
self-insurance arrangements (taking into account, among other things, the
creditworthiness and experience of the Lessee, if any, the type of aircraft and
market practices in the aircraft insurance industry generally). Apart from the
matters covered by the preceding sentence, the coverage and terms (including
endorsements) of any insurance maintained (a) with respect to any Aircraft not
subject to a Lease shall be substantially consistent with the commercial
practices of leading international aircraft operating lessors regarding similar
aircraft and (b) with respect to any Aircraft subject to a Lease, shall be
substantially consistent with the relevant provisions of such Lease.
In determining the amount of insurance required to be maintained by the
covenant, the Relevant Issuer may take into account any indemnification from, or
insurance provided by, any governmental, supranational or
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inter-governmental authority or agency (other than, with respect to PRI, any
governmental authority or agency of any jurisdiction for which PRI must be
obtained), the sovereign foreign currency debt rating of which is rated AA, or
the equivalent, by at least one of the Rating Agencies, against any risk with
respect to an Aircraft at least in an amount which, when added to the amount of
insurance against such risk maintained by the Relevant Issuer (or which the
Relevant Issuer has caused to be maintained), shall be at least equal to the
amount of insurance against such risk otherwise required by the covenant (taking
into account self-insurance permitted by the covenant). Any such indemnification
or insurance provided by such government shall provide substantially similar
protection as the insurance required by the covenant. The Relevant Issuer will
not be required to maintain (or to cause to be maintained) any insurance
otherwise required hereunder to the extent that such insurance is not generally
available in the relevant insurance market from time to time.
Indemnity. Under the terms of each Trust Indenture, the Relevant Issuer
will, and will cause each of its subsidiaries to include in each Lease between a
member of Airplanes Group and a person who is not a member of Airplanes Group an
indemnity in respect of the Lease in respect of any losses or liabilities
arising from the use or operation of the Aircraft during the term of such Lease,
subject to such exceptions, limitations and qualifications as are consistent
with the reasonable commercial practices of leading international aircraft
operating lessors.
NOTE EVENTS OF DEFAULT AND REMEDIES
Each of the following events will constitute a "NOTE EVENT OF DEFAULT" with
respect to any class of Notes under each applicable Trust Indenture (unless
otherwise specified below):
(a) failure to pay interest on the Notes of such class or any subclass
thereof (other than Step-Up Interest), in each case when such amount
becomes due, and such default continues for a period of five or more
Business Days;
(b) failure to pay principal of or premium, if any, on the Notes of such
class or subclass thereof either on or prior to the applicable Final
Maturity Date;
(c) failure to pay any amount (other than interest) when due and payable
in connection with any Note, to the extent that there are at such time
Available Collections therefor, and such default continues for a
period of two or more Business Days;
(d) failure by Airplanes Limited or Airplanes Trust to comply with any of
the covenants, obligations, conditions or provisions binding on it
under the Trust Indentures or the Notes (other than a payment default
for which provision is made in clause (a), (b) or (c) above) or any
material breach of any of the covenants, obligations, conditions or
provisions binding on it under any of the Related Documents to which
it is a party or any breach of the representations and warranties
given as of the Closing Date by Airplanes Limited, Airplanes Trust or
any subsidiary thereof in such agreements, if such failure or such
breach materially adversely affects the holders of such class of Notes
and continues for a period of 30 days or more after written notice
thereof has been given to the Relevant Issuer by the Cash Manager, the
Administrative Agent, the Servicer or by holders of at least 25% of
the aggregate Outstanding Principal Balance of the Notes of the Senior
Class;
(e) an "Event of Default" by any Guarantor under the Trust Indentures or
failure by any Guarantor to pay any amount when due and payable under
the Trust Indentures;
(f) a court having jurisdiction in the premises enters a decree or order
for (i) relief in respect of Airplanes Limited, Airplanes Trust or any
subsidiary thereof (other than a subsidiary which owns or leases
Aircraft having an aggregate Base Value of less than 2% of the
Adjusted Portfolio Value at that time (each, a "SIGNIFICANT
SUBSIDIARY"), under any applicable law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization,
examination, relief of debtors or other similar law now or hereafter
in effect, (ii) appointment of a receiver, liquidator, examiner,
assignee, custodian, trustee, sequestrator or similar official of
Airplanes Limited, Airplanes Trust, or any Significant Subsidiary; or
(iii) the winding up or liquidation of the affairs of Airplanes
Limited, Airplanes Trust, or any Significant Subsidiary and, in each
case, such decree or order shall
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remain unstayed or such writ or other process shall not have been stayed
or dismissed within 90 days from entry thereof;
(g) Airplanes Limited, Airplanes Trust, or any Significant Subsidiary (i)
commences a voluntary case under any applicable law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization, examination, relief of debtors or other similar law
now or hereafter in effect, or consents to the entry of an order for
relief in any voluntary case under any such law, (ii) consents to the
appointment of or taking possession by a receiver, liquidator,
examiner, assignee, custodian, trustee, sequestrator or similar
official of Airplanes Limited, Airplanes Trust or any Significant
Subsidiary or for all or substantially all of the property and assets
of Airplanes Limited, Airplanes Trust or any Significant Subsidiary or
(iii) effects any general assignment for the benefit of creditors;
(h) any judgment or order for the payment of money in excess of
$100,000,000 shall be rendered against Airplanes Limited, Airplanes
Trust or any subsidiary thereof and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order
or (ii) there shall be any period of 10 consecutive days during which
a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; provided,
however, that any such judgment or order shall not be an Event of
Default under the Trust Indentures if and for so long as (i) the
amount of such judgment or order is covered by a valid and binding
policy of insurance between the defendant and the insurer covering
payment thereof and (ii) such insurer, which shall be rated at least A
by A.M. Best Company or any similar successor entity, has been
notified of, and has not disputed the claim made for payment of, the
amount of such judgment or order; or
(i) the constitutional documents of Airplanes Limited or the documents
creating Airplanes Trust cease to be in full force and effect without
replacement documents having the same terms being in full force and
effect.
If a Note Event of Default (other than a Note Event of Default under (f) or
(g)above) shall have occurred and be continuing, the Senior Trustee may, and,
when instructed by the holders of 25% of the aggregate Outstanding Principal
Balance of the Senior Class of Notes, shall, give a Default Notice to the
Relevant Issuer and the Cash Manager declaring the Outstanding Principal Balance
of the Notes and all accrued and unpaid interest thereon to be due and payable.
At any time after the Senior Trustee has declared the Outstanding Principal
Balance of the Notes to be due and payable and prior to the exercise of any
other remedies pursuant to the Trust Indentures, holders of a majority of the
Outstanding Principal Balance of the Senior Class of Notes, by written notice to
the Relevant Issuer, the Senior Trustee and the Cash Manager, may rescind and
annul such declaration and thereby annul its consequences if: (i) there has been
paid to or deposited with the Senior Trustee an amount sufficient to pay all
overdue installments of interest on the Notes, and the principal of and premium,
if any, on the Notes that would have become due otherwise than by such
declaration of acceleration, (ii) the rescission would not conflict with any
judgment or decree and (iii) all other defaults and Note Events of Default,
other than nonpayment of interest and principal on the Notes that have become
due solely because of such acceleration, have been cured or waived. If a Note
Event of Default under clause (f) or (g) occurs, the Outstanding Principal
Balance of the Notes and all accrued and unpaid interest thereon shall
automatically become due and payable without any further action by any party.
After the occurrence and during the continuation of a Note Event of Default: (i)
the Class B Noteholders will not be permitted to give or direct the giving of a
Default Notice or to exercise any remedy in respect of such Note Event of
Default until all interest and principal on the Class A Notes have been paid in
full; (ii) the Class C Noteholders will not be permitted to give a Default
Notice or to exercise any remedy in respect of such Note Event of Default until
all interest and principal on the Class A Notes and the Class B Notes have been
paid in full; (iii) the Class D Noteholders will not be permitted to give a
Default Notice or to exercise any remedy in respect of such Note Event of
Default until all interest and principal on the Class A Notes, the Class B Notes
and the Class C Notes have been paid in full and (iv) the Class E Noteholders
will not be permitted to give a Default Notice or to exercise any remedy in
respect of such Note Event of Default until all interest and principal on the
Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes have
been paid
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in full. The relevant Indenture Trustee shall provide each Rating Agency with a
copy of any Default Notice it receives pursuant to the Trust Indentures.
Each Trust Indenture contains a provision entitling the applicable
Indenture Trustee, subject to the duty of the Indenture Trustee during a default
to act with the required standard of care, to be indemnified by the holders of
any class of the Notes before proceeding to exercise any right or power under
the applicable Trust Indenture or the Cash Management Agreement at the request
or direction of such holders. Except in limited circumstances, no holder of the
Notes will have the right, other than through the Senior Trustee acting in
accordance with the Trust Agreement and the Trust Indentures to sue for recovery
or take any other actions to enforce the obligations of the Relevant Issuer to
pay any and all amounts due and payable under the Notes issued under either
Trust Indenture, and no holder of the Notes will have the right to take any
steps to cause the filing for bankruptcy of such Issuer. The Senior Trustee, as
sole initial holder of the senior class of Notes outstanding, is entitled to
exercise any and all remedies available under the applicable Trust Indentures.
INTERCREDITOR RIGHTS
Subject to the terms of the Trust Indentures, the Senior Trustee will have
sole discretion as to whether to direct the Cash Manager to exercise and enforce
any and all remedies with respect to the Notes. The Senior Trustee may take
various actions in respect of the Notes, without regard to the interests of any
other creditors.
MODIFICATION AND WAIVER
Each Trust Indenture will provide that, with the consent of the holders of
a majority of the Outstanding Principal Balance of the Notes on the date of any
vote of such holders (voting as a single class), modifications may be made to
any class or subclass of Notes or such Trust Indenture; provided that any
modification of the provisions setting forth the frequency or the currency of
payment of, the maturity of, or the method of calculation of the amount of any
interest, principal and premium, if any, payable in respect of any class or
subclass of Notes, or reducing the percentage of the aggregate Outstanding
Principal Balance of any class or subclass of Notes required to approve any such
amendment or waiver, or altering the manner or priority of payment of such class
or subclass of Notes (each, a "BASIC TERMS MODIFICATION") is not permitted
without the consent of any Swap Provider and the holder of each Outstanding Note
affected thereby; provided further, however, that the Senior Trustee may waive
any Note Event of Default. Any such modification approved by the required
holders of any class or subclass of Notes will be binding on the holders of the
relevant class or subclass of Notes and each party to the Trust Indenture. The
foregoing, however, shall not prevent Airplanes Group or any subsidiary from
amending any Lease; provided that such amendment is otherwise permitted by the
relevant Trust Indentures.
The subordination provisions contained in each Trust Indenture may not be
amended or modified without the consent of each Swap Provider, each holder of
the class or subclass of Notes affected thereby and each holder of any class or
subclass of Notes ranking senior to such Notes.
Without the consent of each Noteholder, no amendment or modification of the
relevant Trust Indenture or the Cash Management Agreement may, among other
things, (a) modify the provisions of the relevant Trust Indenture or the Cash
Management Agreement with respect to Account payment instructions and the
payment thereunder by the Cash Manager or (b) result in the sale of the Relevant
Issuer's assets other than pursuant to the provisions of "Trust Indenture
Covenants". In no event shall the provisions relating to the priority of the
Expenses, Swap Payments or Swap Breakage Costs in each Trust Indenture be
amended or modified.
The Trust Agreement contains provisions permitting the Relevant Issuer and
the applicable Trustee to enter into supplemental trust agreements, without the
consent of any Certificateholders of the related Trust, among others, (i) to
allow the Issuers to issue Refinancing Notes, (ii) to add to the covenants of
Airplanes Limited and Airplanes Trust for the benefit of the Certificateholders
of any Class, or to surrender any right or power of Airplanes Limited and
Airplanes Trust under the Trust Agreement, (iii) to cure any ambiguity in, or to
correct or supplement any defective or inconsistent provision of, the Trust
Agreement or any supplemental trust agreement; provided that any such actions
set forth in clause (iii) above shall not adversely affect the
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interests of such Certificateholders or (iv) to make any modification necessary
to continue the qualification of the Trust Agreement under the Trust Indenture
Act.
The Trust Agreement also contains provisions permitting the Relevant Issuer
and the applicable Trustee, with the consent of the holders of each class or
subclass of Certificates of the applicable Trust evidencing interests
aggregating not less than a majority of the Outstanding Principal Balance of
such class or subclass to execute supplemental trust agreements adding any
provisions to or changing or eliminating any of the provisions of the Trust
Agreement or modifying the rights of the Certificateholders of such class or
subclass, except that no such supplemental trust agreement may, without the
consent of each Certificateholder so affected, (i) reduce in any manner the
amount of, or delay the timing of, the applicable Trustee's receipt of payments
on any of the related Notes held in such Trust, or distributions in respect of
any related Certificate, change the Final Maturity Date or Payment Date on any
Certificate, change the place of payment where, or the coin or currency in
which, any Certificate is payable, or impair the right of any Certificateholder
to institute suit for the enforcement of any such payment when due, (ii) permit
the disposition of any of the Notes except as provided in the Trust Agreement,
or otherwise deprive any Certificateholder of the benefit of the ownership of
such Notes, (iii) reduce the percentage of the Outstanding Principal Balance of
the Certificates of any class or subclass provided for in the Trust Agreement,
the consent of the holders of which is required for any such supplemental trust
agreement or for any waiver provided for in the Trust Agreement, or (iv)
adversely affect the status of the Trust as a grantor trust for U.S. federal
income tax purposes.
In the event that any Trustee, as the holder of each subclass of Notes held
in the applicable Trust, receives a request for its consent to an amendment,
modification or waiver under the applicable Trust Indenture, such Notes, the
Cash Management Agreement, the Administrative Agency Agreement or other Related
Document relating to such Notes, such Trustee shall mail a notice of such
proposed amendment, modification or waiver to each Certificateholder of such
subclass as to whether or not to consent to such amendment, modification or
waiver. The applicable Trustee shall vote or consent with respect to such Notes
in such Trust in the same proportion as the Certificates of such subclass were
actually voted by the holders thereof by a certain date.
GOVERNING LAW AND JURISDICTION
Each Trust Indenture and the Cash Management Agreement are to be governed
by and construed in accordance with the laws of the State of New York. In each
Trust Indenture and the Cash Management Agreement, Airplanes Limited and
Airplanes Trust respectively have submitted to the jurisdiction of the United
States Federal and New York State courts located in the City of New York for all
purposes of or in connection with the Notes and Cash Management Agreement, as
the case may be, and have each designated a person in the City of New York to
accept service of any process on its behalf.
THE CLASS E NOTES
The $591 million in aggregate principal amount of Class E Notes have been
issued by and constitute direct, unsecured obligations of Airplanes Limited (the
"AIRPLANES LIMITED CLASS E NOTES") and Airplanes Trust (the "AIRPLANES TRUST
CLASS E NOTES"), pursuant to the Airplanes Limited Indenture and the Airplanes
Trust Indenture respectively. GPA holds a majority in aggregate principal amount
of the Class E Notes. Approximately $83 million (or 14%) of the aggregate
principal amount of the Class E Notes have been issued to subsidiaries of GPA in
which minority shareholders have interests representing approximately $23
million (or 4%) of the aggregate principal amount of the Class E Notes. The
Class E Notes were issued in transactions exempt from the registration
requirements of the Securities Act.
The Class E Notes rank junior in priority of payment to certain payments on
the Notes and certain other obligations of Airplanes Limited and Airplanes Trust
and, to the extent held by more than one person, equally among such persons.
Pursuant to the subordination provisions of the Trust Indentures and the Class E
Notes, payments on any Class E Note, other than the Class E Note Minimum
Interest Amount and the Class E Note Supplemental Interest Amount, in each case
as set forth in "-- Priority of Payments", are subordinated to all payments of
interest and principal on the Notes. Holders of the Class E Notes are not
permitted to give a
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Default Notice with respect to any Note Event of Default or to exercise any
remedy in respect of any such Note Event of Default until all amounts owing
under each other class of the Notes have been paid in full. In addition, any
amendment to or modification of the subordination provisions contained in the
Trust Indentures will require the consent of each noteholder if such amendment
or modification would adversely affect the rights of such noteholders.
The Class E Notes have been issued in fully certificated form. The Class E
Notes accrue interest for each Interest Accrual Period at a rate of 20% per
annum, payable monthly in arrears on each Payment Date, commencing May 15, 1996.
The stated interest rate on the Class E Notes is adjusted by reference to the
U.S. Consumer Price Index. Except for the Class E Note Minimum Interest Amount
plus the Class E Note Supplemental Interest Amount, each of which is paid
interest at a rate of 1% and 10% multiplied by the Outstanding Principal Balance
of the Class E Notes, respectively, no interest is payable on the Class E Notes
until all of the interest, principal and premium, if any, on the Notes have been
repaid in full. Interest accrued but not paid on the Class E Notes on each
Payment Date will accrue during each Interest Accrual Period until the principal
of the Class E Notes shall have been repaid. The Class E Note Minimum Interest
Amount plus, in more limited circumstances, the Class E Note Supplemental
Interest Amount will be paid on each Payment Date only to the extent that
Airplanes Group has Available Collections sufficient to make such payment after
paying or providing for each of the items ranking prior to such payment in the
order of priority described under "-- Priority of Payments".
Principal of the Class E Notes will not be payable until the Outstanding
Principal Balance of the Notes is reduced to zero.
The terms of the Class E Notes require, among other things, that the Class
E Noteholders pay over to the Cash Manager any money (including principal or
interest) paid to them in the event that the Cash Manager, acting in good faith,
determines subsequently that such monies were not paid in accordance with the
priority of payment obligations described above under "-- Priority of Payments"
or as a result of any other mistake of fact or law on the part of the Cash
Manager in making such payment.
Under Airplanes Limited's Articles of Association and the Airplanes Trust
Agreement, the holder or holders of a majority in aggregate principal amount of
the Class E Notes have the right to appoint one of Airplanes Limited's Directors
and one of Airplanes Trust's Controlling Trustees while the Class E Notes are
outstanding. Currently, GPA has appointed Edward Hansom as such Director and
Controlling Trustee. If GE Capital exercises its right to acquire at least 90%
of the ordinary share capital of GPA Group, the holder of a majority in
aggregate principal amount of the Class E Notes will be entitled to dismiss the
Directors of Airplanes Limited and all of the Controlling Trustees of Airplanes
Trust and to appoint new Directors and Controlling Trustees. There can be no
assurance, however, that GE Capital will elect to acquire any of such ordinary
shares. Neither the Certificates nor the Notes are obligations of, or guaranteed
by, or offered for sale by, GE Capital, GECAS or any of their affiliates.
At such time, if any, as the Directors and Controlling Trustees have been
appointed by the holder of a majority in aggregate principal amount of the Class
E Notes, then the Directors of Airplanes Limited and all of the Controlling
Trustees of Airplanes Trust shall have the authority, acting on a majority vote,
without any independent committee veto rights, to cause Airplanes Group to sell,
directly or indirectly, all of the assets of the Airplanes Group, whether
through a stock or an asset sale, to any person who provides, as consideration
therefor, any combination of cash, obligations of the United States government
or of corporate issuers rated at least AA+ or its equivalent, and Class E Notes
which, through the payment of interest, principal and premium, if any, in
respect thereof, will be sufficient to repay or defease, as the case may be, the
Notes in accordance with their terms and the terms of the Trust Indentures,
discharge any Class E Notes not so transferred and pay the Discounted Annual
Dividend Amount, plus any arrears of the Annual Dividend Amount.
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<PAGE> 159
THE CASH MANAGEMENT AGREEMENT
The following summary description of the Cash Management Agreement is
subject to, and qualified in its entirety by reference to, the provisions of
each Trust Indenture and the Cash Management Agreement, forms of which are filed
as exhibits to the Registration Statement of which this Prospectus forms a part.
Each payment of cash in respect of any class of Notes and all other
payments to be received by Airplanes Limited or Airplanes Trust or made by
either of them pursuant to the applicable Trust Indenture will be directed by
the Cash Management Agreement.
The Cash Management Agreement was entered into by Airplanes Limited,
Airplanes Trust, the Cash Manager, GPA Group, Indenture Trustees and the
Security Trustee. The Cash Management Agreement appoints the Cash Manager to
administer the Accounts, to monitor the performance of Airplanes Group, to
prepare reports with respect to such performance and to perform certain other
specified administrative tasks on behalf of Airplanes Group. The Cash Manager
shall ensure that the proceeds of the Airplanes Group assets are deposited in
the Collection Account. The Cash Management Agreement and each Trust Indenture
set forth a number of covenants of Airplanes Group with respect to the conduct
of Airplanes Group's business and the Airplanes Group assets and provides for
the establishment and operation of the Accounts. Upon the occurrence of a Note
Event of Default, the Cash Manager will distribute funds in the manner set forth
in the Indenture.
THE ACCOUNTS
The Cash Manager, acting on behalf of the Security Trustee, has established
the following accounts: (i) the Collection Account, (ii) the Lessee Funded
Account, (iii) the Expense Account and (iv) the Rental Accounts (collectively
with the Proceeds Account, the Refinancing Account and the Defeasance/Redemption
Account, and including any ledger or subledger accounts maintained therein, the
"ACCOUNTS"). For a description of the Accounts see "Management's Discussion and
Analysis of Financial Conditions and Results of Operations -- The Accounts".
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REPORTS TO CERTIFICATEHOLDERS
On each Payment Date and any other date for distribution of any payments
with respect to each class or subclass of Certificates then Outstanding, the
applicable Trustee will include with each distribution of any payment to a
Certificateholder a statement with respect to such distribution to be made on
such Payment Date or other date, as the case may be, setting forth the following
information:
<TABLE>
<S> <C> <C>
(i) With respect to each Payment Date, (A) the balances on deposit on the Calculation
Date immediately preceding the prior Payment Date, (B) the aggregate amounts of
deposits and withdrawals between such Calculation Date and the Calculation Date
immediately preceding the Payment Date and (C) the balances on deposit in the
Expense Account, Collection Account and Lessee Funded Account on the Calculation
Date immediately preceding such Payment Date.
(ii) Analysis of Expense Account Activity
Balance on Preceding Calculation Date; ..................................
Payments during period between prior Calculation Date and the relevant
Calculation Date;
(1) Payments on prior Payment Date.......................................
(2) Other payments.......................................................
Balance on relevant Calculation Date.....................................
(iii) Analysis of Collection Account Activity
Balance on Preceding Calculation Date....................................
-- Required Expense Amount (including on preceding Payment Date).........
-- Net Transfer to Lessee Funded Accounts during period..................
-- Collections during period.............................................
-- Aggregate Certificate Payments........................................
-- Swap Payments.........................................................
Balance on relevant Calculation Date (separately stating the components
of the Liquidity Reserve Amount).........................................
Analysis of current Payment Date distributions...........................
(iv) Payments on the Certificates
(a) Floating Rate Certificates (by class or subclass)....................
Applicable LIBOR for the current Interest Accrual Period.................
Applicable Margin for the current Interest Accrual Period................
Applicable Interest Rate for the current Interest Accrual Period.........
Interest Amount Payable..................................................
Step-Up Interest.........................................................
Opening Outstanding Principal Balance....................................
Minimum Principal Payment Amount.........................................
Adjusted Principal Payment Amount........................................
Supplemental Principal Payment Amount....................................
Redemption Amount........................................................
-- amount allocable to principal.........................................
-- amount allocable to premium...........................................
Closing Outstanding Principal Balance....................................
(b) Fixed Rate Certificates (by class)
Applicable Interest Rate.................................................
Interest Amount Payable..................................................
Opening Outstanding Principal Balance....................................
Scheduled Principal Payment Amount.......................................
Redemption Amount
-- amount allocable to principal.........................................
-- amount allocable to premium...........................................
</TABLE>
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<PAGE> 161
<TABLE>
<S> <C> <C>
Closing Outstanding Principal Balance....................................
Pool Factors and scheduled payment amounts in the event of
a partial redemption.....................................................
(v) Floating Rate Certificate information for next Interest Accrual Period
(by class or subclass)
Applicable LIBOR.........................................................
Applicable Margin........................................................
Applicable Interest Rate.................................................
(vi) Payments per $100,000 Initial Outstanding Principal Balance of
Certificates
(by class or subclass)
Opening Outstanding Principal Balance....................................
Total Principal Payments.................................................
Closing Outstanding Principal Balance....................................
---------
Total Interest...........................................................
Total Premium............................................................
</TABLE>
These monthly statements are filed with the Securities and Exchange
Commission (the "COMMISSION") as a Current Report on Form 8-K. Such monthly
statements do not contain financial information with respect to Airplanes Group;
however, on the first Payment Date following the filing by Airplanes Group of
any Report on Form 10-Q or Form 10-K under the Securities Exchange Act of 1934,
as amended, with the Commission with respect to each class or subclass of
Certificates then Outstanding, the applicable Trustee will include with each
statement accompanying a distribution of any payment as described in (i) - (vi)
above, a supplemental statement setting forth the following information: a copy
of the "Airplanes Group Portfolio Analysis" table in this Prospectus, updated
and revised to reflect the current composition of the Portfolio. Each Airplanes
Group Report on Form 10-Q or Form 10-K includes disclosure with respect to any
material adverse effect of any delinquency or loss in connection with the
Leases.
In addition, after the end of each calendar year, the applicable Trustee
will furnish to each person who at any time during such calendar year was a
holder of any class or subclass of Certificates a statement containing the sum
of the amounts determined pursuant to clause (iv) above with respect to such
class or subclass for such calendar year or, in the event such person was a
holder of record of any class or subclass of Certificates during a portion of
such calendar year, for the applicable portion of such calendar year, and such
other items as are readily available to such Trustee and which a
Certificateholder shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its U.S. federal income tax returns. So long
as the Certificates of any class or subclass are registered in the name of DTC
or its nominee, such report and such other items will be prepared on the basis
of such information supplied to such Trustee by DTC and the DTC Participants,
and will be delivered by such Trustee to such DTC Participants to be available
for forwarding by such DTC Participants to the applicable Certificateholders in
the manner described above.
At such time, if any, as the Certificates of any class or subclass are
issued in the Form of Definitive Certificates, the applicable Trustee will
prepare and deliver the information described above to each holder of record of
a Definitive Certificate of such class or subclass as the name and period of
beneficial ownership of such holder of record of a Definitive Certificate of
such class or subclass appears on the records of the Trustee. The Trustee
maintains the records concerning the holders of such Certificates.
The Trustee will publish or cause to be published following each
distribution date in a daily newspaper in Luxembourg (expected to be the
Luxemburger Wort) a notice to the effect that the information set forth in the
statement described under "Reports to Certificateholders" will be available at
the office of the Listing Agent of Airplanes Group in Luxembourg, Banque
Internationale a Luxembourg S.A. (the "LISTING AGENT"), 69 route d'Esch, L-1470
Luxembourg. The Luxembourg Stock Exchange will receive notice promptly following
each distribution date. In addition, the Trustee provides such information to
Bloomberg Financial Markets promptly following each distribution date for
publication on the BLOOMBERG.
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BOOK-ENTRY REGISTRATION, GLOBAL CLEARANCE AND SETTLEMENT
BOOK-ENTRY REGISTRATION
Certificateholders will hold their Certificates through DTC (in the United
States) or Cedel Bank or Euroclear (in Europe) if they are participants in such
systems, or indirectly through organizations which are participants in such
systems. Except as set forth below, the Certificates will be registered in the
name of Cede as the nominee for DTC. Certificateholders will be entitled to
receive a physical certificate representing such person's interest therein only
in the limited circumstances described herein. Unless and until Definitive
Certificates are issued, all references herein to actions by Certificateholders
will refer to actions taken by DTC upon instructions from participants whose
securities are held by DTC (the "DTC PARTICIPANTS"), and all references herein
to distributions, notices, reports and statements to Certificateholders will
refer to distributions, notices, reports and statements, respectively, to DTC or
Cede, as the registered holder of the Certificates, or to DTC Participants for
distribution to Certificateholders in accordance with DTC procedures.
Cedel Bank and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Cedel Bank's and Morgan
Guaranty's names on the books of their respective Depositaries which, in turn,
will hold such positions in customers' securities accounts in the Depositaries'
names on the books of DTC. Citibank, N.A. will act as depositary for Cedel Bank
and Morgan Guaranty Trust Company of New York will act as depositary for
Euroclear (in such capacities, the "DEPOSITARIES").
Transfers between DTC Participants will occur in the ordinary way in
accordance with DTC rules. Transfers between participating organizations whose
securities are held by Cedel Bank (the "CEDEL PARTICIPANTS") and participants in
Euroclear (the "EUROCLEAR PARTICIPANTS") will occur in the ordinary way in
accordance with the applicable rules and operating procedures of Cedel and
Euroclear.
Cross-market transfers between persons holding directly or indirectly
through DTC Participants, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants, on the other, will be effected by
DTC in accordance with DTC rules on behalf of Cedel or Euroclear, as the case
may be, by its respective Depositary. However, such cross-market transactions
will require delivery of instructions to Cedel or Euroclear, as the case may be,
by the counterparty in such system in accordance with its rules and procedures
and within its established deadlines. If the transaction meets its settlement
requirements, Cedel Bank or Euroclear, as the case may be, will deliver
instructions to its respective Depositary to take action to effect final
settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of Certificates received in Cedel
Bank or Euroclear as a result of a transaction with a DTC Participant will be
made during the securities settlement processing day dated the Business Day
following the DTC settlement date. Such credits or any transactions in such
Certificates settled during such processing will be reported to the relevant
Cedel Participant or Euroclear Participant on such Business Day. Cash received
in Cedel Bank or Euroclear as a result of sales of Certificates by or through a
Cedel Participant or Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account of as only the business day following settlement
in DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for DTC Participants and to
facilitate the clearance and settlement of securities transactions between DTC.
Participants through electronic book-entry changes in accounts of DTC
Participants, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies and clearing corporations and may in
the future include certain other organizations. Indirect access to the DTC
system also is available to others such as banks, brokers, dealers and trust
companies that clear through or
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<PAGE> 163
maintain a custodial relationship with a DTC Participant either directly or
indirectly ("INDIRECT PARTICIPANTS") .
Certificateholders who are not DTC Participants but desire to purchase,
sell or otherwise transfer ownership of, or other interests in, the Certificates
may do so only through DTC Participants. Indirect Participants are required to
effect transfers through a DTC Participant. Payments of interest, principal, and
premium, if any, in respect of the Certificates will be made to DTC and are the
responsibility of the Trust, Certificateholders will receive all distributions
of interest, principal and premium, if any, in respect of the Certificates from
the Trustee through DTC Participants and Indirect Participants. Disbursement of
such payments to DTC Participants will be the responsibility of DTC and
disbursement of such payments to the Certificateholders will be the
responsibility of DTC Participants and Indirect Participants. DTC's practice is
to credit DTC Participants' accounts on the payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payment on such payment date. Payments by DTC
Participants to Certificateholders will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such DTC Participant. So long as the Certificates are
registered in the name of Cede, the only "Certificateholder" will be Cede, as
nominee for DTC. While so registered, Certificateholders will be permitted to
exercise the rights of Certificateholders only indirectly through DTC and DTC
Participants.
Under the rules, regulations and procedures governing DTC and its
operations (the "RULES"), DTC is required to make book-entry transfers of the
Certificates among the DTC Participants on whose behalf it acts with respect to
the Certificates and to receive and transmit distributions of interest,
principal and premium if any, in respect of the Certificates. DTC Participants
and Indirect Participants with which Certificateholders have accounts with
respect to the Certificates similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective
Certificates. The Rules provide a mechanism by which Certificateholders will
receive payments and will be able to transfer their interests.
DTC has advised Airplanes Limited, Airplanes Trust, and the Trust that it
will take any action permitted to be taken by a Certificateholder in respect of
each class or subclass of Certificates under the Trust Agreement only at the
direction of one or more DTC Participants to whose accounts that class or
subclass of Certificates is credited. Additionally, DTC has advised Airplanes
Limited, Airplanes Trust and the Trust that it will take such actions with
respect to any percentage of the outstanding principal amount of any class or
subclass of Certificates only at the direction of and on behalf of the DTC
Participants whose holders own such outstanding principal amount. DTC may take
conflicting actions with respect to different classes or subclasses of
Certificates to the extent that such actions are taken on behalf of DTC
Participants whose holdings include such different classes or subclasses of
Certificates.
Distributions with respect to Certificates held beneficially through Cedel
will be credited to cash accounts of Cedel Participants in accordance with
Cedel's rules and procedures, to the extent received by its Depositary. Cedel
will take any other action permitted to be taken by a Certificate owner under
the Trust Agreement on behalf of a Cedel Participant only in accordance with its
rules and procedures and subject to its Depositary's ability to effect such
actions on its behalf through DTC.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "TERMS AND CONDITIONS"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in
Euroclear. All securities of a particular class (or, in the case of the Class A
Certificates, subclass) in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
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<PAGE> 164
Distributions with respect to Certificates held through Euroclear will be
credited to the cash accounts of Euroclear Participants in accordance with the
Terms and Conditions, to the extent received by its Depositary. The Euroclear
Operator will take any other action permitted to be taken by a Certificateholder
under the Trust Agreement on behalf of a Euroclear Participant only in
accordance with the Terms and Conditions and subject to its Depositary ability
to effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
The Certificates of any class or subclass may be issued in fully
registered, certificated form ("DEFINITIVE CERTIFICATES") to Certificateholders
of that class or subclass or their nominees only if (i) Airplanes Limited and
Airplanes Trust advise the Trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depositary with respect to
the Certificates and Airplanes Limited and Airplanes Trust are unable to locate
a qualified successor, (ii) Airplanes Limited and Airplanes Trust at their
option, elect to terminate the book-entry system through DTC or (iii) after the
occurrence of an Event of Default with respect to such class or subclass,
Certificateholders of such class or subclass representing an aggregate of not
less than 51% of the aggregate outstanding principal amount of Certificates of
such class or subclass advise the Trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in such Certificateholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all Certificateholders of each
affected class or subclass through DTC of the availability of Definitive
Certificates of such class or subclass. Upon surrender by DTC of the
Certificates of that class or subclass and receipt of instructions for
re-registration, the Trustee will reissue the Certificates of that class or
subclass as Definitive Certificates to Certificateholders of that class or
subclass.
Distributions of principal of, and interest on, any Definitive Certificates
will thereafter be made by the Trustee in accordance with the procedures set
forth in the Trust Agreement directly to holders of Definitive Certificates in
whose names the Definitive Certificates were registered at the close of business
on the Record Date. Such distributions will be made by check mailed to the
address of such holder as it appears on the register maintained by the Trustee.
The final payment on any such Definitive Certificates, however, will be made
only upon presentation and surrender of such Definitive Certificates at the
office or agency specified in the notice of final distribution to
Certificateholders.
Definitive Certificates will be freely transferable and exchangeable for
Definitive Certificates of the same class or subclass at the office of the
Trustee upon compliance with the requirements set forth in the Trust Agreement.
No service charge will be imposed for any registration of transfer or exchange,
but payment of a sum sufficient to cover any tax or other governmental charge
may be required.
A Certificate that is mutilated, destroyed lost or stolen may be exchanged
or replaced, as the case may be, at the offices of the co-transfer agent and the
co-registrar in Luxembourg upon presentation of the Certificate or satisfactory
evidence of destruction, loss or theft thereof to the co-transfer agent and
co-registrar. An indemnity satisfactory to the co-transfer agent and
co-registrar and the Trustee may be required at the expense of the
Certificateholder before a replacement Certificate will be issued. The
Certificateholder will be required to pay any tax or other governmental charge
imposed in connection with such exchange or replacement and any other expenses
(including the fees and expenses of the Trustee and the co-transfer agent and
co-registrar) connected therewith.
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CUSIP, ISIN AND COMMON CODE NUMBERS
The 1998 Refinancing Certificates have been accepted for clearance through
Euroclear and Cedel Bank. The CUSIP numbers, International Securities
Identification Numbers ("ISIN") and the Common Code Numbers ("CCN") are set
forth in the table below.
<TABLE>
<CAPTION>
CLASS OR SUBCLASS CUSIP ISIN CCN
- -------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Subclass A-6......................................
Subclass A-7......................................
</TABLE>
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TAX CONSIDERATIONS
CERTAIN JERSEY TAX CONSIDERATIONS
The following summary is based upon the opinion of Mourant du Feu & Jeune
("JERSEY TAX COUNSEL") as to the tax treatment under Jersey law of Airplanes
Limited and the Trust and the tax treatment under Jersey law in relation to the
purchase, ownership and disposition of the Airplanes Limited 1998 Refinancing
Notes and the 1998 Refinancing Certificates. The discussion is based on an
interpretation of laws, regulations, rulings and decisions, including certain
letters from the Comptroller of Income Tax in Jersey and the Director of the
Jersey Financial Services Department, all of which are currently in effect and
are subject to change. Any such change may be applied retroactively and may
adversely affect the Jersey tax consequences described herein. Unless otherwise
specifically noted, the term "CERTIFICATEHOLDERS" as used in the discussion
below (including the discussion with respect to Irish and United States Federal
tax consequences) refers to the beneficial owner of the 1998 Refinancing
Certificates and the term "CERTIFICATE" refers to both the actual 1998
Refinancing Certificate and the interest in the 1998 Refinancing Certificate
held indirectly through Cede, Cedel or Euroclear.
INCOME TAXES
Airplanes Limited will qualify as an "exempt company" under Article 123A of
the Income Tax (Jersey) Law 1961 as amended (the "1961 LAW") as long as it makes
the returns of information and pays the fees (L600 per annum with effect from
January 1, 1998) as required by that Article and, subject to the concession
referred to below, as long as no Jersey resident has a beneficial interest (for
purposes of the 1961 Law) in Airplanes Limited. As an exempt company, Airplanes
Limited will be treated for purposes of the 1961 Law as not resident in Jersey
and will pay no Jersey income tax other than on income arising in Jersey (but,
by long standing concession, excluding bank deposit interest arising in Jersey)
and on profits of its trade (if any) carried on through an established place of
business in Jersey. For purposes of the 1961 Law the Comptroller of Income Tax
in Jersey, among other things, has: (i) granted a concession to the effect that
the 1998 Refinancing Certificateholders and holders of Airplanes Limited 1998
Refinancing Notes will not be regarded as having a beneficial interest (for the
purposes of Article 123A of the 1961 Law) in Airplanes Limited; (ii) confirmed
that the holding of the shares in the capital of Airplanes Limited by or on
behalf of the Charitable Trust Trustees will not prejudice the exempt company
status of Airplanes Limited; (iii) confirmed that the income generated by the
activities undertaken by Airplanes Limited as described herein will not be
treated as income arising in Jersey; and (iv) confirmed that the administration
in and from Jersey of the business undertaken by Airplanes Limited as described
herein will not constitute the carrying on of a trade through an established
place of business in Jersey. Accordingly, based upon the foregoing, in the
opinion of Jersey Tax Counsel, Airplanes Limited will not be subject to Jersey
income tax.
In addition. in the opinion of Jersey Tax Counsel, there will not be any
Jersey income taxes imposed on the 1998 Refinancing Trusts.
WITHHOLDING TAXES
In general, Jersey imposes a withholding tax at the rate of 20% on interest
and other amounts paid to non-residents of Jersey with respect to a debt
obligation of a company resident in Jersey. However, no such withholding tax is
imposed with respect to an exempt company (as defined above). Accordingly, based
upon Airplanes Limited's qualification as an exempt company, in the opinion of
Jersey Tax Counsel, no withholding tax will be deducted from interest and other
amounts paid on the Airplanes Limited 1998 Refinancing Notes on account of
Jersey taxes.
In addition, in the opinion of Jersey Tax Counsel, no withholding or
deduction on account of Jersey taxes will be imposed with respect to interest
and other amounts paid on the 1998 Refinancing Certificates (other than any
deduction with respect to payments on the 1998 Refinancing Certificates
attributable to withholding on the Airplanes Limited 1998 Refinancing Notes, if
any, as described above).
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<PAGE> 167
In the event that any Jersey withholding tax is imposed, 1998 Refinancing
Certificateholders should note that there is no income tax treaty between the
United States and Jersey that would apply to reduce or eliminate such
withholding. 1998 Refinancing Certificateholders should note further that
Airplanes Limited will not be obligated under the terms of the Airplanes Limited
1998 Refinancing Notes, and the Trustee will not be obligated under the terms of
the 1998 Refinancing Certificates, to make any additional payments in respect of
any such withholding tax. Accordingly, in the event that withholding were to be
required on account of Jersey taxes, distributions to 1998 Refinancing
Certificateholders may be less than those which would be made on the 1998
Refinancing Certificates in the absence of any such withholding tax.
OTHER TAXES
There is no taxation of capital gains (other than with respect to certain
tax avoidance transactions) in Jersey. As a result, the capital gains of
Airplanes Limited on its investments and the capital gains of the 1998
Refinancing Certificateholders on a sale or transfer of their 1998 Refinancing
Certificates will not be subject to taxation in Jersey. There is no value added
tax or other relevant taxation in Jersey. No stamp duty, stamp duty reserve tax
or issue, documentary, registration or other similar tax imposed by any
governmental department or other taxing authority of or in Jersey is payable in
connection with the creation, initial issue, delivery or transfer inter vivos of
the Airplanes Limited 1998 Refinancing Notes or the 1998 Refinancing
Certificates.
In the event that on the death of a sole individual holder of 1998
Refinancing Certificates who is a non-resident of Jersey, such 1998 Refinancing
Certificates or corresponding Airplanes Limited 1998 Refinancing Notes are
situated in Jersey (by virtue of their being held on a register in Jersey or in
bearer form and held in Jersey at the date of death or otherwise deemed to be so
situated under applicable rules of private international law), a grant of
probate or letters of administration would have to be obtained in Jersey and a
duty of up to 1% of the value of the assets of the deceased situated in Jersey
would be payable.
IRISH TAX CONSIDERATIONS
The following summary is based on the opinion of McCann FitzGerald on
principles of Irish taxation law. These principles depend on interpretation of
laws, regulations, rulings and decisions, all of which are currently in effect
but are subject to change. Any such change may be applied retroactively and may
adversely affect the principles of Irish tax on which the opinion is based. This
summary does not address all Irish tax principles that may apply to all
categories of potential investors, some of which may be subject to special
rules.
IRISH INCOME AND WITHHOLDING TAXES
A company that is resident in Ireland is subject to Irish tax on its
worldwide income and gains, and a company that is not resident in Ireland but
which carries on a trade in Ireland through a permanent establishment, branch or
agency is subject to Irish taxes on its income and capital gains arising in
Ireland. In addition, there generally is an Irish withholding tax imposed on
interest paid to non-residents of Ireland by a company resident in Ireland or by
a company that is not a resident of Ireland to the extent that such interest is
attributable to trade carried on in Ireland through a permanent establishment,
branch or agency or is Irish source interest.
In the opinion of McCann FitzGerald, (i) there will be no Irish taxation on
the income of, or any capital gain of, Airplanes Limited, Airplanes Trust or the
Trust; and (ii) there will be no withholding or deduction on account of Irish
taxes with respect to interest and other amounts paid by Airplanes Limited or
Airplanes Trust on the 1998 Refinancing Notes, or by the 1998 Refinancing Trust
on the 1998 Refinancing Certificates. The foregoing opinion is based on the
assumptions that (i) none of Airplanes Limited, Airplanes Trust or the Trust
will (a) be Irish tax resident, (b) have a branch, agency or permanent
establishment in Ireland or (c) have any Irish source income or gain other than
interest paid by their direct and indirect Irish subsidiaries in the course of
carrying on relevant trading operations under their Shannon certificates
("SHANNON CERTIFIED OPERATIONS"), and (ii) the interest and other amounts paid
on the 1998 Refinancing Notes and 1998 Refinancing Certificates will not be
Irish source income. In relation to the assumption at (c), Shannon Certified
Operations will cease on 31 December 2005 and with it, absent a change in law in
the intervening
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period the exemption from Irish tax that Airplanes Limited, Airplanes Trust and
the Trust currently enjoy in respect of interest paid by their direct and
indirect Irish subsidiaries. This is so because the interest has an Irish source
and, as such, whether or not paid gross is, under existing Irish tax law,
chargeable to Irish income tax by direct assessment subject to the provisions of
any applicable double tax treaty. However, as a matter of practice, the Irish
tax authorities do not pursue collection of any such liability to Irish tax in
respect of persons who are regarded as not being resident in Ireland except
where such persons:
(a) are chargeable in the name of a person (including a trustee) or in the
name of an agent or branch in Ireland having the management and
control of the interest; or
(b) seek to claim relief and/or repayment of tax deducted at source in
respect of taxed income from Irish sources; or
(c) are chargeable to Irish corporation tax on the income of an Irish
branch or agency or to income tax on the profits of a trade carried on
in Ireland to which the interest is attributable."
Airplanes Limited, Airplanes Trust and the Trust intend to operate their
business in a way which will satisfy these criteria.
As regards Shannon Certified Operations, and their termination in 2005, see
"Risk Factors -- Tax Risks".
In the event that any Irish withholding tax is imposed, 1998 Refinancing
Certificateholders should note that neither Airplanes Limited nor Airplanes
Trust will be obliged under the terms of the 1998 Refinancing Notes, and the
Trustee will not be obliged under the terms of the 1998 Refinancing
Certificates, to make any additional payments in respect of any such withholding
tax. Accordingly, distributions to 1998 Refinancing Certificateholders would be
less than those which would be made on the 1998 Refinancing Certificates in the
absence of any such withholding tax.
IRISH VALUE ADDED TAX
Ireland generally imposes a value added tax on the supply of goods and
services. In the opinion of McCann FitzGerald, (i) payments under the Existing
Leases to the various Aircraft Owning Companies, Special Lessors, AeroUSA and
AeroUSA3 by the Lessees will not be subject to Irish value added tax and (ii)
any Irish value added tax that may become payable by AeroUSA in connection with
any management services performed by the Servicer or GPA Group will be eligible
to be reclaimed by AeroUSA. The foregoing opinion is based upon certain
covenants by each of Airplanes Limited, Airplanes Trust and AeroUSA regarding
its place of business and the location of the Aircraft and on the assumptions
that: (i) the Aircraft are used or to be used by a transport undertaking
operation for reward chiefly on international routes; (ii) none of Airplanes
Limited, Airplanes Trust or AeroUSA supply goods or services within Ireland and
(iii) input credit would not be denied to an Irish person carrying on the same
activity as the payor, if that person were in receipt of the management
services.
In general, Irish value added tax will be payable, and may not be
reclaimable, in respect of certain management services performed by the Servicer
or GPA Group for Airplanes Limited, Airplanes Trust or the Trust.
OTHER IRISH TAXES
In the opinion of McCann FitzGerald no stamp duty, stamp duty reserve tax
or issue, documentary, registration or other similar tax imposed by any
government department or other taxing authority of or in Ireland will be payable
in connection with the creation, initial issue or delivery of the 1998
Refinancing Notes or the 1998 Refinancing Certificates.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Davis Polk & Wardwell ("FEDERAL TAX COUNSEL") the
following summary accurately sets forth the material United States federal tax
consequences resulting from the purchase, ownership and
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<PAGE> 169
disposition of 1998 Refinancing Certificates. It does not purport to consider
all the possible tax consequences of the purchase, ownership or disposition of
the 1998 Refinancing Certificates, and it is not intended to reflect the
individual tax position of any holder. It deals only with 1998 Refinancing
Certificates held as capital assets. Except as expressly indicated, it is
addressed only to initial holders purchasing 1998 Refinancing Certificates at
their "issue price" (as defined below) and does not deal with holders with a
special tax status or special tax situation, such as financial institutions or
dealers in securities or currencies, 1998 Refinancing Certificates held as a
hedge against currency risks or as part of a straddle with other investments or
as part of a "synthetic security" or other integrated investment (including a
conversion or constructive sale transaction) consisting of a 1998 Refinancing
Certificate and one or more other investments, or situations in which the
functional currency of the 1998 Refinancing Certificateholder is not the U.S.
dollar. Except to the extent discussed below, this discussion is not applicable
to non-United States persons not subject to United States federal income tax on
a net income basis. It is based upon the United States federal tax laws and
regulations as now in effect and as currently interpreted, and does not take
into account possible changes in such tax laws or such interpretations, all of
which may be applied retroactively. It does not include any description of the
tax laws of any state or local governments within the United States, or of any
foreign government, that may be applicable to the 1998 Refinancing Certificates
or holders thereof. Persons considering the purchase of 1998 Refinancing
Certificates should consult their own tax advisors concerning the application of
the United States federal tax laws to their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction.
At Closing, the Trust will be provided with an opinion of Federal Tax
Counsel, special Federal tax counsel to Airplanes Limited and Airplanes Trust
regarding certain of the United States federal income tax matters discussed
below. An opinion of Federal Tax Counsel is not binding on the Internal Revenue
Service (the "IRS") or the courts. Prospective investors should note that no
rulings have been or will be sought from the IRS with respect to any United
States federal income tax consequences discussed below, and no assurance can be
given that the IRS will not take contrary positions. Accordingly, each
prospective investor is urged to consult its own tax advisor with respect to the
United States federal income tax consequences of holding an interest in a 1998
Refinancing Certificate.
For purposes of the discussion below, (i) "UNITED STATES PERSON" means a
citizen or resident of the United States, a corporation, partnership or certain
other entities created or organized in or under the laws of the United States,
or any political subdivision thereof, or an estate or trust the income of which
is includible in gross income for United States federal income tax purposes
regardless of its source and (ii) "NON-UNITED STATES PERSON" or "NON-U.S. 1998
REFINANCING CERTIFICATEHOLDER" means a person other than a United States person.
The "ISSUE PRICE" of a Certificate is the first price to the public (not
including bond houses, brokers or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of Certificates is sold for money.
U.S. TAX STATUS OF THE TRUST
In the opinion of Federal Tax Counsel, the Trust will be classified for
United States federal income tax purposes as a grantor trust and not as an
association (or publicly traded partnership) taxable as a corporation.
Accordingly, each 1998 Refinancing Certificateholder will be treated as owning
directly the portion of the subclass of 1998 Refinancing Notes represented by
such 1998 Refinancing Certificate.
TAXATION OF U.S. CERTIFICATEHOLDERS
Each 1998 Refinancing Certificateholder that is a United States person will
be required to include in income, in accordance with its usual method of
accounting, the portion of the stated interest with respect to the 1998
Refinancing Notes that is allocable to the 1998 Refinancing Certificates held by
such 1998 Refinancing Certificateholder. The 1998 Refinancing Notes will be
issued either at par, in which case there will be no original issue discount, or
at less than par with a minimal amount of original issue discount. A holder of
an instrument with minimal original issue discount must include such original
issue discount in income on a pro rata basis as principal payments are made.
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<PAGE> 170
In the event any withholding or deduction is required with respect to the
1998 Refinancing Notes on account of Irish or Jersey taxes, 1998 Refinancing
Certificateholders that are United States persons will be required to include in
gross income the gross amount of interest payable. Such 1998 Refinancing
Certificateholders may be entitled to claim foreign tax credits, subject to
applicable limitations, with respect to any such withheld taxes. 1998
Refinancing Certificateholders should consult their tax advisors about the
treatment of any such taxes.
A 1998 Refinancing Certificateholder that is a United States person will
recognize capital gain or loss upon the sale or exchange of a 1998 Refinancing
Certificate equal to the difference between the amount realized from such sale
or exchange (exclusive of any portion thereof reflecting accrued but unpaid
interest accrued between interest payment dates on the underlying 1998
Refinancing Notes, which will be includible in income in accordance with the
United States person's method of accounting as described above) and its tax
basis in the 1998 Refinancing Certificate. Amounts attributable to accrued
interest are treated as interest, subject to the treatment described above. A
1998 Refinancing Certificateholder that is a United States person will have a
tax basis in a 1998 Refinancing Certificate equal to the 1998 Refinancing
Certificateholder's purchase price for such 1998 Refinancing Certificate,
decreased by any principal repayments. Any capital gain will generally be U.S.
source gain. Certificateholders should consult their tax advisors regarding the
U.S. federal income tax treatment of capital gains (which may be taxed at lower
rates than ordinary income for certain taxpayers who are individuals) and losses
(the deductibility of which is subject to limitations).
TAXATION OF NON-U.S. 1998 REFINANCING CERTIFICATEHOLDERS
To the extent that payments on 1998 Refinancing Certificates are in respect
of the underlying Airplanes Trust 1998 Refinancing Notes:
(a) payments of interest (including original issue discount, if any),
principal and premium, if any, on the 1998 Refinancing Notes to any
non-United States person will not be subject to United States federal
withholding tax, provided that, in the case of interest, such person
(i) does not own, actually or constructively, 10% or more of the total
combined voting power of all classes of stock of AeroUSA entitled to
vote, (ii) is not a controlled foreign corporation related, directly
or indirectly, to AeroUSA through stock ownership and (iii) is not a
bank receiving interest described in Section 881(c)(3)(A) of the Code,
and provided that the certification requirement described in paragraph
(b) has been fulfilled with respect to the beneficial owner; and
(b) Sections 871(h) and 881(c) of the Code require that, in order to
obtain the exemption from withholding tax described in paragraph (a),
either the beneficial owner of the 1998 Refinancing Certificate, or a
securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade
or business (a "FINANCIAL INSTITUTION") and that is holding the 1998
Refinancing Certificate on behalf of such beneficial owner, file a
statement with the withholding agent to the effect that the beneficial
owner of the 1998 Refinancing Certificate is not a United States
person. Under temporary United States Treasury Regulations which apply
to both stated interest and sale or exchange proceeds if either is
paid with respect to a Certificate on or before December 31, 1998,
such requirement will be fulfilled if (i) the beneficial owner of a
1998 Refinancing Certificate certifies on IRS Form W-8, under
penalties of perjury, that it is not a United States person and
provides its name and address and (ii) any Financial Institution
holding the 1998 Refinancing Note on behalf of the beneficial owner
files a statement with the withholding agent to the effect that it has
received such a statement from the 1998 Refinancing Certificateholder
(and furnishes the withholding agent with a copy thereof). Recently
issued final Treasury Regulations (the "FINAL REGULATIONS"), which
apply to interest (including original issue discount) and sale or
exchange proceeds paid with respect to a Certificate after December
31, 1998, also provide that the requirement of Section 871(h) and
881(c) generally will be fulfilled if beneficial owners (including
partners of certain foreign partnerships), as well as certain foreign
partnerships, meet the two conditions set forth in the preceding
sentence. However, a beneficial owner that is a foreign estate or
trust (or fiduciary thereof), a foreign partnership that has entered
into a withholding agreement with the Internal Revenue Service, or a
Non-U.S. 1998 Refinancing
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<PAGE> 171
Certificateholder holding a 1998 Refinancing Certificate through its
U.S. branch will be required to
provide its "taxpayer identification number" ("TIN") in addition to its
name and address on Form W-8. Foreign partnerships and their partners
should consult their tax advisors regarding possible additional
reporting requirements.
To the extent that payments on 1998 Refinancing Certificates are in respect
of the underlying Airplanes Limited 1998 Refinancing Notes, interest paid to a
1998 Refinancing Certificateholder that is a non-United States person will not
be subject to United States federal withholding tax.
Notwithstanding the foregoing, if interest or other income received with
respect to the 1998 Refinancing Certificate (whether representing the underlying
1998 Refinancing Notes of Airplanes Limited or Airplanes Trust) is effectively
connected with a United States trade or business conducted by a non-U.S. 1998
Refinancing Certificateholder, such 1998 Refinancing Certificateholder, although
exempt from the withholding tax described in the preceding paragraph, may be
subject to United States federal income tax on such interest in the same manner
as if it were a United States person. In addition, if such 1998 Refinancing
Certificateholder is a corporation, it may be subject to a branch profits tax
equal to 30% (or a lower treaty rate) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
A Non-U.S. 1998 Refinancing Certificateholder will not be subject to United
States federal income tax on gain realized on the sale, exchange or other
disposition of a Certificate, unless (i) such 1998 Refinancing Certificateholder
is an individual who is present in the United States for 183 days or more in the
taxable year of disposition, and either (a) such individual has a "tax home" (as
defined in Code Section 911(d)(3)) in the United States (unless such gain is
attributable to a fixed place of business in a foreign country maintained by
such individual and has been subject to foreign tax of at least 10%) or (b) the
gain is attributable to an office or other fixed place of business maintained by
such individual in the United States or (ii) such gain is effectively connected
with the conduct by such Holder of a trade or business in the United States.
A 1998 Refinancing Certificate held by an individual who is not a citizen
or resident of the United States at the time of his death will not be subject to
United States federal estate tax as a result of such individual's death,
provided, to the extent the 1998 Refinancing Certificate represents the
underlying Airplanes Trust 1998 Refinancing Notes, that the individual does not
own, actually or constructively, 10% or more of the total combined voting power
of all classes of stock of AeroUSA entitled to vote and, at the time of such
individual's death, payments with respect to such 1998 Refinancing Certificate
would not have been effectively connected with the conduct by such individual of
a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will be required to report annually to the IRS, and to each
1998 Refinancing Certificateholder of record, certain information, including the
1998 Refinancing Certificateholder's name, address and TIN (either the 1998
Refinancing Certificateholder's Social Security number or its employer
identification number, as the case may be), the aggregate amount of principal
and interest paid and the amount of tax withheld, if any. This obligation,
however, does not apply with respect to certain United States persons, including
corporations, tax-exempt organizations, qualified pension and profit-sharing
trusts and individual retirement accounts.
In the event a United States person subject to the reporting requirements
described above fails to supply its correct TIN in the manner required by
applicable law or underreports its tax liability, the Trust, its agents or
paying agents may be required to "backup" withhold a tax equal to 31% of each
payment of interest and principal on the 1998 Refinancing Certificates. This
backup withholding is not an additional tax and may be credited against the 1998
Refinancing Certificateholder's United States Federal income tax liability,
provided that the required information is furnished to the IRS.
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments made by the Trust or any agent thereof to
a 1998 Refinancing Certificateholder that is a non-United States person if the
certifications required by Section 871(h) and 881(c) of the Code (described
above) are
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received, provided that the Trust or such agent does not have actual knowledge
that the payee is a United States person.
The Final Regulations modify the backup withholding and information
reporting procedures in certain respects for payments made after December 31,
1998. Prospective investors are urged to consult their tax advisors regarding
the application of the backup withholding and information reporting rules.
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ERISA CONSIDERATIONS
Any Plan that proposes to purchase 1998 Refinancing Certificates should
consult with its counsel with respect to the potential consequences of such
investment under the fiduciary responsibility provisions of ERISA and the
prohibited transaction provisions of ERISA and the Code.
ERISA and the Code impose certain requirements on employee benefit plans
and certain other retirement plans and arrangements, including individual
retirement accounts and annuities, that are subject to ERISA and/or the Code
(all of which are hereinafter referred to as "PLANS") and or persons who are
fiduciaries with respect to such Plans. A person who exercises discretionary
authority or control with respect to the management or assets of a Plan will be
considered a fiduciary of the Plan under ERISA. In accordance with ERISA's
general fiduciary standards, before investing in a 1998 Refinancing Certificate,
a Plan fiduciary should determine whether such an investment is permitted under
the governing Plan instruments and is appropriate for the Plan in view of its
overall investment policy and the composition and diversification of its
portfolio, taking into account the limited liquidity of the 1998 Refinancing
Certificates. Other provisions of ERISA and the Code prohibit certain
transactions involving the assets of a Plan and persons who have certain
specified relationships to the Plan ("PARTIES IN INTEREST" within the meaning of
ERISA or "DISQUALIFIED PERSONS" within the meaning of the Code). Thus, a Plan
fiduciary considering an investment in 1998 Refinancing Certificates should also
consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or the Code and whether an administrative
exemption might be applicable to such investment.
An investment in 1998 Refinancing Certificates by a Plan might also result
in the assets of the Trust being deemed to constitute Plan assets, which in turn
might mean that certain aspects of such investment, or actions involving the
assets of the Trust, would involve assets of a Plan, which transactions might be
or become prohibited transactions under ERISA and/or the Code. Further, in such
case the Plan fiduciary might be deemed to have engaged in an improper
delegation to the Trustee of its investment management responsibilities with
respect to those assets of the Trust deemed Plan assets. Neither ERISA nor the
Code defines the term "plan assets". Under Section 2510.3-101 of the United
States Department of Labor (the "DOL") regulations (the "REGULATIONS"), a Plan's
assets may include an interest in the underlying assets of an entity (such as a
trust) for certain purposes, including the fiduciary responsibility provisions
of ERISA and the prohibited transaction provisions of ERISA and the Code, if the
Plan acquires an "equity interest" in such entity. Thus, if a Plan acquired a
1998 Refinancing Certificate, for certain purposes (including such fiduciary
responsibility and prohibited transaction provisions) the Plan would be
considered to own its share of the underlying assets of the Trust allocable to
such 1998 Refinancing Certificates unless equity participation by benefit plan
investors in the Trust is not "significant". In the event that at any time
investment by benefit plan investors in the Trust is "significant", as discussed
below, investment by a Plan in a 1998 Refinancing Certificate of any class or
subclass would, in effect, be considered, for purposes of the fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and the Code, to be an investment in the corresponding pair of 1998
Refinancing Notes and an ongoing loan to Airplanes Limited and Airplanes Trust.
Participation by benefit plan investors in 1998 Refinancing Certificates
would not be significant if at all times less than 25 percent of the value of
the 1998 Refinancing Certificates was held by benefit plan investors, which are
defined to include both Plans and employee benefit plans not subject to ERISA
(for example, governmental plans, foreign plans and individual retirement
accounts and entities whose assets are treated as "plan assets" under the
Regulation). Investment in and transfer of the 1998 Refinancing Certificates
will not be restricted or monitored with respect to this 25 percent limit.
Accordingly, it is possible that during the term of the 1998 Refinancing
Certificates 25 percent or more of the 1998 Refinancing Certificates will be
held by Plans and other benefit plan investors so that, under the Regulation, an
investment by a Plan in 1998 Refinancing Certificates during such period would,
in effect, be considered, for purposes of the fiduciary responsibility
provisions of ERISA and the prohibited transaction provisions of ERISA and the
Code, to be an investment in the corresponding pair of 1998 Refinancing Notes
and an ongoing loan to Airplanes Limited and Airplanes Trust.
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Accordingly, if assets of the Trust are considered Plan assets, investment
by a Plan or Plans in 1998 Refinancing Certificates could result in a prohibited
transaction or impermissible delegation of authority. The acquisition of 1998
Refinancing Certificates by a Plan could be a prohibited transaction if an
Underwriter, the Trustee, Airplanes Limited, Airplanes Trust, GPA, GECAS, the
Lessees or any of their affiliates are parties in interest or disqualified
persons with respect to the Plan. The duties of the Trustee under the Trust,
however, are essentially custodial and ministerial in nature and it is not
expected that the Trustee will be required to exercise discretionary authority
or control in the discharge of its responsibilities under the Trust other than
in limited circumstances such as upon a default on the 1998 Refinancing Notes.
Moreover, since Airplanes Limited and Airplanes Trust are special-purpose
entities whose principal assets are the Aircraft and since GPA (which has,
directly or indirectly, sold the Aircraft to Airplanes Limited and Airplanes
Trust and owns the Class E Notes) is engaged primarily in the business of
owning, selling and leasing aircraft and GECAS is engaged primarily in the
business of providing aircraft management services, it is possible that many
Plans will be able to determine that Airplanes Limited, Airplanes Trust, GPA and
GECAS or any of their other affiliates are not disqualified persons or parties
in interest with respect to such Plans.
Any prohibited transaction could be treated as exempt under ERISA and the
Code if the 1998 Refinancing Certificates were acquired pursuant to and in
accordance with one or more "class exemptions" issued by the DOL, such as
Prohibited Transaction Class Exemption ("PTCE") 75-1 (an exemption for certain
transactions involving employee benefit plans and broker dealers (such as an
Underwriter), reporting dealers and banks), PTCE 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
certain transactions involving insurance company general accounts), or PTCE
96-23 (an exemption for certain transactions determined by a qualified in-house
asset manager).
ERISA also prohibits a fiduciary of a Plan from maintaining the indicia of
ownership of any assets of the Plan outside the jurisdiction of the district
courts of the United States except under certain circumstances. Before investing
in a 1998 Refinancing Certificate, a Plan fiduciary should consider whether its
acquisition and holding of a 1998 Refinancing Certificate would satisfy such
indicia of ownership rules.
A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF 1998 REFINANCING CERTIFICATES
SHOULD CONSULT ITS TAX AND/OR LEGAL ADVISORS REGARDING UNDER WHAT CIRCUMSTANCES
THE ASSETS OF THE 1998 REFINANCING TRUSTS WOULD BE CONSIDERED PLAN ASSETS, THE
AVAILABILITY, IF ANY, OF EXEMPTIVE RELIEF FROM ANY POTENTIAL PROHIBITED
TRANSACTION AND OTHER FIDUCIARY ISSUES AND THEIR POTENTIAL CONSEQUENCES.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "UNDERWRITING AGREEMENT"), the Underwriters
(the "UNDERWRITERS") named below have severally agreed to purchase, and the
Trust has agreed to sell to them, the principal amounts of 1998 Refinancing
Certificates set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
SUBCLASS SUBCLASS
A-6 A-7
---------- ----------
<S> <C> <C>
Underwriters:
Morgan Stanley & Co. Incorporated............................... $ $
Lehman Brothers Inc.............................................
Salomon Brothers Inc............................................
--------- ---------
Total........................................................ $ $
========= =========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the 1998 Refinancing Certificates
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obliged to take
and pay for all of the 1998 Refinancing Certificates offered hereby if any such
1998 Refinancing Certificates are taken.
The Underwriters initially propose to offer the 1998 Refinancing
Certificates directly to the public at the public offering price set forth on
the cover page hereof and to certain dealers at a price that represents a
concession not in excess of the percentage of the principal amount thereof
specified in the table set forth below. The Underwriters may allow, and such
dealers may reallow, concessions not in excess of the percentage of the
principal amount thereof specified in the table set forth below to certain
brokers and dealers. After the initial public offering, such concessions and
reallowances and other selling terms may be changed by the Underwriters.
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<TABLE>
<CAPTION>
UNDERWRITING
SUBCLASS OR CLASS OF CERTIFICATES COMMISSIONS ALLOWANCE REALLOWANCE
- ------------------------------------------------------- ----------- --------- -----------
<S> <C> <C> <C>
Subclass A-6 Certificates..............................
Subclass A-7 Certificates..............................
</TABLE>
Pursuant to the Agreement among Underwriters, each Underwriter has
represented that it has not offered or sold, and has agreed not to offer or
sell, any 1998 Refinancing Certificates, directly or indirectly, in Canada in
contravention of the securities laws of Canada or any province or territory
thereof and has represented that any offer of 1998 Refinancing Certificates in
Canada will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made.
Each Underwriter has further agreed to send to any dealer who purchases from it
any 1998 Refinancing Certificates a notice stating in substance that, by
purchasing such 1998 Refinancing Certificates, such dealer represents and agrees
that it has not offered or sold, and will not offer or sell, directly or
indirectly, any of such 1998 Refinancing Certificates in Canada or to, or for
the benefit of, any resident of Canada in contravention of the securities laws
of Canada or any province or territory thereof and that any offer of 1998
Refinancing Certificates in Canada will only be made pursuant to an exemption
from the requirement to file a prospectus in the province of Canada in which
such offer is made, and that such dealer will deliver to any other dealer to
whom it sells any of such 1998 Refinancing Certificates a notice to the
foregoing effect.
Pursuant to the agreement among Underwriters, each Underwriter represents
and agrees that:
(1) it has not offered or sold and, prior to the expiry of the period of
six months from the Closing Date, will not offer or sell any 1998
Refinancing Certificates to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995 (the "1995 REGULATIONS");
(2) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the 1995 Regulations with respect to
anything done by it in relation to the 1998 Refinancing Certificates
in, from or otherwise involving the United Kingdom; and
(3) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
issue of the 1998 Refinancing Certificates to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to
whom such document may otherwise lawfully be issued or passed on.
Each of the Underwriters has agreed that it will not undertake any directed
selling efforts with respect to the 1998 Refinancing Certificates in Jersey
other than to financial institutions who may acquire 1998 Refinancing
Certificates in the normal course of their trade.
The 1998 Refinancing Certificates have not been and will not be registered
under the Securities and Exchange Law of Japan and each of the Underwriters has
represented and agreed that it has not offered or sold, and it will not offer or
sell, directly or indirectly, any of the 1998 Refinancing Certificates in or to
residents of Japan or to any persons for reoffering or resale, directly or
indirectly in Japan or to any resident of Japan, except pursuant to an exemption
from the registration requirements of the Securities and Exchange Law available
thereunder and in compliance with the other relevant laws and regulations of
Japan.
Each of the Underwriters has represented and agreed that it has not offered
or sold, and it will not offer or sell, the 1998 Refinancing Certificates by
means of any document to persons in Hong Kong other than persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, or otherwise in circumstances which do not constitute an offer to the
public within the meaning of the Hong Kong Companies Ordinance (Chapter 32 of
the Laws of Hong Kong).
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Each of the Underwriters has acknowledged that the Prospectus has not been
registered with the Registrar of Companies in Singapore and that the 1998
Refinancing Certificates are issued in Singapore pursuant to an exemption
invoked under section 106C of the Companies Act, Chapter 50 of Singapore (the
"SINGAPORE COMPANIES ACT"). Accordingly, each of the Underwriters has
represented and agreed that the 1998 Refinancing Certificates issued in
Singapore may not be offered or sold, nor may the Prospectus or any other
offering document or material relating to the 1998 Refinancing Certificates to
be circulated or distributed, directly or indirectly, to the public or any
member of the public in Singapore other than (i) to an institutional investor or
other body or person specified in section 106C of the Singapore Companies Act,
(ii) to a sophisticated investor or other body or person specified in section
106D of the Singapore Companies Act, or (iii) otherwise pursuant to, and in
accordance with the conditions of, section 106E(2) of the Singapore Companies
Act or any other applicable exemption invoked under Division 5A of Part IV of
the Singapore Companies Act.
Each Underwriter that is not a member of the National Association of
Securities Dealers, Inc. (the "NASD") is a foreign broker or dealer not eligible
for membership in the NASD which has agreed not to make any sales within the
United States, its territories or possessions or to persons who are citizens
thereof or residents therein (other than certain sales made by the Underwriters
as a group), except that each such Underwriter shall be permitted to make sales
to the other Underwriters or their United States affiliates provided that such
sales are made in compliance with applicable rules under the Exchange Act and in
conformity with the Rules of Fair Practice of the NASD.
Application has been made for the listing of the 1998 Refinancing
Certificates on the Luxembourg Stock Exchange. The Underwriters have advised the
Trust that they intend to sell the 1998 Refinancing Certificates so as to meet
the distribution requirements of such listing.
The Trust, Airplanes Limited and Airplanes Trust each have agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated ("MORGAN
STANLEY"), it will not, for a period of up to six months from the date of this
Prospectus, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or otherwise dispose of, directly or
indirectly, any securities of the Trust, Airplanes Limited or Airplanes Trust,
other than the 1998 Refinancing Notes, or any 1998 Refinancing Certificates of
fractional undivided interests in any debt of Airplanes Limited or Airplanes
Trust, which are substantially similar to the 1998 Refinancing Notes or the 1998
Refinancing Certificates other than as contemplated in this Prospectus.
The Underwriting Agreement provides that Airplanes Limited and Airplanes
Trust will, jointly and severally, and that GPA Group separately will, indemnify
the Underwriters against certain liabilities, including liabilities under
applicable securities laws or contribute to payments the Underwriters may be
required to make in respect thereof. In addition, Airplanes Limited, Airplanes
Trust and GPA Group will reimburse the Underwriters for certain of their
expenses incurred in connection with the offering of the 1998 Refinancing
Certificates, including certain fees and expenses of counsel for the
Underwriters.
There has been no market for the 1998 Refinancing Certificates prior to the
sale of the 1998 Refinancing Certificates. The Underwriters have advised the
Trust, Airplanes Limited, Airplanes Trust and GPA Group that they presently
intend to make a market in the 1998 Refinancing Certificates. The Underwriters
are not obliged, however, to make a market in the 1998 Refinancing Certificates
and any such market-making may be discontinued at any time at the sole
discretion of the Underwriters. Accordingly, no assurance can be given as to the
liquidity of or trading market for the 1998 Refinancing Certificates.
Morgan Stanley has provided various investment banking and advisory
services to Airplanes Group and to GPA and/or its affiliates and may continue to
provide such services to Airplanes Group and to GPA and/or its affiliates. In
addition, Morgan Stanley are acting as swap counterparties in Swap Agreements
with Airplanes Group.
176
<PAGE> 178
It is expected that delivery of the 1998 Refinancing Certificates will be
made against payment therefor on or about the date specified on the cover page,
which will be the calendar day following the date of pricing of the
1998 Refinancing Certificates. Under rule 15c6-1 adopted by the Commission under
the Securities Exchange Act of 1934, as amended, trades in the secondary market
generally are required to settle in three business days, unless the parties to
any such trade expressly agree otherwise. Accordingly, purchasers who wish to
trade 1998 Refinancing Certificates on any day prior to the third business day
before the date of delivery of any payment for the 1998 Refinancing Certificates
will be required, by virtue of the fact that the 1998 Refinancing Certificates
initially will settle on a delayed basis, to specify an alternate settlement
cycle at the time of any such trade to prevent a failed settlement.
LEGAL MATTERS
Certain legal matters relating to the 1998 Refinancing Certificates offered
hereby and the 1998 Refinancing Notes will be passed upon for Airplanes Limited
and Airplanes Trust by Davis Polk & Wardwell, New York, New York, United States
counsel for Airplanes Limited and Airplanes Trust, and Potter Anderson & Corroon
LLP, Delaware counsel to Airplanes Trust. Certain legal matters relating to the
1998 Refinancing Notes will be passed upon for Airplanes Limited by Mourant du
Feu & Jeune, Jersey counsel to Airplanes Limited. Certain legal matters relating
to the 1998 Refinancing Certificates offered hereby and the 1998 Refinancing
Notes will be passed upon for the Underwriters by Shearman & Sterling, New York,
New York, United States counsel for the Underwriters.
Prospective investors should consider the applicability of statutes, rules,
regulations, orders, guidelines or agreements generally governing investments
made by a particular investor including, but not limited to, "prudent investor"
provisions and percentage-of-assets limitations. Investors should consult their
own legal advisors in determining whether and to what extent the Certificates
constitute legal investment for such investors.
The Trustee, Airplanes Limited, Airplanes Trust and the Underwriters make
no representation as to the proper characterization of the 1998 Refinancing
Certificates for legal investment or financial institution regulatory purposes,
or as to the ability of particular investors to purchase 1998 Refinancing
Certificates under applicable legal investment restrictions. The uncertainties
described above (and any unfavorable future determinations concerning legal
investment or financial institutions regulatory characteristics of the 1998
Refinancing Certificates) may adversely affect the liquidity of the 1998
Refinancing Certificates.
ENFORCEMENT OF CIVIL LIABILITIES
Airplanes Limited is a public limited company incorporated and registered
in Jersey. All but one of the Directors of Airplanes Limited and the Controlling
Trustees of Airplanes Trust and certain experts named in this Prospectus are
non-residents of the United States. All or a substantial portion of the assets
of such non-resident persons and of Airplanes Limited are located outside the
United States. As a result, it may not be possible for investors to effect
service of process within the United States upon such persons or Airplanes
Limited or to enforce against them in United States courts judgments obtained in
such courts predicted upon the civil liability provisions of the Federal
securities laws of the United States. Airplanes Limited has been advised that it
is unlikely that the courts of Jersey would adjudge civil liability in an
original action predicated solely upon the Federal securities laws of the United
States. There is no arrangement in place between Jersey and the United States
for the reciprocal enforcement of judgements. There are no limitations on the
right of non-residents of Jersey to hold or vote the 1998 Refinancing
Certificates under Jersey law or under the Memorandum and Articles of
Association of Airplanes Limited.
177
<PAGE> 179
EXPERTS
The financial statements of Airplanes Limited and Airplanes Trust included
in this Prospectus as of March 31, 1997 and 1996 and for each of the years in
the three year period ended March 31, 1997 have been audited by KPMG -- Dublin,
Ireland, independent public accountants, as indicated in their report thereon
included herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
With respect to certain matters, Airplanes Group and GPA are not
represented by separate counsel and are not expected to be unless it is agreed
that separate representation is required to satisfy the professional
responsibilities of counsel. Also, certain professionals, appraisers and experts
who perform services for Airplanes Group and the Trust have performed services
for GECAS and GPA and certain of their respective affiliates in the past and may
do so again in the future.
Valuations of the Aircraft have been made by three expert aircraft
appraisers: Aircraft Information Services, Inc., BK Associates, Inc. and
Airclaims Limited. These valuations are discussed in detail elsewhere in this
prospectus and are included herein in reliance upon the authority of such firms
as experts in giving such appraisals.
ADDITIONAL INFORMATION
A Registration Statement under the Securities Act has been filed with the
Commission with respect to the Certificates that are offered pursuant to this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement (of which the Prospectus is a part) and exhibits
relating thereto, which have been filed with the Commission in Washington, D.C.
Copies of the information and the exhibits are available for inspection without
charge at the Commission's public reference facilities at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the regional offices of the
Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611. Copies of such material can also be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports and other information, including the
Registration Statement (of which this Prospectus is a part), filed by Airplanes
Group.
Application has been made to list the 1998 Refinancing Notes and the 1998
Refinancing Certificates on the Luxembourg Stock Exchange. Once the 1998
Refinancing Certificates have been so listed, trading of the 1998 Refinancing
Certificates may be effected on the Luxembourg Stock Exchange. The constitutive
documents of Airplanes Group and the legal notice relating to the issue of the
1998 Refinancing Notes and the 1998 Refinancing Certificates have been deposited
with the Registrar of the District Court in Luxembourg. (Greffier en Chef du
Tribunal d'Arrondissement de et a Luxembourg) where such documents will be
available for inspection and where such documents will be obtainable upon
request. In accordance with the rules of the Luxembourg Stock Exchange,
Airplanes Group states that except as otherwise disclosed in this Prospectus
there has been no material adverse change in the financial position of Airplanes
Limited and Airplanes Trust since the date of their formation.
The transactions contemplated in this Prospectus were authorized by
resolutions adopted by the Directors of the Airplanes Limited and the
Controlling Trustees of Airplanes Trust on February 2, 1998.
Copies of the Prospectus, the annual report of independent public
accountants, the documents listed under "Available Information" and the reports
to Certificateholders referred to under "Reports to Certificateholders" are
available at the office of the Listing Agent whose address is 69 route d'Esch,
L-1470 Luxembourg. Financial information regarding Airplanes Group is included
in the Airplanes Group Annual Report and Form 10-K for each fiscal year and is
available at the office of the Listing Agent in Luxembourg after the Annual
Report and Form 10-K for each fiscal year is filed with the Commission.
178
<PAGE> 180
AIRPLANES GROUP
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Independent Auditors' Report........................................................... F-2
Balance Sheets......................................................................... F-3
Statements of Operations............................................................... F-4
Statements of Changes in Shareholders' Deficit/Net Liabilities......................... F-5
Statements of Cash Flows............................................................... F-6
Notes to the Financial Statements...................................................... F-7
Unaudited Interim Financial Statements................................................. F-26
Notes to the Unaudited Condensed Financial Statements.................................. F-30
</TABLE>
F-1
<PAGE> 181
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Airplanes Limited
and the Controlling Trustees of Airplanes U.S. Trust
We have audited the accompanying balance sheets of Airplanes Limited and
Airplanes U.S. Trust as of March 31, 1997 and 1996, and the related statements
of operations, changes in shareholders' deficit/net liabilities and cashflows
for each of the years in the three year period ended March 31, 1997. These
financial statements represent certain specified leasing operations of GPA Group
plc (as defined in Notes 1 and 2) up to March 28, 1996 and the leasing
operations of Airplanes Limited and Airplanes U.S. Trust in the period from
March 28, 1996 to March 31, 1997 (as defined in Notes 1 and 2). These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. These standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Airplanes Limited and
Airplanes U.S. Trust as at March 31, 1997 and 1996, and the results of their
operations and cash flows for each of the years in the three year period ended
March 31, 1997, in conformity with generally accepted accounting principles in
the United States.
KPMG
Chartered Accountants
Dublin, Ireland
June 26, 1997
F-2
<PAGE> 182
AIRPLANES GROUP
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
-------------------------------------------------------------------
1996 1997
-------------------------------- --------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
NOTES LIMITED TRUST COMBINED LIMITED TRUST COMBINED
----- --------- --------- -------- --------- --------- --------
($ MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash.............................. 5 214 6 220 219 6 225
Accounts receivable............... 6
Trade receivables............... 40 2 42 39 2 41
Allowance for doubtful debts.... (12) (1) (13) (12) (1) (13)
Amounts due from Airplanes
Trust........................... 7 -- -- -- 56 -- 56
Amounts due from GPA.............. 8 12 1 13 -- 2 2
Net investment in capital and
sales type leases............... 9 113 -- 113 94 -- 94
Aircraft, net..................... 10 3,471 381 3,852 3,242 395 3,637
Other assets...................... 8 1 9 5 1 6
----- --- ----- ----- --- -----
Total assets...................... 3,846 390 4,236 3,643 405 4,048
===== === ===== ===== === =====
LIABILITIES
Accrued expenses and other
liabilities..................... 11 163 17 180 295 24 319
Amounts due to Airplanes
Limited......................... -- -- -- -- 56 56
Amounts due to GPA................ 12 12 -- 12 4 -- 4
Indebtedness...................... 13 4,221 413 4,634 4,005 392 4,397
Provision for maintenance......... 14 276 35 311 287 26 313
Deferred income taxes............. 20 67 48 115 57 48 105
----- --- ----- ----- --- -----
Total liabilities................. 4,739 513 5,252 4,648 546 5,194
----- --- ----- ----- --- -----
Net liabilities................... (893) (123) (1,016) (1,005) (141) (1,146)
----- --- ----- ----- --- -----
3,846 390 4,236 3,643 405 4,048
===== === ===== ===== === =====
Commitments and Contingent Liabilities (Notes 21 and 22)
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 183
AIRPLANES GROUP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------ ------------------------------ ------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
NOTES LIMITED TRUST COMBINED LIMITED TRUST COMBINED LIMITED TRUST COMBINED
----- --------- --------- -------- --------- --------- -------- --------- --------- --------
($MILLIONS) ($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Aircraft leasing......... 16 547 61 608 556 60 616 532 72 604
EXPENSES
Depreciation and
amortization........... (183) (25) (208) (183) (24) (207) (191) (32) (223)
Net interest expense..... 17 (317) (31) (348) (335) (33) (368) (343) (40) (383)
Provision for
maintenance............ (74) (14) (88) (79) (18) (97) (70) (21) (91)
Bad and doubtful debts... (34) 1 (33) 27 1 28 -- -- --
Provision for loss making
leases, net............ 18 (4) (1) (5) 18 (3) 15 5 7 12
Other lease costs........ (16) (1) (17) (20) (1) (21) (20) (1) (21)
Selling, general and
administrative
expenses............... 19 (31) (3) (34) (32) (3) (35) (35) (3) (38)
----- ---- ----- ----- ---- ----- ----- ---- -----
OPERATING LOSS BEFORE
INCOME TAXES........... (112) (13) (125) (48) (21) (69) (122) (18) (140)
Income tax benefit....... 20 11 5 16 5 8 13 10 -- 10
----- ---- ----- ----- ---- ----- ----- ---- -----
NET LOSS................. (101) (8) (109) (43) (13) (56) (112) (18) (130)
===== ==== ===== ===== ==== ===== ===== ==== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 184
AIRPLANES GROUP
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT/NET LIABILITIES
YEARS ENDED MARCH 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
AIRPLANES LIMITED AIRPLANES COMBINED
------------------------------------------ TRUST ------------
SHARE ----------- SHAREHOLDERS
CAPITAL NET SHAREHOLDERS NET DEFICIT/NET
(NOTE 15) LIABILITIES DEFICIT LIABILITIES LIABILITIES
----------- ----------- ------------ ----------- ------------
($MILLIONS) ($MILLIONS) ($MILLIONS) ($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31, 1994.......... -- 557 557 51 608
Net loss for the fiscal year........ -- 101 101 8 109
Distributions to/(Contributions
from) GPA, net.................... -- 158 158 15 173
Deferred interest on indebtedness to
GPA (Note 2 (iii))................ -- (44) (44) (4) (48)
--- ----- ----- --- -----
BALANCE AT MARCH 31, 1995........... -- 772 772 70 842
Net loss for the fiscal year........ -- 43 43 13 56
Distributions to/(Contributions
from) GPA, net.................... -- 124 124 45 169
Deferred interest on indebtedness to
GPA (Note 2 (iii))................ -- (46) (46) (5) (51)
Ordinary shares issued, $1 par value
per share (Note 15)............... -- -- -- -- --
--- ----- ----- --- -----
BALANCE AT MARCH 31, 1996........... -- 893 893 123 1,016
=== ===== ===== === =====
Net loss for the fiscal year........ -- 112 112 18 130
--- ----- ----- --- -----
BALANCE AT MARCH 31, 1997........... -- 1,005 1,005 141 1,146
=== ===== ===== === =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 185
AIRPLANES GROUP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------ ------------------------------ ------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST COMBINED LIMITED TRUST COMBINED LIMITED TRUST COMBINED
--------- --------- -------- --------- --------- -------- --------- --------- --------
($ MILLIONS) ($ MILLIONS) ($ MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss....................... (101) (8) (109) (43) (13) (56) (112) (18) (130)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and
amortization................. 183 25 208 183 24 207 191 32 223
Aircraft maintenance, net...... 49 2 51 34 9 43 11 (9) 2
Deferred income taxes.......... (11) (5) (16) (5) (8) (13) (10) -- (10)
Provision for loss making
leases....................... 4 1 5 (18) 3 (15) (5) (7) (12)
Accrued and deferred interest
expense...................... 49 5 54 48 5 53 123 11 134
Changes in operating assets and
liabilities:
Accounts receivable............ (8) 1 (7) 18 -- 18 1 -- 1
Other accruals and
liabilities.................. (2) (4) (6) (19) -- (19) 18 3 21
Other assets................... (2) (1) (3) (2) -- (2) (3) (2) (5)
---- ---- ---- ------ ---- ------ ---- ---- ----
NET CASH PROVIDED BY OPERATING
ACTIVITIES................... 161 16 177 196 20 216 214 10 224
==== ==== ==== ====== ==== ====== ==== ==== ====
CASH FLOWS FROM INVESTING
ACTIVITIES
Sale/(Purchase) of aircraft.... (26) (1) (27) (3) -- (3) 44 (44) --
Aircraft deposits and
pre-delivery payments........ (10) -- (10) -- -- -- -- -- --
Capital and sales type
leases....................... 14 -- 14 16 -- 16 19 -- 19
---- ---- ---- ------ ---- ------ ---- ---- ----
NET CASH PROVIDED BY/(USED IN)
INVESTING ACTIVITIES......... (22) (1) (23) 13 -- 13 63 (44) 19
==== ==== ==== ====== ==== ====== ==== ==== ====
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of notes............. -- -- -- -- -- -- (216) (22) (238)
Issue of A-E notes............. -- -- -- 4,221 413 4,634 -- -- --
Amounts due from Airplanes
Trust to Airplanes Limited... (56) 56 --
Increase in/(repayment of)
indebtedness -- GPA.......... 19 -- 19 (4,192) (410) (4,602) -- -- --
(Distributions
to)/Contributions from GPA
Group plc.................... (158) (15) (173) (147) (29) (176) -- --
---- ---- ---- ------ ---- ------ ---- ---- ----
NET CASH PROVIDED BY/(USED IN)
FINANCING ACTIVITIES......... (139) (15) (154) (118) (26) (144) (272) 34 (238)
---- ---- ---- ------ ---- ------ ---- ---- ----
Net Increase/(Decrease) in
Cash......................... -- -- -- 91 (6) 85 5 -- 5
Cash at beginning of year...... 123 12 135 123 12 135 214 6 220
---- ---- ---- ------ ---- ------ ---- ---- ----
Cash at end of year............ 123 12 135 214 6 220 219 6 225
==== ==== ==== ====== ==== ====== ==== ==== ====
CASH PAID IN RESPECT OF:
Interest....................... 276 27 303 294 29 323 237 28 265
==== ==== ==== ====== ==== ====== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 186
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS
1. SECURITIZATION TRANSACTION
On March 28, 1996 (the "CLOSING DATE") GPA Group plc and its subsidiary
undertakings ("GPA") re-financed on a long term basis certain indebtedness due
to commercial banks and other senior secured debt. The re-financing was effected
through a major aircraft securitization transaction (the "TRANSACTION").
Under the terms of the Transaction, a combination ("AIRPLANES GROUP")
comprising Airplanes Limited, a special purpose company formed under the laws of
Jersey, Channel Islands ("AIRPLANES LIMITED") and Airplanes U.S. Trust, a trust
formed under the laws of Delaware ("AIRPLANES TRUST") together acquired directly
or indirectly from GPA a portfolio of 229 commercial aircraft (collectively the
"AIRCRAFT") and related leases (the "LEASES"). The Transaction was effected by
transferring existing subsidiaries of GPA that owned the Aircraft to Airplanes
Limited and Airplanes Trust, respectively. References to Airplanes Group in
these notes to the financial statements may relate to Airplanes Limited and
Airplanes Trust on a combined or individual basis as applicable.
Simultaneously with such transfers, Airplanes Group issued notes of $4,048
million in aggregate principal amount in four classes: Class A, Class B, Class C
and Class D ("NOTES") with approximately 91% of the principal amount of notes in
each class being issued by Airplanes Limited and 9% approximately by Airplanes
Trust. Airplanes Group also issued Class E Notes ranking after the Notes and
these were taken up by GPA as part consideration for the transfer of the
Aircraft and certain related lease receivables. Airplanes Limited and Airplanes
Trust have each fully and unconditionally guaranteed each others' obligations
under the relevant notes.
2. BASIS OF PREPARATION
The accompanying financial statements of Airplanes Limited, Airplanes Trust
and the combined balance sheets, statements of operations, statements of changes
in shareholders' deficit/net liabilities and cash flows of Airplanes Group
(together, the "FINANCIAL STATEMENTS") have been prepared on a going concern
basis and on the bases and using the assumptions set out below and in accordance
with the accounting policies set out in Note 4 and in conformity with United
States generally accepted accounting principles:
The financial statements are presented on an historical cost basis as if
Airplanes Limited and Airplanes Trust had been organized as single economic
entities for all periods presented.
Accordingly, the financial statements reflect the results of operations,
assets and liabilities relating to the 229 aircraft transferred to Airplanes
Limited and Airplanes Trust, from the date of original acquisition of
controlling interest by GPA of each aircraft. For all periods prior to the
Closing Date, the financial statements have been prepared on the bases and
assumptions set out below. For the period subsequent to the Closing Date the
financial statements reflect the actual results of Airplanes Limited and
Airplanes Trust.
Bases and Assumptions
(i) Prior to the Closing Date, an allocation of certain costs such as
selling, general and administrative expenses of GPA to Airplanes Limited and
Airplanes Trust was made. The most significant element of these costs related to
aircraft management fees, substantially all of which were asset based fees
calculated as an annual percentage of a reference net book value of aircraft
under management. The balance of such costs have been allocated in proportion to
rental revenues. Management believes that the basis for these allocations are
reasonable.
Airplanes Group has entered into a Servicing Agreement with GE Capital
Aviation Services Limited ("GECAS") under which GECAS provides, among other
things, lease management and aircraft asset management services in return for a
fee. Airplanes Group has also entered into an Administrative Agency Agreement
and a Cash Management Agreement with GPA. (Note 19)
F-7
<PAGE> 187
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
2. BASIS OF PREPARATION -- (CONTINUED)
(ii) In the period prior to the Closing Date it was assumed that Airplanes
Group was financed with indebtedness to GPA in an amount equivalent to the
aggregate amount of all classes of Notes (A, B, C, D and E) originally expected
to be issued by Airplanes Group pursuant to the Transaction of $4,602 million.
It was also assumed that such indebtedness built up as and when Airplanes Group
acquired aircraft, at an amount equal to the appraised value (based on the value
of each Aircraft given a stable market with a reasonable balance of supply and
demand and a reasonable period of time available for marketing) of the aircraft
at October 31, 1995. In addition, it was assumed that no repayment of debt was
made prior to the Closing Date.
At the Closing Date the actual aggregate amount of all classes of Notes
issued was $4,652 million. Of the $604 million Class E Notes issued,
approximately $13 million were surrendered and cancelled under the terms of the
Transaction (after giving effect to certain purchase price adjustments). It was
assumed that the indebtedness to GPA (explained above) was repaid from the
proceeds of the Notes and the Class E Notes. Details of the terms of the various
classes of Notes issued by Airplanes Group are set out in Note 13.
Indebtedness at March 31, 1997 represents the aggregate of the Class A-E
Notes in issue.
(iii) The interest charged on Airplanes Group's indebtedness to GPA in the
periods prior to the Closing Date is based on GPA's average cost of debt of
7.83% and 8.25% for the years ended March 31, 1995 and 1996, respectively. In
the period subsequent to the Closing Date interest expense is based on the terms
of the notes issued. Details of the interest rates applicable to the various
classes of Notes are set out in Note 13.
In respect of the portion of the indebtedness to GPA which is represented
by the E Note (assumed in these financial statements to be approximately 15% of
total indebtedness up until the Closing Date), the Statements of Cash Flows in
the periods prior to the Closing Date gives effect to cash payments for interest
of only 1% per annum and the balance is deferred and reflected as a movement in
net liabilities.
(iv) Airplanes Group's cash balances were maintained throughout the period
to the Closing Date at the amount originally assumed to be retained by Airplanes
Group on completion of the securitization transaction of $135 million. Cash
generated from or absorbed by the activities of Airplanes Group during the
period up to the Closing Date is reflected as distributions to or transfers from
GPA. The cash balances as at March 31, 1997, and March 31, 1996, represent the
actual cash balances held by Airplanes Group at those dates.
(v) In the period prior to the Closing Date, Airplanes Group's tax
provisions and deferred income tax assets and liabilities have been determined
as if the underlying taxable entities of Airplanes Limited and Airplanes Trust
were separate taxable entities from GPA.
At March 31, 1997 and March 31, 1996 the deferred income tax assets and
liabilities represent the assets and liabilities of Airplanes Limited and
Airplanes Trust at that date.
3. RELATIONSHIP WITH GPA GROUP PLC AND MANAGEMENT ARRANGEMENTS
Airplanes Group's portfolio has been acquired entirely from GPA pursuant to
the Transaction.
With effect from the Closing Date, GECAS provides, in consideration for
management fees, certain management services to Airplanes Group pursuant to a
servicing agreement entered into by GECAS with certain members of Airplanes
Group and their subsidiaries. Under certain circumstances GECAS may resign from
the performance of its duties in relation to the management of all the aircraft
generally, or the management of one or more aircraft individually, provided in
either case that a replacement has been appointed to manage the aircraft. In
addition, Airplanes Group will, under certain circumstances, have the right to
terminate the servicing agreement.
F-8
<PAGE> 188
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
3. RELATIONSHIP WITH GPA GROUP PLC AND MANAGEMENT ARRANGEMENTS -- (CONTINUED)
As a holder of the majority of the Class E Notes, GPA has the right to
appoint one director to the board of Airplanes Limited and one of the
controlling trustees of Airplanes Trust. Airplanes Limited initially has a board
of directors of five directors, including the director appointed by the holders
of the Class E Notes. The controlling trustees of Airplanes Trust are the same
individuals. GE Capital Corporation ("GE CAPITAL"), GECAS' indirect parent, has
an option to acquire at least 90% of the ordinary shares of GPA Group at any
time up to October 29, 2001. If GE Capital acquires 90% or more of the ordinary
share capital of GPA Group and certain other conditions are met, the holder of a
majority in aggregate principal amount of the Class E Notes will have the right
to appoint all of the directors of Airplanes Limited and the trustees of
Airplanes Trust, provided that an independent committee of at least three
directors/trustees is established and maintained to review the terms of certain
transactions between Airplanes Limited and Airplanes Trust on the one hand, and
GECAS or any of its affiliates on the other.
Certain cash management and administrative services are being provided by
GPA subsidiaries to Airplanes Group, pursuant to a cash management agreement and
administrative agency agreement entered into by such GPA subsidiaries with
Airplanes Group.
Although Airplanes Group's portfolio will at all times be held in two
different entities, Airplanes Limited and Airplanes Trust, Airplanes Group is
managed and the note covenants structured on the basis of a single economic
entity owning a single aircraft portfolio.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Airplanes Group's accounting policies conform with United States generally
accepted accounting principles. The following paragraphs describe the main
accounting policies followed in these financial statements.
(a) Revenue Recognition
Revenue from aircraft on operating leases is recognized as income as it
accrues over the period of the leases. Unearned revenue from capital and sales
type leases is amortized and included in income.
(b) Aircraft
Aircraft, including engines, are stated at cost less accumulated
depreciation.
Airplanes Group adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("FAS 121") with effect from April 1, 1996. The
statement requires the recognition of an impairment loss for an asset held for
use when the estimate of undiscounted future cash flows expected to be generated
by the asset is less than its carrying amount. Measurement of impairment loss is
to be recognized based on the fair value of the asset. Fair market value
reflects the underlying economic value of aircraft, including engines, in normal
market conditions (where supply and demand are in reasonable equilibrium) and
assumes adequate time for a sale and a willing buyer and seller. Short term
fluctuations in the market place are disregarded and it is assumed that there is
no necessity either to dispose of a significant number of aircraft
simultaneously or to dispose of aircraft quickly. The fair market value of the
assets is based on independent valuations of the aircraft in the fleet and
estimates of discounted future cash flows.
FAS 121 also requires that long-lived assets to be disposed of, be reported
at the lower of the carrying amount or fair value less estimated disposal costs.
F-9
<PAGE> 189
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Prior to the adoption of FAS 121, additional depreciation was charged to
reduce the book value of specific assets to fair market value where a permanent
diminution was considered to have occurred. Where fair market value was greater
than book value, no adjustment was made. Additionally, prior to the
implementation of FAS 121, Airplanes Group made a separate provision for
downtime costs where aircraft were off lease and were expected to be on the
ground for a period prior to re-leasing. Following the adoption of FAS 121,
Airplanes Group's assessment of the need for downtime provisions is incorporated
in its impairment assessment.
The adoption of FAS 121 did not have a material impact on these financial
statements.
Cost comprises the invoiced cost net of manufacturers' discounts.
Depreciation is calculated on a straight line basis. The estimates of useful
lives and residual values are reviewed periodically. The current estimates for
residual values are generally 15% of cost, and for useful lives are as follows:
<TABLE>
<CAPTION>
YEARS FROM
----- ----------------
<S> <C> <C>
Stage 2 aircraft................................................ 20-25 Manufacture date
Refurbished and upgraded aircraft -- converted to freighters.... 20 Conversion date
Turbopro aircraft............................................... 22.5 Manufacture date
All other aircraft.............................................. 25 Manufacture date
</TABLE>
(c) Net Investment in Capital and Sales Type Leases
The amounts due by lessees under capital leases, where the entire cost of
the asset is recovered, are shown in the balance sheet at the net amount
receivable under these leases. The related finance revenue is recognized as
income over the period of the lease in proportion to the amounts outstanding.
(d) Provision for Maintenance
In most lease contracts the lessee has the obligation for maintenance costs
on airframes and engines and in many lease contracts the lessee makes a full or
partial prepayment, calculated at an hourly rate, from which maintenance
expenditures for major checks are disbursed. The undisbursed portion of these
prepayments are included in the provision for maintenance.
Maintenance provisions also include an estimate of maintenance costs which
are Airplanes Group's primary responsibility and certain amounts in respect of
the risk of lessees defaulting on obligations, which could result in Airplanes
Group incurring maintenance costs which are the lessee's primary responsibility.
(e) Allowance for doubtful debts
Allowances are made for doubtful debts where it is considered that there is
a significant risk of non recovery.
The assessment of risk of non recovery is primarily based on the extent to
which amounts outstanding exceed the expected value of security held, together
with an assessment of the financial strength and condition of a lessee and the
economic conditions existing in the lessee's operating environment.
(f) Provision for Loss Making Leases
A lease agreement is deemed to be "Loss Making" in circumstances where the
contracted rental payments are insufficient to cover the depreciation and
allocated interest cost attributable to the relevant aircraft, together with
direct costs such as legal fees and other costs attributable to the lease over
its term. At
F-10
<PAGE> 190
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
March 31, 1997 and March 31, 1996, the attributable allocated interest cost
excludes the element of the interest on the Class E Notes, 9% per annum, which
is payable only in the event that the principal amount on all the Notes is
repaid. Provision is made for the expected losses on such leases.
(g) Taxation
Deferred income tax assets and liabilities recognize the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred income tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
income tax assets and liabilities of a change in tax rates is recognized in the
period that includes the enactment date.
Income tax is provided based on the results for the year. Airplanes
Limited's underlying taxable entities in Ireland are subject to Irish Corporate
Income Tax on approved trading operations at a rate of 10% until December 31,
2005. Airplanes Trust's underlying taxable entities in the US are subject to US
Federal and State taxes on their trading operations.
(h) Concentrations of Credit Risk
Financial instruments which potentially subject Airplanes Group to
significant concentrations of credit risk consist primarily of trade accounts
receivable and interest rates swaps and similar hedging instruments. Details of
Airplanes Group's interest rate swaps and similar hedging instruments are set
out at (i) below.
Credit risk with respect to trade accounts receivable is generally
diversified due to the number of lessees comprising Airplanes Group's customer
base and the different geographic areas in which they operate. At March 31, 1997
Airplanes Group had leased aircraft to 79 lessees in 40 countries. The
geographic concentrations of leasing revenues is set out in Note 16.
Many of Airplanes Group's lessees are in a relatively weak financial
position because of the difficult economic conditions in the civil aviation
industry as a whole and because, in general, weakly capitalized airlines are
more likely to seek operating leases.
The exposure of Airplanes Group's aircraft to particular countries and
customers is managed partly through concentration limits provided for under the
terms of the notes and through obtaining security from lessees by way of
deposits, letters of credit and guarantees. Airplanes Group will continue to
manage its exposure to particular countries, regions and lessees through
concentration limits. In the normal course of its business Airplanes Group (and
in the past GPA) has reached agreements with certain of its lessees to
restructure their leases and defer certain receivable balances. Details of
accounts receivable, deferred balances and provision for bad and doubtful debts
are set out in Note 6.
Mexico is a significant market for Airplanes Group's aircraft and at March
31, 1997, 28 of Airplanes Group's aircraft were being operated by three Mexican
lessees. Difficult market conditions and substantial over-capacity continue to
have an adverse effect on the Mexican air transport sector and restructuring
negotiations with certain of Airplanes Group's Mexican lessees have been
concluded, while negotiations with other lessees are continuing. Receivable
balances with Mexican lessees in total were $15.4 million at March 31, 1997, of
which $8 million has been deferred, and in respect of which allowances of $4.7
million for doubtful debts have been made.
Airplanes Group's Brazilian lessees also continue to experience significant
difficulties due to over-capacity and adverse market conditions. At March 31,
1997, 14 of Airplanes Group's aircraft were being
F-11
<PAGE> 191
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
operated by four Brazilian lessees. Restructuring arrangements have been agreed
with certain of the Brazilian lessees allowing for rescheduling of balances
owing to Airplanes Group. Receivable balances with Brazilian lessees in total
were $10 million at March 31, 1997, of which $8 million has been deferred, and
in respect of which no allowances for doubtful debts have been made.
Canadian Airlines, Airplanes Group's second largest lessee at March 31,
1997 by appraised value, approached its creditors including Airplanes Group,
with proposals to reschedule its obligations. A rescheduling plan which granted
Canadian Airlines a deferral of operating lease rentals for a three month period
and a deferral of finance lease principal payments for the six month period
commencing from December 1996 has been reached in principle. The deferred
payments are to be repaid with interest over a two and a half year period
commencing October 1998. Receivable balances at March 31, 1997 were $6.9 million
against which $2.4 million of doubtful debt provisions have been made.
(i) Derivative Financial Instruments
Airplanes Group uses interest rate swaps and options to enter into interest
rate swaps ("Swaptions") to manage its interest rate exposures which arise in
the normal course of its business.
The differential paid or received on interest rate derivatives that qualify
for hedge (deferral) accounting is recognised as an adjustment to interest
expense. Interest rate derivatives contracts that do not qualify for hedge
accounting are marked to market with unrealised gains and losses recorded in the
statement of operations. Gains and losses realised upon termination of
derivative contracts designated as hedges are deferred and amortised over the
shorter of the term of the derivative or the term of the hedged indebtedness.
Airplanes Group does not hold or issue derivative financial instruments for
trading purposes.
(j) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 "Disclosures about Fair
Value of Financial Instruments" defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Fair values of financial instruments have been determined with reference to
available market information and the valuation methodologies discussed below.
However, considerable management judgement is required in interpreting market
data to arrive at estimates of fair values. Accordingly, the estimates presented
herein may not be indicative of the amounts that Airplanes Group could realize
in a current market exchange.
(i) The fair value of cash, trade receivables and trade payables
approximates the carrying amount because of the nature and short maturity
of these instruments.
(ii) The fair value of the A, B, C and D Notes issued by Airplanes
Group outstanding at March 31, 1997 and 1996 were $3,865 million and $4,055
million respectively, as compared to the carrying values (before discounts)
of $3,810 million and $4,048 million at March 31, 1997 and 1996
respectively. While the amount subscribed for the E Notes was based on the
appraised value of the aircraft at the Closing Date, the fair value of
these Notes at March 31, 1997 and 1996 cannot be determined, as it
represents the holders' residual interest in the aircraft owned by
Airplanes Group.
(iii) Airplanes Group manages its interest rate exposure through the
use of interest rate swaps and options to enter into interest rate swaps
Swaptions. At March 31, 1997 and 1996 Airplanes Group had entered into
interest rate swaps with an aggregate notional principal amount of $2.79
billion and $2.62 billion, respectively. Under these swap arrangements
Airplanes Group will pay fixed and receive floating amounts on a monthly
basis. The objective of Airplanes Group's interest rate risk management
F-12
<PAGE> 192
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
policy is to correlate the contracted fixed and floating rental payments in
its portfolio to the fixed and floating interest payments on the bonds,
taking into account the expected amortization of Class A and Class B Notes.
The fair value of these swaps at March 31, 1997 and 1996 were $8.77 million
and nil, respectively.
Interest rate exposures which may arise in the event that lessees paying
rate rentals default are managed in part through the purchase of Swaptions.
March 31, 1997 Airplanes Group had entered into Swaptions with a notional
principal amount of $76 million. The fair value of the Swaptions at March 31,
1997 was $0.3 million and this amount has been included in income for the year
ended March 31, 1997. At March 31, 1996, Airplanes Group had no Swaptions.
Airplanes Group is exposed to losses in the event of non-performance by
counterparties to interest rate swap agreements or in the event of defaults by
lessees. However, Airplanes Group does not anticipate non-performance by the
counterparties and other parties and accounts for hedging losses resulting from
lessee defaults as they are incurred.
Counterparty risk is monitored on an ongoing basis. Counterparties are
subject to the prior approval of the Directors of Airplanes Limited and the
Controlling Trustees of Airplanes Trust. Airplanes Group's counterparties at
March 31, 1997 comprise three major U.S./European financial institutions.
(k) Foreign Currency Transactions
Airplanes Group's foreign currency transactions are not significant as
virtually all revenues and most costs are denominated in US dollars. The US
dollar is the currency of the primary economic environment in which Airplanes
Group operates and accordingly is its functional currency.
5. CASH
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Cash.............................................. 214 6 219 6
=== === === ===
</TABLE>
Substantially all of the cash balances at March 31, 1997 and March 31, 1996
are held for specific purposes under the terms of the Transaction. Included in
the cash balances at March 31, 1997 and 1996 is restricted cash of $6 million.
F-13
<PAGE> 193
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Trade receivables.................................. 40 2 39 2
Allowance for doubtful debts....................... (12) (1) (12) (1)
---- ---- ---- ----
28 1 27 1
==== ==== ==== ====
Included in trade receivables are deferred amounts
as follows:--
Gross deferred lease receivables................... 25 -- 16 --
Allowance for doubtful debts....................... (4) -- (2) --
---- ---- ---- ----
21 -- 14 --
==== ==== ==== ====
</TABLE>
Deferred lease receivables at March 31, 1997 represent deferrals of rent,
maintenance and miscellaneous payments due from lessees. The most significant of
these lessees are located in Mexico and Brazil where the air transport sector is
suffering from substantial over capacity and the effects of difficult economic
conditions (see Note 4(h)). In December 1996, Canadian Airlines deferred
operating lease rentals for a three month period and finance lease principal
payments for a six month period.
Receivables include amounts classified as due after one year of $8 million
(Airplanes Limited $8 million and Airplanes Trust $Nil) at March 31, 1997 and
$17 million (Airplanes Limited $17 and Airplanes Trust $Nil) at March 31, 1996.
7. AMOUNTS DUE FROM AIRPLANES TRUST TO AIRPLANES LIMITED
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Amount receivable from Airplanes Trust............. -- -- 56 (56)
=== === === ===
</TABLE>
Included in the balance of $56 million at March 31, 1997 was $43 million in
respect of aircraft sales and purchases. This amount bears interest based on the
interest terms of the Class A-D Notes. The remaining balance represents the net
amount due to Airplanes Limited in respect of Airplanes Trust's trading
activities, including servicing of its debt obligations.
8. AMOUNTS DUE FROM GPA
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Amounts due from GPA.............................. 12 1 -- 2
=== === === ===
</TABLE>
The amounts due from GPA at March 31, 1996 related to a cash adjustment
amount in respect of the difference between the collateralized value of the
receivables which were originally assumed to be transferred
F-14
<PAGE> 194
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
8. AMOUNTS DUE FROM GPA -- (CONTINUED)
and the actual balances which were transferred at the Closing Date. The balance
at March 31, 1997 represents cash received by GPA, in respect of aircraft owned
by Airplanes Trust.
9. NET INVESTMENT IN CAPITAL AND SALES TYPE LEASES
The following are the components of the net investment in capital and sales
type leases of Airplanes Limited:
<TABLE>
<CAPTION>
MARCH 31,
-------------
1996 1997
---- ----
($MILLIONS)
<S> <C> <C>
Total minimum lease payments receivable................... 112 77
Estimated residual values of leased assets................ 37 39
Less unearned revenue..................................... (36) (22)
--- ---
Net investment in capital and sales type leases........... 113 94
=== ===
</TABLE>
Aggregate lease rentals in respect of such capital and sales type leases
for the years ended March 31, 1995, 1996 and 1997 amounted to $26 million, $28
million and $28 million respectively.
Unearned revenue of $13 million, $8 million and $9 million for the years
ended March 31, 1995, 1996 and 1997, respectively, was amortized and included in
revenue.
Minimum future payments to be received on such capital leases for aircraft
at March 31, 1997 are as follows:
<TABLE>
<CAPTION>
MINIMUM LEASE
PAYABLES RECEIVABLE
-------------------
($MILLIONS)
<S> <C>
Years ending March 31, 1998............................. 27
1999.................................................. 15
2000.................................................. 14
2001.................................................. 13
2002.................................................. 7
Thereafter.............................................. 1
---
77
===
</TABLE>
F-15
<PAGE> 195
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
10. AIRCRAFT
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Aircraft
Cost.............................................. 4,332 510 4,281 554
Less Accumulated depreciation..................... (861) (129) (1,039) (159)
----- ---- ------ ----
3,471 381 3,242 395
===== ==== ====== ====
Fleet Analysis
On operating lease for a further period of:
More than five years............................ 683 -- 425 74
From one to five years.......................... 1,950 322 2,277 283
Less than one year.............................. 722 25 493 25
Non revenue earning aircraft:
Available for lease............................. 31 25 6 --
Available for lease, subject to letters of
intent....................................... 85 9 41 13
----- ---- ------ ----
3,471 381 3,242 395
===== ==== ====== ====
</TABLE>
Certain aircraft are subject to purchase options granted to existing
lessees.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------------------------------------------
1995 1996 1997
---------------------- ---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST LIMITED TRUST
--------- --------- --------- --------- --------- ---------
($MILLIONS) ($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Depreciation expense............... 180 24 180 23 185 30
=== == === == === ==
</TABLE>
11. ACCRUED EXPENSES AND OTHER LIABILITIES
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Accrued expenses and other liabilities include:
Unearned revenue.................................. 15 2 17 2
Provisions for loss making leases................. 63 13 58 6
Interest accrued.................................. 3 -- 126 11
Other accruals.................................... 26 -- 34 2
Trade payables.................................... 1 -- 1 --
Deposits received................................. 55 2 59 3
-- --
--- ---
163 17 295 24
=== == === ==
Of which:
Payable within one year........................... 66 10 87 5
Payable after one year............................ 97 7 208 19
-- --
--- ---
163 17 295 24
=== == === ==
</TABLE>
F-16
<PAGE> 196
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
12. AMOUNTS DUE TO GPA
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Amounts due....................................... 12 -- 4 --
=== == === ==
</TABLE>
The amounts due to GPA relate to cash balances retained by Airplanes Group
on the Closing Date in excess of those required in accordance with the terms of
the Transaction, in respect of security deposits and letters of credit which
were not novated from GPA at the Closing Date. The balance at March 31, 1997
represents cash received by Airplanes Limited, in respect of aircraft owned by
GPA.
13. INDEBTEDNESS
The components of the debt are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Indebtedness in respect of Notes issued:
Subclass A-1...................................... 773 77 773 77
Subclass A-2...................................... 683 67 683 67
Subclass A-3...................................... 455 45 455 45
Subclass A-4...................................... 182 18 182 18
Subclass A-5...................................... 548 50 345 29
Class B........................................... 341 34 328 33
Class C........................................... 341 34 341 34
Class D........................................... 364 36 364 36
Class E........................................... 538 53 538 53
----- ----- ----- -----
4,225 414 4,009 392
Discounts arising on issue of Notes............... (4) (1) (4) --
----- ----- ----- -----
4,221 413 4,005 392
===== ===== ===== =====
</TABLE>
F-17
<PAGE> 197
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
13. INDEBTEDNESS -- (CONTINUED)
Debt maturity
The repayment terms of the A, B, C and D Notes are such that certain
principal amounts are expected to be repaid based on certain assumptions (the
"EXPECTED FINAL PAYMENT DATE") or refinanced through the issue of new Notes by
specified Expected Final Payment Dates but in any event are ultimately due for
repayment on specified final maturity dates (the "FINAL MATURITY DATE"). The
Expected Final Payment Dates, Final Maturity Dates and interest rates applicable
to each class of note are set out below:
<TABLE>
<CAPTION>
INTEREST EXPECTED FINAL FINAL
CLASS/SUBCLASS OF NOTES RATES PRINCIPAL AMOUNT PAYMENT DATE MATURITY DATE
- --------------------------- ------------- ---------------- -------------- --------------
($MILLIONS)
<S> <C> <C> <C> <C>
Subclass A-1............... (LIBOR+ .25%) 850 March 15, 1998 March 15, 2006
Subclass A-2............... (LIBOR+ .32%) 750 March 15, 1999 March 15, 2009
Subclass A-3............... (LIBOR+ .47%) 500 March 15, 2001 March 15, 2015
Subclass A-4............... (LIBOR+ .62%) 200 March 15, 2003 March 15, 2019
Subclass A-5............... (LIBOR+ .35%) 374 April 15, 1999 March 15, 2019
Class B.................... (LIBOR+ 1.10%) 361 March 15, 2009 March 15, 2019
Class C.................... (8.15%) 375 March 15, 2011 March 15, 2019
Class D.................... (10.875%) 400 March 15, 2012 March 15, 2019
Class E.................... (see below) 591 See below See below
-----
4,401
=====
</TABLE>
The dates on which principal repayments on the Notes will actually occur
will depend on the cash generated by Airplanes Group and in the event that the
sub-class A-1, A-2, A-3 and A-4 are not repaid or refinanced by the Expected
Final Maturity Date, additional interest will arise.
LIBOR on the Class A and Class B Notes equates to the London interbank
offered rate for one month US dollar deposits.
Interest on the Class C and Class D fixed rate Notes is calculated on the
basis of a 360-day year, consisting of twelve 30-day months.
The Class E Notes accrue interest at a rate of 20% per annum adjusted by
reference to the U.S. Consumer Price Index. Except for a minimum interest amount
and a supplemental interest amount of 1% and 10%, respectively, no interest will
be payable on the Class E Notes until all of the interest, principal and
premium, if any, on the Notes have been repaid in full. The principal on the
Class E notes will be repaid, subject to adequate funds being available, after
payment of all interest due on the E Note.
In general the priority of the principal payments on the Notes is as set
out below;
1. Specified minimum principal amounts on the A and the B Notes in that
order.
2. Additional amounts on the A Notes in the event that the value of the
fleet falls below specified amounts.
3. Scheduled principal repayments on the C and D Notes in that order.
4. Specified additional amounts on the B Notes and the A Notes in that
order.
5. Thereafter cash available to repay the principal on the Notes is
applied on each payment date to repay the outstanding principal on
the D Notes, the C Notes, the B Notes and the A Notes in that order.
F-18
<PAGE> 198
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
13. INDEBTEDNESS -- (CONTINUED)
On each payment date the priority of the principal amounts outstanding in
respect of the various sub-classes of A Notes is A-5, A-1, A-2, A-3 and A-4 in
that order.
14. PROVISION FOR MAINTENANCE
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------
1996 1997
----------------------- -----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C>
Balance at April, 1............................... 242 26 276 35
Receivable during year............................ 78 14 70 21
Expenditure/Transfer.............................. (44) (5) (59) (30)
--- --- --- ---
Balance at March, 31.............................. 276 35 287 26
=== === === ===
</TABLE>
The reserve for maintenance includes maintenance reserve funds received
from lessees, provisions to cover the directors'/trustees' estimate of
maintenance costs where Airplanes Group has the primary obligation for
maintenance and provisions to cover the risk of lessees defaulting on
obligations, which could result in Airplanes Group incurring maintenance costs
which are the lessees' primary responsibility.
15. SHARE CAPITAL
<TABLE>
<CAPTION>
AIRPLANES LIMITED
-----------------
MARCH 31,
-----------------
1996 1997
------ ------
($)
<S> <C> <C>
Ordinary shares, par value $1
Authorized 10,000...................................................... 10,000 10,000
====== ======
Issued 30.............................................................. 30 30
====== ======
</TABLE>
The holders of the issued ordinary shares are entitled to an annual
cumulative preferential dividend of $4,500. As Airplanes Limited does not have
distributable profits this dividend has not been paid. As at March 31, 1997 the
total unpaid cumulative preferential dividend amounted to $4,500.
F-19
<PAGE> 199
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
16. REVENUES
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------------------------------------
1995 1996 1997
--------------------- --------------------- ---------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST LIMITED TRUST
--------- --------- --------- --------- --------- ---------
($MILLIONS) ($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
The distribution of revenues by
geographic area is as follows:
Europe................................... 136 1 195 2 193 1
North America............................ 58 59 58 56 51 58
South America............................ 216 1 185 1 180 12
Asia/rest of world....................... 137 -- 118 1 108 1
-- -- --
--- --- ---
547 61 556 60 532 72
=== == === == === ==
Of which, maintenance revenue
represents............................. 74 14 78 14 70 21
=== == === == === ==
</TABLE>
At March 31, 1997, Airplanes Group had contracted to receive the following
minimum rentals under operating leases:
<TABLE>
<CAPTION>
1997
-----------------------
AIRPLANES AIRPLANES
LIMITED TRUST
--------- ---------
($MILLIONS)
<S> <C> <C>
Year ending March 31,
1998................................................................. 402 48
1999................................................................. 319 41
2000................................................................. 230 37
2001................................................................. 154 30
2002................................................................. 104 10
Thereafter........................................................... 28 --
----- ---
1,237 166
===== ===
</TABLE>
Contracted rentals are based on actual rates up to the first recalculation
date, and thereafter are based on a budget LIBOR of 5.6%, and include aircraft
subject to letters of intent to lease.
Each of Airplanes Limited and Airplanes Trust operates in one business
segment, the leasing of aircraft.
For Airplanes Limited no customer accounted for more than 10% of revenue in
fiscal 1995, 1996 or 1997. For Airplanes Trust: (a) two lessees each accounted
for more than 10% of leasing revenue for the year ended March 31, 1995, and
individually these lessees accounted for 38% and 27% of leasing revenue,
respectively, (b) two lessees each accounted for more than 10% of leasing
revenue for the year ended March 31, 1996, and individually these lessees
accounted for 32% and 31% of leasing revenue respectively and (c) two lessees
each accounted for more than 10% of leasing revenue in the year ended March 31,
1997 and individually these lessees accounted for 37% and 31% of leasing revenue
respectively.
F-20
<PAGE> 200
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
17. NET INTEREST EXPENSE
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------------------------------------
1995 1996 1997
--------------------- --------------------- ---------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST LIMITED TRUST
--------- --------- --------- --------- --------- ---------
($MILLIONS) ($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Interest on indebtedness to GPA.......... 325 32 339 34 -- --
Interest on Notes issued................. -- -- 3 -- 360 40
Interest income.......................... (8) (1) (7) (1) (17) --
--- --- --- --- --- ---
317 31 335 33 343 40
=== === === === === ===
Cash paid in respect of interest......... 276 27 294 29 237 28
=== === === === === ===
</TABLE>
As set out in Note 2, Basis of Preparation, interest charges included in
the Statement of Operations relating to indebtedness to GPA are based on GPA's
average cost of debt of 7.83% and 8.25% for the years ended March 31, 1995, and
the period to March 28, 1996 respectively. For periods up to March 28, 1996 the
Statement of Cash Flows gives effect to cash payments for interest only of 1%
per annum on that portion of the indebtedness assumed to be refinanced by the E
Notes (assumed in these financial statements to be approximately 15% of total
indebtedness) and the balance is deferred and reflected as a movement in net
liabilities.
For all periods subsequent to March 28, 1996 the Statement of Operations
and the Statement of Cash Flows includes the actual amounts charged and paid
respectively.
18. LOSS MAKING LEASES
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------
1997
------------------------
AIRPLANES AIRPLANES
LIMITED TRUST
--------- ---------
($MILLIONS)
<S> <C> <C>
Provision............................................................. 54 2
Release............................................................... (59) (9)
Net Release........................................................... (5) (7)
</TABLE>
Provision is made for the expected losses where a lease agreement is deemed
to be loss making. The charge in respect of the loss making lease provisions and
the utilization of these provisions are reflected on a net basis in the income
statement. These provisions are utilized as the corresponding actual losses
arise over the period of the lease. The actual losses are reflected within the
depreciation expense, interest expense or other costs within the Statement of
Operations.
F-21
<PAGE> 201
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
19. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------------------------------------
1995 1996 1997
--------------------- --------------------- ---------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST LIMITED TRUST
--------- --------- --------- --------- --------- ---------
($MILLIONS) ($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
GECAS Management fees.................... 21 2 20 2 24 2
Other selling, general and administrative
expenses............................... 10 1 12 1 11 1
--- --- --- --- --- ---
31 3 32 3 35 3
=== === === === === ===
</TABLE>
In the year ended March 31, 1997 other selling, general and administrative
expenses included an amount of $9 million (Airplanes Limited $8 million,
Airplanes Trust $1 million) payable to GPA in respect of Administration and Cash
Management fees.
20. PROVISION FOR INCOME TAXES
References to Airplanes Limited and Airplanes Trust in the context of this
footnote refer to the underlying taxable entities of Airplanes Limited
(primarily Irish entities) and Airplanes Trust (primarily US entities).
Substantially all of the net loss before taxes of Airplanes Trust is subject to
US income taxes and substantially all of the net loss before taxes of Airplanes
Limited is subject to Irish income taxes.
(a) Airplanes Limited
Income tax benefit of Airplanes Limited consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------
1995 1996 1997
---- ---- ----
($MILLIONS)
<S> <C> <C> <C>
Current income tax.................................................... -- -- --
Deferred income tax benefit........................................... 11 5 10
--- --- ---
11 5 10
=== === ===
</TABLE>
Airplanes Limited's income from approved activities in Ireland is taxable
at a rate of 10% until December 31, 2005.
A reconciliation of differences between actual income tax benefit of
Airplanes Limited for 1995, 1996 and 1997 and the expected tax benefit based on
a tax rate of 10% is shown below:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------
1995 1996 1997
---- ---- ----
($MILLIONS)
<S> <C> <C> <C>
Tax benefit at 10%.................................................... 11 5 12
Non deductible E Note interest........................................ -- -- (12)
Reversal of prior year over provision................................. -- -- 10
--- --- ---
Actual tax benefit.................................................... 11 5 10
=== === ===
</TABLE>
E Note interest is not deductible for tax purposes in Ireland.
F-22
<PAGE> 202
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
20. PROVISION FOR INCOME TAXES -- (CONTINUED)
The deferred tax provision at March 31, 1996 was based on calculations of
losses forward and capital allowances of Airplanes Limited at December 31, 1995
adjusted on an estimated basis to March 31, 1996. The reversal of the over
provision in respect of the prior year primarily relates to the finalization of
these estimates.
Airplanes Limited has net operating loss carryforwards of approximately
$788 million as of March 31, 1997, which are available for offset against future
taxable income with no restrictions to expiration.
The deferred tax assets and liabilities of Airplanes Limited are summarized
below:
<TABLE>
<CAPTION>
MARCH 31,
-------------
1996 1997
---- ----
($MILLIONS)
<S> <C> <C>
Deferred tax assets relating to:
Net operating loss carryforwards........................................... 40 79
Deferred tax liability relating to:
Aircraft................................................................... 107 136
--- ---
Net deferred tax liability................................................... 67 57
=== ===
</TABLE>
(b) Airplanes Trust
Income tax benefit of Airplanes Trust consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------
1995 1996 1997
---- ---- ----
($MILLIONS)
<S> <C> <C> <C>
Current income tax:
Federal............................................................. -- -- --
State............................................................... -- -- --
--- --- ---
Total Current......................................................... -- -- --
--- --- ---
Deferred income tax:
Federal............................................................. 4 6 --
State............................................................... 1 2 --
--- --- ---
Total deferred........................................................ 5 8 --
--- --- ---
5 8 --
--- --- ---
</TABLE>
A reconciliation of differences between actual income tax benefit of
Airplanes Trust for 1995, 1996, and 1997 and the expected tax benefit based on
the U.S. Federal statutory tax rate of 35% in 1995, 1996, and 1997 is shown
below:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------
1995 1996 1997
---- ---- ----
($MILLIONS)
<S> <C> <C> <C>
Tax benefit at statutory rate......................................... 4 7 6
State taxes, net of Federal tax....................................... 1 1 1
Non deductible E-Note interest........................................ -- -- (5)
Increase on valuation allowance....................................... -- -- (2)
--- --- ---
5 8 --
=== === ===
</TABLE>
F-23
<PAGE> 203
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
20. PROVISION FOR INCOME TAXES -- (CONTINUED)
E Note interest is not deductible for tax purposes.
Airplanes Trust has Federal tax net operating loss carryforwards of
approximately $97 million as of March 31, 1997 which expire in the following
years:
<TABLE>
<CAPTION>
($ MILLION)
-----------
<S> <C>
2007............................................................................ 10
2008............................................................................ 2
2009............................................................................ 11
2010............................................................................ 0
2011............................................................................ 34
2012............................................................................ 40
</TABLE>
Deferred tax assets and liabilities of Airplanes Trust are summarized
below:
<TABLE>
<CAPTION>
MARCH 31,
-------------
1996 1997
---- ----
($MILLIONS)
<S> <C> <C>
Deferred tax assets relating to:
Net operating loss carryforwards........................................... 22 40
Other...................................................................... 10 6
Valuation allowance........................................................ (17) (19)
--- ---
15 27
--- ---
Deferred tax liability relating to:
Aircraft................................................................... 63 75
--- ---
Net deferred tax liability................................................... 48 48
=== ===
</TABLE>
The valuation allowance of $19 million arises as it is believed that a
portion of the net operating loss carryforwards will be utilized in future
years.
Although all of the aircraft are owned by Airplanes Trust, for tax
purposes, certain of the aircraft are treated as being leased from third parties
under US "safe-harbor lease" tax rules (see Note 5). Under existing tax laws,
certain events could reverse the cumulative effect of this tax treatment, in
which case Airplanes Trust would be required to make payments to the third
parties under the tax indemnification clauses included in the lease agreements.
As of March 31, 1995, 1996 and 1997 the maximum potential exposure under these
provisions is $11 million, $9 million and $7 million, respectively. However, it
is believed that no events have taken place which could cause such payments to
become due.
Pursuant to a tax sharing agreement between Airplanes Trust and GPA,
Airplanes Trust is liable to GPA for its share of the consolidated tax liability
in years subsequent to the completion of the Transaction, in which Airplanes
Trust generates taxable income. However, Airplanes Trust shall satisfy this
liability in cash only to the extent that payments due to tax authorities from
GPA are attributable to Airplanes Trust's share of the consolidated tax
liability; the remainder will be paid in the form of subordinated notes.
Conversely, Airplanes Trust is entitled to be reimbursed by GPA for any tax
benefits provided subsequent to the completion of the Transaction, to GPA from
Airplanes Trust's tax losses. GPA has also indemnified Airplanes Trust for any
tax liabilities of AeroUSA, Inc. (a subsidiary of Airplanes Trust) that relate
to tax years prior to the completion of the Transaction. In the year ended March
31, 1997 no tax sharing will occur as both groups will be in a loss position.
F-24
<PAGE> 204
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
21. COMMITMENTS
Capital Commitments
Airplanes Group did not have any material contractual commitments for
capital expenditures at March 31, 1997.
22. CONTINGENT LIABILITIES
Guarantees
Airplanes Limited and Airplanes Trust have unconditionally guaranteed each
others' obligations under all classes of notes issued by Airplanes Limited and
Airplanes Trust, respectively, pursuant to the securitization transaction,
details of which are set out in Note 1.
Foreign Taxation
The international character of Airplanes Group's operations gives rise to
some uncertainties with regard to the impact of taxation in certain countries.
The position is kept under continuous review and Airplanes Group provides for
all known liabilities.
F-25
<PAGE> 205
AIRPLANES GROUP
UNAUDITED INTERIM BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1997
-------------------------------- --------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST COMBINED LIMITED TRUST COMBINED
--------- --------- -------- --------- --------- --------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash.................................... 219 6 225 324 6 330
Accounts receivable
Trade receivables..................... 39 2 41 24 3 27
Allowance for doubtful debts.......... (12) (1) (13) (11) (1) (12)
Amounts due from Airplanes Trust........ 56 -- 56 28 -- 28
Amounts due from GPA.................... -- 2 2 1 -- 1
Net investment in capital and sales type
leases................................ 94 -- 94 58 -- 58
Aircraft, net........................... 3,242 395 3,637 3,073 350 3,423
Other assets............................ 5 1 6 5 -- 5
----- --- ----- ----- --- -----
Total assets............................ 3,643 405 4,048 3,502 358 3,860
===== === ===== ===== === =====
LIABILITIES
Accrued expenses and other
liabilities........................... 295 24 319 416 33 449
Amounts due to Airplanes Limited........ -- 56 56 -- 28 28
Amounts due to GPA...................... 4 -- 4 -- -- --
Indebtedness............................ 4,005 392 4,397 3,848 376 4,224
Provision for maintenance............... 287 26 313 291 23 314
Deferred income taxes................... 57 48 105 55 48 103
----- --- ----- ----- --- -----
Total liabilities....................... 4,648 546 5,194 4,610 508 5,118
----- --- ----- ----- --- -----
Net liabilities......................... (1,005) (141) (1,146) (1,108) (150) (1,258)
----- --- ----- ----- --- -----
3,643 405 4,048 3,502 358 3,860
===== === ===== ===== === =====
</TABLE>
The accompanying notes are an integral part of the unaudited condensed financial
statements.
F-26
<PAGE> 206
AIRPLANES GROUP
UNAUDITED INTERIM STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
-------------------------------------------------------------------
1996 1997
-------------------------------- --------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST COMBINED LIMITED TRUST COMBINED
--------- --------- -------- --------- --------- --------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Aircraft leasing........................ 405 54 459 394 56 450
Aircraft sales.......................... -- -- -- 46 48 94
EXPENSES
Cost of aircraft sales.................. -- -- -- (41) (49) (90)
Depreciation and amortisation........... (136) (19) (155) (129) (17) (146)
Net interest expense.................... (260) (26) (286) (278) (30) (308)
Provision for maintenance............... (57) (15) (72) (54) (16) (70)
Bad and doubtful debts.................. -- -- -- -- -- --
Provision for loss making leases, net... 9 5 14 5 2 7
Other lease costs....................... (23) (7) (30) (21) (1) (22)
Selling, general and administrative
expenses.............................. (24) (3) (27) (27) (2) (29)
---- ---- ---- ---- ---- ----
OPERATING (LOSS) BEFORE
PROVISION FOR INCOME TAXES.............. (86) (11) (97) (105) (9) (114)
Income tax benefit/(charge)............. (1) 1 -- 2 -- 2
---- ---- ---- ---- ---- ----
NET (LOSS).............................. (87) (10) (97) (103) (9) (112)
==== ==== ==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of the unaudited condensed financial
statements.
F-27
<PAGE> 207
AIRPLANES GROUP
UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT/NET LIABILITIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997
---------------------------------------------------------------------
AIRPLANES COMBINED
AIRPLANES LIMITED TRUST ------------
---------------------------------------- ----------- SHAREHOLDERS
SHARE NET SHAREHOLDERS' NET DEFICIT/NET
CAPITAL LIABILITIES DEFICIT LIABILITIES LIABILITIES
----------- ----------- ------------ ----------- ------------
($MILLIONS) ($MILLIONS) ($MILLIONS) ($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31 1996.................. 0 893 893 123 1,016
Net loss for the period................... 87 87 10 97
--- ----- ----- --- -----
BALANCE AT DECEMBER 31, 1996.............. 0 980 980 133 1,113
=== ===== ===== === =====
BALANCE AT MARCH 31 1997.................. 0 1,005 1,005 141 1,146
Net loss for the period................... 103 103 9 112
--- ----- ----- --- -----
BALANCE AT DECEMBER 31, 1997.............. 0 1,108 1,108 150 1,258
=== ===== ===== === =====
</TABLE>
The accompanying notes are an integral part of the unaudited condensed financial
statements.
F-28
<PAGE> 208
AIRPLANES GROUP
UNAUDITED CONDENSED STATEMENTS OF CASHFLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
-------------------------------------------------------------------
1996 1997
-------------------------------- --------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST COMBINED LIMITED TRUST COMBINED
--------- --------- -------- --------- --------- --------
($MILLIONS) ($MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................ (87) (10) (97) (103) (9) (112)
Adjustment to reconcile (net loss) to
net cash provided by operating
activities:
Depreciation and amortisation........... 136 19 155 129 17 146
Aircraft maintenance, net............... 14 7 21 7 1 8
Profit on disposal of aircraft.......... -- -- -- (5) 1 (4)
Deferred income taxes................... 1 (1) -- (2) -- (2)
Provision for loss making leases........ (9) (5) (14) (5) (2) (7)
Accrued and deferred interest expense... 90 9 99 102 19 121
CHANGES IN OPERATING ASSETS &
LIABILITIES:
Accounts receivable, net................ (9) (6) (15) 14 (1) 13
Intercompany account movements.......... 9 (7) 2 28 (28) --
Amounts due to GPA...................... -- -- -- (5) 2 (3)
Other accruals and liabilities.......... 25 7 32 27 (9) 18
Other assets............................ (1) -- (1) (1) -- (1)
----- ---- ----- ----- ---- -----
NET CASH PROVIDED BY OPERATING
ACTIVITIES............................ 169 13 182 186 (9) 177
===== ==== ===== ===== ==== =====
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase/Sale of aircraft............... 44 (45) (1) 64 25 89
Intercompany movements - Airplanes
Group................................. (44) 44 -- -- -- --
Capital and sales type leases........... 14 -- 14 14 -- 14
----- ---- ----- ----- ---- -----
NET CASH PROVIDED BY INVESTING
ACTIVITIES............................ 14 (1) 13 78 25 103
===== ==== ===== ===== ==== =====
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in indebtedness................ (163) (12) (175) (159) (16) (175)
----- ---- ----- ----- ---- -----
NET CASH USED IN FINANCING ACTIVITIES... (163) (12) (175) (159) (16) (175)
===== ==== ===== ===== ==== =====
NET INCREASE IN CASH.................... 20 -- 20 105 -- 105
CASH AT BEGINNING OF PERIOD............. 214 6 220 219 6 225
----- ---- ----- ----- ---- -----
CASH AT END OF PERIOD................... 234 6 240 324 6 330
===== ==== ===== ===== ==== =====
CASH PAID IN RESPECT OF:
Interest................................ 182 18 200 173 17 190
===== ==== ===== ===== ==== =====
</TABLE>
The accompanying notes are an integral part of the unaudited condensed financial
statements.
F-29
<PAGE> 209
AIRPLANES GROUP
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The accompanying unaudited condensed financial statements of Airplanes
Limited, Airplanes Trust and the balance sheets, statements of operations,
statement of changes in shareholders deficit/net liabilities and statements of
cash flows of Airplanes Group have been prepared on a going concern basis in
conformity with United States generally accepted accounting principles. The
financial statements are presented on a historical cost basis.
The accompanying financial statements for Airplanes Limited and Airplanes
Trust reflect all adjustments which in the opinion of management are necessary
to present a fair statement of the information presented as of December 31, 1997
and for the nine month periods ending December 31, 1997 and December 31, 1996.
Such adjustments are of a normal, recurring nature. The results of operations
for the nine months ended December 31, 1997 are not necessarily indicative of
the results to be expected for the full year.
F-30
<PAGE> 210
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors of Airplanes Limited
and the Controlling Trustees of Airplanes U.S. Trust
Under date of June 26, 1997, we reported on the balance sheets of Airplanes
Limited and Airplanes U.S. Trust as of March 31, 1996 and 1997, and the related
statements of operations, changes in shareholders' deficit/net liabilities and
cash flows for each of the years in the three year period ended March 31, 1997,
which are included in this Registration Statement on form S-1. In connection
with our audits of the aforementioned financial statements, we also audited the
related financial statement schedule in this Registration Statement on form S-1.
This financial statement schedule is the responsibility of the companies'
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
We consent to the use of our reports included herein and to references to
our firm under the headings "Summary Combined Financial Data", "Selected
Financial Data" and "Experts" in the Registration Statement.
KPMG
Chartered Accountants
Dublin, Ireland
December 15, 1997
S-1
<PAGE> 211
AIRPLANES GROUP
VALUATION AND QUALIFYING ACCOUNTS
ACCOUNTS RECEIVABLE
SCHEDULE II
<TABLE>
<CAPTION>
BALANCE AT CHARGED/(RELEASED) DEDUCTION
BEGINNING TO COSTS AND (WRITE-OFFS/ BALANCE AT
AIRPLANES LIMITED OF YEAR EXPENSES TRANSFERS) END OF YEAR
- ------------------------------------------ ---------- ------------------ ------------ -----------
($ MILLIONS)
<S> <C> <C> <C> <C>
Year ended March 31,
1994.................................... 25 17 (3) 39
1995.................................... 39 34 (7) 66
1996.................................... 66 (27) (27) 12
1997.................................... 12 2 (2) 12
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT CHARGED/(RELEASED) DEDUCTION
BEGINNING TO COSTS AND (WRITE-OFFS/ BALANCE AT
AIRPLANES TRUST OF YEAR EXPENSES TRANSFERS) END OF YEAR
- ------------------------------------------ ---------- ------------------ ------------ -----------
($ MILLIONS)
<S> <C> <C> <C> <C>
Year ended March 31,
1994.................................... 3 3 (1) 5
1995.................................... 5 (1) 1 5
1996.................................... 5 (1) (3) 1
1997.................................... 1 -- -- 1
</TABLE>
S-2
<PAGE> 212
APPENDIX 1
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
$................................... 3
1958 Order.......................... 4
1961 Law............................ 165
1995 Regulations.................... 175
1996 Assumptions.................... 108
1996 Offering....................... 6
1998 Refinancing
Certificateholders................ 15
1998 Refinancing Certificates....... 1
1998 Refinancing Guarantees......... 15
1998 Refinancing Notes.............. 1
1998 Refinancing Trust A-6.......... 6
1998 Refinancing Trust A-7.......... 6
1998 Refinancing Trustee............ 1,14
1998 Refinancing Trust.............. 1
1998 Refinancing Trusts............. 1
Accounts............................ 158
Acquisition......................... 6
Actual Pool Factor.................. 136
Adjusted Balance.................... 135
Adjusted Base Value................. 135
Adjusted Portfolio Value............ 135
Administrative Agency Agreement..... 24
Administrative Agent................ 24
Administrative Agent's Conflict
Duties............................ 36
Administrative Agent's Services
Standard.......................... 36
Administrative Fee.................. 91
ADs................................. 41
Aeromexico.......................... 64
AeroUSA............................. 6
AeroUSA 3........................... 33
affiliate........................... 142
Air Europa.......................... 64
Aircraft............................ 6
Aircraft Agreement.................. 146
Aircraft Owning Companies........... 7
Airplanes Group..................... 1,6
Airplanes Limited................... 1,16
Airplanes Limited 1998 Refinancing
Notes............................. 17
Airplanes Limited Class E Notes..... 156
Airplanes Limited Guarantee......... 130
Airplanes Limited Indenture......... 17
Airplanes Limited Indenture
Trustee........................... 17
Airplanes Limited Member............ 143
Airplanes Limited Notes............. 17
Airplanes Pass Through Trust........ 14
Airplanes Trust..................... 1,16
Airplanes Trust 1998 Refinancing
Notes............................. 17
Airplanes Trust Agreement........... 16
<CAPTION>
PAGE
---------
<S> <C>
Airplanes Trust Class E Notes....... 156
Airplanes Trust Guarantee........... 130
Airplanes Trust Indenture........... 17
Airplanes Trust Indenture Trustee... 17
Airplanes Trust Member.............. 143
Airplanes Trust Notes............... 17
Airplanes Trust Residual Interest... 20
Airtours............................ 64
Allowed Restructuring............... 143
ALPS 94-1........................... 34
Amortization Commencement Date...... 133
Amortizing Notes.................... 134
Annual Dividend Amount.............. 52
AOG................................. 124
Appraisals.......................... 20
Appraised Value..................... 21
Appraisers.......................... 20
ARE................................. 125
Asset Based Servicing Fee........... 88
Assumptions......................... 18
Available Collections............... 15
Avg................................. 127
Avianca............................. 64
Base Value.......................... 21
Basic Terms Modification............ 155
Burlington Air...................... 64
Business Day........................ 14
CAA................................. 39
Calculation Date.................... 14
Call Right.......................... 52
Canadian Airlines................... 64
Capital Stock....................... 20
Cash Management Agreement........... 24
Cash Manager........................ 23
CCN................................. 164
Cedel Bank.......................... 3
Cedel Participants.................. 161
Certificate......................... 165
Certificate Account................. 118
Certificateholders.................. 15,165
Certificates........................ 6
Charitable Trust Trustees........... 84
Charitable Trusts................... 20
Chicago Convention.................. 63
CIS................................. 77
Class E Note Minimum Interest
Amount............................ 124
Class E Note Supplemental Interest
Amount............................ 124
Class E Notes....................... 6
</TABLE>
A-1
<PAGE> 213
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Closing Date........................ 14
Code................................ 26
Collection Account.................. 22
Collections......................... 112
Commission.......................... 160
Committee........................... 4
Company Secretary................... 92
Concentration Limits................ 149
control............................. 142
Controlling Trustees................ 53
Core Lease Provisions............... 151
Corresponding Notes................. 115
covenant defeasance................. 139
DCR................................. 16
Default Notice...................... 119
defeasance trust.................... 139
Definitive Certificates............. 163
Delaware Trustee.................... 16
Depositaries........................ 161
Depreciation Factor................. 135
Directors........................... 52
Discounted Annual Dividend Amount... 53
disqualified persons................ 172
DOL................................. 172
DTC................................. 3
DTC Participants.................... 161
Emery............................... 7
Encumbrance......................... 142
Engines............................. 145
ERISA............................... 26
EU.................................. 45
Euroclear........................... 3
Euroclear Participants.............. 161
Event of Default.................... 119
Existing Certificates............... 6
Existing Guarantees................. 15
Existing Leases..................... 6
Existing Notes...................... 6
Existing Trusts..................... 115
Exp................................. 127
Expected Final Payment Date......... 9
Expected Maturity................... 127
Expected Portfolio Value............ 134
Expense Account..................... 23
Expenses............................ 19
FAS 121............................. 29
Federal Tax Counsel................. 167
Final Maturity Date................. 9
Final Regulations................... 169
Financial Institution............... 169
Financial Statements................ F-7
First Collection Account Top-up..... 139
Fixed Price Premium................. 136
Fixed Rate Certificates............. 17
PAGE
---------
Fixed Rate Notes.................... 17
Fixed Rate Redemption Price......... 136
Floating Rate Certificates.......... 17
Floating Rate Notes................. 17
Floating Rate Redemption Price...... 136
Future Lease Rate................... 122
Future Leases....................... 7
GE Capital.......................... 3
GE Group............................ 34
GE Policy........................... 86
GECAS............................... 1
GECAS Conflicts Standard............ 35
GECAS Managed Portfolio............. 34
GECAS Services Standard............. 34
General Agreement................... 56
General Offer....................... 52
GPA................................. 1
GPA Cash Manager.................... 23
GPA Financial....................... 24
GPA Group........................... 1
GPA, Inc............................ 16
GPA Management Agreement............ 34
GPA Servicing Agreement............. 56
GPA U.S. Tax Group.................. 32
Gross Revenue....................... 123
guarantee........................... 145
Guarantees.......................... 15,130
High Court.......................... 57
Holding Co.......................... 6
incur............................... 144
Indebtedness........................ 144
Indenture Trustees.................. 17
Independent Directors............... 52
Independent Trustees................ 54
Indirect Participants............... 162
Initial Appraised Value............. 38
Initial Loan to Aircraft Value...... 8
Intercompany Loan................... 145
Interest Accrual Period............. 14
investment.......................... 143
IOMCos.............................. 143
IRS................................. 168
ISIN................................ 164
issue price......................... 168
Issuer.............................. 115
Jersey Tax Counsel.................. 165
Lease LOI........................... 70
Leases.............................. 7
legal defeasance.................... 139
Lessee Funded Account............... 22
Lessees............................. 22
Lessor.............................. 70
LIBOR............................... 1
Liens............................... 39
</TABLE>
A-2
<PAGE> 214
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Liquidity Reserve Amount............ 22,113
Listing Agent....................... 160
Losses.............................. 35
Maintenance Reserve Amount.......... 43
Maintenance Reserves................ 43
Make-Whole Price.................... 137
Make-Whole Spread................... 137
Mexicana............................ 64
Minimum Hedge Payment............... 110
Minimum Principal Payment Amount.... 134
Miscellaneous Reserve Amount........ 113
Modification Payment................ 146
Moody's............................. 16
Morgan Stanley...................... 176
NASD................................ 176
Net Sale Proceeds................... 146
Nominees............................ 20
Non-U.S. 1998 Refinancing
Certificateholder................. 168
non-United States person............ 168
Note Event of Default............... 153
Note Target Price................... 146
Notes............................... 6
Notice of Redemption................ 138
Offering............................ 1,6
Outstanding Principal Balance....... 119
parties in interest................. 172
Parts............................... 145
Payment Date........................ 14
Permitted Account Investments....... 92
Permitted Accruals.................. 113
Permitted Encumbrance............... 142
Plans............................... 172
Portfolio........................... 7
Precedent Lease..................... 151
Premium Expiration Date............. 136
PRI................................. 152
Principal Adjustment Amount......... 135
Principal Distribution Amount....... 134
PTCE................................ 173
Purchase Option..................... 61
Purchase Price...................... 32
Rating Agencies..................... 16
Re-Leasing Guidelines............... 24
Record Date......................... 14
Redemption Date..................... 136
Redemption Price.................... 136
Reducing Fee........................ 91
Reference Agent..................... 132
Reference Banks..................... 132
Reference Date...................... 14
Refinancing Certificates............ 18
Refinancing Notes................... 35
Registrants......................... 2
PAGE
---------
Regulations......................... 172
Related Collateral.................. 21
Related Documents................... 115
Relevant Appraisal.................. 135
Relevant Issuer..................... 115
Remaining Weighted Average Life..... 137
Renewal Lease....................... 151
Rental Accounts..................... 22
Rental Payments..................... 130
Repossessed Assets.................. 57
Required Expense Amount............. 15,112
RPMs................................ 76
Rules............................... 162
Sale LOI............................ 70
Scheduled Principal Payment
Amount............................ 136
Second Collection Account Top-up.... 140
Securities Act...................... 1
Security Deposit Reserve Amount..... 113
Security Deposits................... 21
Segregated Funds.................... 22
Servicer............................ 7
Servicer's Pro Forma Lease.......... 151
Services............................ 86
Servicing Agreement................. 7
Settlor............................. 16
Shannon Certified Operations........ 166
Shareholders Agreement.............. 84
Significant Subsidiary.............. 153
Singapore Companies Act............. 176
Soft Bullet Notes................... 133
Special Lessors..................... 7
Stage 2 aircraft.................... 63
Stage 3 aircraft.................... 63
Stand-alone Tax Liability........... 32
Standard & Poor's................... 16
Step-Up Interest.................... 19
Stock............................... 142
Stock Purchase Agreements........... 32
Stresses............................ 124
Subclass A-6 Certificates........... 6
Subclass A-7 Certificates........... 6
Subordinated Swap Payments.......... 140
Supplemental Hedge Payment.......... 110
Supplemental Loan to Value Ratio.... 135
Supplemental Principal Balance...... 135
Supplemental Principal Payment
Amount............................ 135
Swap Agreements..................... 47
Swap Providers...................... 19
Swaps............................... 110
Swaptions........................... 110
TAM................................. 64
Target Hedge........................ 110
Target Loan to Value Ratio.......... 134
Target Pool Factor.................. 136
</TABLE>
A-3
<PAGE> 215
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Target Principal Balance............ 134
Tax Liabilities..................... 32
Tax Sharing Agreement............... 32
Terms and Conditions................ 162
Third Party Event................... 150
THY................................. 64
TIN................................. 170
Transferred Companies............... 7
Treasury Yield...................... 137
Treaty.............................. 50
Trust............................... 115
Trust Agreement..................... 1,115
PAGE
---------
Trust Assets........................ 14
Trust Indenture Act................. 115
Trust Indentures.................... 17
Trustee............................. 14
U.S. GAAP........................... 27
Underwriters........................ 174
Underwriting Agreement.............. 174
United States person................ 168
Varig............................... 43
Weighted Average Life............... 126
Year 2000 Issue..................... 111
</TABLE>
A-4
<PAGE> 216
APPENDIX 2
AIRCRAFT TYPES DATA
<TABLE>
<CAPTION>
NO. AND STAGE 3
TYPICAL MFR. OF NOISE PROD. NO. CURRENT ON NO. OF
TYPE & VARIANT SEATS ENGINES COMPLIANCE YEARS DELIVERED FLEET ORDER OPERATORS
- -------------------- ------- ------------- ---------- -------- --------- ------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Airbus A300B4-200 Widebody Jet..... 250 2 X GE/PW Yes 1975-88
Airbus A320-200 Narrowbody Jet... 150 2 X CFM/IAE Yes 1988-
AI(R) ATR42-300 Turboprop........ 46 2 X PWC Yes(2) 1985-
Boeing 727-200 Adv Narrowbody Jet... 150 3 X PW No(1) 1972-84
Boeing 737-200 Adv Narrowbody Jet... 110 2 X PW No(1) 1971-88
Boeing 737-300 Narrowbody Jet... 130 2 X CFM Yes 1984-
Boeing 737-400 Narrowbody Jet... 150 2 X CFM Yes 1988-
Boeing 737-500 Narrowbody Jet... 110 2 X CFM Yes 1990-
Boeing 747-200B Widebody Jet..... 370 4 X GE/PW/RR Yes 1970-89
Boeing 757-200 Narrowbody Jet... 180 2 X RR/PW Yes 1982-
Boeing 767-200ER Widebody Jet..... 210 2 X GE/PW Yes 1984-
Boeing 767-300ER Widebody Jet..... 250 2 X GE/PW/RR Yes 1988-
De Havilland Dash 8 Turboprop........ 36-50 2 X PWC Yes(2) 1984-
Fairchild Metro Turboprop........ 20 2 X GT Yes(2) 1970-
Fokker 100 Narrowbody Jet... 100 2 X RR Yes 1988-96
MDC DC-8-70 Narrowbody Jet... Cargo 4 X CFM Yes 1981-86
MDC DC-9-10 Narrowbody Jet... 70 2 X PW No(1) 1965-68
MDC DC-9-30 Narrowbody Jet... 100 2 X PW No(1) 1967-82
MDC DC-9-50 Narrowbody Jet... 120 2 X PW No(1) 1975-81
MDC MD-82/83 Narrowbody Jet... 150 2 X PW Yes 1981-
MDC MD-87 Narrowbody Jet... 115 2 X PW Yes 1986-92
MDC DC-10-30 Widebody Jet..... 260 3 X GE Yes 1971-88
MDC MD-11 Widebody Jet..... 290 3 X GE/PW Yes 1991-
</TABLE>
- ---------------
Notes -- CFM = CFM International; GE = General Electric; GT = Garrett; IAE =
International Aero Engines; PW = Pratt & Whitney; PWC = Pratt & Whitney Canada;
RR = Rolls-Royce. DC-8 production is years since conversion or re-engining.
Source -- Airclaims CASE Database.
(1) Certain aircraft classified as Stage 2 are capable of meeting Stage 3
compliance requirements through either re-engining or hushkitting. For a
description of the Stage compliance categorization of each aircraft in the
Portfolio, see "-- Portfolio Information".
(2) Turboprop aircraft have been classified as Stage 3 compliant.
A-5
<PAGE> 217
APPENDIX 3
MONTHLY GROSS REVENUES BASED ON THE ASSUMPTIONS
<TABLE>
<CAPTION>
MONTHLY GROSS REVENUES
MONTH ($MILLIONS)
- ------------------------------------------------------------------------ ----------------------
<S> <C>
March 1998..............................................................
</TABLE>
A-6
<PAGE> 218
APPENDIX 4
EXPECTED PORTFOLIO VALUE
BASED ON THE DEPRECIATION FACTORS
AND THE AIRCRAFT IN THE PORTFOLIO AS OF JANUARY 31, 1998
<TABLE>
<CAPTION>
EXPECTED PORTFOLIO
MONTH VALUE
- -----------------------------------------
(MILLIONS)
<S> <C>
March 1998............. -
April 1998............. -
May 1998............... -
June 1998.............. -
July 1998.............. -
August 1998............ -
September 1998......... -
October 1998........... -
November 1998.......... -
December 1998.......... -
January 1999........... -
February 1999.......... -
March 1999............. -
April 1999............. -
May 1999............... -
June 1999.............. -
July 1999.............. -
August 1999............ -
September 1999......... -
October 1999........... -
November 1999.......... -
December 1999.......... -
January 2000........... -
February 2000.......... -
March 2000............. -
April 2000............. -
May 2000............... -
June 2000.............. -
July 2000.............. -
August 2000............ -
September 2000......... -
October 2000........... -
November 2000.......... -
December 2000.......... -
January 2001........... -
February 2001.......... -
March 2001............. -
April 2001............. -
May 2001............... -
June 2001.............. -
July 2001.............. -
August 2001............ -
September 2001......... -
October 2001........... -
November 2001.......... -
December 2001.......... -
January 2002........... -
February 2002.......... -
March 2002............. -
April 2002............. -
May 2002............... -
June 2002.............. -
<CAPTION>
EXPECTED PORTFOLIO
MONTH VALUE
- -----------------------------------------
(MILLIONS)
<S> <C>
July 2002.............. -
August 2002............ -
September 2002......... -
October 2002........... -
November 2002.......... -
December 2002.......... -
January 2003........... -
February 2003.......... -
March 2003............. -
April 2003............. -
May 2003............... -
June 2003.............. -
July 2003.............. -
August 2003............ -
September 2003......... -
October 2003........... -
November 2003.......... -
December 2003.......... -
January 2004........... -
February 2004.......... -
March 2004............. -
April 2004............. -
May 2004............... -
June 2004.............. -
July 2004.............. -
August 2004............ -
September 2004......... -
October 2004........... -
November 2004.......... -
December 2004.......... -
January 2005........... -
February 2005.......... -
March 2005............. -
April 2005............. -
May 2005............... -
June 2005.............. -
July 2005.............. -
August 2005............ -
September 2005......... -
October 2005........... -
November 2005.......... -
December 2005.......... -
January 2006........... -
February 2006.......... -
March 2006............. -
April 2006............. -
May 2006............... -
June 2006.............. -
July 2006.............. -
August 2006............ -
September 2006......... -
October 2006........... -
<CAPTION>
EXPECTED PORTFOLIO
MONTH VALUE
- -----------------------------------------
(MILLIONS)
<S> <C>
November 2006.......... -
December 2006.......... -
January 2007........... -
February 2007.......... -
March 2007............. -
April 2007............. -
May 2007............... -
June 2007.............. -
July 2007.............. -
August 2007............ -
September 2007......... -
October 2007........... -
November 2007.......... -
December 2007.......... -
January 2008........... -
February 2008.......... -
March 2008............. -
April 2008............. -
May 2008............... -
June 2008.............. -
July 2008.............. -
August 2008............ -
September 2008......... -
October 2008........... -
November 2008.......... -
December 2008.......... -
January 2009........... -
February 2009.......... -
March 2009............. -
April 2009............. -
May 2009............... -
June 2009.............. -
July 2009.............. -
August 2009............ -
September 2009......... -
October 2009........... -
November 2009.......... -
December 2009.......... -
January 2010........... -
February 2010.......... -
March 2010............. -
April 2010............. -
May 2010............... -
June 2010.............. -
July 2010.............. -
August 2010............ -
September 2010......... -
October 2010........... -
November 2010.......... -
December 2010.......... -
January 2011........... -
February 2011.......... -
</TABLE>
A-7
<PAGE> 219
<TABLE>
<CAPTION>
EXPECTED PORTFOLIO
MONTH VALUE
- -----------------------------------------
(MILLIONS)
<S> <C>
March 2011............. -
April 2011............. -
May 2011............... -
June 2011.............. -
July 2011.............. -
August 2011............ -
September 2011......... -
October 2011........... -
November 2011.......... -
December 2011.......... -
January 2012........... -
February 2012.......... -
March 2012............. -
April 2012............. -
May 2012............... -
June 2012.............. -
July 2012.............. -
August 2012............ -
September 2012......... -
October 2012........... -
November 2012.......... -
December 2012.......... -
January 2013........... -
February 2013.......... -
March 2013............. -
April 2013............. -
May 2013............... -
June 2013.............. -
July 2013.............. -
August 2013............ -
September 2013......... -
October 2013........... -
November 2013.......... -
EXPECTED PORTFOLIO
MONTH VALUE
- -----------------------------------------
(MILLIONS)
December 2013.......... -
January 2014........... -
February 2014.......... -
March 2014............. -
April 2014............. -
May 2014............... -
June 2014.............. -
July 2014.............. -
August 2014............ -
September 2014......... -
October 2014........... -
November 2014.......... -
December 2014.......... -
January 2015........... -
February 2015.......... -
March 2015............. -
April 2015............. -
May 2015............... -
June 2015.............. -
July 2015.............. -
August 2015............ -
September 2015......... -
October 2015........... -
November 2015.......... -
December 2015.......... -
January 2016........... -
February 2016.......... -
March 2016............. -
April 2016............. -
May 2016............... -
June 2016.............. -
July 2016.............. -
EXPECTED PORTFOLIO
MONTH VALUE
- -----------------------------------------
(MILLIONS)
August 2016............ -
September 2016......... -
October 2016........... -
November 2016.......... -
December 2016.......... -
January 2017........... -
February 2017.......... -
March 2017............. -
April 2017............. -
May 2017............... -
June 2017.............. -
July 2017.............. -
August 2017............ -
September 2017......... -
October 2017........... -
November 2017.......... -
December 2017.......... -
January 2018........... -
February 2018.......... -
March 2018............. -
April 2018............. -
May 2018............... -
June 2018.............. -
July 2018.............. -
August 2018............ -
September 2018......... -
October 2018........... -
November 2018.......... -
December 2018.......... -
January 2019........... -
February 2019.......... -
March 2019............. -
</TABLE>
A-8
<PAGE> 220
APPENDIX 5
TARGET LOAN TO VALUE RATIO AND
TARGET PRINCIPAL BALANCE OF CLASS A
AND CLASS B CERTIFICATES
<TABLE>
<CAPTION>
TARGET LOAN TO TARGET
VALUE RATIO PRINCIPAL BALANCE
---------------------- -------------------------
AGGREGATE AGGREGATE
CLASS A CLASS A
PAYMENT DATE INCLUDING INCLUDING
OCCURRING IN REFINANCINGS CLASS B REFINANCINGS CLASS B
- --------------------------- ------- ------------ ----------
($) ($)
<S> <C> <C> <C> <C>
March 1998..... 62.71% 8.28%
April 1998..... 62.65% 8.28%
May 1998....... 62.57% 8.28%
June 1998...... 62.50% 8.28%
July 1998...... 62.43% 8.28%
August 1998.... 62.36% 8.28%
September
1998......... 62.28% 8.28%
October 1998... 62.20% 8.28%
November 1998.. 62.13% 8.28%
December 1998.. 62.05% 8.28%
January 1999... 61.97% 8.28%
February 1999.. 61.89% 8.28%
March 1999..... 61.81% 8.28%
April 1999..... 61.72% 8.28%
May 1999....... 61.64% 8.28%
June 1999...... 61.55% 8.28%
July 1999...... 61.46% 8.28%
August 1999.... 61.38% 8.25%
September
1999......... 61.29% 8.25%
October 1999... 61.20% 8.24%
November 1999.. 61.10% 8.24%
December 1999.. 61.01% 8.24%
January 2000... 60.92% 8.23%
February 2000.. 60.82% 8.23%
March 2000..... 60.72% 8.22%
April 2000..... 60.72% 8.22%
May 2000....... 60.53% 8.21%
June 2000...... 60.42% 8.21%
July 2000...... 60.32% 8.20%
August 2000.... 60.22% 8.20%
September
2000......... 60.11% 8.19%
October 2000... 60.01% 8.19%
November 2000.. 59.90% 8.18%
December 2000.. 59.79% 8.18%
January 2001... 59.68% 8.17%
February 2001.. 59.57% 8.16%
March 2002..... 59.46% 8.16%
April 2001..... 59.34% 8.15%
May 2001....... 59.23% 8.14%
June 2001...... 59.11% 8.14%
July 2001...... 58.99% 8.13%
August 2001.... 58.87% 8.12%
September
2001......... 58.75% 8.11%
October 2001... 58.63% 8.11%
November 2001.. 58.50% 8.10%
December 2001.. 58.38% 8.09%
January 2002... 58.25% 8.08%
February 2002.. 58.12% 8.07%
March 2002..... 57.99% 8.06%
April 2002..... 57.86% 8.06%
May 2002....... 57.72% 8.05%
June 2002...... 57.59% 8.04%
July 2002...... 57.45% 8.03%
August 2002.... 57.32% 8.02%
September
2002......... 57.18% 8.01%
October 2002... 57.04% 8.00%
November 2002.. 56.89% 7.99%
December 2002.. 56.75% 7.97%
January 2003... 56.61% 7.96%
February 2003.. 56.46% 7.95%
March 2003..... 56.31% 7.94%
April 2003..... 56.16% 7.93%
<CAPTION>
TARGET LOAN TO TARGET
VALUE RATIO PRINCIPAL BALANCE
---------------------- -------------------------
AGGREGATE AGGREGATE
CLASS A CLASS A
PAYMENT DATE INCLUDING INCLUDING
OCCURRING IN REFINANCINGS CLASS B REFINANCINGS CLASS B
- --------------------------- ------- ------------ ----------
($) ($)
<S> <C> <C> <C> <C>
May 2003....... 56.01% 7.92%
June 2003...... 55.86% 7.91%
July 2003...... 55.70% 7.89%
August 2003.... 55.54% 7.88%
September
2003......... 55.39% 7.87%
October 2003... 55.23% 7.85%
November 2003.. 55.07% 7.84%
December 2003.. 54.90% 7.83%
January 2004... 54.74% 7.81%
February 2004.. 54.57% 7.80%
March 2004..... 54.40% 7.79%
April 2004..... 54.23% 7.77%
May 2004....... 54.06% 7.76%
June 2004...... 53.89% 7.74%
July 2004...... 53.72% 7.73%
August 2004.... 53.54% 7.71%
September
2004......... 53.36% 7.69%
October 2004... 53.18% 7.68%
November 2004.. 53.00% 7.66%
December 2004.. 52.82% 7.65%
January 2005... 52.63% 7.63%
February 2005.. 52.44% 7.61%
March 2005..... 52.26% 7.59%
April 2005..... 52.07% 7.58%
May 2005....... 51.87% 7.56%
June 2005...... 51.68% 7.54%
July 2005...... 51.48% 7.52%
August 2005.... 51.29% 7.50%
September
2005......... 51.09% 7.48%
October 2005... 50.88% 7.46%
November 2005.. 50.68% 7.45%
December 2005.. 50.48% 7.43%
January 2006... 50.27% 7.41%
February 2006.. 50.06% 7.38%
March 2006..... 49.85% 7.36%
April 2006..... 49.64% 7.34%
May 2006....... 49.42% 7.32%
June 2006...... 49.20% 7.30%
July 2006...... 48.99% 7.28%
August 2006.... 48.77% 7.26%
September
2006......... 48.54% 7.23%
October 2006... 48.32% 7.21%
November 2006.. 48.09% 7.19%
December 2006.. 47.86% 7.16%
January 2007... 47.63% 7.14%
February 2007.. 47.40% 7.12%
March 2007..... 47.17% 7.09%
April 2007..... 46.93% 7.07%
May 2007....... 46.69% 7.04%
June 2007...... 46.45% 7.02%
July 2007...... 46.21% 6.99%
August 2007.... 45.96% 6.97%
September
2007......... 45.71% 6.94%
October 2007... 45.46% 6.91%
November 2007.. 45.21% 6.89%
December 2007.. 44.96% 6.86%
January 2008... 44.70% 6.83%
February 2008.. 44.45% 6.80%
March 2008..... 44.19% 6.78%
April 2008..... 43.92% 6.75%
May 2008....... 43.66% 6.72%
June 2008...... 43.39% 6.69%
</TABLE>
A-9
<PAGE> 221
<TABLE>
<CAPTION>
TARGET LOAN TO TARGET
VALUE RATIO PRINCIPAL BALANCE
---------------------- -------------------------
AGGREGATE AGGREGATE
CLASS A CLASS A
PAYMENT DATE INCLUDING INCLUDING
OCCURRING IN REFINANCINGS CLASS B REFINANCINGS CLASS B
- --------------------------- ------- ------------ ----------
($) ($)
<S> <C> <C> <C> <C>
July 2008...... 43.13% 6.66%
August 2008.... 42.85% 6.63%
September
2008......... 42.58% 6.60%
October 2008... 42.31% 6.57%
November 2008.. 42.03% 6.54%
December 2008.. 41.75% 6.50%
January 2009... 41.47% 6.47%
February 2009.. 41.18% 6.44%
March 2009..... 40.90% 6.41%
April 2009..... 40.61% 6.38%
May 2009....... 40.31% 6.34%
June 2009...... 40.02% 6.31%
July 2009...... 39.72% 6.27%
Aug 2009....... 39.43% 6.24%
September
2009......... 39.13% 6.21%
October 2009... 38.82% 6.17%
November 2009.. 38.52% 6.13%
December 2009.. 38.21% 6.10%
January 2010... 37.90% 6.06%
February 2010.. 37.58% 6.03%
March 2010..... 37.27% 5.99%
April 2010..... 36.95% 5.95%
May 2010....... 36.63% 5.91%
June 2010...... 36.31% 5.87%
July 2010...... 35.98% 5.84%
August 2010.... 35.66% 5.80%
September
2010......... 35.32% 5.76%
October 2010... 34.99% 5.72%
November 2010.. 34.66% 5.68%
December 2010.. 34.32% 5.63%
January 2011... 33.98% 5.59%
February 2011.. 33.63% 5.55%
March 2011..... 33.29% 5.51%
April 2011..... 32.94% 5.47%
May 2011....... 32.59% 5.42%
June 2011...... 32.23% 5.38%
July 2011...... 31.88% 5.34%
August 2011.... 31.52% 5.29%
September
2011......... 31.16% 5.25%
October 2011... 30.79% 5.20%
November 2011.. 30.43% 5.16%
December 2011.. 30.06% 5.11%
January 2012... 29.68% 5.06%
February 2012.. 29.31% 5.02%
March 2012..... 28.93% 4.97%
April 2012..... 28.55% 4.92%
May 2012....... 28.16% 4.87%
June 2012...... 27.78% 4.82%
July 2012...... 27.39% 4.77%
August 2012.... 26.60% 4.67%
October 2012... 26.20% 4.62%
November 2012.. 25.80% 4.57%
December 2012.. 25.40% 4.52%
January 2013... 24.99% 4.47%
February 2013.. 24.58% 4.41%
March 2013..... 24.17% 4.36%
April 2013..... 23.75% 4.31%
May 2013....... 23.33% 4.25%
June 2013...... 22.91% 4.20%
July 2013...... 22.49% 4.14%
August 2013.... 22.06% 4.08%
September
2013......... 21.63% 4.03%
October 2013... 21.19% 3.97%
November 2013.. 20.76% 3.91%
December 2013.. 20.32% 3.85%
TARGET LOAN TO TARGET
VALUE RATIO PRINCIPAL BALANCE
---------------------- -------------------------
AGGREGATE AGGREGATE
CLASS A CLASS A
PAYMENT DATE INCLUDING INCLUDING
OCCURRING IN REFINANCINGS CLASS B REFINANCINGS CLASS B
- --------------------------- ------- ------------ ----------
($) ($)
January 2014... 19.87% 3.80%
February 2014.. 19.43% 3.74%
March 2014..... 18.98% 3.68%
April 2014..... 18.53% 3.62%
May 2014....... 18.07% 3.56%
June 2014...... 17.61% 3.49%
July 2014...... 17.15% 3.43%
August 2014.... 16.68% 3.37%
September
2014......... 16.22% 3.31%
October 2014... 15.74% 3.24%
November 2014.. 15.27% 3.18%
December 2014.. 14.79% 3.11%
January 2015... 14.31% 3.05%
February 2015.. 13.82% 2.98%
March 2015..... 13.34% 2.92%
April 2015..... 12.84% 2.85%
May 2015....... 12.35% 2.78%
June 2015...... 11.85% 2.71%
July 2015...... 11.35% 2.64%
August 2015.... 10.84% 2.57%
September
2015......... 10.34% 2.50%
October 2015... 9.82% 2.43%
November 2015.. 9.31% 2.36%
December 2015.. 8.79% 2.29%
January 2016... 8.27% 2.22%
February 2016.. 7.74% 2.14%
March 2016..... 7.21% 2.07%
April 2016..... 6.68% 1.99%
May 2016....... 6.14% 1.92%
June 2016...... 5.60% 1.84%
July 2016...... 5.06% 1.77%
August 2016.... 4.51% 1.69%
September
2016......... 3.96% 1.61%
October 2016... 3.41% 1.53%
November 2016.. 2.85% 1.45%
December 2016.. 2.29% 1.37%
January 2017... 1.72% 1.29%
February 2017.. 1.15% 1.21%
March 2017..... 0.58% 1.13%
April 2017..... 0.00% 1.05%
May 2017....... 0.00% 0.96%
June 2017...... 0.00% 0.88%
July 2017...... 0.00% 0.79%
August 2017.... 0.00% 0.71%
September
2017......... 0.00% 0.62%
October 2017... 0.00% 0.54%
November 2017.. 0.00% 0.45%
December 2017.. 0.00% 0.36%
January 2018... 0.00% 0.27%
February 2018.. 0.00% 0.18%
March 2018..... 0.00% 0.09%
April 2018..... 0.00% 0.00%
May 2018....... 0.00% 0.00%
June 2018...... 0.00% 0.00%
July 2018...... 0.00% 0.00%
August 2018.... 0.00% 0.00%
September
2018......... 0.00% 0.00%
October 2018... 0.00% 0.00%
November 2018.. 0.00% 0.00%
December 2018.. 0.00% 0.00%
January 2019... 0.00% 0.00%
February 2019.. 0.00% 0.00%
March 2019..... 0.00% 0.00%
April 2019..... 0.00% 0.00%
</TABLE>
A-10
<PAGE> 222
APPENDIX 6
SUPPLEMENTAL LOAN TO VALUE RATIO AND
SUPPLEMENTAL PRINCIPAL BALANCE
<TABLE>
<CAPTION>
SUPPLEMENTAL
SUPPLEMENTAL PRINCIPAL BALANCE
LOAN TO VALUE RATIO -------------------------
---------------------- AGGREGATE
PAYMENT DATE CLASS B CLASS A CLASS B
OCCURRING IN ------- INCLUDING ----------
- --------------- REFINANCINGS
% ------------ $
AGGREGATE $
CLASS A
INCLUDING
REFINANCINGS
------------
%
<S> <C> <C> <C> <C>
December 1997.. 58.00 8.28
January 1998... 57.90 8.28
February 1998.. 57.80 8.28
March 1998..... 57.70 8.28
April 1998..... 57.61 8.28
May 1998....... 57.41 8.28
June 1998...... 57.41 8.28
July 1998...... 57.81 8.28
August 1998.... 56.51 8.28
September
1998......... 56.21 8.28
October 1998... 55.90 8.28
November 1998.. 55.59 8.28
December 1998.. 55.28 8.28
January 1999... 54.97 8.28
February 1999.. 54.65 8.28
March 1999..... 54.33 8.28
April 1999..... 54.01 8.28
May 1999....... 53.68 8.28
June 1999...... 53.35 8.28
July 1999...... 53.02 8.28
August 1999.... 52.69 7.90
September
1999......... 52.36 7.89
October 1999... 52.02 7.88
November 1999.. 51.68 7.87
December 1999.. 51.33 7.86
January 2000... 50.98 7.85
February 2000.. 50.63 7.82
March 2000..... 50.28 7.83
April 2000..... 49.93 7.81
May 2000....... 49.57 7.80
June 2000...... 49.21 7.79
July 2000...... 48.84 7.78
August 2000.... 48.48 7.77
September
2000......... 48.11 7.76
October 2000... 47.73 7.75
November 2000.. 47.36 7.74
December 2000.. 46.98 7.73
January 2001... 46.60 7.69
February 2001.. 46.21 7.73
March 2001..... 45.82 7.71
April 2001..... 45.43 7.68
May 2001....... 45.04 7.66
June 2001...... 44.64 7.63
July 2001...... 44.24 7.60
August 2001.... 43.84 7.57
September
2001......... 43.43 7.55
October 2001... 43.02 7.52
November 2001.. 42.61 7.49
December 2001.. 42.20 7.48
January 2002... 41.78 7.47
February 2002.. 41.35 7.46
March 2002..... 40.93 7.45
April 2002..... 40.50 7.41
May 2002....... 40.07 7.38
June 2002...... 39.63 7.34
July 2002...... 39.20 7.30
August 2002.... 38.75 7.26
September
2002......... 38.31 7.22
October 2002... 37.86 7.18
November 2002.. 37.41 7.13
December 2002.. 36.95 7.10
January 2003... 36.50 7.04
February 2003.. 36.03 7.01
March 2003..... 35.57 6.97
April 2003..... 35.10 6.91
May 2003....... 34.63 6.90
June 2003...... 34.15 6.86
July 2003...... 33.67 6.81
August 2003.... 33.19 6.76
September
2003......... 32.71 6.71
October 2003... 32.22 6.65
November 2003.. 31.72 6.60
December 2003.. 31.23 6.55
<CAPTION>
SUPPLEMENTAL
SUPPLEMENTAL PRINCIPAL BALANCE
LOAN TO VALUE RATIO -------------------------
---------------------- AGGREGATE
PAYMENT DATE CLASS B CLASS A CLASS B
OCCURRING IN ------- INCLUDING ----------
- --------------- REFINANCINGS
% ------------ $
$
AGGREGATE
CLASS A
INCLUDING
REFINANCINGS
------------
%
<S> <C> <C> <C> <C>
January 2004... 30.73 6.49
February 2004.. 30.22 6.43
March 2004..... 29.71 6.37
April 2004..... 29.20 6.25
May 2004....... 28.69 6.21
June 2004...... 28.17 6.19
July 2004...... 27.65 6.13
August 2004.... 27.12 6.07
September
2004......... 26.59 6.00
October 2004... 26.06 5.93
November 2004.. 25.52 5.87
December 2004.. 24.98 5.80
January 2005... 24.44 5.73
February 2005.. 23.89 5.65
March 2005..... 23.33 5.52
April 2005..... 22.78 5.45
May 2005....... 22.22 5.43
June 2005...... 21.65 5.35
July 2005...... 21.09 5.27
August 2005.... 20.51 5.19
September
2005......... 19.94 5.11
October 2005... 19.36 5.03
November 2005.. 18.77 4.95
December 2005.. 18.19 4.86
January 2006... 17.59 4.77
February 2006.. 17.00 4.60
March 2006..... 16.40 4.59
April 2006..... 15.79 4.50
May 2006....... 15.18 4.41
June 2006...... 14.57 4.31
July 2006...... 13.96 4.22
August 2006.... 13.33 4.12
September
2006......... 12.71 4.02
October 2006... 12.08 3.92
November 2006.. 11.45 3.81
December 2006.. 10.81 3.71
January 2007... 10.17 3.60
February 2007.. 9.52 3.49
March 2007..... 8.87 3.38
April 2007..... 8.21 3.27
May 2007....... 7.55 3.04
June 2007...... 6.89 2.90
July 2007...... 6.22 2.84
August 2007.... 5.55 2.73
September
2007......... 4.87 2.68
October 2007... 4.19 2.56
November 2007.. 3.50 2.44
December 2007.. 2.81 2.31
January 2008... 2.11 2.18
February 2008.. 1.41 2.05
March 2008..... 0.71 1.92
April 2008..... 0.00 1.78
May 2008....... 0.00 1.65
June 2008...... 0.00 1.51
July 2008...... 0.00 1.37
August 2008.... 0.00 1.22
September
2008......... 0.00 1.08
October 2008... 0.00 0.93
November 2008.. 0.00 0.78
December 2008.. 0.00 0.63
January 2009... 0.00 0.48
February 2009.. 0.00 0.32
March 2009..... 0.00 0.00
April 2009..... 0.00 0.00
May 2009....... 0.00 0.00
June 2009...... 0.00 0.00
July 2009...... 0.00 0.00
August 2009.... 0.00 0.00
September
2009......... 0.00 0.00
October 2009... 0.00 0.00
November 2009.. 0.00 0.00
December 2009.. 0.00 0.00
</TABLE>
A-11
<PAGE> 223
APPENDIX 7
SCHEDULED PRINCIPAL PAYMENT
AMOUNTS AND TARGET POOL FACTORS
FOR FIXED RATE CERTIFICATES
<TABLE>
<CAPTION>
SCHEDULED PRINCIPAL TARGET
PAYMENT AMOUNTS POOL FACTORS
PAYMENT DATE --------------------- -----------------
OCCURRING IN CLASS C CLASS D CLASS C CLASS D
- ------------------------------- --------- ------- -------
($) ($)
<S> <C> <C> <C> <C>
December 1997......... 0 0 100.00% 100.00%
January 1998.......... 0 0 100.00% 100.00%
February 1998......... 0 0 100.00% 100.00%
March 1998............ 0 0 100.00% 100.00%
April 1998............ 0 0 100.00% 100.00%
May 1998.............. 885,843 0 99.76% 100.00%
June 1998............. 899,286 0 99.52% 100.00%
July 1998............. 912,823 0 99.28% 100.00%
August 1998........... 926,456 0 99.03% 100.00%
September 1998........ 940,184 0 98.78% 100.00%
October 1998.......... 954,010 0 98.53% 100.00%
November 1998......... 967,932 0 98.27% 100.00%
December 1998......... 981,952 0 98.01% 100.00%
January 1999.......... 996,070 0 97.74% 100.00%
February 1999......... 1,010,286 0 97.47% 100.00%
March 1999............ 1,024,602 0 97.20% 100.00%
April 1999............ 1,039,018 0 96.92% 100.00%
May 1999.............. 1,053,534 316,942 96.64% 99.92%
June 1999............. 1,068,152 333,313 96.36% 99.84%
July 1999............. 1,082,871 349,860 96.07% 99.75%
August 1999........... 1,097,692 366,583 95.78% 99.66%
September 1999........ 1,112,616 383,485 95.48% 99.56%
October 1999.......... 1,127,643 400,566 95.18% 99.46%
November 1999......... 1,142,775 417,827 94.87% 99.36%
December 1999......... 1,158,011 435,270 94.56% 99.25%
January 2000.......... 1,173,352 452,899 94.25% 99.14%
February 2000......... 1,188,799 470,712 93.93% 99.02%
March 2000............ 1,204,352 488,712 93.61% 98.90%
April 2000............ 1,220,012 506,901 93.29% 98.77%
May 2000.............. 1,235,780 525,280 92.96% 98.64%
June 2000............. 1,251,656 543,850 92.63% 98.50%
July 2000............. 1,267,641 562,613 92.29% 98.36%
August 2000........... 1,283,736 581,572 91.94% 98.22%
September 2000........ 1,299,940 600,727 91.60% 98.07%
October 2000.......... 1,316,255 620,080 91.25% 97.91%
November 2000......... 1,332,682 639,632 90.89% 97.75%
December 2000......... 1,349,221 659,385 90.53% 97.59%
January 2001.......... 1,365,872 679,342 90.17% 97.42%
February 2001......... 1,382,636 699,503 89.80% 97.24%
March 2001............ 1,399,515 719,871 89.43% 97.06%
April................. 1,416,508 740,447 89.05% 96.88%
May 2001.............. 1,433,616 761,232 88.67% 96.69%
June 2001............. 1,450,841 782,228 88.28% 96.49%
July 2001............. 1,468,181 803,438 87.89% 96.29%
August 2001........... 1,485,639 824,862 87.49% 96.08%
September 2001........ 1,503,215 846,503 87.09% 95.87%
October 2001.......... 1,520,910 868,362 86.68% 95.65%
November 2001......... 1,538,723 890,442 86.27% 95.43%
December 2001......... 1,556,657 912,744 85.86% 95.20%
January 2002.......... 1,574,711 935,269 85.44% 94.97%
February 2002......... 1,592,886 958,019 85.01% 94.73%
March 2002............ 1,611,184 980,997 84.58% 94.49%
April 2002............ 1,629,604 1,004,204 84.15% 94.23%
May 2002.............. 1,648,147 1,027,643 83.71% 93.98%
June 2002............. 1,666,814 1,051,315 83.27% 93.71%
July 2002............. 1,685,606 1,075,221 82.82% 93.45%
August 2002........... 1,704,524 1,099,363 82.36% 93.17%
September 2002........ 1,723,568 1,123,745 81.90% 92.89%
October 2002.......... 1,742,738 1,148,367 81.44% 92.60%
November 2002......... 1,762,037 1,173,232 80.97% 92.31%
December 2002......... 1,781,463 1,198,340 80.49% 92.01%
January 2003.......... 1,801,019 1,223,696 80.01% 91.70%
February 2003......... 1,820,704 1,249,300 79.53% 91.39%
March 2003............ 1,840,520 1,275,154 79.04% 91.07%
April 2003............ 1,860,467 1,301,261 78.54% 90.75%
May 2003.............. 1,880,546 1,327,622 78.04% 90.42%
<CAPTION>
SCHEDULED PRINCIPAL TARGET
PAYMENT AMOUNTS POOL FACTORS
PAYMENT DATE --------------------- -----------------
OCCURRING IN CLASS C CLASS D CLASS C CLASS D
- ------------------------------- --------- ------- -------
($) ($)
<S> <C> <C> <C> <C>
June 2003............. 1,900,758 1,354,240 77.53% 90.08%
July 2003............. 1,921,104 1,381,117 77.02% 89.73%
August 2003........... 1,941,583 1,408,253 76.50% 89.38%
September 2003........ 1,962,198 1,435,652 75.98% 89.02%
October 2003.......... 1,982,948 1,463,317 75.45% 88.65%
November.............. 2,003,835 1,491,249 74.92% 88.28%
December 2003......... 2,024,859 1,519,449 74.38% 87.90%
January 2004.......... 2,046,021 1,547,920 73.83% 87.52%
February 2004......... 2,067,322 1,576,665 73.28% 87.12%
March 2004............ 2,088,762 1,605,686 72.72% 86.72%
April 2004............ 2,110,343 1,634,985 72.16% 86.31%
May 2004.............. 2,132,066 1,664,563 71.59% 85.89%
June 2004............. 2,153,930 1,694,424 71.02% 85.47%
July 2004............. 2,175,936 1,724,569 70.44% 85.04%
August 2004........... 2,198,087 1,755,000 69.85% 84.60%
September 2004........ 2,220,382 1,785,721 69.26% 83.70%
October 2004.......... 2,242,822 1,816,733 68.66% 84.15%
November 2004......... 2,265,408 1,848,039 68.06% 83.24%
December 2004......... 2,288,140 1,879,641 67.45% 82.77%
January 2005.......... 2,311,021 1,911,541 66.83% 82.29%
February 2005......... 2,334,050 1,943,741 66.21% 81.80%
March 2005............ 2,357,228 1,976,245 65.58% 81.31%
April 2005............ 2,380,556 2,009,053 64.94% 80.81%
May 2005.............. 2,404,035 2,042,170 64.30% 80.30%
June 2005............. 2,427,666 2,075,597 63.65% 79.78%
July 2005............. 2,451,450 2,109,337 63.00% 79.25%
August 2005........... 2,475,387 2,143,392 62.34% 78.72%
September 2005........ 2,499,479 2,177,764 61.67% 78.17%
October 2005.......... 2,523,725 2,212,458 61.00% 77.62%
November 2005......... 2,548,128 2,247,473 60.32% 77.06%
December 2005......... 2,572,688 2,282,814 59.64% 76.49%
January 2006.......... 2,597,405 2,318,482 58.94% 75.91%
February 2006......... 2,622,282 2,354,480 58.24% 75.32%
March 2006............ 2,647,318 2,390,813 57.54% 74.72%
April 2006............ 2,672,514 2,427,480 56.83% 74.11%
May 2006.............. 2,697,872 2,464,485 56.11% 73.50%
June 2006............. 2,723,392 2,501,832 55.38% 72.87%
July 2006............. 2,749,075 2,539,522 54.65% 72.24%
August 2006........... 2,774,922 2,577,559 53.91% 71.59%
September 2006........ 2,800,934 2,615,944 53.16% 70.94%
October 2006.......... 2,827,112 2,654,680 52.41% 70.27%
November 2006......... 2,853,457 2,693,772 51.64% 69.60%
December 2006......... 2,879,970 2,733,220 50.88% 68.92%
January 2007.......... 2,906,651 2,773,029 50.10% 68.22%
February 2007......... 2,933,502 2,813,200 49.32% 67.52%
March 2007............ 2,960,523 2,853,737 48.53% 66.81%
April 2007............ 2,987,716 2,894,643 47.73% 66.08%
May 2007.............. 3,015,082 2,935,919 46.93% 65.35%
June 2007............. 3,042,620 2,977,569 46.12% 64.61%
July 2007............. 3,070,333 3,019,598 45.30% 63.85%
August 2007........... 3,098,222 3,062,006 44.47% 63.09%
September 2007........ 3,126,287 3,104,797 43.64% 62.31%
October 2007.......... 3,154,529 3,147,975 42.80% 61.52%
November 2007......... 3,182,949 3,191,541 41.95% 60.72%
December 2007......... 3,211,548 3,235,499 41.09% 59.92%
January 2008.......... 3,240,328 3,279,852 40.23% 59.10%
February 2008......... 3,269,288 3,324,603 39.36% 58.26%
March 2008............ 3,298,431 3,369,756 38.48% 57.42%
April 2008............ 3,327,758 3,415,313 37.59% 56.57%
May 2008.............. 3,357,268 3,461,277 36.69% 55.70%
June 2008............. 3,386,964 3,507,652 35.79% 54.83%
July 2008............. 3,416,845 3,554,441 34.88% 53.94%
August 2008........... 3,446,915 3,601,646 33.96% 53.04%
September 2008........ 3,477,172 3,649,271 33.03% 52.12%
October 2008.......... 3,507,619 3,697,321 32.10% 51.20%
November 2008......... 3,538,256 3,745,797 31.15% 50.26%
</TABLE>
A-12
<PAGE> 224
<TABLE>
<CAPTION>
SCHEDULED PRINCIPAL TARGET
PAYMENT AMOUNTS POOL FACTORS
PAYMENT DATE --------------------- -----------------
OCCURRING IN CLASS C CLASS D CLASS C CLASS D
- ------------------------------- --------- ------- -------
($) ($)
<S> <C> <C> <C> <C>
December 2008......... 3,569,084 3,794,703 30.20% 49.31%
January 2009.......... 3,600,105 3,844,042 29.24% 48.35%
February 2009......... 3,631,320 3,893,818 28.27% 47.38%
March 2009............ 3,662,729 3,944,033 27.30% 46.39%
April 2009............ 3,694,334 3,994,693 26.31% 45.40%
May 2009.............. 3,726,135 4,045,799 25.32% 44.38%
June 2009............. 3,758,135 4,097,355 24.32% 43.36%
July 2009............. 3,790,333 4,149,365 23.31% 42.32%
August 2009........... 3,822,731 4,201,832 22.29% 41.27%
September 2009........ 3,855,330 4,254,760 21.26% 40.21%
October 2009.......... 3,888,132 4,308,152 20.22% 39.13%
November 2009......... 3,921,136 4,362,011 19.18% 38.04%
December 2009......... 3,954,345 4,416,342 18.12% 36.94%
January 2010.......... 3,987,760 4,471,148 17.06% 35.82%
February 2010......... 4,021,381 4,526,433 15.99% 34.69%
March 2010............ 4,055,210 4,582,199 14.90% 33.54%
April 2010............ 4,089,248 4,638,451 13.81% 32.38%
May 2010.............. 4,123,496 4,695,193 12.71% 31.21%
June 2010............. 4,157,955 4,752,429 11.61% 30.02%
July 2010............. 4,192,627 4,810,162 10.49% 28.82%
August 2010........... 4,227,512 4,868,396 9.36% 27.60%
September 2010........ 4,262,611 4,927,135 8.22% 26.37%
October 2010.......... 4,297,927 4,986,381 7.08% 25.12%
November 2010......... 4,333,459 5,046,140 5.92% 23.86%
December 2010......... 4,369,210 5,106,416 4.76% 22.58%
January 2011.......... 4,405,180 5,167,212 3.58% 21.29%
February 2011......... 4,441,370 5,228,532 2.40% 19.99%
March 2011............ 8,992,201 5,290,381 0.00% 18.66%
April 2011............ 0 5,352,762 0.00% 17.32%
May 2011.............. 0 5,415,679 0.00% 15.97%
June 2011............. 0 5,479,139 0.00% 14.60%
July 2011............. 0 5,543,139 0.00% 13.22%
SCHEDULED PRINCIPAL TARGET
PAYMENT AMOUNTS POOL FACTORS
PAYMENT DATE --------------------- -----------------
OCCURRING IN CLASS C CLASS D CLASS C CLASS D
- ------------------------------- --------- ------- -------
($) ($)
August 2011........... 0 5,607,689 0.00% 11.81%
September 2011........ 0 5,672,792 0.00% 10.39%
October 2011.......... 0 5,738,453 0.00% 8.96%
November 2011......... 0 5,804,675 0.00% 7.51%
December 2011......... 0 5,871,461 0.00% 6.04%
January 2012.......... 0 5,938,817 0.00% 4.56%
February 2012......... 0 6,006,748 0.00% 3.05%
March 2012............ 0 12,219,605 0.00% 0.00%
April 2012............ 0 0 0.00% 0.00%
May 2012.............. 0 0 0.00% 0.00%
June 2012............. 0 0 0.00% 0.00%
July 2012............. 0 0 0.00% 0.00%
August 2012........... 0 0 0.00% 0.00%
September 2012........ 0 0 0.00% 0.00%
October 2012.......... 0 0 0.00% 0.00%
November 2012......... 0 0 0.00% 0.00%
December 2012......... 0 0 0.00% 0.00%
January 2013.......... 0 0 0.00% 4.56%
February 2013......... 0 0 0.00% 3.05%
March 2013............ 0 0 0.00% 0.00%
April 2013............ 0 0 0.00% 0.00%
May 2013.............. 0 0 0.00% 0.00%
June 2013............. 0 0 0.00% 0.00%
July 2013............. 0 0 0.00% 0.00%
August 2013........... 0 0 0.00% 0.00%
September 2013........ 0 0 0.00% 0.00%
October 2013.......... 0 0 0.00% 0.00%
November 2013......... 0 0 0.00% 0.00%
December 2013......... 0 0 0.00% 0.00%
January 2014.......... 0 0 0.00% 0.00%
February 2014......... 0 0 0.00% 0.00%
</TABLE>
A-13
<PAGE> 225
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Airplanes Group in connection
with this offering. All amounts are estimated other than the SEC Registration
Fee:
<TABLE>
<S> <C>
SEC registration Fee.................................................. $ 250,750
Blue Sky Fees and Expenses............................................ 7,000
Printing and Engraving................................................ 100,000
Accounting Fees and Expenses.......................................... 450,000
Legal Fees and Expenses............................................... 1,650,000
Rating Agencies' Fees................................................. 100,000
Trustee's Fees........................................................ 30,000
Appraisers' Fees...................................................... 55,000
Miscellaneous......................................................... 637,500
TOTAL............................................................... 3,280,250
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as hereinafter set forth, there is no provision of Airplanes
Limited's Memorandum and Articles of Association or Airplanes Trust's Trust
Agreement, or of any contract, arrangement or statute under which any director,
trustee or officer of Airplanes Limited or Airplanes Trust is insured or
indemnified in any manner against any liability that he may incur in his
capacity as such.
Airplanes Limited's Articles of Association provide that Airplanes Limited
shall indemnify every present and former director of Airplanes Limited against
any loss or liability incurred by reason of being or having been a director of
Airplanes Limited to the fullest extent permitted by Jersey law. Article 77 of
the Companies (Jersey) Law 1991 ("ARTICLE 77") permits a Jersey company to
indemnify each director of that company against, among others, any liabilities
incurred in defending any proceedings (whether civil or criminal)(i) in which
judgment is given in his favor or he is acquitted, or (ii) which are
discontinued otherwise than for some benefit conferred by him (or on his behalf)
or for some detriment suffered by him, or (iii) which are settled on terms which
include such benefit or detriment and, in the opinion of a majority of the
directors of the company (excluding any director who conferred such benefit or
on whose behalf such benefit was conferred or who suffered such detriment), the
director was substantially successful on the merits in this resistance to the
proceedings.
Airplanes Limited may purchase and maintain, in the name of and at the
expense of Airplanes Limited, insurance for the benefit of any person who is or
was a director or officer of Airplanes Limited or is or was serving at the
request of Airplanes Limited as a director of officer in another corporation,
partnership, joint venture, trust or other enterprise against any liability
incurred by him or her in any such capacity, or arising out of such person's
status as such, whether or not Airplanes Limited would have the power to
indemnify him or her against such liability under Article 77.
The Airplanes Trust Agreement provides that Airplanes Trust shall indemnify
every present and former trustee for any and all liabilities, losses or expenses
arising out of the administration of Airplanes Trust, except in the case of a
trustee's gross negligence or willful misconduct in the performance of its
duties as trustee. Under Delaware law, a business trust has the power to
indemnify and hold harmless any trustee for and against all claims and demands
whatsoever. Airplanes Trust shall ensure that for the term of the Airplanes
Trust Agreement, the trustees are named insureds on liability insurance policies
with respect to the Aircraft on terms required by the related Lease or mortgage
then in effect with respect to such Aircraft or if there is no such lease or
mortgage, on terms customary in the industry for similar Aircraft.
II-1
<PAGE> 226
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The securities of Airplanes Limited issued or sold by Airplanes Limited
within the past three years and not registered with the Securities and Exchange
Commission (the "COMMISSION") are described below. All such securities were
offered and issued outside the United States to buyers who were neither citizens
nor residents of the United States. Accordingly, the offering and issuance of
such securities were not subject to the registration requirements of the
Securities Act of 1933:
<TABLE>
<CAPTION>
NO. OF SHARES/
PRINCIPAL
TITLE OF AMOUNT OF PRICE PER AGGREGATE
DATE OF ISSUE SECURITIES NOTES PURCHASER SHARE OFFERING PRICE
- --------------------- ------------------ -------------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C>
November 29, 1995.... Capital Stock 15 Juris Limited $1 $15
November 29, 1995.... Capital Stock 15 Lively Limited $1 $15
Airplanes Limited
March 28, 1996....... Class E Notes $551,000,000 GPA N/A $551,000,000
Airplanes Trust
March 28, 1996....... Class E Notes $53,000,000 GPA N/A $53,000,000
</TABLE>
ITEM 16. EXHIBITS
All exhibits will be filed by amendment.
<TABLE>
<S> <C>
1 Form of Underwriting Agreement among Airplanes Limited, Airplanes Trust, GPA Group
plc and Morgan Stanley & Co. Incorporated
3.1 Certificate of Incorporation of Atlanta Holdings Limited dated November 3, 1995 and
Certificate of Incorporation on change of name to Airplanes Limited dated November
29, 1995*
3.2 Memorandum and Articles of Association of Airplanes Limited**
3.3 Airplanes U.S. Trust Amended and Restated Trust Agreement among GPA, Inc., as
Settlor, Wilmington Trust Company, as the Delaware Trustee, and the Controlling
Trustees referred to therein**
4.1 Pass Through Trust Agreement dated as of March 28, 1996 among Airplanes Limited,
Airplanes U.S. Trust and Bankers Trust Company, as Trustee**
4.2 Trust Supplement No. 1 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.3 Trust Supplement No. 2 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.4 Trust Supplement No. 3 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.5 Trust Supplement No. 4 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.6 Trust Supplement No. 5 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.7 Trust Supplement No. 6 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.8 Trust Supplement No. 7 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.9 Trust Supplement No. 8 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.10 Form of Trust Supplement to the Pass Through Trust Agreement relating to the 1998
Refinancing Certificates
4.11 Form of 1998 Refinancing Pass Through Certificates (included in Exhibit 4.10)
4.12 Airplanes Limited Indenture dated March 28, 1996 between Airplanes Limited,
Airplanes U.S. Trust and Bankers Trust Company, as Trustee**
4.13 Airplanes U.S. Trust Indenture dated March 28, 1996 between Airplanes U.S. Trust,
Airplanes Limited and Bankers Trust Company, as Trustee**
4.14 Form of Supplement to the Airplanes Limited Indenture
4.15 Form of Supplement to the Airplanes U.S. Trust Indenture
4.16 Form of Floating Rate 1998 Refinancing Notes (included in Exhibits 4.14 and 4.15)
</TABLE>
II-2
<PAGE> 227
<TABLE>
<S> <C>
5.1 Opinion of Davis Polk & Wardwell, U.S. counsel for the 1998 Refinancing Trust, as
to the legality of the 1998 Refinancing Notes and 1998 Refinancing Certificates
5.2 Opinion of Mourant du Feu & Jeune, as to the legality of the Airplanes Limited 1998
Refinancing Notes
5.3 Opinion of Potter Anderson & Corroon LLP, as to legality of the Airplanes Trust
1998 Refinancing Notes
8.1 Opinion of Davis Polk & Wardwell, U.S. counsel for the Trust, as to certain tax
matters
8.2 Opinion of McCann FitzGerald, Irish counsel for Airplanes Limited, as to certain
tax matters
8.3 Opinion of Mourant du Feu & Jeune, Jersey counsel for Airplanes Limited, as to
certain tax matters
9.1 Shareholders Agreement among the Note Indenture Trustee, Mourant & Co. Trustees
Limited, as trustees of the Charitable Trusts, and Juris Limited and Lively
Limited*
9.2 Voting Trust Agreement among AeroUSA, Airplanes Trust and First Security Bank of
Utah, National Association*
9.3 Voting Trust Agreement among AeroUSA 3, AeroUSA and First Security Bank of Utah,
National Association*
10.1 Stock Purchase Agreement dated as of March 28, 1996 among GPA, Inc., GPA Group plc
and Airplanes U.S. Trust**
10.2 Stock Purchase Agreement dated as of March 28, 1996 among GPA Group plc, Skyscape
Limited and Airplanes Limited**
10.3 Administrative Agency Agreement dated as of March 28, 1996, among GPA Financial
Services (Ireland) Limited, GPA Group plc, Airplanes Limited, GPA II Limited,
Airplanes U.S. Trust and AeroUSA, Inc.**
10.4 Servicing Agreement dated as of March 28, 1996, among GE Capital Aviation Services,
Limited, Airplanes Limited, AeroUSA, Inc., GPA II Limited, Airplanes U.S. Trust and
GPA Cash Manager Limited**
10.5 Reference Agency Agreement dated as of March 28, 1996, among Airplanes Limited,
Airplanes U.S. Trust Bankers Trust Company, as Airplanes Limited Indenture Trustee
and Airplanes U.S. Trust Indenture Trustee, Bankers Trust Company, as Reference
Agent and GPA Cash Manager Limited, as Cash Manager**
10.6 Secretarial Services Agreement dated as of March 28, 1996, between Airplanes
Limited and Mourant & Co. Secretaries Limited, as Company Secretary**
10.7 Cash Management Agreement dated March 28, 1996, between GP Cash Manager Limited as
Cash Manager, GPA Group plc, Airplanes Limited, Airplanes U.S. Trust and Bankers
Trust Company, as Trustee under each of the Airplanes Limited Indenture, the
Airplanes U.S. Trust Indenture and the Security Trust Agreement**
10.8 Form of Swap Agreement**
10.9 Security Trust Agreement dated as of March 28, 1996 among Airplanes Limited,
Airplanes U.S. Trust, Mourant & Co. Secretaries Limited, the Issuer Subsidiaries
listed therein, GPA Financial Services (Ireland) Limited, GPA Cash Manager Limited,
GPA Group plc, GE Capital Aviation Services, Limited, Bankers Trust Company, as
Airplanes U.S. Trust Indenture Trustee and Airplanes Limited Indenture Trustee,
Bankers Trust Company, as Reference Agent, and Bankers Trust Company, as Security
Trustee**
12 Statement re: Computation of Ratios
21 Subsidiaries of Airplanes Group*
23.1 Consent of Davis Polk & Wardwell (included in Exhibits 5.1 and 8.1)
23.2 Consent of McCann FitzGerald (included in Exhibit 8.2)
23.3 Consent of Mourant du Feu & Jeune (included in Exhibits 5.2 and 8.3)
</TABLE>
II-3
<PAGE> 228
<TABLE>
<S> <C>
23.4 Consent of Potter, Anderson & Corroon LLP (included in Exhibit 5.3)
23.5 Consent of KPMG
23.6 Consent of Aircraft Information Services, Inc.
23.7 Consent of BK Associates, Inc.
23.8 Consent of Airclaims Limited
24.1 Directors' Power of Attorney (with the Resolution of the Board of Directors
attached thereto) (included in signature pages)***
25 Statement of Eligibility of Bankers Trust Company, as Trustee, under the Trust
Agreement to be qualified under the Trust Indenture Act of 1939***
99.1 Appraisal of Aircraft Information Services, Inc. relating to the Aircraft
99.2 Appraisal of BK Associates, Inc. relating to the Aircraft
99.3 Appraisal of Airclaims Limited relating to the Aircraft
</TABLE>
- ---------------
* Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-99978), previously filed with the Commission
** Incorporated by reference to the Report on Form 10-Q for the quarterly
period ended December 31, 1996, previously filed with the Commission
*** Previously filed
ITEM 17. UNDERTAKINGS
The undersigned registrants hereby undertake:
(a) (1) for purposes of determining any liability under the Securities
Act of 1933 (the "Securities Act"), the information omitted from
the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it was declared
effective;
(2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrants pursuant to the foregoing provisions, or
otherwise, the registrants have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of
expenses incurred or paid by a director, officer or controlling person
of the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrants will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE> 229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, Airplanes Limited has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Jersey, Channel Islands
on February 19, 1998.
AIRPLANES LIMITED
AS ORIGINATOR OF THE TRUST
By /s/ WILLIAM A. FRANKE
----------------------------------
Name: William A. Franke
Title: Director and Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, this Amendment No. 1 to the
Registration Statement has been signed by the following persons in the following
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------- ------------------
<C> <S> <C>
/s/ WILLIAM A. FRANKE Director and Officer February 19, 1998
- --------------------------------------------- (principal executive
William A. Franke officer)
/s/ ROY M. DANTZIC Director and Officer February 19, 1998
- --------------------------------------------- (principal financial
Roy M. Dantzic officer)
/s/ WILLIAM A. MCCANN Director and Officer February 19, 1998
- --------------------------------------------- (principal accounting
William M. McCann officer)
/s/ HUGH R. JENKINS Director February 19, 1998
- ---------------------------------------------
Hugh R. Jenkins
/s/ EDWARD J. HANSOM Director February 19, 1998
- ---------------------------------------------
Edward J. Hansom
</TABLE>
II-5
<PAGE> 230
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, Airplanes U.S. Trust has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Jersey, Channel Islands
on February 19, 1998.
AIRPLANES U.S. TRUST
AS ORIGINATOR OF THE TRUST
By /s/ WILLIAM A. FRANKE
----------------------------------
Name: William A. Franke
Title: Trustee
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, this Amendment No. 1 to the
Registration Statement has been signed by the following persons in the following
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM A. FRANKE Trustee February 19, 1998
- --------------------------------------------- (principal executive
William A. Franke officer)
/s/ ROY M. DANTZIC Trustee February 19, 1998
- --------------------------------------------- (principal financial
Roy M. Dantzic officer)
/s/ WILLIAM A. MCCANN Trustee February 19, 1998
- --------------------------------------------- (principal accounting
William A. McCann officer)
/s/ HUGH R. JENKINS Trustee February 19, 1998
- ---------------------------------------------
Hugh R. Jenkins
/s/ EDWARD J. HANSOM Trustee February 19, 1998
- ---------------------------------------------
Edward J. Hansom
</TABLE>
II-6
<PAGE> 231
AUTHORIZED REPRESENTATIVE
/s/ WILLIAM A. FRANKE
- --------------------------------
Name: William A. Franke
As the duly authorized representative
of Airplanes Limited in the United States
Date: February 19, 1998
II-7
<PAGE> 232
EXHIBIT INDEX
<TABLE>
<S> <C>
1 Form of Underwriting Agreement among Airplanes Limited, Airplanes Trust, GPA Group
plc and Morgan Stanley & Co. Incorporated
3.1 Certificate of Incorporation of Atlanta Holdings Limited dated November 3, 1995 and
Certificate of Incorporation on change of name to Airplanes Limited dated November
29, 1995*
3.2 Memorandum and Articles of Association of Airplanes Limited**
3.3 Airplanes U.S. Trust Amended and Restated Trust Agreement among GPA, Inc., as
Settlor, Wilmington Trust Company, as the Delaware Trustee, and the Controlling
Trustees referred to therein**
4.1 Pass Through Trust Agreement dated as of March 28, 1996 among Airplanes Limited,
Airplanes U.S. Trust and Bankers Trust Company, as Trustee**
4.2 Trust Supplement No. 1 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.3 Trust Supplement No. 2 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.4 Trust Supplement No. 3 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.5 Trust Supplement No. 4 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.6 Trust Supplement No. 5 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.7 Trust Supplement No. 6 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.8 Trust Supplement No. 7 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.9 Trust Supplement No. 8 dated as of March 28, 1996 to the Pass Through Trust
Agreement**
4.10 Form of Trust Supplement to the Pass Through Trust Agreement relating to the 1998
Refinancing Certificates
4.11 Form of 1998 Refinancing Pass Through Certificates (included in Exhibit 4.10)
4.12 Airplanes Limited Indenture dated March 28, 1996 between Airplanes Limited,
Airplanes U.S. Trust and Bankers Trust Company, as Trustee**
4.13 Airplanes U.S. Trust Indenture dated March 28, 1996 between Airplanes U.S. Trust,
Airplanes Limited and Bankers Trust Company, as Trustee**
4.14 Form of Supplement to the Airplanes Limited Indenture
4.15 Form of Supplement to the Airplanes U.S. Trust Indenture
4.16 Form of Floating Rate 1998 Refinancing Notes (included in Exhibits 4.14 and 4.15)
5.1 Opinion of Davis Polk & Wardwell, U.S. counsel for the 1998 Refinancing Trust, as
to the legality of the 1998 Refinancing Notes and 1998 Refinancing Certificates
5.2 Opinion of Mourant du Feu & Jeune, as to the legality of the Airplanes Limited 1998
Refinancing Notes
5.3 Opinion of Potter Anderson & Corroon LLP, as to legality of the Airplanes Trust
1998 Refinancing Notes
8.1 Opinion of Davis Polk & Wardwell, U.S. counsel for the Trust, as to certain tax
matters
8.2 Opinion of McCann FitzGerald, Irish counsel for Airplanes Limited, as to certain
tax matters
8.3 Opinion of Mourant du Feu & Jeune, Jersey counsel for Airplanes Limited, as to
certain tax matters
9.1 Shareholders Agreement among the Note Indenture Trustee, Mourant & Co. Trustees
Limited, as trustees of the Charitable Trusts, and Juris Limited and Lively
Limited*
9.2 Voting Trust Agreement among AeroUSA, Airplanes Trust and First Security Bank of
Utah, National Association*
9.3 Voting Trust Agreement among AeroUSA 3, AeroUSA and First Security Bank of Utah,
National Association*
</TABLE>
<PAGE> 233
<TABLE>
<S> <C>
10.1 Stock Purchase Agreement dated as of March 28, 1996 among GPA, Inc., GPA Group plc
and Airplanes U.S. Trust**
10.2 Stock Purchase Agreement dated as of March 28, 1996 among GPA Group plc, Skyscape
Limited and Airplanes Limited**
10.3 Administrative Agency Agreement dated as of March 28, 1996, among GPA Financial
Services (Ireland) Limited, GPA Group plc, Airplanes Limited, GPA II Limited,
Airplanes U.S. Trust and AeroUSA, Inc.**
10.4 Servicing Agreement dated as of March 28, 1996, among GE Capital Aviation Services,
Limited, Airplanes Limited, AeroUSA, Inc., GPA II Limited, Airplanes U.S. Trust and
GPA Cash Manager Limited**
10.5 Reference Agency Agreement dated as of March 28, 1996, among Airplanes Limited,
Airplanes U.S. Trust Bankers Trust Company, as Airplanes Limited Indenture Trustee
and Airplanes U.S. Trust Indenture Trustee, Bankers Trust Company, as Reference
Agent and GPA Cash Manager Limited, as Cash Manager**
10.6 Secretarial Services Agreement dated as of March 28, 1996, between Airplanes
Limited and Mourant & Co. Secretaries Limited, as Company Secretary**
10.7 Cash Management Agreement dated March 28, 1996, between GP Cash Manager Limited as
Cash Manager, GPA Group plc, Airplanes Limited, Airplanes U.S. Trust and Bankers
Trust Company, as Trustee under each of the Airplanes Limited Indenture, the
Airplanes U.S. Trust Indenture and the Security Trust Agreement**
10.8 Form of Swap Agreement**
10.9 Security Trust Agreement dated as of March 28, 1996 among Airplanes Limited,
Airplanes U.S. Trust, Mourant & Co. Secretaries Limited, the Issuer Subsidiaries
listed therein, GPA Financial Services (Ireland) Limited, GPA Cash Manager Limited,
GPA Group plc, GE Capital Aviation Services, Limited, Bankers Trust Company, as
Airplanes U.S. Trust Indenture Trustee and Airplanes Limited Indenture Trustee,
Bankers Trust Company, as Reference Agent, and Bankers Trust Company, as Security
Trustee**
12 Statement re: Computation of Ratios
21 Subsidiaries of Airplanes Group*
23.1 Consent of Davis Polk & Wardwell (included in Exhibits 5.1 and 8.1)
23.2 Consent of McCann FitzGerald (included in Exhibit 8.2)
23.3 Consent of Mourant du Feu & Jeune (included in Exhibits 5.2 and 8.3)
23.4 Consent of Potter, Anderson & Corroon LLP (included in Exhibit 5.3)
23.5 Consent of KPMG
23.6 Consent of Aircraft Information Services, Inc.
23.7 Consent of BK Associates, Inc.
23.8 Consent of Airclaims Limited
24.1 Directors' Power of Attorney (with the Resolution of the Board of Directors
attached thereto) (included in signature pages)***
25 Statement of Eligibility of Bankers Trust Company, as Trustee, under the Trust
Agreement to be qualified under the Trust Indenture Act of 1939***
99.1 Appraisal of Aircraft Information Services, Inc. relating to the Aircraft
99.2 Appraisal of BK Associates, Inc. relating to the Aircraft
99.3 Appraisal of Airclaims Limited relating to the Aircraft
</TABLE>
- ---------------
* Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-99978), previously filed with the Commission
<PAGE> 234
** Incorporated by reference to the Report on Form 10-Q for the quarterly
period ended December 31, 1996, previously filed with the Commission
*** Previously filed
<PAGE> 1
EXHIBIT 1
$850,000,000
AIRPLANES PASS THROUGH TRUST
PASS THROUGH CERTIFICATES
UNDERWRITING AGREEMENT
March --, 1998
<PAGE> 2
UNDERWRITING AGREEMENT
March --, 1998
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036-8293
Ladies and Gentlemen:
Airplanes Limited, a limited liability company incorporated under the laws
of Jersey, Channel Islands ("Airplanes Limited"), and Airplanes U.S. Trust, a
statutory business trust organized under the laws of Delaware ("Airplanes
Trust" and, together with Airplanes Limited, the "Issuers") pursuant to the
Amended and Restated Trust Agreement, dated as of March 11, 1996 (the
"Airplanes Trust Agreement"), among GPA, Inc., a Delaware corporation, as
settlor (the "Settlor"), Wilmington Trust Company, a Delaware banking
corporation, as trustee (the "Delaware Trustee"), and each other trustee party
thereto (each a "Controlling Trustee"), jointly propose to cause Bankers Trust
Company, a New York banking corporation, acting not in its individual capacity,
except as otherwise noted, but solely as trustee (the "1998 Refinancing
Trustee") for each of the Subclass A-6 Pass Through Trust and the Subclass A-7
Pass Through Trust (each, a "1998 Refinancing Trust" and, collectively, the
"1998 Refinancing Trusts"), organized pursuant to Supplements Nos. 9 and 10,
respectively, to the pass through trust agreement dated as of March 28, 1996
(as so supplemented and as it may be amended, supplemented or otherwise
modified, the "Trust Agreement"), each to be dated as of the Closing Date,
among each of the Issuers and the 1998 Refinancing Trustee, to issue and sell
to the several underwriters named in Schedule I hereto (the "Underwriters")
refinancing pass through certificates (the "1998 Refinancing Certificates")
issued under the Trust Agreement in the subclass designations and in the
respective aggregate principal amounts set forth in Schedule II hereto. Morgan
Stanley & Co. Incorporated shall act as representative (the "Representative")
of the several Underwriters. As hereinafter described, the Issuers have filed
with the U.S. Securities and Exchange Commission (the "Commission") a
registration statement on Form S-1, including a prospectus, relating to the
1998 Refinancing Certificates. Capitalized terms used and not defined herein
shall have the meanings ascribed to them in the Trust Agreement.
In connection with the issuance of 1998 Refinancing Certificates, each of
the Issuers will separately issue and deposit in the 1998 Refinancing Trusts
two corresponding subclasses of Class A Notes, the "Subclass A-6 Notes" and the
"Subclass A-7 Notes", respectively (collectively, the "1998 Refinancing
Notes"). Each subclass of 1998 Refinancing Notes will have the same
designation as the corresponding subclass of 1998 Refinancing Certificates, and
the sum of the aggregate principal amounts of the 1998 Refinancing Notes of
each subclass issued by the Issuers will equal the aggregate principal amount
of the corresponding subclass of 1998 Refinancing Certificates. Each subclass
of 1998 Refinancing Certificates will represent a fractional undivided
beneficial interest in the pair of 1998 Refinancing Notes of the corresponding
subclass and will entitle the holder thereof to receive a portion of the
payments of principal, interest and premium, if any, on such pair of 1998
Refinancing Notes. The 1998 Refinancing Notes issued by Airplanes Limited
pursuant to Supplement No. 1 to the trust indenture dated as of March 28,1996,
to be dated as of the Closing Date, among Airplanes Limited, Airplanes Trust
and Bankers Trust
<PAGE> 3
2
Company, as trustee (as so supplemented and as it may be amended, supplemented
or otherwise modified, the "Airplanes Limited Indenture") are referred to
herein as the "Airplanes Limited 1998 Refinancing Notes," and the 1998
Refinancing Notes issued by Airplanes Trust pursuant to Supplement No. 1 to the
trust indenture dated as of March 28, 1996, to be dated as of the Closing Date,
among Airplanes Trust, Airplanes Limited and Bankers Trust Company, as trustee
(as so supplemented and as if may be amended, supplemented or otherwise
modified, the "Airplanes Trust Indenture" and, together with the Airplanes
Limited Indenture, the "Indentures") are referred to herein as the "Airplanes
Trust 1998 Refinancing Notes." Pursuant to the terms of the Indentures,
Airplanes Limited and Airplanes Trust have each unconditionally guaranteed the
other's performance of its obligations under the 1998 Refinancing Notes issued
by it (respectively, the "Airplanes Limited 1998 Refinancing Guarantee" and the
"Airplanes Trust 1998 Refinancing Guarantee" and, together, the "1998
Refinancing Guarantees"). Simultaneous with the closing of the public offering
of the 1998 Refinancing Certificates, the Subclass A-1 Certificates of the
Subclass A-1 Pass Through Trust will be refinanced with the proceeds of the
issue and sale of the 1998 Refinancing Certificates, and the corresponding
Subclass A-1 Notes of Airplanes Limited and Airplanes Trust will be refinanced
with the proceeds of the issuance of the 1998 Refinancing Notes.
This Agreement, the Trust Agreement, the 1998 Refinancing Certificates,
each Indenture (including its respective 1998 Refinancing Guarantee), the 1998
Refinancing Notes, the Cash Management Agreement, the Administrative Agency
Agreement, the Servicing Agreement, the Servicing Agreement Guarantees, the
Security Trust Agreement, the Secretarial Services Agreement, the Reference
Agency Agreement, the Tax Sharing Agreement and the Voting Trust Agreement
(Aero USA), each as amended, supplemented or otherwise modified, are
collectively referred to herein as the "Relevant Documents." As used in this
Agreement, "Effective Time" means the date and the time as of which such
registration statement, or the most recent post-effective amendment thereto, if
any, was declared effective by the Commission; "Effective Date" means the date
of the Effective Time; "business day" means any day on which the New York Stock
Exchange, Inc. is open for trading; "Preliminary Prospectus" means each
prospectus filed as part of such registration statement as originally filed, or
as part of any amendment thereto, before such registration statement became
effective under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and any prospectus filed by the Issuers with the Commission with the
consent of the Representative pursuant to Rule 424(a) or Rule 462 of the rules
and regulations of the Commission under the Securities Act (the "Rules and
Regulations"); "Registration Statement" means such registration statement, as
amended at the Effective Time, including the information (if any) deemed to be
part of the registration statement at the Effective Time pursuant to Rule 430A
of the Rules and Regulations; and "Prospectus" means the prospectus in the form
first used to confirm sales of 1998 Refinancing Certificates. If the Issuers
file a registration statement to register a portion of the 1998 Refinancing
Certificates and rely on Rule 462(b) of the Rules and Regulations for such
registration statement to become effective upon filing with the Commission (the
"Rule 462 Registration Statement"), then any reference to the "Registration
Statement" shall be deemed to refer to both the registration statement referred
to above (Commission File No. 333-43453) and the Rule 462 Registration
Statement, in each case as amended from time to time.
<PAGE> 4
3
1. Representations, Warranties and Agreements of Airplanes Limited.
Airplanes Limited represents and warrants to each of the Underwriters and
agrees with the Underwriters that:
(a) A Registration Statement, including a prospectus, on Form S-1
(Commission File No. 333-43453), and amendments thereto, with respect to the
1998 Refinancing Certificates, the 1998 Refinancing Notes and the 1998
Refinancing Guarantees have (i) been prepared by the Issuers in conformity
with the requirements of the Securities Act and the Rules and Regulations,
(ii) been filed with the Commission in accordance with the Securities Act
and (iii) become effective under the Securities Act. Copies of such
registration statement and each amendment thereto have been delivered by the
Issuers to you as the Representative. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus. No
stop order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or threatened
by the Commission.
(b) (i) The Registration Statement at the Effective Time, and each
Preliminary Prospectus when originally filed or as part of any amendment
thereto, conformed, and the Prospectus and any further amendments or
supplements to the Registration Statement or the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform, in all material respects with the Securities Act and the applicable
Rules and Regulations; (ii) each Preliminary Prospectus did not when
originally filed, and the Prospectus did not at the Effective Time, and, as
amended or supplemented, if applicable, will not contain as of the
applicable filing date, any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and (iii)
at the Effective Time each part of the Registration Statement did not, and
each such part, as amended or supplemented, if applicable, will not, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided that no representation or warranty in this Section
1(b) is made as to (A) statements or omissions in the Registration Statement
or Prospectus based upon information relating to any Underwriter furnished
to the Issuers in writing by such Underwriter through the Representative
expressly for inclusion therein (the "Underwriter Information") or (B) that
part of the Registration Statement that constitutes the Statement of
Eligibility and Qualification on Form T-1 (the "Form T-1") under the United
States Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"),
of the 1998 Refinancing Trustee (the "T-1 Information").
(c) The requirements for the use of Form S-1 under the Securities Act
have been met. Airplanes Limited is an "issuer" within the meaning of the
Securities Act and the Rules and Regulations, and an appropriate registrant
with respect to the offering and sale of the 1998 Refinancing Certificates.
(d) Airplanes Limited has been duly incorporated as a public limited
liability company, is validly existing as a public limited liability company
under the laws of Jersey, has the corporate power and authority to own or
hold its property and to
<PAGE> 5
4
conduct its business as described in the Prospectus, and is duly qualified
to transact business in each jurisdiction in which the conduct of its
business or its ownership or leasing of its property requires such
qualification, except to the extent that the failure to be so qualified
would not have a material adverse effect on the financial condition, results
of operations or business of Airplanes Limited.
(e) Airplanes Limited has not taken any action nor, to the best of its
knowledge, have any other steps been taken or legal proceedings been started
or threatened against Airplanes Limited as a result of which it could become
a bankrupt or for its winding-up, dissolution or reorganization, or for the
appointment of a liquidator, receiver, administrator, administrative
receiver, examiner or similar officer of Airplanes Limited or of any or all
of its assets or revenues, or as a result of which Airplanes Limited could
become bankrupt.
(f) Airplanes Limited has the authorized capitalization set forth in
the Prospectus. All of the issued shares of capital stock of Airplanes
Limited have been duly and validly authorized and issued, are fully paid and
non-assessable. All of Airplanes Limited's issued capital stock is held by
Juris Limited and Lively Limited, each, a Jersey limited liability company,
as nominees (together, the "Nominees"), for the benefit of the trustees of
certain charitable trusts organized under the laws of Jersey (the
"Charitable Trusts").
(g) Airplanes Limited has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder, and this Agreement has been duly authorized, executed and
delivered by Airplanes Limited.
(h) Airplanes Limited has all necessary corporate power and authority
to execute and deliver Supplements Nos. 9 and 10 to the Trust Agreement and
to perform its obligations thereunder. The Trust Agreement has been duly
qualified under the Trust Indenture Act, and Supplements Nos. 9 and 10
thereto have been duly and validly authorized on the date hereof and, on the
Closing Date, will be duly executed and delivered by Airplanes Limited, and
thereupon, together with the Trust Agreement, will be a valid and binding
agreement of Airplanes Limited, enforceable against Airplanes Limited in
accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws
affecting creditors' rights generally from time to time in effect, and
subject, as to rights of acceleration and the availability of equitable
remedies, to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
Trust Agreement complies as to form in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission thereunder.
(i) Assuming due authorization and execution by each of the 1998
Refinancing Trusts and due authentication by the 1998 Refinancing Trustee in
accordance with the provisions of the Trust Agreement, the 1998 Refinancing
Certificates will be duly issued by each of the 1998 Refinancing Trusts and,
when delivered to and paid for by the Underwriters, will be entitled to the
benefits of the Trust Agreement.
<PAGE> 6
5
(j) Airplanes Limited has all necessary corporate power and authority
to execute and deliver Supplement No. 1 to the Airplanes Limited Indenture,
including the Airplanes Limited 1998 Refinancing Guarantee, and to perform
its obligations thereunder. Supplement No. 1 to the Airplanes Limited
Indenture has been duly and validly authorized and upon due execution and
delivery by Airplanes Limited will be, together with the Airplanes Limited
Indenture, a valid and binding agreement of Airplanes Limited, enforceable
against Airplanes Limited in accordance with its terms (subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws affecting creditors' rights generally from
time to time in effect, and subject, as to rights of acceleration and the
availability of equitable remedies, to general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law). The Airplanes Limited Indenture is not required to be
qualified under the Trust Indenture Act.
(k) Airplanes Limited has all necessary corporate power and authority
to execute and deliver the Airplanes Limited 1998 Refinancing Notes and to
perform its obligations thereunder. The Airplanes Limited 1998 Refinancing
Notes have been duly and validly authorized for issuance and, when executed
and authenticated in accordance with the provisions of the Airplanes Limited
Indenture and delivered to and paid for by the 1998 Refinancing Trustee,
will be entitled to the benefits of the Airplanes Limited Indenture, and
will be valid and binding obligations of Airplanes Limited, enforceable
against Airplanes Limited in accordance with their terms (subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws affecting creditors' rights generally from
time to time in effect, and subject, as to rights of acceleration and the
availability of equitable remedies, to general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law). The deposit of the Airplanes Limited 1998 Refinancing
Notes into the 1998 Refinancing Trusts is not required to be registered
under the Securities Act.
(l) Airplanes Limited has all necessary corporate power and authority
to execute and deliver each Relevant Document to which it is or will become
a party and to perform its obligations thereunder. Each Relevant Document
to which it is a party has been duly and validly authorized by, and has been
or will be executed and delivered by Airplanes Limited on or prior to the
Closing Date, and constitutes or will constitute a valid and binding
agreement of Airplanes Limited, enforceable against Airplanes Limited in
accordance with its terms (in each case, subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other
similar laws affecting creditors' rights generally from time to time in
effect, and subject, as to rights of acceleration and the availability of
equitable remedies, to general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(m) Airplanes Limited has not engaged in any other activities since the
date of its incorporation other than the business, financing and refinancing
activities described in the Prospectus and the transactions contemplated by
the Relevant Documents to which it is a party.
(n) There has not been any material adverse change, or any development
<PAGE> 7
6
that could reasonably be expected to involve a material adverse change, in
the condition, financial or other, or in the earnings, business or
operations of Airplanes Limited from that set forth in the Prospectus.
(o) The authorization, execution, delivery and performance of this
Agreement and the performance of the other Relevant Documents, the
authentication, issuance, sale and delivery of the 1998 Refinancing Notes
and the 1998 Refinancing Certificates and compliance with the terms thereof,
and the consummation by Airplanes Limited of the transactions contemplated
hereby and thereby will not conflict with, or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any properties or assets of Airplanes Limited pursuant to
the terms of any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Airplanes Limited is a party or by which
Airplanes Limited is bound or to which any of the properties or assets of
Airplanes Limited is subject (other than liens, charges and encumbrances
created pursuant to the Security Trust Agreement), nor will such actions
result in any violation of, or conflict with, the provisions of the
memorandum or articles of association of Airplanes Limited or any statute,
order, decree, rule or regulation of any court or governmental agency or
body having proper jurisdiction over Airplanes Limited or any of its
properties or assets.
(p) Except for (i) such consents, approvals, authorizations,
registrations or qualifications as may be required under the applicable
state securities, Blue Sky or similar laws in connection with the offer,
purchase and distribution of the 1998 Refinancing Certificates by the
Underwriters, (ii) the consent required pursuant to the Control of Borrowing
(Jersey) Order 1958 (as amended) in respect of the issue by Airplanes
Limited of the Airplanes Limited 1998 Refinancing Notes which shall be
obtained prior to the Effective Time; (iii) the filing of the completed
Prospectus after the date hereof with the Registrar of Companies in Jersey
pursuant to the Companies (General Provisions) (Jersey) Order 1992 and the
issue pursuant thereto of such Registrar's consent to the circulation of the
final and completed Prospectus, (iv) such consents as have been obtained and
are in full force and effect and (v) such consents the failure of which to
obtain would not have a material adverse effect on the financial condition,
results of operations or business of Airplanes Limited, no consent,
approval, authorization or order of, or filing or registration with, any
court or governmental agency or body having jurisdiction over Airplanes
Limited or any of its property or assets is required for the execution,
delivery and performance of this Agreement and for the performance of each
other Relevant Document by Airplanes Limited and the consummation of the
transactions contemplated hereby and thereby, including the authentication,
execution, issuance and delivery of the Airplanes Limited 1998 Refinancing
Notes and the 1998 Refinancing Certificates and compliance with the terms
thereof.
(q) No stamp duty, stock exchange tax, value added tax or any other tax
or duty is payable with respect to the authorization, issuance, sale and
delivery of the Airplanes Limited 1998 Refinancing Notes by Airplanes
Limited to each of the 1998 Refinancing Trusts, or of the 1998 Refinancing
Certificates by each of the 1998 Refinancing Trusts to the Underwriters, in
each case in the manner contemplated by this
<PAGE> 8
7
Agreement, or the execution and delivery of this Agreement.
(r) Airplanes Limited has not sustained, since the date of the audited
balance sheets included in the Prospectus, any material loss or interference
with its business from any court or governmental action, order or decree,
other than as set forth in or contemplated by the Prospectus; and, since
such date, there has not been any change in the capital stock or debt of
Airplanes Limited or any material adverse change in or affecting the
financial condition, results of operations or business of Airplanes Limited,
whether or not arising from transactions in the ordinary course of business,
other than as set forth in or contemplated by the Prospectus.
(s) The financial statements of Airplanes Group and the notes thereto
included in the Registration Statement and Prospectus were prepared in
conformity with generally accepted accounting principles of the United
States ("U.S. GAAP") and in accordance with the requirements of the
Securities Act.
(t) KPMG-Dublin, who have audited the financial statements of Airplanes
Group and whose report appears in the Prospectus, are independent public
accountants as required by the Securities Act and the Rules and Regulations.
(u) Except as disclosed in the Prospectus, there are no legal or
governmental proceedings pending to which Airplanes Limited is a party, or
to which any property of Airplanes Limited is subject (i) asserting the
invalidity of this Agreement, the 1998 Refinancing Certificates, the
Airplanes Limited 1998 Refinancing Notes or any Relevant Document, (ii)
seeking to prevent the issuance by Airplanes Limited of the Airplanes
Limited 1998 Refinancing Notes, or by the 1998 Refinancing Trustee of the
1998 Refinancing Certificates or the consummation of any of the transactions
contemplated by this Agreement or any Relevant Document, (iii) seeking any
determination or ruling that would materially and adversely affect the
performance by Airplanes Limited of its obligations under this Agreement,
the Airplanes Limited 1998 Refinancing Notes or any Relevant Document, (iv)
seeking any determination or ruling that would adversely affect the validity
or enforceability of this Agreement or any Relevant Document, (v) seeking to
affect adversely the Jersey, Irish, United States Federal or State of New
York tax attributes of Airplanes Limited, each of the 1998 Refinancing
Trusts, the 1998 Refinancing Certificates or the Airplanes Limited 1998
Refinancing Notes, or of any payments to be made by any party under this
Agreement or any Relevant Document, or (vi) which would reasonably be
expected to have a material adverse effect on the financial condition,
results of operations or business of Airplanes Limited; and, to the best of
Airplanes Limited's knowledge, no such proceedings are threatened or
contemplated.
(v) Except as disclosed in the Prospectus, Airplanes Limited is not now
in, and the execution and delivery by Airplanes Limited of, and the
performance by Airplanes Limited of its obligations under, this Agreement
and each Relevant Document to which it is a party will not result in (i)
violation of its memorandum or articles of association, (ii) default in any
respect, and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or
<PAGE> 9
8
observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties or assets is subject (except where such violation or failure
would not reasonably be expected to have a material adverse effect) or (iii)
violation of any law, ordinance, governmental rule, regulation or court
decree to which it or its properties or assets may be subject, nor has it
failed to obtain any license, permit, certificate, franchise or other
governmental authorization or permit necessary to the conduct of its
business (except where such violation or failure would not reasonably be
expected to have a material adverse effect).
(w) Airplanes Limited is not an "investment company" or an entity
"controlled" by an "investment company" registered or required to be
registered under the United States Investment Company Act of 1940, as
amended (the "Investment Company Act"), as such terms are defined in the
Investment Company Act. Neither of the 1998 Refinancing Trusts is required
to be registered under the Investment Company Act.
(x) There are no statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are
not so described or filed as required.
(y) Airplanes Limited has complied with all provisions of section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(z) Airplanes Limited will use the net proceeds received by it from the
sale of the 1998 Refinancing Notes pursuant to this Agreement in the manner
specified in the Prospectus under the caption "Use of Proceeds."
2. Representations, Warranties and Agreements of Airplanes Trust.
Airplanes Trust represents and warrants to each of the Underwriters and agrees
with the Underwriters that:
(a) A Registration Statement, including a prospectus, on Form S-1
(Commission File No. 333-43453), and amendments thereto, with respect to the
1998 Refinancing Certificates, the 1998 Refinancing Notes and the 1998
Refinancing Guarantees have (i) been prepared by the Issuers in conformity
with the requirements of the Securities Act and the Rules and Regulations,
(ii) been filed with the Commission in accordance with the Securities Act
and (iii) become effective under the Securities Act. Copies of such
registration statement and each amendment thereto have been delivered by the
Issuers to you as the Representative. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus. No
stop order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or threatened
by the Commission.
(b) (i) The Registration Statement at the Effective Time, and each
Preliminary Prospectus when originally filed or as part of any amendment
thereto, conformed, and the Prospectus and any further amendments or
supplements to the Registration Statement or the Prospectus, when they
become effective or are filed with the
<PAGE> 10
9
Commission, as the case may be, will conform, in all material respects with
the Securities Act and the applicable Rules and Regulations; (ii) each
Preliminary Prospectus did not when originally filed, and the Prospectus did
not at the Effective Time, and, as amended or supplemented, if applicable,
will not contain as of the applicable filing date, any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and (iii) at the Effective Time each part of the
Registration Statement did not, and each such part, as amended or
supplemented, if applicable, will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided that no
representation or warranty in this Section 2(b) is made as to (A) statements
or omissions in the Registration Statement or Prospectus based upon the
Underwriter Information or (B) the T-1 Information.
(c) The requirements for the use of Form S-1 under the Securities Act
have been met. Airplanes Trust is an "issuer" within the meaning of the
Securities Act and the Rules and Regulations, and an appropriate registrant
with respect to the offering and sale of the 1998 Refinancing Certificates.
(d) Wilmington Trust Company is duly organized and validly existing in
good standing as a banking corporation under the laws of the State of
Delaware, and has full power, authority and legal right to perform the
Airplanes Trust Agreement, to own or hold its property and to conduct its
business as described in the Prospectus and, as the Delaware Trustee, to
issue, execute, deliver and perform the Airplanes Trust 1998 Refinancing
Notes.
(e) The Airplanes Trust Agreement and the related trust documents have
been duly authorized, executed and delivered by Wilmington Trust Company and
the Settlor, and constitute valid and binding agreements of Wilmington Trust
Company, enforceable against Wilmington Trust Company in accordance with
their respective terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws
affecting creditors' rights generally from time to time in effect, and
subject, as to rights of acceleration and the availability of equitable
remedies, to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(f) Airplanes Trust has been duly formed and is legally and validly
existing in good standing as a business trust under the laws of the State of
Delaware, has the power and authority under the Airplanes Trust Agreement
and the laws of the State of Delaware to conduct its activities as described
in the Prospectus.
(g) The Delaware Trustee and each Controlling Trustee has the power and
authority under the Airplanes Trust Agreement to execute, deliver and
perform on behalf of Airplanes Trust, this Agreement, the Airplanes Trust
1998 Refinancing Notes and to perform each other Relevant Document to which
Airplanes Trust is a party, and the execution, delivery and performance by
the Delaware Trustee on behalf of Airplanes Trust of this Agreement, the
Airplanes Trust 1998 Refinancing Notes and each other
<PAGE> 11
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Relevant Document to which Airplanes Trust is a party are not in violation
of the charter or by-laws of the Delaware Trustee or of any law,
governmental rule or regulation of the State of Delaware or the United
States governing the banking or trust powers of the Delaware Trustee and, to
our knowledge, will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Delaware Trustee is a party or by which the Delaware
Trustee is bound, or, to our knowledge, any judgment or order of any court,
governmental agency or body having proper jurisdiction over the banking or
trust powers of the Delaware Trustee.
(h) The Delaware Trustee has not taken any action nor, to the best of
its knowledge, have any other steps been taken or legal proceedings been
started or threatened against Airplanes Trust for the winding-up,
dissolution or reorganization, for the appointment of a liquidator,
receiver, administrator, administrative receiver, examiner or similar
officer of Airplanes Trust or of any or all of its assets or revenues or as
a result of which Airplanes Trust could become bankrupt.
(i) All of the residual interest in Airplanes Trust is held by the
Settlor pursuant to the Airplanes Trust Agreement.
(j) Airplanes Trust has all necessary power and authority under the
Airplanes Trust Agreement to execute and deliver this Agreement and to
perform its obligations hereunder, and this Agreement has been duly
authorized, executed and delivered by Airplanes Trust.
(k) Airplanes Trust has all necessary power and authority under the
Airplanes Trust Agreement to execute and deliver Supplements Nos. 9 and 10
to the Trust Agreement and to perform its obligations thereunder. The Trust
Agreement has been duly qualified under the Trust Indenture Act, and
Supplements Nos. 9 and 10 have been duly and validly authorized on the date
hereof and, on the Closing Date, will be duly executed and delivered by
Airplanes Trust, and thereupon together with the Trust Agreement, will be a
valid and binding agreement of Airplanes Trust, enforceable against
Airplanes Trust in accordance with its terms (subject to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws affecting creditors' rights generally from time to time
in effect, and subject, as to rights of acceleration and the availability of
equitable remedies, to general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law). The
Trust Agreement complies as to form in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission thereunder.
(l) Assuming due authorization and execution by each of the 1998
Refinancing Trusts and due authentication by the 1998 Refinancing Trustee in
accordance with the provisions of the Trust Agreement, the 1998 Refinancing
Certificates will be duly issued by each of the 1998 Refinancing Trusts and,
when delivered to and paid for by the Underwriters, will be entitled to the
benefits of the Trust Agreement.
(m) Airplanes Trust has all necessary power and authority under the
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Airplanes Trust Agreement to execute and deliver Supplement No. 1 to the
Airplanes Trust Indenture, including the Airplanes Trust 1998 Refinancing
Guarantee, and to perform its obligations thereunder. Supplement No. 1 to
the Airplanes Trust Indenture has been duly and validly authorized on the
date hereof, and, on the Closing Date, will be executed and delivered by
Airplanes Trust, and thereupon, together with the Airplanes Trust Indenture,
will be a valid and binding agreement of Airplanes Trust, enforceable
against Airplanes Trust in accordance with its terms (subject to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws affecting creditors' rights generally from time to time
in effect, and subject, as to rights of acceleration and the availability of
equitable remedies, to general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law). The
Airplanes Trust Indenture is not required to be qualified under the Trust
Indenture Act.
(n) Airplanes Trust has all necessary power and authority under the
Airplanes Trust Agreement to execute and deliver the Airplanes Trust 1998
Refinancing Notes and perform its obligations thereunder. The Airplanes
Trust 1998 Refinancing Notes have been duly and validly authorized for
issuance and, when executed and authenticated in accordance with the
provisions of the Airplanes Trust Indenture and delivered to and paid for by
the 1998 Refinancing Trustee, will be entitled to the benefits of the
Airplanes Trust Indenture, and will be valid and binding obligations of
Airplanes Trust, enforceable against Airplanes Trust in accordance with
their terms (subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws affecting
creditors' rights generally from time to time in effect, and subject, as to
rights of acceleration and the availability of equitable remedies, to
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law). The deposit of the
Airplanes Trust 1998 Refinancing Notes into the 1998 Refinancing Trusts is
not required to be registered under the Securities Act.
(o) There is no fee, tax or other governmental charge under the laws of
the State of Delaware or any political subdivision thereof in existence on
the date hereof on, based on or measured by any payments under the Airplanes
Trust 1998 Refinancing Notes or the beneficial interests in the estate
created by Supplement No. 1 to the Airplanes Trust Indenture by reason of
the Delaware Trustee's performance of its duties under the Airplanes Trust
Agreement within the State of Delaware, which would not have been imposed if
the Delaware Trustee did not have its principal place of business in such
State and did not perform its obligations under the Relevant Documents in
such State.
(p) Airplanes Trust has all necessary power and authority under the
Airplanes Trust Agreement to execute and deliver each Relevant Document to
which it is or will become a party and to perform its obligations
thereunder. Each Relevant Document to which it is a party has been duly and
validly authorized by, and has been or will be executed and delivered by
Airplanes Trust on or prior to the Closing Date, and constitutes or will
constitute a valid and binding agreement of Airplanes Trust, enforceable
against Airplanes Trust in accordance with its terms (in each case, subject
to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and
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other similar laws affecting creditors' rights generally from time to time
in effect, and subject, as to rights of acceleration and the availability of
equitable remedies, to general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(q) Airplanes Trust has not engaged in any other activities since the
date of its incorporation other than the business, financing and refinancing
activities described in the Prospectus and the transactions contemplated by
the Relevant Documents to which it is a party.
(r) There has not been any material adverse change, or any development
that could reasonably be expected to involve a material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of Airplanes Trust from that set forth in the Prospectus.
(s) The authorization, execution, delivery and performance of this
Agreement and the performance of the other Relevant Documents, the
authentication, issuance, sale and delivery of the 1998 Refinancing Notes
and the 1998 Refinancing Certificates and compliance with the terms thereof,
and the consummation by Airplanes Trust of the transactions contemplated
hereby and thereby will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance upon
any properties or assets of Airplanes Trust pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which Airplanes Trust is a party or by which Airplanes Trust
is bound or to which any of the properties or assets of Airplanes Trust is
subject (other than liens, charges and encumbrances created pursuant to the
Security Trust Agreement), nor will such actions result in any violation of,
or conflict with, the provisions of the Airplanes Trust Agreement or any
statute or any order, decree, rule or regulation of any court or
governmental agency or body having proper jurisdiction over Airplanes Trust
or any of its properties or assets.
(t) Except for (i) such consents, approvals, authorizations,
registrations or qualifications as may be required under the applicable
state securities, Blue Sky or similar laws in connection with the offer,
purchase and distribution of the 1998 Refinancing Certificates by the
Underwriters, (ii) such consents as have been obtained and are in full force
and effect and (iii) such consents the failure of which to obtain would not
have a material adverse effect on the financial condition, results of
operations or business of Airplanes Trust, no consent, approval,
authorization or order of, or filing or registration with, any court or
governmental agency or body having jurisdiction over the Delaware Trustee,
Airplanes Trust or any of its properties or assets is required for the
execution, delivery and performance of this Agreement and the performance of
each other Relevant Document by Airplanes Trust and the consummation of the
transactions contemplated hereby and thereby, including the issuance,
authentication, sale and delivery of the Airplanes Trust 1998 Refinancing
Notes and the 1998 Refinancing Certificates and compliance with the terms
thereof.
(u) No stamp duty, stock exchange tax, value added tax or any other tax
or
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13
duty is payable with respect to the authorization, issuance, sale and
delivery of the Airplanes Trust 1998 Refinancing Notes by Airplanes Trust to
each of the 1998 Refinancing Trusts, or of the 1998 Refinancing Certificates
by each of the 1998 Refinancing Trusts to the Underwriters, in each case in
the manner contemplated by this Agreement, or the execution and delivery of
this Agreement or the other Relevant Documents.
(v) Airplanes Trust has not sustained since the date of the audited
balance sheets included in the Prospectus any material loss or interference
with its business from any court or governmental action, order or decree,
other than as set forth in or contemplated by the Prospectus; and, since
such date, there has not been any change in the residual interest or debt of
Airplanes Trust or any material adverse change in or affecting the financial
condition, results of operations or business of Airplanes Trust, whether or
not arising from transactions in the ordinary course of business, other than
as set forth in or contemplated by the Prospectus.
(w) The financial statements of Airplanes Group and the notes thereto
included in the Registration Statement and Prospectus were prepared in
conformity with generally accepted accounting principles of the United
States ("U.S. GAAP") and in accordance with the requirements of the
Securities Act.
(x) KPMG, who have audited the financial statements of Airplanes Group
and whose report appears in the Prospectus, are independent public
accountants as required by the Securities Act and the Rules and Regulations.
(y) Except as disclosed in the Prospectus, there are no legal or
governmental proceedings pending to which Airplanes Trust is a party, or to
which any property of Airplanes Trust is subject (i) asserting the
invalidity of this Agreement, the 1998 Refinancing Certificates, the
Airplanes Trust 1998 Refinancing Notes or any Relevant Document, (ii)
seeking to prevent the issuance by Airplanes Trust of the Airplanes Trust
1998 Refinancing Notes, or by the 1998 Refinancing Trustee of the 1998
Refinancing Certificates or the consummation of any of the transactions
contemplated by this Agreement or any Relevant Document, (iii) seeking any
determination or ruling that would materially and adversely affect the
performance by Airplanes Trust of its obligations under this Agreement or
any Relevant Document, (iv) seeking any determination or ruling that would
adversely affect the validity or enforceability of this Agreement or any
Relevant Document, (v) seeking to affect adversely the Jersey, Irish, United
States Federal or State of Delaware or New York income tax attributes of
Airplanes Trust, each of the 1998 Refinancing Trusts, the 1998 Refinancing
Certificates or the Airplanes Trust 1998 Refinancing Notes, or of any
payments to be made by any party under this Agreement or any Relevant
Document, or (vi) which would reasonably be expected to have a material
adverse effect on the financial condition, results of operations or business
of Airplanes Trust; and, to the best of Airplanes Trust's knowledge, no such
proceedings are threatened or contemplated.
(z) Except as disclosed in the Prospectus, Airplanes Trust is not now
in, and the execution and delivery by Airplanes Trust of, and the
performance by Airplanes
<PAGE> 15
14
Trust of its obligations under this Agreement and each other Relevant
Document to which it is a party will not result in (i) violation of the
Airplanes Trust Agreement, (ii) default in any respect, and no event has
occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets is subject
(except where such violation or failure would not reasonably be expected to
have a material adverse effect) or (iii) violation of any law, ordinance,
governmental rule, regulation or court decree to which it or its properties
or assets may be subject, nor has it failed to obtain any license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the conduct of its business (except where such violation or
failure would not reasonably be expected to have a material adverse effect).
(aa) Airplanes Trust is not an "investment company" or an entity
"controlled" by an "investment company" registered or required to be
registered under the Investment Company Act, as such terms are defined in
the Investment Company Act. Neither of the 1998 Refinancing Trusts is
required to be registered as an investment company under the Investment
Company Act.
(ab) There are no statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are
not so described or filed as required.
(ac) Airplanes Trust has complied with all provisions of section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(ad) Airplanes Trust will use the net proceeds received by it from the
sale of the 1998 Refinancing Notes pursuant to this Agreement in the manner
specified in the Prospectus under the caption "Use of Proceeds".
3. Representations, Warranties and Agreements of GPA Group. GPA Group
represents and warrants to the Underwriters and agrees with the Underwriters
that:
(a) (i) Each Preliminary Prospectus did not when originally filed, and
the Prospectus did not at the Effective Time, and, as amended or
supplemented, if applicable, will not contain as of the applicable filing
date any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (ii) at the
Effective Time, each part of the Registration Statement did not contain, and
each such part, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided that no representation or warranty in this Section
3(a) is made as to (A) statements or omissions in the Registration Statement
or Prospectus based upon the Underwriter Information or the T-1 Information
or information other than the information relating to GPA Group specified in
Schedule III hereto (the "GPA Information").
<PAGE> 16
15
(b) Each of GPA Group, the Settlor and their respective subsidiaries
(collectively, the "Subsidiaries" and, together with GPA Group, the "GPA
Companies") is duly incorporated (in the case of GPA Group, as a public
limited company) and is validly existing as a corporation in good standing
(in each jurisdiction in which such concept applies) under the applicable
laws of its jurisdiction of incorporation, is duly qualified to transact
business and in good standing (in each jurisdiction in which such concept
applies) in each jurisdiction in which the ownership or leasing of its
properties and the conduct of its business requires such qualification,
except to the extent that the failure to be so qualified or to be in good
standing (in each jurisdiction in which such concept applies) would not have
a material adverse effect on the financial condition, results of operations
or business of GPA Group, and each GPA Company has the corporate power and
authority to own or hold its property and to conduct the business in which
it is engaged as described in the Prospectus.
(c) GPA Group has all necessary corporate power and authority to
execute and deliver this Agreement and perform its obligations hereunder and
this Agreement has been duly authorized, executed and delivered by GPA
Group.
(d) Each of the GPA Companies has all necessary corporate power and
authority to perform its obligations under each Relevant Document to which
it is a party. Each Relevant Document has been duly authorized, executed
and delivered by such of the GPA Companies as are party thereto and
constitutes a valid and binding agreement of such GPA Company, enforceable
against such GPA Company in accordance with its terms (subject in each case
to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws affecting creditors' rights generally from
time to time in effect, and subject, as to rights of acceleration and the
availability of equitable remedies, to general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(e) The execution, delivery and performance of this Agreement by GPA
Group, and of the Relevant Documents by such of the GPA Companies as are
party thereto, and compliance with the terms of this Agreement by GPA Group,
and of the terms of the Relevant Documents by such of the GPA Companies as
are party thereto, and the consummation of the transactions contemplated by
this Agreement by GPA Group and of the transactions contemplated by the
Relevant Documents by such of the GPA Companies as are party thereto, will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any properties or assets
of any GPA Company pursuant to the terms of, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which any such
GPA Company is a party or by which any such GPA Company is bound, or to
which any of the properties or assets of any such GPA Company is subject,
nor will such actions result in any violation of, or conflict with, the
provisions of the constitutional documents of any such GPA Company or any
statute, order, decree, rule or regulation of any court or governmental
agency or body having proper jurisdiction over any GPA Company or any of
their respective properties or assets (except for such statutes, orders,
decrees, rules or regulations the violation of which
<PAGE> 17
16
would not have a material adverse effect on the consolidated financial
condition, results of operations or business of the GPA Companies, taken as
a whole).
(f) Except for (i) such consents, approvals, authorizations,
registrations or qualifications as may be required under the applicable
state securities, Blue Sky or similar laws in connection with the offer,
purchase and distribution of the 1998 Refinancing Certificates by the
Underwriters and (ii) such consents as have been obtained and are in full
force and effect, no consent, approval, authorization or order of, or filing
or registration with, any court or governmental agency or body having
jurisdiction over any GPA Company or any of their respective properties or
assets is required for the execution, delivery and performance of this
Agreement and the performance of the other Relevant Documents by such of the
GPA Companies as are party thereto and the consummation of the transactions
contemplated hereby and thereby, other than such consents the failure of
which to obtain would not have a material adverse effect on the consolidated
financial condition, results of operations or business of the GPA Companies,
taken as a whole.
(g) Except as disclosed in the Prospectus, there are no legal or
governmental proceedings pending to which any GPA Company is a party or of
which any property of any GPA Company is the subject (i) asserting the
invalidity of this Agreement or any Relevant Document to which such GPA
Company is a party, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any Relevant Document to
which such GPA Company is a party, (iii) seeking any determination or ruling
that would materially and adversely affect the performance by any of the GPA
Companies of its respective obligations under this Agreement or any Relevant
Document to which such GPA Company is a party, (iv) seeking any
determination or ruling that would adversely affect the validity or
enforceability of this Agreement or any Relevant Document to which such GPA
Company is a party, or (v) which would reasonably be expected to have a
material adverse effect on the consolidated financial condition, results of
operations or business of the GPA Companies, taken as a whole; and, to the
best of GPA Group's knowledge, no such proceedings are pending or
threatened.
(h) All of the information supplied by GPA Group to the Representative
and the Rating Agencies in connection with the actual or prospective
issuance of the 1998 Refinancing Notes and the 1998 Refinancing Certificates
(as supplemented or superseded from time to time prior to the date of this
Agreement) was, at the time it was supplied, and is true and correct in all
material respects and is not misleading, and did not fail to disclose any
information which was necessary to make the information so given not
misleading in the context in which it was given.
(i) The Settlor is an entity separate and distinct from the estate
created by the Airplanes Trust Indenture.
(j) The acquisition by the Settlor of its residual interest in
Airplanes Trust under the Airplanes Trust Agreement is an exempt transaction
under the Securities Act, and it is not necessary to qualify the Airplanes
Trust Agreement under the Trust Indenture Act in connection with such
acquisition.
<PAGE> 18
17
4. Purchase and Offering of the 1998 Refinancing Certificates by the
Underwriters. Upon the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions hereinafter stated,
each Issuer agrees to cause each of the 1998 Refinancing Trusts to sell to the
several Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from each of the 1998 Refinancing Trusts the respective
principal amounts of each subclass of 1998 Refinancing Certificates set forth
in Schedule I hereto opposite their names at the percentages of the principal
amounts of such subclasses of 1998 Refinancing Certificates set forth in
Schedule II hereto (the "public offering prices"). As compensation for the
Underwriters for their respective commitments and obligations hereunder in
respect of the 1998 Refinancing Certificates, including their respective
undertakings to offer the 1998 Refinancing Certificates for sale to the public,
the Issuers will pay to the Underwriters severally and not jointly underwriting
commissions in an amount equal to the respective percentages of the principal
amount of each subclass of 1998 Refinancing Certificates purchased by the
Underwriters as set forth in Schedule II hereto (the "Commissions"). Payment
of the Commissions shall be made simultaneously with the payment by the
Underwriters to the 1998 Refinancing Trustee of the public offering price of
the 1998 Refinancing Certificates, in each case in the manner specified in
Section 5 hereof.
Each of the Issuers is advised by the Representative that the Underwriters
propose to make a public offering of their respective portions of the 1998
Refinancing Certificates upon the terms and conditions set forth in the
Prospectus as soon after the Registration Statement and this Agreement have
become effective as is advisable in the judgment of the Representative. Each
of the Issuers is further advised by the Representative that each subclass of
1998 Refinancing Certificates is to be offered to the public initially at the
public offering price thereof and to certain dealers selected by the
Representative at a price that represents a concession not in excess of the
percentage of the principal amount thereof under the public offering price set
forth for such subclass in Schedule II hereto, and that any Underwriter may
allow, and such dealers may reallow, a concession, not in excess of the
percentage of the principal amount thereof set forth for such subclass in
Schedule II hereto, to any Underwriter or to certain other dealers.
Each Underwriter agrees, severally and not jointly, that the Issuers may
rely upon the restrictions set forth in paragraphs - through - under the
caption "Selling Restrictions for the 1998 Refinancing Certificates" in the
Invitation Telex, dated -, 1998, from the Representative to the Underwriters.
5. Delivery of and Payment for the 1998 Refinancing Certificates. Payment
for the 1998 Refinancing Certificates shall be made in U.S. dollars, against
delivery of the 1998 Refinancing Certificates as specified below, at 9:00 A.M.
(New York time) on March 16, 1998, or at such other time or on such other date
as shall be designated in writing by the Representative with the agreement of
the Issuers, by wire transfer payable in immediately available funds to the
order of the party or parties identified by the Issuers to the Representative
not later than two full business days prior to the Closing Date. The time and
date of such payment are herein referred to as the "Closing Date."
Each subclass of the 1998 Refinancing Certificates will be represented by
one
<PAGE> 19
18
or more global certificates (the "Global Certificates") registered in the name
of Cede & Co. as nominee of The Depository Trust Company, Inc. ("DTC"), as
specified to the Issuers by the Representative. Such Global Certificates shall
be delivered to the Representative at the offices of Shearman & Sterling, 199
Bishopsgate, London, EC2M 3TY, England not later than 2:00 P.M. (London time)
two business days prior to the Closing Date, for the respective accounts of the
several Underwriters, with any transfer taxes payable in connection with the
transfer of the 1998 Refinancing Certificates to the Underwriters duly paid.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligation of each
Underwriter hereunder.
6. Further Agreements of the Issuers. Each of the Issuers further agrees
with the Underwriters that:
(a) The Issuers will prepare the Prospectus in a form approved by the
Representative, and file such Prospectus pursuant to Rule 424(b) or Rule 462
of the Rules and Regulations not later than the Commission's close of
business on the second business day following the execution and delivery of
this Agreement or, if applicable, such earlier time as may be required by
Rule 430A of the Rules and Regulations; make no further amendment or any
supplement to the Registration Statement or to the Prospectus prior to the
Closing Date except as permitted herein; advise the Representative, promptly
after it receives notice thereof at any time prior to the expiration of the
period during which the Underwriters are obligated under the Securities Act
and the Rules and Regulations to deliver a prospectus, of the time when any
amendment to the Registration Statement has been filed or becomes effective
or any supplement to the Prospectus or any amended Prospectus has been filed
and furnish the Representative with copies thereof; advise the
Representative, promptly after it receives notice thereof, of the issuance
by the Commission of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus, of the suspension
of the qualification of the 1998 Refinancing Certificates for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the amending
or supplementing of the Registration Statement or the Prospectus or for any
additional information; and, in the event of the issuance of any stop order
or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification, promptly
use its best efforts to obtain its withdrawal at the earliest possible time.
(b) The Issuers will furnish promptly to the Representative or to
counsel to the Underwriters three signed copies of the Registration
Statement as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits filed
therewith, without charge.
(c) The Issuers will deliver promptly to the Representative such number
of the following documents as the Representative shall reasonably request:
(i) a conformed copy of the Registration Statement as originally filed with
the Commission and each amendment thereto (in each case, without consents or
exhibits) for delivery to each Underwriter and (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus. In
the case of the Prospectus, each of Airplanes Limited and
<PAGE> 20
19
Airplanes Trust further agrees to furnish copies of the Prospectus in New
York and London, prior to 5:00 P.M. (London time) on the business day
following the date of this Agreement, in such quantities as the
Representative reasonably requests. If the delivery of a prospectus is
required at any time prior to the expiration of nine months after the
Effective Time in connection with the offering or sale of the 1998
Refinancing Certificates and, if at such time any events shall have occurred
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary during
such same period to amend or supplement the Prospectus in order to comply
with the Securities Act, the Issuers shall amend or supplement the
Prospectus, as the Issuers deem appropriate to correct such statement or
omission or effect such compliance, notify the Representative of such
amendment or supplement and, upon the Representative's request, prepare and
furnish without charge to each Underwriter and to any dealer in securities
as many copies as the Representative may from time to time reasonably
request of such amended Prospectus or supplement to the Prospectus which
corrects such statement or omission or effects such compliance, and in case
any Underwriter is required to deliver a prospectus in connection with sales
of any of the 1998 Refinancing Certificates at any time nine months or more
after the Effective Time, upon the request of the Representative but at the
expense of such Underwriter, prepare and deliver to such Underwriter as many
copies as the Representative may reasonably request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Securities
Act.
(d) The Issuers will file promptly with the Commission any amendment to
the Registration Statement or the Prospectus or any supplement to the
Prospectus that (i) may, in the reasonable judgment of the Issuers or in the
reasonable judgment of the Representative at any time prior to the
expiration of the period during which the Underwriters are obligated under
the Securities Act and the Rules and Regulations to deliver a prospectus, be
required by the Securities Act or the Rules and Regulations or (ii) is
requested by the Commission.
(e) Prior to filing with the Commission (i) any amendment to the
Registration Statement or supplement to the Prospectus or (ii) any
Prospectus pursuant to Rule 424 or Rule 462 of the Rules and Regulations,
the Issuers will, at any time prior to the expiration of the period during
which the Underwriters are obligated under the Securities Act and the Rules
and Regulations to deliver a prospectus, furnish a copy thereof to the
Representative and counsel for the Underwriters and not file any such
document to which the Representative shall reasonably object after having
been given reasonable notice of the proposed filing thereof.
(f) So long as any of the 1998 Refinancing Certificates are
outstanding, the Issuers will furnish to the Underwriters, by first-class
mail as soon as practicable (i) all documents distributed by the 1998
Refinancing Trustee, either Indenture Trustee, the Cash Manager or the
Issuers to holders of 1998 Refinancing Certificates, or filed with the
Commission pursuant to the Exchange Act, or any rule or regulation of the
Commission thereunder, (ii) any order of the Commission under the Securities
Act or the Exchange
<PAGE> 21
20
Act applicable to either of the 1998 Refinancing Trusts or to the Issuers as
originators of the 1998 Refinancing Trusts, or pursuant to a "no action"
letter obtained from the staff of the Commission by the Issuers and
affecting either of the 1998 Refinancing Trusts or the Issuers as
originators of the 1998 Refinancing Trusts, and (iii) from time to time,
such other information concerning the Issuers or either of the 1998
Refinancing Trusts as the Underwriters may reasonably request.
(g) The Issuers will promptly from time to time take such action as the
Representative may reasonably request to qualify the 1998 Refinancing
Certificates for offering and sale under the securities or Blue Sky laws of
such jurisdictions as the Representative may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of the 1998 Refinancing Certificates; provided that, in connection
therewith, the Issuers shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction.
(h) During the period beginning on the date hereof and continuing to
and including the later of (i) the completion of the distribution of the
1998 Refinancing Certificates covered by this Agreement and (ii) the Closing
Date, the Issuers will not offer, sell, contract to sell or otherwise
dispose of, or cause to be offered, sold, contracted for sale or disposed,
any debt securities of the Issuers, other than the 1998 Refinancing Notes or
any certificates of fractional undivided interests in any debt of the
Issuers which are substantially similar to the 1998 Refinancing Notes, or
the 1998 Refinancing Certificates, other than as contemplated in the
Prospectus, without the prior written consent of the Representative.
(i) The Issuers will make generally available to the Issuers'
Certificateholders and to the Underwriters as soon as practicable an earning
statement covering the twelve-month period ending March 31, 1998 that
satisfies the provisions of Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder.
(j) To the extent, if any, that the ratings provided with respect to
the 1998 Refinancing Certificates by any Rating Agency are conditional upon
the furnishing of documents or the taking of any other actions by the
Issuers, the Issuers will furnish such documents and take any such other
actions.
(k) The Issuers will use their reasonable best efforts to cause the
1998 Refinancing Certificates to be listed on the Luxembourg Stock Exchange
prior to the Closing Date and will furnish from time to time any and all
documents, instruments, information and undertakings that may reasonably be
necessary or advisable in order to comply with the listing rules of the
Luxembourg Stock Exchange unless and until the Issuers, after consultation
with the Representative, determine to terminate the listing of the 1998
Refinancing Certificates on such exchange.
7. Expenses. Each of the Issuers will pay (a) the costs incident to the
authorization, issuance, sale, authentication, transfer and delivery of the
1998 Refinancing
<PAGE> 22
21
Notes to the purchaser thereof and the 1998 Refinancing Certificates to the
Underwriters and any taxes payable in connection therewith; (b) the costs
incident to the preparation, printing and filing under the Securities Act of
the Registration Statement, any amendments and exhibits thereto, any
Preliminary Prospectus, the Prospectus and any amendment or supplement thereto
and the Trust Agreement; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), any Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Prospectus,
all as provided in this Agreement; (d) the costs of distributing any agreement
relating to the organization of the underwriting syndicate and the selling
group to the members thereof by mail, telex or other means of communication;
(e) the reasonable fees and expenses of qualifying the 1998 Refinancing
Certificates under the securities laws of the several jurisdictions as provided
in Section 6(h) hereof and of preparing, printing and distributing a Blue Sky
Memorandum (including fees and expenses of counsel to the Underwriters); (f)
any fees charged by the Rating Agencies for rating the 1998 Refinancing
Certificates; (g) all costs and expenses incident to the listing of the 1998
Refinancing Certificates on the Luxembourg Stock Exchange; (h) the costs and
charges of DTC and its nominee in connection with the 1998 Refinancing
Certificates, including the book-entry ownership system for the 1998
Refinancing Certificates; (i) the costs and charges of any transfer agent,
registrar or paying agent; (j) the fees and expenses of the 1998 Refinancing
Trustee and any agent of the 1998 Refinancing Trustee and the fees and
disbursements of counsel for the 1998 Refinancing Trustee in connection with
the Trust Agreement and the 1998 Refinancing Certificates; (k) the reasonable
expenses of the Underwriters properly incurred, including the fees and
disbursements of legal advisors and other professional advisors; and (l) all
other reasonable fees and expenses incident to the performance of the
obligations of the Issuers hereunder.
8. Conditions of the Underwriters' Obligations. The several obligations
of the Underwriters hereunder are subject to the accuracy, when made on the
date hereof and on the Closing Date, of the representations and warranties of
each of the Issuers and GPA Group contained herein, to the performance by the
Issuers and GPA Group of their respective obligations hereunder, and to each of
the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission in
accordance with Section 6(a) hereof; and no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission.
(b) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Relevant Documents,
the Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall be
satisfactory in all material respects to counsel for the Underwriters, and
each of the Issuers and GPA Group shall have furnished or caused to be
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date,
<PAGE> 23
22
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Issuers' securities by any "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule
436(g)(2) of the Rules and Regulations,
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations,
of the Issuers or any of their respective subsidiaries, taken as a
whole, from that set forth in the Registration Statement, that, in
the judgment of the Representative, is material and adverse and
that makes it, in the judgment of the Representative, impracticable
to market the 1998 Refinancing Certificates on the terms and in the
manner contemplated in the Prospectus.
(d) Mourant du Feu & Jeune, Jersey, Channel Islands counsel to
Airplanes Limited, shall have furnished to the Representative their written
opinion to the effect specified in Exhibit A hereto, addressed to the
Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Representative.
(e) Potter, Anderson & Corroon, Delaware counsel to Airplanes Trust and
the Airplanes Trustee, shall have furnished to the Representative their
written opinion to the effect specified in Exhibit B hereto, addressed to
the Underwriters and dated the Closing Date, in form and substance
reasonably satisfactory to the Representative.
(f) Davis Polk & Wardwell, U.S. counsel to GPA Group, the Issuers and
the Settlor, shall have furnished to the Representative their written
opinion to the effect specified in Exhibit C hereto, addressed to the
Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Representative.
(g) McCann FitzGerald Solicitors, Irish counsel to GPA Group and the
Issuers, shall have furnished to the Representative their written opinion to
the effect specified in Exhibit D hereto, addressed to the Underwriters and
dated the Closing Date, in form and substance reasonably satisfactory to the
Representative.
(h) Seward & Kissel, special counsel to the 1998 Refinancing Trustee,
shall have furnished to the Representative their written opinion to the
effect set forth in Exhibit E hereto, addressed to the Underwriters and
dated the Closing Date, in form and substance reasonably satisfactory to the
Representative.
(i) Any opinions delivered to any Rating Agency in respect of the 1998
Refinancing Certificates shall each have been furnished to the
Representative in form and substance satisfactory to the Representative,
together with a letter stating that each of the Underwriters may rely on
such opinions as if they were addressed to the Underwriters.
<PAGE> 24
23
(j) Shearman & Sterling, special counsel to the Underwriters, shall
have furnished to the Representative their written opinion dated the Closing
Date, in form and substance satisfactory to the Representative, with respect
to the 1998 Refinancing Certificates, the 1998 Refinancing Notes, the
Registration Statement, the Prospectus, this Agreement and other related
matters as the Representative may reasonably require, and the Issuers and
GPA Group shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass upon such
matters. In rendering such opinion, such counsel may make assumptions
relating to issues covered by the other opinions delivered pursuant to this
Section, including all matters governed by the laws of Jersey, Ireland and
the United Kingdom, and their opinion may be subject to the qualifications,
assumptions and exceptions set forth in the other opinions delivered
pursuant to this Section.
(k) At the time this Agreement is executed and at the Closing Date,
KPMG shall have furnished to the Representative a letter or letters
addressed to the parties hereto, dated respectively as of the date of this
Agreement and the Closing Date, to the effect set forth in Exhibit G hereto,
in form and substance satisfactory to the Representative.
(l) At the time this Agreement is executed and at the Closing Date, the
Washington, D.C. office of KPMG shall have furnished to the parties hereto,
a letter or letters addressed to the parties hereto, dated respectively as
of the date of the Prospectus and the Closing Date, to the effect set forth
in Exhibit H hereto, in form and substance satisfactory to the
Representative.
(m) With respect to the letters, dated and delivered the date of this
Agreement (the "initial letters"), from KPMG to the Representative, pursuant
to Sections 8(l) and 8(m) hereof, the appropriate office of KPMG shall have
furnished to the Representative letters, addressed to the parties hereto and
dated the Closing Date (the "bringdown letters"), (i) confirming that they
are independent public accountants within the meaning of the Securities Act
and are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of each such bringdown letter (or,
with respect to matters involving changes or developments since the
respective dates as of which certain specified financial information is
given in the Prospectus, as of the date not more than five days prior to the
date of the bringdown letter), the conclusions and findings of such firm
with respect to the financial information and other matters covered by the
initial letter and (iii) confirming in all material respects the conclusions
and findings set forth in the respective initial letter.
(n) The Representative shall have received from each Issuer on the
Closing Date a certificate, dated the Closing Date and signed by (i), with
respect to the certificate delivered by Airplanes Limited, a member of the
Board of Directors of Airplanes Limited, and (ii), with respect to the
certificate of Airplanes Trust, a Controlling Trustee of Airplanes Trust, in
either case to the effect set forth in clause 8(c)(ii) above and to the
effect that the representations and warranties of such Issuer in Section 1
or 2 hereof, as applicable, are true and correct as of such date and that
such Issuer has complied with all
<PAGE> 25
24
its agreements and satisfied all of the conditions on its part to be
performed or satisfied on or before such date except for such agreements or
conditions as may have been waived by the Representative by notice in
writing.
(o) GPA Group shall have furnished to the Representative a certificate
of GPA Group, dated the Closing Date and executed by an executive officer,
stating that the representations and warranties of GPA Group in Section 3
hereof are true and correct as of the Closing Date; GPA Group has complied
with all its agreements contained herein; the conditions on its part to be
fulfilled pursuant to this Agreement prior to the Closing Date have been
fulfilled or waived by the Representative by notice in writing; and nothing
has come to such officer's attention that would lead such officer to believe
that the Registration Statement or the Prospectus, and any amendment or
supplement thereto, as of the date thereof and as of the Closing Date,
contained an untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading.
(p) The Representative shall have received evidence satisfactory to the
Representative that each subclass of 1998 Refinancing Certificates shall
have obtained the ratings set forth in the Prospectus.
(q) Each of the Accounts established by the Cash Manager shall be
jointly in the names of the Indenture Trustees with the 1998 Refinancing
Trustee or with the bank or banks set forth in the Cash Management
Agreement.
(r) On or prior to the Closing Date, (i) each Issuer shall have duly
authorized, executed and delivered Supplements Nos. 9 and 10 to the Trust
Agreement , (ii) Airplanes Limited shall have duly authorized, executed and
delivered Supplement No. 1 to the Airplanes Limited Indenture, (iii)
Airplanes Trust shall have duly authorized, executed and delivered
Supplement No. 1 to the Airplanes Trust Indenture, (iv) each Relevant
Document shall be and remain in full force and effect with respect to each
of the Issuers party thereto as of the Closing Date and (v) there shall not
have occurred any breach in any representation or warranty of any party
under the Stock Purchase Agreement other than as has been notified to the
Representative in writing.
(s) Each Issuer shall be in compliance and shall have performed or
complied with all of the covenants, agreements, terms and provisions on its
part to be performed or observed contained in the Trust Agreement and each
Relevant Document to which it is a party, and each GPA Company party thereto
shall have performed or complied in all material respects with all of the
covenants, agreements, terms and provisions on their respective parts to be
performed or observed contained in the Relevant Documents.
(t) Simultaneous with or prior to the Closing Date, the 1998
Refinancing Notes shall have been issued and sold to each of the 1998
Refinancing Trusts.
(u) Subsequent to the respective dates of the audited balance sheets in
the Registration Statement and the Prospectus, (i) the Issuers and their
respective subsidiaries
<PAGE> 26
25
shall not have incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary
course of business; (ii) the Issuers shall not have purchased any of their
outstanding capital stock or residual interest, as the case may be, nor
declared, paid or otherwise made any dividend or distribution of any kind,
in the case of Airplanes Limited, on its capital stock, and in the case of
Airplanes Trust, on its residual interest; and (iii) there shall not have
been any material change in the capital stock or residual interest, as the
case may be, short-term debt or long-term debt of the Issuers and their
consolidated subsidiaries, taken as a whole, except in each case as
described in or contemplated by the Prospectus.
(v) The Issuers shall have furnished to the Representative a letter of
each of the Appraisers, addressed to each of the parties hereto and dated
the Closing Date, confirming that each of such Appraisers and each of its
directors and officers (i) is not an affiliate of the Issuers, any of the
GPA Companies, GE Capital Aviation Services Limited, an Irish public limited
company ("GECAS"), or any affiliate of any of the foregoing, (ii) does not
have any substantial interest, direct or indirect, in the Issuers or their
respective subsidiaries, any of the GPA Companies, GECAS or in any affiliate
of any of the foregoing, (iii) is not connected with the Issuers, any of the
GPA Companies, GECAS or any affiliate of any of the foregoing as an officer,
employee, promoter, underwriter, trustee, partner, director or person
performing similar functions and (iv) has not had and does not have any
past, present or anticipated future interest in any of the Aircraft.
(w) The Luxembourg Stock Exchange shall have approved the 1998
Refinancing Certificates for Listing, subject only to official notice of
issuance.
(x) All of the conditions necessary to be fulfilled for the closing of
the refinancing of the Subclass A-1 Notes of each of Airplanes Limited and
Airplanes Trust and the Subclass A-1 Certificates shall have been fulfilled
without any waivers other than such waivers as shall have been agreed by the
Representative.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
9. Indemnification and Contribution. (a) Each of the Issuers and the GPA
Group agrees to jointly and severally indemnify and hold harmless each
Underwriter, each person, if any, who controls (each, a "Control Person") any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and each of their respective directors, officers, employees or agents,
from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
by any Underwriter or any such Control Person in connection with defending or
investigating any such action or claim) caused by any untrue or misleading
statement or alleged untrue or misleading statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented), or
caused by any omission or alleged omission to state therein a material fact
<PAGE> 27
26
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue or misleading statement or omission based upon the
Underwriter Information or the T-1 Information included therein; provided,
however, that the foregoing indemnity of GPA Group shall be limited to the GPA
Information.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless each of the Issuers and GPA Group, their respective directors and
officers who sign the Registration Statement and each Control Person of either
Issuer or GPA Group, in each case to the same extent as the foregoing indemnity
from the Issuers and GPA Group to such Underwriter, but only with reference to
the information relating to such Underwriter furnished to the Issuers in
writing by such Underwriter through the Representative expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing, and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by the
Representative, in the case of parties indemnified pursuant to the second
preceding paragraph, and by GPA Group on its own behalf and the Administrative
Agent on behalf of the Issuers, in the case of parties indemnified pursuant to
the first preceding paragraph. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid request and (ii) such
<PAGE> 28
27
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
Notwithstanding anything contained herein to the contrary, if indemnity may be
sought pursuant to this Section 9 in respect of any action or proceeding, then
in addition to such separate firm for the indemnified parties, the indemnifying
party shall be liable for the reasonable fees and expenses of not more than one
separate firm (in addition to any local counsel) for the Representative in its
capacity as a "qualified independent underwriter" and all Control Persons, if
any, of the Representative.
(d) If the indemnification provided for in the first or second paragraph
of this Section 9 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Issuers and GPA Group on the one hand and the
Underwriters on the other hand from the offering of the 1998 Refinancing
Certificates or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Issuers and GPA Group on the one hand and the
Underwriters on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Issuers and GPA Group on the one hand and the Underwriters on the other hand in
connection with the offering of the 1998 Refinancing Certificates shall be
deemed to be in the same respective proportions as the aggregate net proceeds
from the offering of the 1998 Refinancing Certificates (before deducting
expenses) received by the Issuers and GPA Group on the one hand and the total
underwriting commissions received by the Underwriters on the other hand, in
each case as set forth in the table on the cover page of the Prospectus, bear
to the Initial Aggregate Principal Amount of the 1998 Refinancing Certificates.
The relative fault of the Issuers and/or GPA Group on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by (a) the Issuers, (b) GPA Group or (c) the Underwriters
(i.e., the Underwriter Information) and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, provided that GPA Group shall not be responsible for any
such information other than the GPA Information. The Underwriters' respective
obligations to contribute pursuant to this Section 9 are several in proportion
to the respective principal amounts of 1998 Refinancing Certificates they have
purchased hereunder, and not joint.
(e) The Issuers, GPA Group and the Underwriters agree that it would not be
just or equitable if contributions pursuant to this Section 9 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any
<PAGE> 29
28
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liabilities referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the 1998
Refinancing Certificates underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay or become liable to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for in
this Section 9 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section 9
and the representations, warranties and agreements of the Issuers and GPA Group
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation
made by or on behalf of any Underwriter or any Control Person with respect to
any Underwriter or by or on behalf of the Issuers or GPA Group, their
respective officers or directors or any Control Person with respect to the
Issuers or GPA Group and (iii) acceptance of and payment for any of the 1998
Refinancing Certificates.
10. Termination. This Agreement shall be subject to termination by notice
given by the Representative to the Issuers, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
the New York Stock Exchange, the London Stock Exchange or the Luxembourg Stock
Exchange, (ii) trading of any securities of any Issuer shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or in London by the
relevant London or United Kingdom authorities or (iv) there shall have occurred
any outbreak or escalation of hostilities or any change in financial markets or
any calamity or crisis that, in the Representative's judgment, is material and
adverse and (b) in the case of any of the events specified in clauses (a)(i)
through (iv), such event singly or together with any other such event makes it,
in the Representative's judgment, impracticable to market the 1998 Refinancing
Certificates on the terms and in the manner contemplated in the Prospectus.
11. Effectiveness; Defaulting Underwriters. (a) This Agreement shall
become effective upon the later of (x) execution and delivery hereof by the
parties hereto and (y) release of notification of the effectiveness of the
Registration Statement by the Commission.
(b) If, on the Closing Date, any one or more of the Underwriters shall
fail
<PAGE> 30
29
or refuse to purchase 1998 Refinancing Certificates that it or they have agreed
to purchase hereunder on such date, and the aggregate principal amount of 1998
Refinancing Certificates which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate principal amount of the 1998 Refinancing Certificates to be purchased
on such date, the other Underwriters shall be obligated severally in the
proportions that the principal amount of each subclass of 1998 Refinancing
Certificates set forth opposite their respective names in Schedule I bears to
the aggregate principal amount of 1998 Refinancing Certificates set forth
opposite the names of all such non-defaulting Underwriters in Schedule I, or in
such other proportions as the Representative may specify, to purchase the 1998
Refinancing Certificates which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase on such date; provided that in no
event shall the principal amount of any 1998 Refinancing Certificates that any
Underwriter has agreed to purchase pursuant to Section 4 be increased pursuant
to this Section 11 by an amount in excess of one-ninth of such principal amount
of 1998 Refinancing Certificates without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase 1998 Refinancing Certificates and the aggregate
principal amount of 1998 Refinancing Certificates with respect to which such
default occurs is more than one-tenth of the aggregate principal amount of 1998
Refinancing Certificates to be purchased on such date, and arrangements
satisfactory to the Representative and the Issuers for the purchase of such
1998 Refinancing Certificates are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Issuers or GPA Group. In any such case
either the Representative or the Issuers shall have the right to postpone the
Closing Date but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus
or in any other documents or arrangements may be effected. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
12. Expense Reimbursement. If this Agreement shall be terminated by the
Underwriters, or any of them, because of any failure or refusal on the part of
either Issuer to comply with the terms or to fulfill any of the conditions of
this Agreement, or if for any reason either Issuer shall be unable to perform
its obligations under this Agreement, the Issuers will jointly and severally
reimburse the Underwriters or such Underwriters as have so terminated this
Agreement with respect to themselves, severally, for all out-of-pocket expenses
(including the fees and disbursements of their counsel) reasonably incurred by
such Underwriters in connection with this Agreement or the offering
contemplated hereunder.
13. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to any Underwriter, shall be delivered or sent by mail, telex or
facsimile transmission to Morgan Stanley & Co. Incorporated, 25 Cabot
Square, Canary Wharf, E14 4QA London (Telecopy No: +44-171-425-4328),
Attention: C. Scott Peterson, with a copy to the General Counsel at 1585
Broadway, New York, New York 10036 (Telecopy No.: +1-212-761-0504);
(b) if to Airplanes Limited or Airplanes Trust, shall be delivered or
sent by
<PAGE> 31
30
mail, telex or facsimile transmission to the address of the Issuers set
forth in the Registration Statement, with a copy to GPA Financial Services
(Ireland) Limited, an Irish limited company, as Administrative Agent, GPA
House, Shannon, County Clare, Ireland, Attention: Company Secretary
(Telecopy No.: +353-61-360-220);
(c) if to GPA Group, shall be delivered or sent by mail, telex or
facsimile transmission to GPA House, Shannon, County Clare, Ireland,
Attention: [Patrick Blaney] (Telecopy No.: +353-61-360-000);
Any such statement, requests, notices or agreements shall take effect at
the time of receipt thereof. The Issuers and GPA Group shall be entitled to
act and rely upon any request, consent, notice or agreement given or made on
behalf of the Underwriters by the Representative.
14. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the sole benefit of and be binding upon the Underwriters, each Issuer and
GPA Group and any Control Person of each of them and, to the limited extent
provided herein, to their respective directors, officers, employees, agents and
successors. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 14, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
15. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
16. Submission to Jurisdiction; Appointment of Agent for Service;
Obligation Currency. Any suit, action or proceeding against any party to this
Agreement arising out of or relating to this Agreement, any transaction
contemplated hereby or any judgment entered by any court in respect thereof may
be brought in any New York State court located in the County of New York or
Federal court sitting in the Second Circuit, and each such party hereby submits
to the nonexclusive jurisdiction of such courts for the purpose of any such
suit, action or proceeding. To the extent that service of process by mail is
permitted by applicable law, each party hereto irrevocably consents to the
service of process in any such suit, action or proceeding in such courts by the
mailing of such process by registered or certified mail, postage prepaid, at
its address for notices provided above. Each party to this Agreement
irrevocably agrees not to assert any objection which it may ever have to the
laying of venue of any such suit, action or proceeding in any New York State
court located in the County of New York or Federal court sitting in the Second
Circuit, and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. Each of the Issuers
hereby irrevocably designates and appoints Corporation Service Company, 375
Hudson Street, New York, New York 10014-3660, and GPA Group hereby irrevocably
designates and appoints GPA Corporation, Lee Farm Corporate Park, 83 Wooster
Heights Road, Danbury, CT 06810, as their respective authorized agents
(together, the "Process Agents"), upon whom process may be served in any such
suit or proceeding, it being understood that such designations and appointments
shall become effective immediately without any further action on the part of
the Issuers or GPA Group. Each of the Issuers and
<PAGE> 32
31
GPA Group hereby represents to each Underwriter that it has notified its
Process Agent of such designation and appointment and that such Process Agent
has accepted the same in writing. Each of the Issuers and GPA Group hereby
irrevocably authorizes and directs its Process Agent to accept such service.
Each of the Issuers and GPA Group further agrees that service of process upon
its Process Agent and written notice of said service to the Issuers and GPA
Group, as applicable, mailed by first class mail or delivered to such Process
Agent, shall be deemed in every respect effective service of process upon the
Issuers and GPA Group, as applicable, in any such suit or proceeding. Nothing
herein shall affect the right of any Underwriter or any Control Person with
respect to any Underwriter to serve process in any other manner permitted by
law. Each of the Issuers and GPA Group agrees that a final action in any such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other lawful manner. If either
of the Issuers or GPA Group has or hereafter acquires immunity from
jurisdiction or legal process or from attachment in aid of execution or from
execution with respect to itself or its property, such Issuer or GPA Group, as
the case may be, hereby irrevocably waives, to the fullest extent permitted
under applicable law, such immunity in respect of its obligations hereunder in
any action which may be instituted in any federal or state court sitting in New
York, New York, or in any competent court in Jersey, Channel Islands by any
Underwriter or by any Control Person of any Underwriter or any director,
officer, employee or agent of any Underwriter. This waiver is intended to be
effective upon the execution of this Agreement without any further act by
either Issuer or GPA Group before any such court, and the introduction of a
true copy of this Agreement into evidence in any such court shall, to the
fullest extent permitted by applicable law, be conclusive and final evidence of
such waiver.
The obligation of the parties hereto to make payments hereunder is in U.S.
dollars (the "Obligation Currency") and such obligation shall not be discharged
or satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency or any other
realization in such other currency, whether as proceeds of setoff, security,
guarantee, distributions, or otherwise, except to the extent to which such
tender, recovery or realization shall result in the effective receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or affect the meaning or
interpretation of, this Agreement.
18. Waiver of Jury Trial. To the fullest extent permitted by applicable
law, each party to this Agreement waives any right it may have to a trial by
jury in respect of any litigation directly or indirectly arising out of, under
or in connection with this Agreement.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
Very truly yours,
AIRPLANES LIMITED
<PAGE> 33
By __________________________________
Name:
Director
AIRPLANES U.S. TRUST
By __________________________________
Name:
Controlling Trustee
GPA GROUP plc
By __________________________________
Name:
Title:
Accepted, March --, 1998
MORGAN STANLEY & CO. INCORPORATED
Acting severally on behalf of itself and the
the several Underwriters named herein
By Morgan Stanley & Co. Incorporated
By _____________________________________
Name:
Title:
<PAGE> 34
SCHEDULE I
SUBCLASS A-6 CERTIFICATES
<TABLE>
<S> <C>
UNDERWRITERS COMMITMENT
Morgan Stanley & Co Incorporated $
Lehman Brothers Inc.
Salomon Brothers Inc.
Total $
</TABLE>
<TABLE>
SUBCLASS A-7 CERTIFICATES
<S> <C>
UNDERWRITERS COMMITMENT
Morgan Stanley & Co. Incorporated $
Lehman Brothers Inc.
Salomon Brothers Inc
Total $
</TABLE>
<PAGE> 35
SCHEDULE II
<TABLE>
<S> <C> <C> <C>
INITIAL PRICE TO PUBLIC COMMISSIONS
CLASS AGGREGATE (PERCENTAGE OF (PERCENTAGE OF
DESIGNATION PRINCIPAL AMOUNT PRINCIPAL AMOUNT) PRINCIPAL AMOUNT)
Subclass A-6 $
Subclass A-7 $
SELLING CONCESSION DEALER REALLOWANCE
CLASS (PERCENTAGE OF (PERCENTAGE OF
DESIGNATION PRINCIPAL AMOUNT) PRINCIPAL AMOUNT)
Subclass A-6
Subclass A-7
</TABLE>
<PAGE> 36
SCHEDULE III
GPA INFORMATION
[ To come ]
<PAGE> 1
EXHIBIT 4.10
TRUST SUPPLEMENT NO. - -
This TRUST SUPPLEMENT NO. - -, dated as of - - (the "Trust Supplement"),
among AIRPLANES LIMITED, a limited liability company organized under the laws of
Jersey, Channel Islands ("Airplanes Limited"), AIRPLANES U.S. TRUST, a Delaware
business trust formed pursuant to the Airplanes Trust Agreement (as defined in
the Pass Through Agreement (as defined below)) ("Airplanes Trust" and, together
with Airplanes Limited, the "Note Issuers"), and BANKERS TRUST COMPANY, a New
York banking corporation ("Bankers Trust"), not in its individual capacity but
solely as Pass Through Trustee hereunder (the "Trustee"), to the Pass Through
Trust Agreement dated as of March 28, 1996, among the Note Issuers and the
Trustee (the "Pass Through Agreement").
W I T N E S S E T H:
WHEREAS, the Pass Through Agreement, unlimited as to the aggregate
principal amount of Certificates (unless otherwise specified herein,
capitalized terms used herein without definition having the respective meanings
specified therefor in the Pass Through Agreement) which may be issued
thereunder, has heretofore been executed and delivered;
WHEREAS, pursuant to the terms and conditions of the Pass Through
Agreement as supplemented by this Trust Supplement and any other Trust
Supplement (the "Agreement"), the Trustee shall purchase those Notes issued by
the Note Issuers of the same tenor and designation as the Certificates issued
hereunder and shall hold such Notes in trust for the benefit of the Holders of
the Certificates issued hereunder;
WHEREAS, the Trustee hereby declares the creation of this Trust (the
"Trust") for the benefit of the Holders of the Certificates issued hereunder,
and the initial Holders of the Certificates issued hereunder, as the
beneficiaries of the Trust created hereby, by their respective acceptances of
the Certificates issued hereunder, join in the creation of this Trust with the
Trustee;
WHEREAS, all of the conditions and requirements necessary to make this
Trust Supplement, when duly executed and delivered, a legal, valid and binding
instrument in accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and delivery of this
Trust Supplement in the form and with the terms hereof have been in all
respects duly authorized; and
WHEREAS, this Trust Supplement is subject to the provisions of the Trust
Indenture Act of 1939, and shall, to the extent applicable, be governed by such
provisions.
<PAGE> 2
2
NOW, THEREFORE, in consideration of the premises herein, it is agreed
among the Note Issuers and the Trustee as follows:
ARTICLE I
THE CERTIFICATES
Section 1.01. The Certificates. There is hereby created a [subclass]
[class] of Certificates to be issued under the Agreement to be designated and
known as "[Subclass A- -] [Class B] Pass Through Certificates" (hereinafter
referred to as the "[Subclass A- -] [Class B] Certificates"). Each [Subclass A-
- -] [Class B] Certificate represents a Fractional Undivided Interest in the Trust
created hereby. The terms and conditions applicable to the [Subclass A- -]
[Class B] Certificates are as follows:
(a) The aggregate principal amount of the [Subclass A- -] [Class B]
Certificates that shall be authenticated under the Agreement (except for
[Subclass A- -] [Class B] Certificates authenticated and delivered
pursuant to Sections 3.03, 3.04 and 3.05 of the Pass Through Agreement)
upon their initial issuance is $ -.
(b) The [Subclass A- -] [Class B] Certificates shall be in the form
attached hereto as Exhibit A. The [Subclass A- -] [Class B] Certificates
shall be Book-Entry Certificates and shall be subject to the conditions
set forth in the Letter of Representations between the Note Issuers and
the Clearing Agency attached hereto as Exhibit B.
(c) The proceeds of the sale of the [Subclass A- -] [Class B]
Certificates shall be used to purchase from the Note Issuers on the date
hereof the following Notes (the "Corresponding Notes") in the aggregate
principal amounts set forth below:
<TABLE>
<S> <C> <C>
Principal
Notes Amount Maturity
----- --------- --------------
Airplanes Limited [Subclass A- -] [Class B] Notes $ - March 15, 2019
Airplanes Trust [Subclass A- -] [Class B] Notes $ - March 15, 2019
</TABLE>
<PAGE> 3
3
ARTICLE II
ACQUISITION OF THE NOTES; ISSUANCE OF CERTIFICATES
Section 2.01. Acquisition of Notes. (a) The Note Issuers hereby convey,
transfer, sell, set over and otherwise assign to the Trust for the benefit of
the Holders of the [Subclass A- -] [Class B] Certificates, the Corresponding
Notes and all monies due and to become due thereunder and all rights to
collateral and proceeds thereof and all rights to enforce the same.
(b) In connection with such transfer, not later than the date hereof, each
Note Issuer shall deposit the Corresponding Notes issued by it with the Trustee
on behalf of the Trust and cause such Notes to be registered in the name of the
Trustee in the register therefor maintained by such Note Issuer.
(c) The transfer of the Corresponding Notes accomplished hereby is
absolute, it being understood that the transfer is intended by the parties
hereto as a sale.
Section 2.02. Acceptance by Trustee. The Trustee, by its execution and
delivery of this Trust Supplement, acknowledges its acceptance of all right,
title and interest in and to the Corresponding Notes to be acquired hereby and
declares that the Trustee holds and will hold such right, title and interest,
together with all other property constituting the Trust Property of the Trust,
on behalf of the Trust for the benefit of all then present and future Holders of
the [Subclass A- -] [Class B] Certificates, upon the trusts set forth in the
Agreement. By its payment for and acceptance of each [Subclass A- -] [Class B]
Certificate issued to it under the Agreement, each initial Certificateholder of
a [Subclass A- -] [Class B] Certificate, as a grantor of the Trust created
hereby, shall thereby join in the creation and declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust created hereby shall be
constituted solely for the purpose of making the investment in the Corresponding
Notes provided for herein, and, except as set forth herein or in this Trust
Supplement or in the Agreement, the Trustee shall not be authorized or empowered
to acquire any other investments or engage in any other activities and, in
particular, the Trustee shall not be authorized or empowered to do anything that
would cause the Trust created hereby to fail to qualify as a "grantor trust" for
federal income tax purposes.
Section 2.04. Issuance of Certificates. On the date hereof, the Trustee
shall execute on behalf of the Trust, authenticate and deliver, in fully
registered form only, the [Subclass A- -] [Class B] Certificates upon the
written order of the Note Issuers, in authorized denominations and in the names
specified by the Note Issuers. The Trustee shall execute on behalf of the
Trust, deliver and authenticate [Subclass A- -] [Class B] Certificates equalling
the aggregate principal amount of the Corresponding Notes to be purchased by the
Trustee pursuant to this Trust Supplement, and evidencing the entire ownership
interest in the Trust
<PAGE> 4
4
created hereby. The Trustee shall issue on behalf of the Trust and deliver
such Certificates, in authorized denominations and in such Fractional Undivided
Interests, so as to result in the receipt of consideration in an amount equal
to the aggregate principal amount of such Corresponding Notes and, concurrently
therewith, the Trustee shall purchase on behalf of the Trust, pursuant to the
terms and conditions of the related Trust Supplement, such Notes at a purchase
price equal to the amount of such consideration so received.
ARTICLE III
THE TRUSTEE
Section 3.01. The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this Trust
Supplement or the due execution hereof by the Note Issuers, or for or in respect
of the recitals and statements contained herein, all of which recitals and
statements are made solely by the Note Issuers.
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed by the Trustee
other than as set forth in the Agreement, and this Trust Supplement is executed
and accepted on behalf of the Trustee, subject to all the terms and conditions
set forth in the Agreement, upon the effectiveness thereof, as fully to all
intents as if the same were herein set forth at length.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Pass Through Agreement Ratified. Except and so far as
herein expressly provided, all of the provisions, terms and conditions of the
Pass Through Agreement are in all respects ratified and confirmed; and the Pass
Through Agreement and this Trust Supplement shall be taken, read and construed
as one and the same instrument.
Section 4.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE [SUBCLASS A-
- -] [CLASS B] CERTIFICATES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 4.03. Execution in Counterparts. This Trust Supplement may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
<PAGE> 5
5
IN WITNESS WHEREOF, the Trustee and each Note Issuer have caused this
Trust Supplement to be duly executed as of the day and year first written
above.
AIRPLANES LIMITED
By: _____________________________
Name:
Title: Director
AIRPLANES U.S. TRUST
By: ____________________________
Name:
Title: Controlling Trustee
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Trustee
By: ____________________________
Name:
Title:
<PAGE> 6
EXHIBIT A
FORM OF [SUBCLASS A- -] [CLASS B] CERTIFICATE
[Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York Corporation ("DTC"), to Bankers Trust
Company, a New York banking corporation, or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
AIRPLANES [SUBCLASS A- -] [CLASS B] PASS THROUGH TRUST
Airplanes [Subclass A- -] [Class B] Floating Rate Pass Through Certificate
Issuance Date: _______
Final Maturity Date: March 15, 2019
Evidencing a fractional undivided interest in the
Airplanes [Subclass A- -] [Class B] Pass Through Trust
Certificate $______ Fractional Undivided Interest representing
No. ____ 0.__% of the Trust per $100,000 face amount
THIS CERTIFIES THAT , for value received, is the
registered owner of a $ ( dollars) Fractional
Undivided Interest in the Airplanes [Subclass A- -] [Class B] Pass Through
Trust (the "Trust") created pursuant to the Airplanes Pass Through Trust
Agreement dated as of March 28, 1996, among Airplanes Limited, a limited
liability company organized under the laws of Jersey, Channel Islands
("Airplanes Limited"), Airplanes U.S. Trust, a Delaware business trust
("Airplanes Trust" and, together with Airplanes Limited, the "Note Issuers"),
and Bankers Trust Company, a New York banking corporation, as trustee (the
"Trustee"), as supplemented by the Trust Supplement No. - thereto, dated as of
- - (together, the "Agreement"), a summary of certain of the pertinent provisions
of which is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the
Agreement.
This Certificate is one of the duly authorized Certificates designated as
"Airplanes [Subclass A- -] [Class B] Floating Rate Pass Through Certificates
(herein referred to as the "Certificates"). This Certificate is issued under
and is subject to the terms,
<PAGE> 7
provisions, and conditions of the Agreement, to which Agreement the
Certificateholder of this Certificate, by virtue of the acceptance hereof,
assents and by which such Certificateholder is bound. The property of the
Trust includes, among other things, certain Notes and all rights of the
Trustee, on behalf of the Trust, to receive payments under the Guarantees
(collectively, the "Trust Property").
This Certificate represents a Fractional Undivided Interest in the Trust
and the Trust Property, and the Holder hereof shall have no rights, benefits or
interest in respect of any assets or property other than the Trust Property.
Subject to and in accordance with the terms of the Agreement, from funds
received by the Trustee and deposited in the Certificate Account pursuant to
the Agreement, there will be distributed monthly in arrears on each Payment
Date, commencing on April 15, 1998, to the Person in whose name this
Certificate is registered at the close of business on the Record Date with
respect to such Payment Date, in the manner specified in Sections 4.02(c) and
(d) of the Agreement, such Person's pro rata share (based on the aggregate
Fractional Undivided Interest in the Trust held by such Person) of the
aggregate amount in the Certificate Account. Subject to and in accordance with
the terms of the Agreement, in the event that any Special Payment on the Notes
is received by the Trustee, there shall be distributed as soon as the Trustee
has confirmed receipt of such Special Payment in the Special Payment Account,
to the Person in whose name this Certificate is registered at the close of
business on the Record Date immediately preceding such Special Payment, in the
manner specified in Sections 4.02(c) and (d) of the Agreement, such Person's
pro rata share (based on the aggregate Fractional Undivided Interest in the
Trust held by such Person) of the aggregate amount of such Special Payment.
The Trustee shall mail notice of each Special Payment to the Person in whose
name this Certificate is registered at the close of business on the Record Date
immediately preceding such Special Payment.
Payments on this Certificate will be made by the Trustee by check mailed
to the Person entitled thereto (except as otherwise provided in the Agreement),
without the presentation or surrender of this Certificate or the making of any
notation hereon. Except as otherwise provided in the Agreement and,
notwithstanding the above, the final distribution on this Certificate will be
made after notice mailed by the Trustee of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency of the Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Reference is hereby made to the further provisions of this Certificate set
forth in the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
<PAGE> 8
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: _____________________ AIRPLANES [SUBCLASS A- -] [CLASS B]
PASS THROUGH TRUST
By: BANKERS TRUST COMPANY, not in its
individual capacity, but solely as
Trustee
By: _______________________________
Name:
Title:
<PAGE> 9
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
Dated: ____________ BANKERS TRUST COMPANY, not in its
individual capacity, but solely as Trustee
By: __________________________________
Authorized Officer
<PAGE> 10
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or an obligation
guaranteed by, or an interest in, either Note Issuer or the Trustee or any
Affiliate thereof. The Certificates are limited in right of payment, all as
more specifically set forth on the face hereof and in the Agreement. All
payments or distributions made to Certificateholders under the Agreement shall
be made only from the Trust Property and only to the extent that the Trustee
shall have sufficient income or proceeds from the Trust Property to make such
payments in accordance with the terms of the Agreement. Each Holder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made
to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby. A copy of the
Agreement may be examined during normal business hours at the principal office
of the Trustee, and at such other places, if any, designated by the Trustee, by
any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Note Issuers and the rights of the Certificateholders under the Agreement at
any time by the Note Issuers and the Trustee with the consent of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust. Any
such consent by the Certificateholder of this Certificate shall be conclusive
and binding on such Certificateholder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof,
in certain limited circumstances, without the consent of the Holders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Register upon
surrender of this Certificate for registration of transfer at the offices or
agencies maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in New York, New York, duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Registrar duly executed by the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing, and thereupon one or
more new Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $100,000 Fractional Undivided Interest and
integral multiples of $1,000 in excess thereof, except that one Certificate may
be in a denomination of less than $100,000. As provided in the Agreement and
subject to certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
<PAGE> 11
No service charge will be made for any such registration of transfer or
exchange, but the Trustee shall require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the Trustee or the Registrar
may treat the person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Trustee, the Registrar, nor any such
agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant
to the Agreement and the disposition of all property held as part of the Trust
Property.
<PAGE> 12
EXHIBIT B
LETTER OF REPRESENTATIONS
<PAGE> 1
EXHIBIT 4.14
INDENTURE SUPPLEMENT NO. 1
INDENTURE SUPPLEMENT NO. 1, dated as of [March 16, 1998] (the "Indenture
Supplement"), among AIRPLANES LIMITED, a limited liability company incorporated
in Jersey, Channel Islands ("Airplanes Limited"), as issuer of the Notes (the
"Issuer"), AIRPLANES U.S. TRUST, a Delaware business trust created pursuant to
the Airplanes Trust Agreement ("Airplanes Trust"), as guarantor of the Notes
(the "Guarantor" and, together with the Issuer and their respective
subsidiaries, "Airplanes Group") and BANKERS TRUST COMPANY, a New York banking
corporation ("Bankers Trust"), as trustee of each class of Airplanes Limited
Notes (the "Indenture Trustee"), to the Indenture dated as of March 28, 1996,
among the Issuer, the Guarantor and the Trustee (the "Indenture"). Capitalized
terms used herein but not defined herein shall have the meanings given to such
terms in the Indenture.
W I T N E S S E T H:
WHEREAS, the Issuer intends to issue one or more subclasses of Refinancing
Notes to refinance the Outstanding Principal Balance of the Subclass A- - Notes
[and the Class B Notes] (the "1998 Refinancing") in accordance with Section 2.07
of the Indenture;
WHEREAS, in accordance with the Indenture, the Refinancing Notes to be
issued in the 1998 Refinancing are intended to be entitled to all the rights and
benefits appertaining to the Subclass A- - Notes [and the Class B Notes] under
the Indenture, except as specified herein or in the forms of such Refinancing
Notes;
WHEREAS, the Issuer intends to correct certain errors of a formal, minor
or technical nature in the Indenture in connection with the 1998 Refinancing in
accordance with Section 9.02 of the Indenture; and
WHEREAS, all of the conditions and requirements necessary to make this
Indenture Supplement, when duly executed and delivered, a legal, valid and
binding instrument in accordance with its terms and for the purposes herein
expressed, have been done, performed and fulfilled, and the execution and
delivery of this Indenture Supplement in the form and with the terms hereof
have been in all respects duly authorized.
NOW, THEREFORE, in consideration of the premises herein, it is agreed
among the Issuer, the Guarantor and the Indenture Trustee as follows:
ARTICLE I
MODIFICATIONS
Section 1.01. Modifications. The Indenture is, effective as of the date
hereof, hereby modified as follows:
<PAGE> 2
2
(a) Article I. (i) The following definitions shall be modified to
read as follows:
"Amortizing Notes" means the Subclass A-5 Notes, the Subclass A- -
Notes, the Class B Notes and each other class or subclass of Refinancing
Airplanes Group Notes designated as such in the form of such Refinancing
Airplanes Group Notes.
"Class A Minimum Principal Payment Amount" means (i) on any Payment
Date with respect to the Subclass A-5 Airplanes Group Notes, (ii) on any
Payment Date after the payment in full of the Subclass A-5 Airplanes Group
Notes with respect to the Subclass A- - Airplanes Group Notes and (iii) on
any Payment Date following the relevant Amortization Commencement Date, if
applicable, with respect to each subclass of Soft Bullet Notes, in each
case to the extent that any amount remains Outstanding thereon, the
difference, if positive, between the aggregate Outstanding Principal
Balance of the Class A Airplanes Group Notes and the Class A Target
Principal Balance on such Payment Date; provided that, if on any Payment
Date the Outstanding Principal Balance of the Class A Airplanes Group
Notes is greater than the Adjusted Portfolio Value, then the "Class A
Minimum Principal Payment Amount" shall be equal to the difference between
the Outstanding Principal Balance of the Class A Airplanes Group Notes and
the Class A Adjusted Balance.
"Class A Supplemental Principal Payment Amount" means (i) on any
Payment Date with respect to the Subclass A-5 Airplanes Group Notes, (ii)
on any Payment Date after the payment in full of the Subclass A-5
Airplanes Group Notes with respect to the Subclass A- - Airplanes Group
Notes and (iii) on any Payment Date following the relevant Amortization
Commencement Date, if applicable, with respect to each subclass of Soft
Bullet Notes, in each case to the extent that any amount remains
Outstanding thereon, the difference, if positive, between (A) the
Outstanding Principal Balance of the Class A Airplanes Group Notes (after
giving effect to the payment of the Class A Minimum Principal Payment
Amount and any Class A Principal Adjustment Amount to be made on such
Payment Date) and (B) the Class A Supplemental Principal Balance on such
Payment Date.
["Class B Certificates" means the Class B Pass Through Certificates
due March 15, 2019, issued by the Class B Pass Through Trust in the
aggregate principal amount of $ -, including any certificate issued in
replacement or substitution therefor, and any Refinancing Certificate
issued to refinance any such Class B Certificates, in each case ranking
pari passu in order of payment priority with the Class B Certificates.]
["Class B Notes" means the Class B Notes due March 15, 2019, of the
Issuer in an initial aggregate principal amount of $ -, including any
note issued in replacement or substitution therefor, and any Refinancing
Note issued to refinance any such Class B Note, in each case ranking pari
passu in order of payment priority with the Class B Notes, substantially
in the form attached as Exhibit B hereto.]
["Class B Pass Through Trust Agreement" means the Class B Pass
Through Trust Agreement dated -, among the Issuer, the Guarantor and
Bankers Trust as trustee.]
<PAGE> 3
3
"Floating Rate Redemption Price" means (i) with respect to the
Subclass A-1 Airplanes Group Notes, the Subclass A-2 Airplanes Group
Notes, the Subclass A-3 Airplanes Group Notes and the Subclass A-4
Airplanes Group Notes, (A) prior to the Premium Expiration Date
applicable thereto, 102% of the Outstanding Principal Balance of the
portion of such subclass of Notes being redeemed, and (B) on or after the
Premium Expiration Date applicable thereto, the Outstanding Principal
Balance of the portion of such subclass of Notes being redeemed, without
Premium and (ii) with respect to the Subclass A-5 Airplanes Group Notes
and the Class B Airplanes Group Notes, the Outstanding Principal Balance
of the portions of such class or subclass of Notes being redeemed,
without Premium; provided, however, that the Floating Rate Redemption
Price of any Refinancing Airplanes Group Notes shall be the Floating Rate
Redemption Price, if any, designated as such in the form of such
Refinancing Airplanes Group Notes.
"Premium Expiration Date" means (i) March 15, 1997, with respect to
the Subclass A-1 Airplanes Group Notes, (ii) March 15, 1998, with respect
to the Subclass A-2 Airplanes Group Notes and the Subclass A-3 Airplanes
Group Notes and (iii) March 15, 1999, with respect to the Subclass A-4
Airplanes Group Notes; provided, however, that the Premium Expiration
Date of any Refinancing Airplanes Group Notes shall be the Premium
Expiration Date, if any, designated as such in the form of such
Refinancing Airplanes Group Notes.
"Senior Trustee" means the Indenture Trustee of the Senior Class of
the Notes or, if the Senior Notes shall be the Class E Notes, the Class E
Note Representative; provided that if more than one Person shall
otherwise be the Indenture Trustee of the various subclasses of Class A
Notes, then (i) so long as any Subclass A-1 Notes are Outstanding, the
Senior Trustee shall be the Indenture Trustee of the Subclass A-1 Notes,
(ii) after the Subclass A-1 Notes have been repaid in full and so long as
any Subclass A-2 Notes are Outstanding, the Senior Trustee shall be the
Indenture Trustee of the Subclass A-2 Notes, (iii) after the Subclass A-1
Notes and Subclass A-2 Notes have been repaid in full and so long as any
Subclass A-3 Notes are Outstanding, the Senior Trustee shall be the
Indenture Trustee of the Subclass A-3 Notes, (iv) after the Subclass A-1
Notes, the Subclass A-2 Notes and the Subclass A-3 Notes have been paid
in full and so long as any Subclass A-4 Notes are Outstanding, the Senior
Trustee shall be the Indenture Trustee of the Subclass A-4 Notes, (v)
after the Subclass A-1 Notes, the Subclass A-2 Notes, the Subclass A-3
Notes and the Subclass A-4 Notes have been paid in full, the Senior
Trustee shall be the Indenture Trustee of the Subclass A-5 Notes and (vi)
after the Subclass A-1 Notes, the Subclass A-2 Notes, the Subclass A-3
Notes, the Subclass A-4 Notes and the Subclass A-5 Notes have been paid
in full, the Senior Trustee shall be the Indenture Trustee of the
subclass of Class A Refinancing Notes with the lowest numerical
designation by subclass, from time to time.
"Soft Bullet Guarantor Notes" means the Subclass A-1 Guarantor
Notes, the Subclass A-2 Guarantor Notes, the Subclass A-3 Guarantor
Notes, the Subclass A-4
<PAGE> 4
4
Guarantor Notes, the Subclass A- - Guarantor Notes and each other class or
subclass of Refinancing Guarantor Notes designated as such in the form of
such Refinancing Guarantor Notes.
"Soft Bullet Notes" means the Subclass A-1 Notes, the Subclass A-2
Notes, the Subclass A-3 Notes, the Subclass A-4 Notes, the Subclass A- -
Notes and each other class or subclass of Refinancing Notes designated as
such in the form of such Refinancing Notes.
"Step-Up Interest" means (i) with respect to any Subclass A-1,
Subclass A-2, Subclass A-3, Subclass A-4 or Subclass A- - Airplanes Group
Notes not repaid on or before the Expected Final Payment Date thereof and
(ii) with respect to the Subclass A-5 or Subclass A- - Airplanes Group
Notes for any period during which Step-Up Interest is accruing on any
other class of the Class A Airplanes Group Notes, interest at a rate of
0.5% per annum which shall accrue in addition to the stated rate of
interest on the Outstanding Principal Balance of such subclass.
(ii) The following terms shall be added to have the following meanings
indicated below:
"Subclass A- - Airplanes Group Notes" means the Subclass A- - Notes
and the Subclass A- - Guarantor Notes.
"Subclass A- - Amortization Commencement Date" means the date that is
the earlier of (i) the Expected Final Payment Date of the Subclass A- -
Airplanes Group Notes and (ii) the date of repayment in full of the
Subclass A- - Airplanes Group Notes; provided that no Subclass A- -
Principal Distribution Amount shall be paid until the Outstanding
Principal Balance of the Subclass A- - Airplanes Group Notes has been
repaid in full.
"Subclass A- - Certificates" means the Subclass A- - Pass Through
Certificates due March 15, 2019, issued by the Subclass A- - Pass Through
Trust in an aggregate initial principal amount of $ -, including any
certificates issued in replacement or substitution therefor and any
Refinancing Certificate issued to refinance any such Subclass A- -
Certificate, in each case ranking pari passu in order of payment priority
to the Subclass A- - Certificates.
"Subclass A- - Guarantor Notes" means the "Subclass A- - Notes"
referred to in the Guarantor Indenture.
"Subclass A- - Noteholder" means a Person in whose name a Subclass A-
- Note is registered from time to time in the register for the Subclass A-
- Notes maintained by or on behalf of the Issuer.
<PAGE> 5
5
"Subclass A- - Notes" means the Subclass A- - Notes, due March 15,
2019, of the Issuer in the initial aggregate principal amount of $ -, to
refinance the Subclass A- - Notes, including any note issued in
replacement or substitution therefor and any Refinancing Note issued to
refinance any such note, in each case ranking pari passu in order of
payment priority to the Subclass A- - Notes, substantially in the form of
Exhibit A- - hereto.
"Subclass A- - Pass Through Trust" means the trust created pursuant
to the Subclass A- - Pass Through Trust Agreement.
"Subclass A- - Pass Through Trust Agreement" means the Subclass A- -
Pass Through Trust Agreement dated as of the date hereof, among the
Issuer, the Guarantor and Bankers Trust, as trustee.
"Subclass A- - Principal Distribution Amount" means, collectively, on
any Payment Date after the Amortization Commencement Date with respect to
such subclass, the Class A Minimum Principal Payment Amount, if any, the
Class A Principal Adjustment Amount, if any, and the Class A Supplemental
Principal Payment Amount, if any, to be paid in respect of principal of
the Class A Airplanes Group Notes on such Payment Date in accordance with
Section 3.08 hereof and allocable to the Subclass A- - Airplanes Group
Notes in accordance with Section 3.09 hereof.
(b) Section 3.09 is hereby amended and restated in its entirety to
read as follows:
"Section 3.09. Allocation of Principal Payments Among Subclasses
of the Class A Airplanes Group Notes. To the extent that any Class
A Minimum Principal Payment Amount, Class A Principal Adjustment
Amount, Class A Supplemental Principal Payment Amount or Redemption
Price is required to be made with respect to the Class A Airplanes
Group Notes, and sufficient funds are available therefor, such
amounts will be applied to repay, first, all amounts Outstanding
under the Subclass A-1 Airplanes Group Notes, then, all amounts
Outstanding under the Subclass A-2 Airplanes Group Notes, then, all
amounts Outstanding under the Subclass A-3 Airplanes Group Notes,
then, all amounts Outstanding under the Subclass A-4 Airplanes
Group Notes, then, all amounts Outstanding under the Subclass A- -
Airplanes Group Notes, then, in the order of ascending numerical
designation by subclass, all amounts Outstanding under any other
Airplanes Group Class A Refinancing Notes that are Soft Bullet
Notes, but in each such case only following their respective
Amortization Commencement Dates, then, to repay any amounts
Outstanding under the Subclass A-5 Airplanes Group Notes, then, to
repay any amounts Outstanding under the Subclass A- - Airplanes
Group Notes, then, in the order of ascending numerical designation
by subclass, all amounts Outstanding
<PAGE> 6
6
under any other Airplanes Group Class A Refinancing Notes that are
Amortizing Notes."
ARTICLE II
REFINANCING NOTES
Section 2.01. The Refinancing Notes. There are hereby created Subclass
A- - Notes [and Class B Notes] to be issued under the Indenture to refinance the
Outstanding Principal Balance of the Subclass A- - [and the Class B] Notes on
the date hereof. The terms and conditions applicable to the Subclass A- - Notes
[and the Class B] Notes are as follows:
(a) The aggregate principal amount of the Subclass A- - Notes that
shall be authenticated under the Indenture upon their issuance is $ - [and
the aggregate principal amount of the Class B Notes that shall be
authenticated under the Indenture upon their issuance is $ -].
(b) The Subclass A- - Notes [and the Class B Notes] shall be in the
form attached hereto as Exhibit A.
(c) The proceeds of the sale of the Subclass A- - [and the Class B]
Notes shall be used to repay the Outstanding Principal Balance of the
Subclass A- - Notes [and the existing Class B Notes] on the date hereof.
(d) Notwithstanding any provisions in the Indenture to the contrary,
the Subclass A- - Notes shall be entitled to Step-Up Interest on any
Outstanding Principal Balance of such subclass on or after its Expected
Final Payment Date and the Subclass A- - Notes shall be entitled to
Step-Up Interest on any Outstanding Principal Balance of such subclass
for any period during which Step-Up Interest is accruing on any other
subclass of the Class A Airplanes Group Notes.
Section 2.02. Issuance of Notes. On the date hereof, the Issuer shall
execute and the Indenture Trustee shall authenticate and deliver, in fully
registered form only, the Subclass A- - Notes [and the Class B Notes] upon the
written order of the Issuer, in authorized denominations and in the names
specified by the Issuer.
ARTICLE III
THE INDENTURE TRUSTEE
Section 3.01. The Indenture Trustee. The Indenture Trustee shall not be
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Indenture Supplement or the due execution hereof by the
Issuer, or for or in respect of the
<PAGE> 7
7
recitals and statements contained herein, all of which recitals and statements
are made solely by the Issuer.
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed by the Indenture
Trustee other than as set forth in the Indenture, and this Indenture Supplement
is executed and accepted on behalf of the Indenture Trustee, subject to all the
terms and conditions set forth in the Indenture, upon the effectiveness
thereof, as fully to all intents as if the same were herein set forth at
length.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Trust Indenture Ratified. Except and so far as herein
expressly provided, all of the provisions, terms and conditions of the Trust
Indenture are in all respects ratified and confirmed; and the Trust Indenture
and this Indenture Supplement shall be taken, read and construed as one and the
same instrument.
Section 4.02. GOVERNING LAW. THIS INDENTURE SUPPLEMENT, THE SUBCLASS A- -
[AND THE CLASS B] NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
Section 4.03. Execution in Counterparts. This Indenture Supplement may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
<PAGE> 8
8
IN WITNESS WHEREOF, the Indenture Trustee, the Issuer and the Guarantor
have caused this Indenture Supplement to be duly executed as of the day and
year first written above.
AIRPLANES LIMITED, as Issuer
By: _________________________
Name:
Title: Director
AIRPLANES U.S. TRUST, as Guarantor
By: _________________________
Name:
Title: Controlling Trustee
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By: _________________________
Name:
Title:
<PAGE> 9
EXHIBIT A
FORM OF [SUBCLASS A- -] [CLASS B] NOTE
AIRPLANES LIMITED
[SUBCLASS A- -] [CLASS B] NOTE, due March 15, 2019
No. ____ $_________
[DATE]
AIRPLANES LIMITED, a limited liability company organized under the laws of
Jersey, Channel Islands (herein referred to as the "Issuer"), for value
received, hereby promises to pay to BANKERS TRUST COMPANY, as Trustee, or
registered assigns, the principal sum of
_________________________________________________DOLLARS ($__________) on March
15, 2019 (the "Final Maturity Date") and to pay interest monthly in arrears on
the Outstanding Principal Balance hereof at a fluctuating interest rate per
annum equal to the sum of LIBOR plus - % per annum (the "Stated Interest Rate")
from the date hereof until the Outstanding Principal Balance hereof is paid or
duly provided for, payable on each Payment Date. Interest on this [Subclass
A- -] [Class B] Note in each Interest Accrual Period shall be calculated on the
basis of a 360-day year and the actual number of days elapsed in such Interest
Accrual Period.
This [Subclass A- -] [Class B] Note is one of a duly authorized issue of
Refinancing Notes of the Issuer, designated as its "[Subclass A- -] [Class B]
Notes, due March 15, 2019", issued under the Trust Indenture dated as of March
28, 1996 and supplemented by an Indenture Supplement dated as of [March 16,
1998] (as amended or supplemented from time to time, the "Indenture"), among
the Issuer, Airplanes U.S. Trust, a business trust organized under the laws of
the State of Delaware (the "Guarantor"), and Bankers Trust Company, as
indenture trustee (the "Indenture Trustee"). All capitalized terms used in
this [Subclass A- -] [Class B] Note and not defined herein shall have the
respective meanings assigned to such terms in the Indenture. Reference is made
to the Indenture and all indentures supplemental thereto for a statement of the
respective rights and obligations thereunder of the Issuer, the Guarantor, the
Indenture Trustee and the [Subclass A- -] [Class B] Noteholders. This [Subclass
A- -] [Class B] Note is subject to all terms of the Indenture and shall
constitute a [Soft Bullet] [Amortizing] Note thereunder.
<PAGE> 10
2
The Issuer will redeem the Outstanding Principal Balance of this [Subclass
A- -] [Class B] Note prior to the Final Maturity Date on the dates and in the
amounts specified in the Indenture, subject to the availability of Available
Collections therefor after making payments entitled to priority under Section[s]
3.08 [and 3.09] of the Indenture. The Expected Final Payment Date of this
[Subclass A- -] [Class B] Note is -.
The Issuer may redeem all or part of the Outstanding Principal Balance of
this [Subclass A- -] [Class B] Note prior to the Final Maturity Date on the
Payment Dates, in the amounts and under the circumstances specified in the
Indenture.
Other than in the case of a redemption for taxation reasons specified in
the Indenture, upon any redemption of any amount of the Outstanding Principal
Balance of this [Subclass A- -] [Class B] Note in excess of the Principal
Distribution Amount applicable hereto prior to - (the "Premium Expiration
Date"), such amount shall be redeemed at a Redemption Price equal to - % of
the Outstanding Principal Balance thereof and upon any such redemption on or
after the Premium Expiration Date, such amount shall be redeemed at a Redemption
Price equal to - % of the Outstanding Principal thereof (such redemption price
being the "Floating Rate Redemption Price" referred to in the Indenture for the
[Subclass A- -] [Class B] Notes).
[Following the Expected Final Payment Date of this [Subclass A- -] Note and
until the Outstanding Principal Balance hereof is paid or duly provided for, the
Outstanding Principal Balance hereof shall bear additional interest ("Step-Up
Interest") at the rate of 0.50% per annum, payable on each Payment Date, subject
to the availability of Available Collections therefor after making payments
entitled to priority under Sections 3.08 and 3.09 of the Indenture.]
Any amount of Premium or interest [(including Step-Up Interest)] on this
[Subclass A- -] [Class B] Note that is not paid when due shall, to the fullest
extent permitted by applicable law, bear interest at a fluctuating interest rate
per annum equal to the Stated Interest Rate [FOR THE SUBCLASS A- - NOTES ONLY:
plus, following the Expected Final Payment Date of this [Subclass A- -] Note,
0.50% per annum] from the date when due until such amount is paid or duly
provided for, payable on the next succeeding Payment Date, subject, in the case
of Step-Up Interest, to the availability of Available Collections therefor after
making payments entitled to priority under Section[s] 3.08 [and 3.09] of the
Indenture.
The indebtedness evidenced by the [Subclass A- -] [Class B] Notes is, to
the extent and in the manner provided in the Indenture, subordinate and subject
in right of payment to the prior payment in full of all Senior Claims (as
defined in the Indenture), and this [Subclass A- -] [Class B] Note is issued
subject to such provisions. Each Holder of this [Subclass A- - ] [Class B]
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Indenture Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Indenture
Trustee his attorney-in-fact for such purpose.
<PAGE> 11
3
The maturity of this [Subclass A- -] [Class B] Note is subject to
acceleration upon the occurrence and during the continuance of the Events of
Default specified in the Indenture. [FOR THE CLASS B NOTES ONLY: The Class B
Noteholders shall not be permitted to deliver a Default Notice or to exercise
any remedy in respect of any such Event of Default until all interest and
principal on the Class A Notes have been paid in full.]
This [Subclass A- -] [Class B] Note is and will be secured, on a
subordinated basis, by the collateral pledged as security therefor as provided
in the Security Documents.
Subject to and in accordance with the terms of the Indenture, there will be
distributed monthly on each Payment Date commencing on April 15, 1998, to the
Person in whose name this [Subclass A- -] [Class B] Note is registered at the
close of business on the Record Date with respect to such Payment Date, in the
manner specified in Section 3.08 of the Indenture, such Person's pro rata share
(based on the aggregate percentage of the Outstanding Principal Balance of the
[Subclass A- -] [Class B] Notes held by such Person) of the aggregate amount
distributable to all Holders of [Subclass A- -] [Class B] Notes on such Payment
Date.
All amounts payable in respect of this [Subclass A- -] [Class B] Note shall
be payable in U.S. dollars in immediately available funds at the Corporate Trust
Office of the Indenture Trustee or as otherwise directed in the manner provided
in the Indenture to the Holder hereof on the Record Date relating to such
payment. Notwithstanding the foregoing, the Indenture Trustee shall pay, or
cause to be paid, if so requested by the Holder hereof by written notice to the
Issuer and the Indenture Trustee, all amounts payable hereunder to the Holder
hereof, or a nominee therefor, by transferring by wire in immediately available
funds to an account maintained by the Holder hereof with a bank in the United
States, the amount to be distributed to the Holder hereof (provided that written
instructions necessary to implement such wire transfers are received by the
Indenture Trustee prior to the Record Date related to any payment), without any
presentment or surrender of any [Subclass A- -] [Class B] Note, except that the
Holder hereof shall surrender this [Subclass A- -] [Class B] Note to the
Indenture Trustee upon payment in full of the principal and interest on this
[Subclass A- -] [Class B] Note and such other sums payable to the Holder hereof
hereunder or under the Indenture. Any reduction in the principal amount of this
[Subclass A- -] [Class B] Note (or any one or more predecessor [Subclass A- -]
[Class B] Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this [Subclass A- -] [Class B] Note and of
any [Subclass A- -] [Class B] Note issued upon the registration of transfer of,
in exchange or in lieu of or upon the refinancing of this [Subclass A- -] [Class
B] Note, whether or not noted hereon.
The Holder of this [Subclass A- -] [Class B] Note agrees, by acceptance
hereof, to pay over to the Cash Manager any money (including principal, Premium
and interest) paid to it in respect of this [Subclass A- -] [Class B] Note in
the event that the Cash Manager, acting in good faith, determines subsequently
that such monies were not paid in accordance with the priority of payment
provisions of the Indenture or as a result of any other mistake of fact or law
on the part of the Cash Manager in making such payment.
<PAGE> 12
4
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this [Subclass A- -] [Class B] Note may be registered
on the register maintained by the Indenture Trustee for the purpose of
registering transfers and exchanges upon surrender of this [Subclass A- -]
[Class B] Note for registration of transfer at the office or agency designated
by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Indenture Trustee
duly executed by, the Holder hereof or his attorney duly authorized in writing,
with such signature guaranteed, and such other documents as the Indenture
Trustee may require, and thereupon one or more new [Subclass A- -] [Class B]
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this [Subclass
A- -] [Class B] Note, but the transferor may be required to pay a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any such registration of transfer or exchange.
Prior to the due presentment for registration of transfer of this
[Subclass A- -] [Class B] Note, the Issuer, the Indenture Trustee and any agent
of the Issuer or the Indenture Trustee may deem and treat the Person in whose
name this [Subclass A- -] [Class B] Note (as of the day of determination or as
of such other date as may be specified in the Indenture) is registered as the
absolute owner and Holder hereof for the purpose of receiving payment of all
amounts payable with respect to this [Subclass A- -] [Class B] Note and for all
other purposes, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits the amendment or modification of the Indenture and
the [Subclass A- -] [Class B] Notes by the Issuer with the consent of the
Holders of a majority of the Outstanding Principal Balance of all Notes on the
date of any vote of such Holders (voting as a single class); provided that,
without the consent of each Holder of any class or subclass of Notes then
Outstanding, no such amendment may (i) modify the provisions of the Indenture,
the Notes or the Cash Management Agreement setting forth the frequency or the
currency of payment of, the maturity of, or the method of calculation of the
amount of, any interest, principal and Premium, if any, payable in respect of
such class or subclass of Notes, (ii) modify the provisions of Section 5.02 of
the Indenture relating to the sale of any assets of the Issuer, (iii) reduce
the percentage of the aggregate Outstanding Principal Balance of such class or
subclass of Notes required to approve any amendment or waiver of Section 9.01
of the Indenture or (iv) alter the manner or priority of payment of any class
or subclass of Notes or the priority of payment of the Expenses, the Swap
Payments or the Swap Breakage Costs (each, a "Basic Terms Modification"). Any
such amendment or modification shall be binding on every Holder hereof, whether
or not notation thereof is made upon this [Subclass A- -] [Class B] Note. The
Indenture also permits the Indenture Trustee to agree, without the consent of
any Noteholder, (a) to any modification (other than a Basic Terms Modification)
of, or the waiver or authorization of any breach or prospective breach of, any
provision of any Related Document or of the relevant Notes to correct a
manifest error or an error which is of a formal, minor or technical nature or
(b) to modify the provisions of the Indenture or the Cash
<PAGE> 13
5
Management Agreement relating to the timing of movement of Rental Payments or
other monies received or Expenses incurred among the Accounts by the Cash
Manager.
The subordination provisions contained in Section 3.08, Section 3.09 and
Article X of the Indenture may not be amended or modified without the consent
of each Noteholder of the class or subclass affected thereby and each
Noteholder of any class or subclass of Notes ranking senior thereto. In no
event shall the provisions set forth in Section 3.08 of the Indenture relating
to the priority of the Expenses, Swap Payments and Swap Breakage Costs be
amended or modified.
The Indenture also contains provisions permitting the Holders of Notes
representing a majority of the Outstanding Principal Balance of the Senior
Class of Notes, on behalf of the Holders of all of the [Subclass A- -] [Class B]
Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver shall be conclusive and binding upon all present and
future Holders of this [Subclass A- -] [Class B] Note and of any [Subclass A- -]
[Class B] Note issued upon the registration of transfer of, in exchange or in
lieu of or upon the refinancing of this [Subclass A- -] [Class B] Note, whether
or not notation of such consent or waiver is made upon this [Subclass A- -]
[Class B] Note.
The term "Issuer" as used in this [Subclass A- -] [Class B] Note includes
any successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of [Subclass A- -] [Class B] Notes under the Indenture.
The [Subclass A- -] [Class B] Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This [Subclass A- -] [Class B] Note shall in all respects be governed by,
and construed in accordance with, the laws of the State of New York, including
all matters of construction, validity and performance.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this [Subclass
A- -] [Class B] Note shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
<PAGE> 14
6
IN WITNESS WHEREOF, the Issuer has caused this [Subclass A- -] [Class B]
Note to be duly executed by its Responsible Officer.
AIRPLANES LIMITED
By:___________________
Name:
Title:
<PAGE> 15
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the [Subclass A- -] [Class B] Notes designated above and
referred to in the within-mentioned Indenture.
Date: ____________ BANKERS TRUST COMPANY, not in its
individual capacity but
solely as Indenture Trustee
By:__________________________
Authorized Signatory
<PAGE> 16
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
__________________________________
__________________________________
(Please print or typewrite name and address including zip code of assignee)
_________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
_________________________________
attorney to transfer said Note on the books of the Issuer with full power of
substitution in the premises.
Date: [Signature of Transferor]
____________________________ _______________________________________
NOTE: The signature to this assignment
must correspond with the name as
written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
<PAGE> 1
EXHIBIT 4.15
INDENTURE SUPPLEMENT NO. 1
INDENTURE SUPPLEMENT NO. 1, dated as of [March 16, 1998] (the "Indenture
Supplement"), among AIRPLANES U.S. TRUST, a Delaware business trust created
pursuant to the Airplanes Trust Agreement ("Airplanes Trust"), as issuer of the
Notes (the "Issuer"), AIRPLANES LIMITED, a limited liability company
incorporated in Jersey, Channel Islands ("Airplanes Limited"), as guarantor of
the Notes (the "Guarantor" and, together with the Issuer and their respective
subsidiaries, "Airplanes Group") and BANKERS TRUST COMPANY, a New York banking
corporation ("Bankers Trust"), as trustee of each class of Airplanes Trust
Notes (the "Indenture Trustee"), to the Indenture dated as of March 28, 1996,
among the Issuer, the Guarantor and the Trustee (the "Indenture"). Capitalized
terms used herein but not defined herein shall have the meanings given to such
terms in the Indenture.
W I T N E S S E T H:
WHEREAS, the Issuer intends to issue one or more subclasses of Refinancing
Notes to refinance the Outstanding Principal Balance of the Subclass A- - Notes
[and the Class B Notes] (the "1998 Refinancing") in accordance with Section
2.07 of the Indenture;
WHEREAS, in accordance with the Indenture, the Refinancing Notes to be
issued in the 1998 Refinancing are intended to be entitled to all the rights and
benefits appertaining to the Subclass A- - Notes [and the Class B Notes] under
the Indenture, except as specified herein or in the forms of such Refinancing
Notes;
WHEREAS, the Issuer intends to correct certain errors of a formal, minor
or technical nature in the Indenture in connection with the 1998 Refinancing in
accordance with Section 9.02 of the Indenture; and
WHEREAS, all of the conditions and requirements necessary to make this
Indenture Supplement, when duly executed and delivered, a legal, valid and
binding instrument in accordance with its terms and for the purposes herein
expressed, have been done, performed and fulfilled, and the execution and
delivery of this Indenture Supplement in the form and with the terms hereof
have been in all respects duly authorized.
NOW, THEREFORE, in consideration of the premises herein, it is agreed
among the Issuer, the Guarantor and the Indenture Trustee as follows:
ARTICLE I
MODIFICATIONS
Section 1.01. Modifications. The Indenture is, effective as of the date
hereof, hereby modified as follows:
<PAGE> 2
2
(a) Article I. (i) The following definitions shall be modified to read as
follows:
"Amortizing Notes" means the Subclass A-5 Notes, the Subclass A- -
Notes, the Class B Notes and each other class or subclass of Refinancing
Airplanes Group Notes designated as such in the form of such Refinancing
Airplanes Group Notes.
"Class A Minimum Principal Payment Amount" means (i) on any Payment
Date with respect to the Subclass A-5 Airplanes Group Notes, (ii) on any
Payment Date after the payment in full of the Subclass A-5 Airplanes Group
Notes with respect to the Subclass A- - Airplanes Group Notes and (iii) on
any Payment Date following the relevant Amortization Commencement Date, if
applicable, with respect to each subclass of Soft Bullet Notes, in each
case to the extent that any amount remains Outstanding thereon, the
difference, if positive, between the aggregate Outstanding Principal
Balance of the Class A Airplanes Group Notes and the Class A Target
Principal Balance on such Payment Date; provided that, if on any Payment
Date the Outstanding Principal Balance of the Class A Airplanes Group
Notes is greater than the Adjusted Portfolio Value, then the "Class A
Minimum Principal Payment Amount" shall be equal to the difference between
the Outstanding Principal Balance of the Class A Airplanes Group Notes and
the Class A Adjusted Balance.
"Class A Supplemental Principal Payment Amount" means (i) on any
Payment Date with respect to the Subclass A-5 Airplanes Group Notes, (ii)
on any Payment Date after the payment in full of the Subclass A-5
Airplanes Group Notes with respect to the Subclass A- - Airplanes Group
Notes and (iii) on any Payment Date following the relevant Amortization
Commencement Date, if applicable, with respect to each subclass of Soft
Bullet Notes, in each case to the extent that any amount remains
Outstanding thereon, the difference, if positive, between (A) the
Outstanding Principal Balance of the Class A Airplanes Group Notes (after
giving effect to the payment of the Class A Minimum Principal Payment
Amount and any Class A Principal Adjustment Amount to be made on such
Payment Date) and (B) the Class A Supplemental Principal Balance on such
Payment Date.
["Class B Certificates" means the Class B Pass Through Certificates
due March 15, 2019, issued by the Class B Pass Through Trust in the
aggregate principal amount of $ -, including any certificate issued in
replacement or substitution therefor, and any Refinancing Certificate
issued to refinance any such Class B Certificates, in each case ranking
pari passu in order of payment priority with the Class B Certificates.]
["Class B Notes" means the Class B Notes due March 15, 2019, of the
Issuer in an initial aggregate principal amount of $ -, including any
note issued in replacement or substitution therefor, and any Refinancing
Note issued to refinance any such Class B Note, in each case ranking pari
passu in order of payment priority with the Class B Notes, substantially
in the form attached as Exhibit B hereto.]
["Class B Pass Through Trust Agreement" means the Class B Pass
Through Trust Agreement dated -, among the Issuer, the Guarantor and
Bankers Trust, as trustee.]
<PAGE> 3
3
"Floating Rate Redemption Price" means (i) with respect to the
Subclass A-1 Airplanes Group Notes, the Subclass A-2 Airplanes Group
Notes, the Subclass A-3 Airplanes Group Notes and the Subclass A-4
Airplanes Group Notes, (A) prior to the Premium Expiration Date
applicable thereto, 102% of the Outstanding Principal Balance of the
portion of such subclass of Notes being redeemed, and (B) on or after the
Premium Expiration Date applicable thereto, the Outstanding Principal
Balance of the portion of such subclass of Notes being redeemed, without
Premium and (ii) with respect to the Subclass A-5 Airplanes Group Notes
and the Class B Airplanes Group Notes, the Outstanding Principal Balance
of the portions of such class or subclass of Notes being redeemed,
without Premium; provided, however, that the Floating Rate Redemption
Price of any Refinancing Airplanes Group Notes shall be the Floating Rate
Redemption Price, if any, designated as such in the form of such
Refinancing Airplanes Group Notes.
"Premium Expiration Date" means (i) March 15, 1997, with respect to
the Subclass A-1 Airplanes Group Notes, (ii) March 15, 1998, with respect
to the Subclass A-2 Airplanes Group Notes and the Subclass A-3 Airplanes
Group Notes and (iii) March 15, 1999, with respect to the Subclass A-4
Airplanes Group Notes; provided, however, that the Premium Expiration
Date of any Refinancing Airplanes Group Notes shall be the Premium
Expiration Date, if any, designated as such in the form of such
Refinancing Airplanes Group Notes.
"Senior Trustee" means the Indenture Trustee of the Senior Class of
Airplanes Limited Notes or, if the Senior Notes shall be the Class E
Notes, the Class E Note Representative; provided that if more than one
Person shall otherwise be the Indenture Trustee of the various subclasses
of Class A Notes, then (i) so long as any Subclass A-1 Notes are
Outstanding, the Senior Trustee shall be the Indenture Trustee of the
Subclass A-1 Guarantor Notes, (ii) after the Subclass A-1 Notes have been
repaid in full and so long as any Subclass A-2 Notes are Outstanding, the
Senior Trustee shall be the Indenture Trustee of the Subclass A-2
Guarantor Notes, (iii) after the Subclass A-1 Notes and Subclass A-2
Notes have been repaid in full and so long as any Subclass A-3 Notes are
Outstanding, the Senior Trustee shall be the Indenture Trustee of the
Subclass A-3 Guarantor Notes, (iv) after the Subclass A-1 Notes, the
Subclass A-2 Notes and the Subclass A-3 Notes have been paid in full and
so long as any Subclass A-4 Notes are Outstanding, the Senior Trustee
shall be the Indenture Trustee of the Subclass A-4 Guarantor Notes, (v)
after the Subclass A-1 Notes, the Subclass A-2 Notes, the Subclass A-3
Notes and the Subclass A-4 Notes have been paid in full, the Senior
Trustee shall be the Indenture Trustee of the Subclass A-5 Guarantor
Notes and (vi) after the Subclass A-1 Notes, the Subclass A-2 Notes, the
Subclass A-3 Notes, the Subclass A-4 Notes and the Subclass A-5 Notes
have been paid in full, the Senior Trustee shall be the Indenture Trustee
of the subclass of Class A Refinancing Guarantor Notes with the lowest
numerical designation by subclass, from time to time.
<PAGE> 4
4
"Soft Bullet Guarantor Notes" means the Subclass A-1 Guarantor Notes,
the Subclass A-2 Guarantor Notes, the Subclass A-3 Guarantor Notes, the
Subclass A-4 Guarantor Notes, the Subclass A- - Guarantor Notes and each
other class or subclass of Refinancing Guarantor Notes designated as such
in the form of such Refinancing Guarantor Notes.
"Soft Bullet Notes" means the Subclass A-1 Notes, the Subclass A-2
Notes, the Subclass A-3 Notes, the Subclass A-4 Notes, the Subclass A- -
Notes and each other class or subclass of Refinancing Notes designated as
such in the form of such Refinancing Notes.
"Step-Up Interest" means (i) with respect to any Subclass A-1,
Subclass A-2, Subclass A-3, Subclass A-4 or Subclass A- - Airplanes Group
Notes not repaid on or before the Expected Final Payment Date thereof and
(ii) with respect to the Subclass A-5 or Subclass A- - Airplanes Group
Notes for any period during which Step-Up Interest is accruing on any other
subclass of the Class A Airplanes Group Notes, interest at a rate of 0.5%
per annum, which shall accrue in addition to the stated rate of interest on
the Outstanding Principal Balance of such subclass.
(ii) The following terms shall be added to have the following meanings
indicated below:
"Subclass A- - Airplanes Group Notes" means the Subclass A- - Notes
and the Subclass A- - Guarantor Notes.
"Subclass A- - Amortization Commencement Date" means the date that is
the earlier of (i) the Expected Final Payment Date of the Subclass A- -
Airplanes Group Notes and (ii) the date of repayment in full of the
Subclass A-4 Airplanes Group Notes; provided that no Subclass A- -
Principal Distribution Amount shall be paid until the Outstanding Principal
Balance of the Subclass A-2 Airplanes Group Notes has been repaid in full.
"Subclass A- - Certificates" means the Subclass A- - Pass Through
Certificates due March 15, 2019, issued by the Subclass A- - Pass Through
Trust in an aggregate initial principal amount of $ -, including any
certificates issued in replacement or substitution therefor and any
Refinancing Certificate issued to refinance any such Subclass A- -
Certificate, in each case ranking pari passu in order of payment priority
to the Subclass A- - Certificates.
"Subclass A- - Guarantor Notes" means the "Subclass A- - Notes"
referred to in the Guarantor Indenture.
"Subclass A- - Noteholder" means a Person in whose name a Subclass
A- - Note is registered from time to time in the register for the Subclass
A- - Notes maintained by or on behalf of the Issuer.
<PAGE> 5
5
"Subclass A- - Notes" means the Subclass A- - Notes, due March 15,
2019, of the Issuer in the initial aggregate principal amount of $-, to
refinance the Subclass A- - Notes, including any note issued in
replacement or substitution therefor and any Refinancing Note issued to
refinance any such note, in each case ranking pari passu in order of
payment priority to the Subclass A- - Notes, substantially in the form of
Exhibit A- - hereto.
"Subclass A- - Pass Through Trust" means the trust created pursuant
to the Subclass A- - Pass Through Trust Agreement.
"Subclass A- - Pass Through Trust Agreement" means the Subclass A- -
Pass Through Trust Agreement dated as of the date hereof, among the
Issuer, the Guarantor and Bankers Trust, as trustee.
"Subclass A- - Principal Distribution Amount" means, collectively,
on any Payment Date after the Amortization Commencement Date with respect
to such subclass, the Class A Minimum Principal Payment Amount, if any,
the Class A Principal Adjustment Amount, if any, and the Class A
Supplemental Principal Payment Amount, if any, to be paid in respect of
principal of the Class A Airplanes Group Notes on such Payment Date in
accordance with Section 3.08 hereof and allocable to the Subclass A- -
Airplanes Group Notes in accordance with Section 3.09 hereof.
(b) Section 3.09 is hereby amended and restated in its entirety to
read as follows:
"Section 3.09. Allocation of Principal Payments Among Subclasses
of the Class A Airplanes Group Notes. To the extent that any Class
A Minimum Principal Payment Amount, Class A Principal Adjustment
Amount, Class A Supplemental Principal Payment Amount or Redemption
Price is required to be made with respect to the Class A Airplanes
Group Notes, and sufficient funds are available therefor, such
amounts will be applied to repay, first, all amounts Outstanding
under the Subclass A-1 Airplanes Group Notes, then, all amounts
Outstanding under the Subclass A-2 Airplanes Group Notes, then, all
amounts Outstanding under the Subclass A-3 Airplanes Group Notes,
then, all amounts Outstanding under the Subclass A-4 Airplanes
Group Notes, then, all amounts Outstanding under the Subclass A- -
Airplanes Group Notes, then, in the order of ascending numerical
designation by subclass, all amounts Outstanding under any other
Airplanes Group Class A Refinancing Notes that are Soft Bullet
Notes, but in each such case only following their respective
Amortization Commencement Dates, then, to repay any amounts
Outstanding under the Subclass A-5 Airplanes Group Notes, then, to
repay any amounts Outstanding under the Subclass A- - Airplanes
Group Notes, then, in the order of ascending numerical designation
by subclass, all amounts Outstanding
<PAGE> 6
6
under any other Airplanes Group Class A Refinancing Notes that are
Amortizing Notes."
ARTICLE II
REFINANCING NOTES
Section 2.01. The Refinancing Notes. There are hereby created Subclass
A- - Notes [and Class B Notes] to be issued under the Indenture to refinance
the Outstanding Principal Balance of the Subclass A- - [and Class B] Notes on
the date hereof. The terms and conditions applicable to the Subclass A- -
Notes [and the Class B] Notes are as follows:
(a) The aggregate principal amount of the Subclass A- - Notes that
shall be authenticated under the Indenture upon their issuance is $- [and
the aggregate principal amount of the Class B Notes that shall be
authenticated under the Indenture upon their issuance is $-].
(b) The Subclass A- - [and the Class B] Notes shall be in the form
attached hereto as Exhibit A.
(c) The proceeds of the sale of the Subclass A- - [and the Class B]
Notes shall be used to repay the Outstanding Principal Balance of the
Subclass A- - [and the existing Class B] Notes on the date hereof.
(d) Notwithstanding any provisions in the Indenture to the contrary,
the Subclass A- - Notes shall be entitled to Step-Up Interest on any
Outstanding Principal Balance of such subclass on or after its Expected
Final Payment Date and the Subclass A- - Notes shall be entitled to
Step-Up Interest on any Outstanding Principal Balance of such subclass
for any period during which Step-Up Interest is accruing on any other
subclass of the Class A Airplanes Group Notes.
Section 2.02. Issuance of Notes. On the date hereof, the Issuer shall
execute and the Indenture Trustee shall authenticate and deliver, in fully
registered form only, the Subclass A- - [and the Class B] Notes upon the written
order of the Issuer, in authorized denominations and in the names specified by
the Issuer.
ARTICLE III
THE INDENTURE TRUSTEE
Section 3.01. The Indenture Trustee. The Indenture Trustee shall not be
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Indenture Supplement or the due execution hereof by the
Issuer, or for or in respect of the
<PAGE> 7
7
recitals and statements contained herein, all of which recitals and statements
are made solely by the Issuer.
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed by the Indenture
Trustee other than as set forth in the Indenture, and this Indenture Supplement
is executed and accepted on behalf of the Indenture Trustee, subject to all the
terms and conditions set forth in the Indenture, upon the effectiveness
thereof, as fully to all intents as if the same were herein set forth at
length.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Trust Indenture Ratified. Except and so far as herein
expressly provided, all of the provisions, terms and conditions of the Trust
Indenture are in all respects ratified and confirmed; and the Trust Indenture
and this Indenture Supplement shall be taken, read and construed as one and the
same instrument.
Section 4.02. GOVERNING LAW. THIS INDENTURE SUPPLEMENT, THE SUBCLASS A- -
[AND THE CLASS B] NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
Section 4.03. Execution in Counterparts. This Indenture Supplement may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
<PAGE> 8
8
IN WITNESS WHEREOF, the Indenture Trustee, the Issuer and the Guarantor
have caused this Indenture Supplement to be duly executed as of the day and
year first written above.
AIRPLANES U.S. TRUST, as Issuer
By: ____________________________
Name:
Title: Controlling Trustee
AIRPLANES LIMITED, as Guarantor
By: ____________________________
Name:
Title: Director
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By: _____________________________
Name:
Title:
<PAGE> 9
EXHIBIT A
FORM OF [SUBCLASS A- -] [CLASS B] NOTE
AIRPLANES U.S. TRUST
[SUBCLASS A- -] [CLASS B] NOTE, due March 15, 2019
No. ____ $_________
[DATE]
AIRPLANES U.S. TRUST, a business trust organized under the laws of the
State of Delaware (herein referred to as the "Issuer"), for value received,
hereby promises to pay to BANKERS TRUST COMPANY, as Trustee, or registered
assigns, the principal sum of
___________________________________________________________________
_________________________________________________DOLLARS ($__________) on March
15, 2019 (the "Final Maturity Date") and to pay interest monthly in arrears on
the Outstanding Principal Balance hereof at a fluctuating interest rate per
annum equal to the sum of LIBOR plus -% per annum (the "Stated Interest Rate")
from the date hereof until the Outstanding Principal Balance hereof is paid or
duly provided for, payable on each Payment Date. Interest on this [Subclass A-
- -] [Class B] Note in each Interest Accrual Period shall be calculated on the
basis of a 360-day year and the actual number of days elapsed in such Interest
Accrual Period.
This [Subclass A- -] [Class B] Note is one of a duly authorized issue of
Refinancing Notes of the Issuer, designated as its "[Subclass A- -] [Class B]
Notes, due March 15, 2019", issued under the Trust Indenture dated as of March
28, 1996 and supplemented by an Indenture Supplement dated as of [March 16,
1998] (as amended or supplemented from time to time, the "Indenture"), among
the Issuer, Airplanes Limited, a limited liability company organized under the
laws of Jersey, Channel Islands (the "Guarantor"), and Bankers Trust Company,
as indenture trustee (the "Indenture Trustee"). All capitalized terms used in
this [Subclass A- -] [Class B] Note and not defined herein shall have the
respective meanings assigned to such terms in the Indenture. Reference is made
to the Indenture and all indentures supplemental thereto for a statement of the
respective rights and obligations thereunder of the Issuer, the Guarantor, the
Indenture Trustee and the [Subclass A- -] [Class B] Noteholders. This
[Subclass A- -] [Class B] Note is subject to all terms of the Indenture and
shall constitute a [Soft Bullet] [Amortizing] Note thereunder.
The Issuer will redeem the Outstanding Principal Balance of this [Subclass
A- -] [Class B] Note prior to the Final Maturity Date on the dates and in the
amounts
<PAGE> 10
2
specified in the Indenture, subject to the availability of Available
Collections therefor after making payments entitled to priority under
Section[s] 3.08 [and 3.09] of the Indenture. The Expected Final Payment Date
of this [Subclass A- -] [Class B] Note is -.
The Issuer may redeem all or part of the Outstanding Principal Balance of
this [Subclass A- -] [Class B] Note prior to the Final Maturity Date on the
Payment Dates, in the amounts and under the circumstances specified in the
Indenture.
Other than in the case of a redemption for taxation reasons specified in
the Indenture, upon any redemption of any amount of the Outstanding Principal
Balance of this [Subclass A- -] [Class B] Note in excess of the Principal
Distribution Amount applicable hereto prior to - (the "Premium Expiration
Date"), such amount shall be redeemed at a Redemption Price equal to -% of the
Outstanding Principal Balance thereof and upon any such redemption on or after
the Premium Expiration Date, such amount shall be redeemed at a Redemption
Price equal to -% of the Outstanding Principal thereof (such redemption price
being the "Floating Rate Redemption Price" referred to in the Indenture for the
[Subclass A- -] [Class B] Notes).
[Following the Expected Final Payment Date of this [Subclass A- -] Note and
until the Outstanding Principal Balance hereof is paid or duly provided for,
the Outstanding Principal Balance hereof shall bear additional interest
("Step-Up Interest") at the rate of 0.50% per annum, payable on each Payment
Date, subject to the availability of Available Collections therefor after
making payments entitled to priority under Sections 3.08 and 3.09 of the
Indenture.]
Any amount of Premium or interest [(including Step-Up Interest)] on this
[Subclass A- -] [Class B] Note that is not paid when due shall, to the fullest
extent permitted by applicable law, bear interest at a fluctuating interest
rate per annum equal to the Stated Interest Rate [FOR THE SUBCLASS A- - NOTES
ONLY: plus, following the Expected Final Payment Date of this [Subclass A- -]
Note, 0.50% per annum] from the date when due until such amount is paid or duly
provided for, payable on the next succeeding Payment Date, subject, in the case
of Step-Up Interest, to the availability of Available Collections therefor
after making payments entitled to priority under Section[s] 3.08 [and 3.09] of
the Indenture.
The indebtedness evidenced by the [Subclass A- -] [Class B] Notes is, to
the extent and in the manner provided in the Indenture, subordinate and subject
in right of payment to the prior payment in full of all Senior Claims (as
defined in the Indenture), and this [Subclass A- -] [Class B] Note is issued
subject to such provisions. Each Holder of this [Subclass A- -] [Class B]
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Indenture Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Indenture
Trustee his attorney-in-fact for such purpose.
The maturity of this [Subclass A- -] [Class B] Note is subject to
acceleration upon the occurrence and during the continuance of the Events of
Default specified in the
<PAGE> 11
3
Indenture. [FOR THE CLASS B NOTES ONLY: The Class B Noteholders shall not be
permitted to deliver a Default Notice or to exercise any remedy in respect of
any such Event of Default until all interest and principal on the Class A Notes
have been paid in full.]
This [Subclass A- -] [Class B] Note is and will be secured, on a
subordinated basis, by the collateral pledged as security therefor as provided
in the Security Documents.
Subject to and in accordance with the terms of the Indenture, there will
be distributed monthly on each Payment Date commencing on April 15, 1998, to
the Person in whose name this [Subclass A- -] [Class B] Note is registered at
the close of business on the Record Date with respect to such Payment Date, in
the manner specified in Section 3.08 of the Indenture, such Person's pro rata
share (based on the aggregate percentage of the Outstanding Principal Balance
of the [Subclass A- -] [Class B] Notes held by such Person) of the aggregate
amount distributable to all Holders of [Subclass A- -] [Class B] Notes on such
Payment Date.
All amounts payable in respect of this [Subclass A- -] [Class B] Note
shall be payable in U.S. dollars in immediately available funds at the
Corporate Trust Office of the Indenture Trustee or as otherwise directed in the
manner provided in the Indenture to the Holder hereof on the Record Date
relating to such payment. Notwithstanding the foregoing, the Indenture Trustee
shall pay, or cause to be paid, if so requested by the Holder hereof by written
notice to the Issuer and the Indenture Trustee, all amounts payable hereunder
to the Holder hereof, or a nominee therefor, by transferring by wire in
immediately available funds to an account maintained by the Holder hereof with
a bank in the United States, the amount to be distributed to the Holder hereof
(provided that written instructions necessary to implement such wire transfers
are received by the Indenture Trustee prior to the Record Date related to any
payment), without any presentment or surrender of any [Subclass A- -] [Class B]
Note, except that the Holder hereof shall surrender this [Subclass A- -] [Class
B] Note to the Indenture Trustee upon payment in full of the principal and
interest on this [Subclass A- -] [Class B] Note and such other sums payable to
the Holder hereof hereunder or under the Indenture. Any reduction in the
principal amount of this [Subclass A- -] [Class B] Note (or any one or more
predecessor [Subclass A- -] [Class B] Notes) effected by any payments made on
any Payment Date shall be binding upon all future Holders of this [Subclass A-
- -] [Class B] Note and of any [Subclass A- -] [Class B] Note issued upon the
registration of transfer of, in exchange or in lieu of or upon the refinancing
of this [Subclass A- -] [Class B] Note, whether or not noted hereon.
The Holder of this [Subclass A- -] [Class B] Note agrees, by acceptance
hereof, to pay over to the Cash Manager any money (including principal, Premium
and interest) paid to it in respect of this [Subclass A- -] [Class B] Note in
the event that the Cash Manager, acting in good faith, determines subsequently
that such monies were not paid in accordance with the priority of payment
provisions of the Indenture or as a result of any other mistake of fact or law
on the part of the Cash Manager in making such payment.
<PAGE> 12
4
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this [Subclass A- -] [Class B] Note may be registered
on the register maintained by the Indenture Trustee for the purpose of
registering transfers and exchanges upon surrender of this [Subclass A- -]
[Class B] Note for registration of transfer at the office or agency designated
by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Indenture Trustee
duly executed by, the Holder hereof or his attorney duly authorized in writing,
with such signature guaranteed, and such other documents as the Indenture
Trustee may require, and thereupon one or more new [Subclass A- -] [Class B]
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this [Subclass
A- -] [Class B] Note, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Prior to the due presentment for registration of transfer of this
[Subclass A- -] [Class B] Note, the Issuer, the Indenture Trustee and any agent
of the Issuer or the Indenture Trustee may deem and treat the Person in whose
name this [Subclass A- -] [Class B] Note (as of the day of determination or as
of such other date as may be specified in the Indenture) is registered as the
absolute owner and Holder hereof for the purpose of receiving payment of all
amounts payable with respect to this [Subclass A- -] [Class B] Note and for all
other purposes, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits the amendment or modification of the Indenture and
the [Subclass A- -] [Class B] Notes by the Issuer with the consent of the
Holders of a majority of the Outstanding Principal Balance of all Notes on the
date of any vote of such Holders (voting as a single class); provided that,
without the consent of each Holder of any class or subclass of Notes then
Outstanding, no such amendment may (i) modify the provisions of the Indenture,
the Notes or the Cash Management Agreement setting forth the frequency or the
currency of payment of, the maturity of, or the method of calculation of the
amount of, any interest, principal and Premium, if any, payable in respect of
such class or subclass of Notes, (ii) modify the provisions of Section 5.02 of
the Indenture relating to the sale of any assets of the Issuer, (iii) reduce
the percentage of the aggregate Outstanding Principal Balance of such class or
subclass of Notes required to approve any amendment or waiver of Section 9.01
of the Indenture or (iv) alter the manner or priority of payment of any class
or subclass of Notes or the priority of payment of the Expenses, the Swap
Payments or the Swap Breakage Costs (each, a "Basic Terms Modification"). Any
such amendment or modification shall be binding on every Holder hereof, whether
or not notation thereof is made upon this [Subclass A- -] [Class B] Note. The
Indenture also permits the Indenture Trustee to agree, without the consent of
any Noteholder, (a) to any modification (other than a Basic Terms Modification)
of, or the waiver or authorization of any breach or prospective breach of, any
provision of any Related Document or of the relevant Notes to correct a
manifest error or an error which is of a formal, minor or technical nature or
(b) to modify the provisions of the Indenture or the Cash
<PAGE> 13
5
Management Agreement relating to the timing of movement of Rental Payments or
other monies received or Expenses incurred among the Accounts by the Cash
Manager.
The subordination provisions contained in Section 3.08, Section 3.09 and
Article X of the Indenture may not be amended or modified without the consent
of each Noteholder of the class or subclass affected thereby and each
Noteholder of any class or subclass of Notes ranking senior thereto. In no
event shall the provisions set forth in Section 3.08 of the Indenture relating
to the priority of the Expenses, Swap Payments and Swap Breakage Costs be
amended or modified.
The Indenture also contains provisions permitting the Holders of Notes
representing a majority of the Outstanding Principal Balance of the Senior
Class of Notes, on behalf of the Holders of all of the [Subclass A- -] [Class
B] Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver shall be conclusive and binding upon all present
and future Holders of this [Subclass A- -] [Class B] Note and of any [Subclass
A- -] [Class B] Note issued upon the registration of transfer of, in exchange
or in lieu of or upon the refinancing of this [Subclass A- -] [Class B] Note,
whether or not notation of such consent or waiver is made upon this [Subclass
A- -] [Class B] Note.
The term "Issuer" as used in this [Subclass A- -] [Class B] Note includes
any successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of [Subclass A- -] [Class B] Notes under the Indenture.
The [Subclass A- -] [Class B] Notes are issuable only in registered form
in denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This [Subclass A- -] [Class B] Note shall in all respects be governed by,
and construed in accordance with, the laws of the State of New York, including
all matters of construction, validity and performance.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this [Subclass
A- -] [Class B] Note shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
<PAGE> 14
6
IN WITNESS WHEREOF, the Issuer has caused this [Subclass A- -] [Class B]
Note to be duly executed by its Responsible Officer.
AIRPLANES U.S. TRUST
By: ______________________________
Name:
Title:
<PAGE> 15
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the [Subclass A- -] [Class B] Notes designated above and
referred to in the within-mentioned Indenture.
Date: ____________ BANKERS TRUST COMPANY, not in its
individual capacity but
solely as Indenture Trustee
By: ____________________________
Authorized Signatory
<PAGE> 16
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- ----------------------------------
- ----------------------------------
(Please print or typewrite name and address including zip code of assignee)
- ----------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- ----------------------------------
attorney to transfer said Note on the books of the Issuer with full power of
substitution in the premises.
Date: [Signature of Transferor]
----------------------------- ----------------------------------------
NOTE: The signature to this assignment
must correspond with the name as
written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
<PAGE> 1
EXHIBIT 5.1
<PAGE> 2
DAVIS POLK & WARDWELL
<TABLE>
<S> <C> <C>
450 LEXINGTON AVENUE 1 FREDERICK'S PLACE 17-22, AKASAKA 2-CHOME
NEW YORK, N.Y. 10017 LONDON EC2R 8AB MINATO-KU, TOKYO 107
------ TELEPHONE 0171-418 1300 ------
1300 I STREET, N.W. FAX 0171-418 1400 MESSKTURM
WASHINGTON, D.C. 20005 60308 FRANKFURT AM MAIN
------ WRITER'S DIRECT: ------
4, PLACE DE LA CONCORDE 3A CHATER ROAD
75000 PARIS HONG KONG
------
PARTNERS RESIDENT IN LONDON
CHARLES S. WHITMAN, III
DAVID M. WELLS
PAUL KUMLEBEN
RANDALL D. GUYNN
THOMAS J. REID
JOHN D. PATON
MARGARET E. TAHYAR
</TABLE>
February 18, 1998
Airplanes Limited
18 Grenville Street
St. Helier
Jersey JE4 8PX
Channel Islands
Airplanes U.S. Trust
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Ladies and Gentlemen:
We have acted as special United States counsel for Airplanes Limited, a
public limited liability company incorporated in Jersey ("Airplanes Limited")
and Airplanes U.S. Trust, a Delaware business trust ("Airplanes Trust" and,
together with Airplanes Limited, "Airplanes Group") in connection with the
issuance by Airplanes Pass Through Trust (the "Trust") of refinancing
certificates (the "1998 Refinancing Certificates") representing fractional
undivided beneficial interests in corresponding classes and subclasses of notes
(collectively, the "1998 Refinancing Notes"), the proceeds of which will be used
to refinance certain of Airplanes Groups' outstanding Pass Through Trust
Certificates. The 1998 Refinancing Notes will be issued by Airplanes Limited
pursuant to a supplement to the trust indenture (the "Airplanes Limited
Indenture") among Airplanes Limited, Airplanes Trust and Bankers Trust Company,
as trustee, and by Airplanes Trust pursuant to a supplement to the trust
indenture (the "Airplanes Trust Indenture") and, together with the Airplanes
Limited Indenture, the "Trust Indentures") among Airplanes Trust, Airplanes
Limited and Bankers Trust Company, as trustee, dated March 28, 1996. Airplanes
Limited and Airplanes Trust have fully and unconditionally guaranteed (the
"Guarantees") the other's obligations under each class or subclass of Notes. The
Certificates will be purchased and sold pursuant to an Underwriting Agreement
(the "Underwriting Agreement") to be entered into among the Company, GPA Group
plc, Morgan Stanley & Co. Incorporated and the several underwriters named in
Schedule I to the Underwriting Agreement (collectively, the "Underwriters").
THE PRINCIPAL PLACE OF BUSINESS OF THE PARTNERSHIP IN GREAT BRITAIN IS THE
ADDRESS SET FORTH ABOVE AT WHICH A LIST OF THE PARTNERS' NAMES IS OPEN FOR
INSPECTION.
<PAGE> 3
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion, including the following: (a) the Memorandum and
Articles of Association of the Company, as amended; (b) the Amended and Restated
Airplanes U.S. Trust Agreement; (c) the Underwriting Agreement; (d) supplements
to the Pass Through Trust Agreement (the "Trust Agreement") among Airplanes
Limited, Airplanes U.S. Trust and Bankers Trust Company, as trustee, and
supplements to the Trust Indentures; (c) the Registration Statement on Form S-1
(Registration No. 33-43453) that Airplanes Limited and Airplanes Trust are
filing with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended, in connection with the registration of the Certificates
(the "Registration Statement"); (f) the draft preliminary prospectus (the
"Prospectus") and (g) the form of each class or subclass of the 1998 Refinancing
Certificates. We have assumed that each of the documents referred to in clauses
(a), (b), (c), (d) and (g) above will be executed and delivered by the relevant
parties thereto in substantially the form reviewed by us.
Based upon the foregoing, we are of the opinion as follows:
(1) when the supplements to the Trust Indentures referred to above
have been duly authorized, executed and delivered by the parties thereto,
the 1998 Refinancing Notes have been duly authorized by Airplanes Limited
and Airplanes Trust, the Guarantees have been duly authorized by Airplanes
Limited and Airplanes Trust and the 1998 Refinancing Notes have been duly
executed and authenticated in accordance with the Trust Indentures and duly
delivered to and paid for by the Trust (a) the 1998 Refinancing Notes will
constitute valid and binding obligations of Airplanes Limited and Airplanes
Trust and (b) the Guarantees will constitute valid and binding obligations
of Airplanes Limited and Airplanes Trust; and
(2) when the supplements to the Trust Agreement have been duly
authorized, executed and delivered by the parties thereto, the 1998
Refinancing Certificates have been duly authorized executed and
authenticated in accordance with the Trust Agreement, delivered to and paid
for by the Underwriters pursuant to the Underwriting Agreement and issued
and sold by the Trust as contemplated by the Registration Statement, the
1998 Refinancing Certificates will be legally and validly issued and
entitled to the benefits of the Trust Agreement.
We are members of the Bar of the State of New York and we express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York and the federal laws of the United States. In expressing our opinion
herein, we have relied (i) as to all matters of Jersey, Channel Islands law upon
the opinion of Mourant du Feu & Jeune which has been filed as an exhibit to the
Registration Statement and (ii) as to all matters of Delaware law upon the
opinion of Potter, Anderson & Corroon which has been filed as an exhibit to the
Registration Statement. Our opinion is, insofar as such laws are concerned,
subject to the assumptions, qualifications and exceptions contained in such
opinions.
We hereby consent to the use of our name under the caption "Legal Matters"
in the Prospectus forming a part of the Registration Statement, and to the
filing, as an exhibit to the Registration Statement, of this opinion.
Very truly yours,
DAVIS POLK & WARDWELL
<PAGE> 1
EXHIBIT 5.2
<PAGE> 2
ART WORK
United States Securities and Exchange Commission,
Washington D.C. 20549
United States of America
18 February 1998
Our ref: AS/990601.US1
Dear Sirs,
Airplanes Limited
We have acted as special counsel to Airplanes Limited, a public limited
liability company incorporated in Jersey (the "Company"), in connection with the
issuance by the Company of certain Notes (collectively, the "Notes"). The Notes
will be issued pursuant to a supplement to an indenture (the "Supplement") to be
entered into between the Company, Airplanes U.S. Trust and Bankers Trust
Company, as trustee (the "Trustee") and which is supplemented to an indenture
(the "Indenture") entered into as of 28th March, 1996 between the same parties.
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion, including the following: (a) the Certificate of
Incorporation of the Company (under the name "Atlanta Holdings Limited") and the
Certificate of Incorporation on change of name from Atlanta Holdings Limited to
Airplanes Limited; (b) the Memorandum and Articles of Association of the
Company; (c) the Indenture; (d) the draft form of Supplement appearing as an
exhibit to Amendment No. 1 to the Registration Statement (defined below); (e)
the Registration on form S-1 (Registration No. 333-43453) first filed by the
Company with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended, on 30th December, 1997 in connection with the
registration of the Notes and as amended through the date hereof (the
"Registration Statement"); (f) the draft prospectus (the "Prospectus") appearing
in the Registration Statement and (g) a specimen of each class or subclass of
the Notes appearing as an exhibit to Amendment No. 1 to the Registration
Statement.
Based upon the foregoing and assuming no event occurs prior to the events
referred to in (2) and (3) below of significance to the Company and its powers,
we are of the opinion as follows:
(1) the Company has been duly incorporated and is validly existing as
a public limited liability company under the laws of Jersey and has full
corporate power and authority to own its assets and conduct its business as
described on pages 30 to 51 of the Prospectus;
(2) when the Supplement has been duly and validly authorized, executed
and delivered by the Company, Airplanes U.S. Trust and the Trustee in
accordance with all relevant applicable laws, provided (i) the Supplement
and the Indenture constitute the legal, valid and binding agreement and
obligation of the Company under the laws of the State of New York (by which
laws they are expressed to be governed); (ii) the Indenture and the
Supplement are enforceable against the Company under such laws, and (iii)
the directors of the Company are acting in its best interests, the
Supplement and the Indenture will constitute the legal, valid and binding
agreement and obligations of the Company, enforceable
<PAGE> 3
against the Company in accordance with their terms, subject to (i)
applicable bankruptcy, reorganization, insolvency, fraudulent transfer,
moratorium or other laws affecting creditors' rights generally or from time
to time in effect; (ii) overriding principles of jurisdiction in the Jersey
Court and (iii) general principles of equity; and
(3) when the Notes have been duly authorized, executed and delivered
by the Company and issued and sold by the Company as contemplated by the
Registration Statement, and for so long as there are less than ten
registered holders thereof, provided the Notes constitute the valid and
binding obligations of the Company under the laws of the State of New York
by which laws the Notes are expressed to be governed, the Notes will be
legally and validly issued in Jersey and will constitute valid and binding
obligations of the Company, subject to (i) applicable bankruptcy,
reorganisation, insolvency, fraudulent transfer, moratorium or other laws
affecting creditors' rights generally from time to time in effect and (ii)
general principles of equity.
We do not express any opinion as to any laws other than the laws of Jersey
as such laws are applied by the Courts of Jersey as at the date of this letter.
We know that we may be referred to as legal advisors who have opined upon
the validity of the Notes on behalf of the Company, in the Registration
Statement and in any Prospectus forming a part of the Registration Statement,
and we hereby consent to such use of our name in the Registration Statement and
any amendments thereto, as well as to the use of this letter as an exhibit to
the Registration Statement.
Yours faithfully,
MOURANT DU FEU & JEUNE
<PAGE> 1
EXHIBIT 5.3
[POTTER ANDERSON & CORROON LLP LETTERHEAD]
February 18, 1998
Airplanes U.S. Trust
c/o Wilmington Trust Company
Rodney Square North
1100 N. Market Street
Wilmington, Delaware 19890-0001
Re: Airplanes U.S. Trust
Airplanes Refinancing Notes
Ladies and Gentlemen:
We have acted as special Delaware counsel to Airplanes U.S. Trust, a
Delaware business trust (the "Company"), in connection with the prospective
issuance by the Company of refinancing notes the net proceeds of which will be
used to refinance any or all of the Company's outstanding A-1 through A-3 Notes
and the Class B Notes (collectively, the "Refinancing Notes"). The Refinancing
Notes will be issued pursuant to Indenture Supplement No. 1 to be dated as of
March 16, 1998 (the "Supplement to the Indenture") among the Company,
Airplanes Limited, a limited liability company incorporated in Jersey, Channel
Islands ("Airplanes Limited"), as guarantor of the Refinancing Notes, and
Bankers Trust Company (in its individual capacity, "Bankers Trust") not in its
individual capacity but solely as trustee (the "Indenture Trustee"), to the
Trust Indenture dated as of March 28, 1996 (the "Indenture") among the
Company, Airplanes Limited and Bankers Trust. Capitalized terms used but not
defined herein are used as defined in the Amended and Restated Trust Agreement
dated as of March 11, 1996 (the "Trust Agreement") by and among GPA, Inc., as
settlor, and Wilmington Trust Company, Roy M. Dantzic, William A. Franke, Hugh
R. Jenkins and William M. McCann as Trustees thereunder, and Patrick H. Blaney
and John F. Tierney, as withdrawing trustees thereunder.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of the following documents but have conducted no independent
factual
<PAGE> 2
Airplanes U.S. Trust
February 18, 1998
Page 2
investigation of our own: (a) the Trust Agreement; (b) the Certificate of the
Trust dated November 29, 1995 as filed in the Office of the Secretary of State
of the State of Delaware (the "Secretary of State"), as amended by the Restated
Certificate of Trust of the Trust dated February 13, 1998 as filed with the
Secretary of State (together, the "Certificate of Trust"); (c) a certificate of
Good Standing for the Trust dated the date hereof obtained from the Secretary of
State; (d) the Indenture; (e) the draft form of the Supplement to the Indenture
appearing as Exhibit 4.16 to Form S-1 of the Registration Statement (defined
below); and (f) the Registration Statement on Form S-1 (Registration No.
333-43453) filed by the Company with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "1933 Act"), on December
30, 1997 (the "Registration Statement"), including the preliminary prospectus
set forth therein (the "Prospectus"), relating to among other things, the
issuance and sale of the Refinancing Notes. As to certain facts material to the
opinions set forth herein, we have relied upon the representations and
warranties contained in the documents examined by us, all of which we have
assumed to be true, complete and accurate in all material respects.
The opinions set forth herein are limited to the laws of the State of
Delaware, and we express no opinion with respect to (i) federal securities laws,
including without limitation the 1933 Act, as amended, the Securities and
Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as
amended, or (ii) state securities or blue sky laws. For purposes of the opinions
expressed below, we have assumed that the Indenture, the Supplement to the
Indenture and the Refinancing Notes are governed by the laws of the State of
Delaware. The opinions set forth herein are subject to (a) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance,
receivership and similar laws affecting the rights and remedies of creditors
generally, (b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and (c)
public policy limitations with respect to exculpation and indemnity provisions.
In rendering the opinions set forth herein, we have assumed that the
Supplement to the Indenture will not differ in any material respect from the
form of Supplement to the Indenture filed as an exhibit to the Registration
Statement, and that the Indenture and Trust Agreement have not otherwise been
amended or supplemented. We have further assumed that the Refinancing Notes,
when issued, will be in the appropriate form
<PAGE> 3
Airplanes U.S. Trust
February 18, 1998
Page 3
as required by the Indenture and will reflect the appropriate terms and
conditions as authorized by the Controlling Trustees and as provided in the
Supplement to the Indenture. In addition, we have assumed the existence, due
authorization execution and delivery by each party thereto of each of the Trust
Agreement and (except for the Company) the Indenture; that the Indenture, the
Supplement to the Indenture and the Refinancing Notes constitute the legal,
valid and binding obligations of the parties thereto, enforceable against each
in accordance with their respective terms under the laws of New York under which
they are expressed to be governed; and that each party to the Trust Agreement
and (other than the Company) to the Indenture and the Supplement to the
Indenture, has and had at the time of execution, the full power, authority,
legal capacity with respect to natural persons, and legal right to authorize,
deliver and perform each such document. We have further assumed that the Trust
Agreement constitutes the entire agreement among each of the parties thereto
with respect to the subject matter thereof, including with respect to the
creation, operation, dissolution and winding up of the Company and that no
termination event under Section 6.1 of the Trust Agreement has occurred.
To the extent that any opinion expressed herein speaks to an event which
may occur after the date hereof (a "Future Event"), we have assumed that at
the time of any such Future Event no change in any circumstance of fact or law
that exists on the date hereof (or that has been expressly assumed by us herein)
will have occurred such as to adversely affect the validity of any opinion
expressed herein.
Based upon the foregoing, and upon an examination of such questions of law
of the State of Delaware as we have considered necessary or appropriate, we are
of the opinion that:
1. The Company has been duly created and is validly existing as a business
trust under the laws of the State of Delaware and has full trust power and, upon
due authorization by the Controlling Trustees as set forth in the Trust
Agreement, authority to execute and deliver the Supplement to the Indenture and
issue the Refinancing Notes as described in the Prospectus;
2. When the Supplement to the Indenture has been duly and validly
authorized, executed and delivered by the Company and the other parties thereto
in accordance with all relevant applicable laws, it will constitute the legal,
valid
<PAGE> 4
Airplanes U.S. Trust
February 18, 1998
Page 4
and binding agreement and obligation of the Company, enforceable against the
Company in accordance with its terms: and
3. When the Refinancing Notes have been duly authorized, executed and
delivered by the Company pursuant to the authorization of the Controlling
Trustees as provided in the Trust Agreement and issued and sold by the Company
as contemplated by the Registration Statement, the Refinancing Notes will be
legally and validly issued and will constitute validly binding obligations of
the Company.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Legal Matters" in the
Prospectus. In giving this consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the 1933 Act or
the rules and regulations of the Securities and Exchange Commission. We do not
assume any responsibility for the contents of the Prospectus.
Very truly yours,
[SIG]
<PAGE> 1
EXHIBIT 8.1
<PAGE> 2
DAVIS POLK & WARDWELL
<TABLE>
<S> <C> <C>
450 LEXINGTON AVENUE 1 FREDERICK'S PLACE 17-22, AKASAKA 2-CHOME
NEW YORK, N.Y. 10017 LONDON EC2R 8AB MINATO-KU, TOKYO 107
------ TELEPHONE 0171-418 1300 ------
1300 I STREET N.W. FAX 0171-418 1400 MESSETURM
WASHINGTON, DC 20005 60308 FRANKFURT AM MAIN
------ WRITER'S DIRECT ------
4, PLACE DE LA CONCORDE 0171-418 1300 3A CHATER ROAD
75008 PARIS HONG KONG
------
PARTNERS RESIDENT IN LONDON
CHARLES S. WHITMAN, III
DAVID M. WELLS
PAUL KUMLEBEN
RANDALL D. GUYNN
THOMAS J. REID
JOHN D. PATON
MARGARET E. TAHYAR
</TABLE>
February 18, 1998
Airplanes Limited
22 Grenville Street
St. Helier
Jersey JE4 8PX
Channel Islands
Airplanes U.S. Trust
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Dear Sirs:
We have acted as special United States Federal Tax counsel for Airplanes
Limited ("Airplanes Limited"), a public limited liability company formed under
the laws of Jersey, and Airplanes U.S. Trust ("Airplanes Trust") and, together
with Airplanes Limited ("Airplanes Group"), a Delaware business trust, in
connection with the filing by Airplanes Group on behalf of the Airplanes Pass
Through Trust (the "Trust") with the Securities and Exchange Commission of a
Registration Statement on form S-1 (the "Registration Statement") registering
refinancing certificates, (the "1998 Refinancing Certificates") representing
fractional undivided interests in corresponding classes and subclasses of notes
(the "1998 Refinancing Notes"), the proceeds of which will be used to refinance
certain of Airplane Groups' outstanding Pass Through Trust Certificates.
On the basis of the foregoing, we are of the opinion that the "Tax
Considerations -- U.S. Federal Income Tax Considerations" section of the
prospectus included in the Registration Statement, insofar as it relates to
United States federal income tax matters currently applicable to the holders of
the 1998 Refinancing Certificates discussed therein, accurately reflects the
material United States Federal Income tax consequences of owning the 1998
Refinancing Certificates.
We hereby consent to the use of our name under the caption "Prospectus
Summary -- Certain Taxation Matters" and "Tax Considerations -- U.S. Federal
Income Tax Considerations" in the prospectus forming part of the Registration
Statement, and we hereby consent to the use of this opinion for filing with the
Registration Statement as Exhibit 8.1 thereto.
Very truly yours,
DAVIS POLK & WARDWELL
THE PRINCIPAL PLACE OF BUSINESS OF THE PARTNERSHIP IN GREAT BRITAIN IS THE
ADDRESS SET FORTH ABOVE AT WHICH A LIST OF THE PARTNERS' NAMES IS OPEN FOR
INSPECTION.
<PAGE> 1
EXHIBIT 8.2
<PAGE> 2
<TABLE>
<S> <C>
2 Harbourmaster Place McCann FitzGerald
Custom House Dock SOLICITORS
Dublin 1
Tel +353-1-829 0000
Fax +353-1-829 0010
email: [email protected]
Dx 31 Dublin
</TABLE>
our ref DG/GF 1006 your ref. date 18 February 1998
Airplanes Limited
2 Grenville Street
St Helier
Jersey, JE4 8PX
Channel Islands
("Airplanes Limited")
Airplanes US Trust
Rodney Square North
Wilmington
Delaware 19890-0001
("Airplanes trust")
PRIVATE AND CONFIDENTIAL: AIRPLANES REFINANCING
Dear Sirs
We have been asked to provide this opinion to you in connection with
certain tax matters set out in the Draft Registration Statement (as defined
below).
1.1 DOCUMENTS EXAMINED
For the purposes of this opinion, we have examined the draft registration
statement on Form S-1 (registration no. 333-43 453, filed (subject to
completion) on 30 December 1997 pursuant to the US Securities Act, 1933 (the
"Draft Registration Statement").
1.2 INTERPRETATION
In this opinion:-
"AeroUSA", "AeroUSA 3," "Airplanes Group", "Certificateholder", "1998
Refinancing Certificates", "Existing Leases", "Noteholder", "1998
Refinancing Notes", "Servicer", "Servicing Agreement", "Special Lessors",
"Trust", "Trust Agreement" and "Trust Indentures", have the meanings
respectively ascribed to them in the Draft Registration Statement.
"Aircraft Owning Companies" means GPA II, GPA III Limited, GPAA II Limited,
Irish Aerospace II Limited, Emerald Aviation Investments Limited, GPA
Finance (Bermuda) Limited, GPA Finance (Bermuda) No. 2 Limited, GPA Finance
Limited, GPA Fokker Finance Limited, GPA Funding I Limited, GPA Jetprop
Finance Limited, GPAR Finance Limited, Irish Aerospace Finance Limited and
GPAA Funding Limited.
<PAGE> 3
"Certified Aircraft Owning Companies" means each of Emerald Aviation
Investments Limited, GPA Finance (Bermuda) Limited, GPA Finance (Bermuda)
No. 2 Limited, GPA Finance Limited, GPA Fokker Finance Limited, GPA Funding
I Limited, GPA Jetprop Finance Limited, GPAR Finance Limited, Irish
Aerospace Finance Limited and GPAA Funding Limited.
"Documents" means the GPA II Share Sale Agreement, the Stock Purchase
Agreement, the Trust Indentures and the Trust Agreement;
"GPA II Share Sale Agreement" means the share purchase agreement to be
entered into between (1) GPA Group plc ("GPA Group") (2) Skyscrape Limited
and (3) Airplanes Limited relating to the sale of shares (the "Shares") in
GPA II Limited ("Holding Co") to Airplanes Limited.
"Stock Purchase Agreement" means the stock purchase agreement to be entered
into between, inter alia, GPA, GPA Inc. and Airplanes Trust relating to the
sales of shares in AeroUSA (the "AeroUSA Shares") to Airplanes Trust.
"Shannon Certificates" means the certificate under Section 445(2) Taxes
Consolidation Act 1997 issued in respect of each of the Certified Aircraft
Owning Companies.
Headings are for ease of reference only.
1.3 SCOPE OF OPINION
This opinion letter is limited to the matters stated herein and does not
extend, and is not to be read as extending by implication, to any other matters
whatsoever.
We have made no investigation of, and express no opinion on, the laws, or
the effect on the Documents and the transactions contemplated thereby of the
laws, of any country or jurisdiction other than Ireland, and this opinion is
strictly limited to the laws of Ireland as in force on the date hereof and as
currently applied by the courts (excluding any foreign law to which reference
may be made under the rules of Irish private international law)
It should be understood that we have not acted as tax advisers to GPA or
any other party in connection with the transactions constituted by the Documents
and/or contemplated by the Draft Registration Statement. We have not been
responsible for investigating or confirming the accuracy of the facts, including
statements of foreign law, or the reasonableness of any statements or opinion
contained in the Draft Registration Statement, other than our opinion as stated
in the second paragraph under Irish Tax Considerations -- Irish Income and
Withholding Taxes and under Irish Tax Considerations -- Irish Value Added Tax,
or any of the other Documents, or ensuring that no relevant facts or statements
have been omitted therefrom. We have not for the purpose of this opinion made
any other enquiries, carried out any searches or examined any contract,
instrument or document or corporate records, other than the Documents.
1.4 This opinion letter is to be construed in accordance with the laws of
Ireland as at the date hereof. The opinions expressed herein are given on the
basis of the foregoing and the assumptions set out in part 2.
2. ASSUMPTIONS
In considering the Draft Registration Statement and in rendering this
opinion, we have, without further enquiry, assumed:
(a) that the registration statement will be filed by Airplanes Limited
and Airplanes US Trust in substantially the form of the Draft Registration
Statement;
(b) that the Documents will be duly executed by the parties thereto in
substantially the form of the drafts which were filed on or before 20
February 1996 as exhibits to the Draft Registration Statement with the
Securities Exchange Commission and copied to us;
(c) that the 1998 Refinancing Notes and 1998 Refinancing Certificates
will be in the terms contemplated by the Draft Registration Statement and
will be issued outside Ireland;
<PAGE> 4
(d) that each of the Shannon Certificates is in full force and effect
at all applicable times;
(e) the due performance of the Documents by all parties thereto;
(f) that none of Airplanes Limited, Airplanes Trust or the Trust will
(a) be Irish tax resident, (b) have a branch, agency or permanent
establishment in Ireland or (c) have any Irish source income or gain other
than interest paid by their direct and indirect Irish subsidiaries in the
course of carrying on relevant trading operations under their Shannon
Certificates ("Shannon Certified Operations");
(g) that interest and other amounts paid on the 1988 Refinancing Notes
and 1998 Refinancing Certificates will not be Irish source income;
(h) that none of Airplanes Limited, Airplanes Trust or AeroUSA supply
goods or services within Ireland;
(i) that there are no agreements or arrangements in existence and
contemplated between the parties (or any of them) to the Documents which
have not been disclosed to us and which in any way amend, add to or vary
the terms or conditions of the Documents;
(j) that the warranties and representations set out in the Documents
are true and accurate; and
(k) that the Revenue Commissioners of Ireland have not served or will
not serve any notice of attachment under Section 1002 Taxes Consolidation
Act 1997 on Airplanes Limited, Airplanes Trust or the Trust.
3. OPINION
Having regard to the foregoing, and on the basis of the assumptions set out
in paragraph 2 above, we are of the opinion that:
(a) there will be no Irish taxation on the income of, or any capital
gain of, Airplanes Limited, Airplanes Trust or the Trust. We draw your
attention to the fact that this conclusion, as regards receipts of interest
from Irish resident subsidiaries, applies only while the assumptions at (d)
and (f) above are true; under present legislation Shannon Certificates will
terminate on 31 December 2005 and, therefore, interest paid after 31
December 2005 to Airplanes Limited, Airplanes Trust or the Trust by their
direct and indirect Irish subsidiaries will be subject to Irish tax.
However, as a matter of practice, the Irish tax authorities do not pursue
collection of any such liability to Irish tax in respect of persons who are
regarded as not being resident in Ireland except where such persons
(a) are chargeable in the name of a person (including a trustee) or
in the name of an agent or branch in Ireland having the management and
control of the interest; or
(b) seek to claim relief and/or repayment of tax deducted at source
in respect of taxed income from Irish sources; or
(c) are chargeable to Irish corporation tax on the income of an
Irish branch or agency or to income tax on the profits of a trade
carried on in Ireland to which the interest is attributable.
Assuming Holding Co. and the other Irish tax resident Transferred
Companies continue to be entitled to the benefit of the 10% corporate tax
rate for Shannon, Ireland certified companies until 31 December 2005 they
will continue to be able to make interest payments to Airplanes Limited
without deduction for withholding beyond 2005 if they comply with Section
246 Taxes Consolidation Act 1997.
(b) there will be no withholding or deduction on account of Irish
taxes with respect to interest and other amounts paid by Airplanes Limited
or Airplanes Trust on the 1998 Refinancing Notes, or by the Trust on the
1998 Refinancing Certificates;
(c) payments under the Existing Leases to the various Aircraft Owning
Companies, Special Lessors, AeroUSA and AeroUSA 3 by the Lessees will not
be subject to Irish value added tax; any Irish value added tax that may
become payable by AeroUSA in connection with any management services
<PAGE> 5
performed by the Servicer, GPA Cash Manager Limited or GPA Financial
Services (Ireland) Limited will be eligible to be reclaimed by AeroUSA. The
foregoing opinion is based upon certain covenants by each of Airplanes
Limited, Airplanes Trust, and AeroUSA regarding its place of business and
the location of the Aircraft and on the assumptions that: (i) the aircraft
are used or to be used by a transport undertaking operating for reward
chiefly on international routes; (ii) none of Airplanes Limited, Airplanes
Trust or AeroUSA supply goods or services within Ireland and (iii) input
credit would not be denied to an Irish person carrying on the same activity
as the payor, if that person were in receipt of the management services.
In general, Irish value added tax will be payable, and may not be
reclaimable, in respect of certain management services performed by the
Servicer, GPA Cash Manager Limited or GPA Financial Services (Ireland)
Limited for Airplanes Limited, Airplanes Trust or the Trust.
(d) no stamp duty, stamp duty reserve tax or issue, documentary,
registration or other similar tax imposed by any government department or
other taxing authority of or in Ireland will be payable on the creation,
initial issue or delivery of the 1998 Refinancing Notes or the 1998
Refinancing Certificates.
4. GENERAL
This opinion speaks of its date and is addressed to, and is solely for the
benefit of, the addressees and their legal advisers. It may not be relied upon
by, or disclosed to, any other person, without our prior written consent.
We hereby consent to the use of our name in the Draft Registration
Statement in the form and context in which it appears therein.
Yours faithfully
MCCANN FITZGERALD
<PAGE> 1
EXHIBIT 8.3
<PAGE> 2
ART WORK
United States Securities and Exchange Commission
Washington D.C. 20549
United States of America
18 February 1998
Our ref: AS/990601.US2
Dear Sirs,
Airplanes Limited
We have acted as Jersey tax counsel for Airplanes Limited ("Airplanes
Limited"), a public limited liability company formed under the laws of Jersey,
and Airplanes U.S. Trust, a Delaware business trust ("Airplanes Trust" and,
together with Airplanes Limited, the "Company") in connection with the filing by
the Company on behalf of the Airplanes Pass Through Trust (the "Trust") with the
Securities and Exchange Commission of a Registration Statement on Form S-1, File
No. 333 43453 (the "Registration Statement") registering certain Pass Through
Certificates (the "Certificates") representing fractional undivided interests in
certain corresponding notes (the "Trust Notes") to be issued by Airplanes
Limited and Airplanes Trust. Each class or subclass of the Certificates will be
issued pursuant to a trust supplement (together, the "Supplements") to be
entered into among Airplanes Limited, Airplanes Trust and Bankers Trust Company,
as Trustee and which are supplemental to the Trust Agreement entered into as of
28th March, 1996 between the same parties.
Assuming proper execution of the Supplements and proper issue of the Trust
Notes and the Certificates in the forms filed as exhibits to Amendment No. 1 to
the Registration Statement as filed on 18 February, 1998 we hereby confirm that
the statements set forth in the prospectus (the "Prospectus") forming a part of
the Registration Statement under the heading "TAX CONSIDERATIONS -- Certain
Jersey tax considerations", to the extent that they constitute matters of law,
accurately describe the material Jersey tax consequences to holders of the
Certificates.
We know that we are referred to under the headings "Prospectus Summary --
Certain Taxation Matters", "TAX CONSIDERATIONS -- Certain Jersey Tax
Considerations". "Risk Factors -- Risks relating to Tax" and "Legal Matters" in
the prospectus forming a part of the Registration Statement, and we hereby
consent to such use of our name therein and to the use of this opinion for
filing with the Registration Statement as Exhibit 8.3 thereto.
Yours faithfully,
MOURANT DU FEU & JEUNE
<PAGE> 1
EXHIBIT 12
COMPUTATION OF DEFICIENCY OF COMBINED EARNINGS TO COMBINED FIXED CHARGES
The following computations of the deficiency of combined earnings to combined
fixed charges has been based upon the audited Financial Statements of Airplanes
Limited and Airplanes U.S. Trust for the five year period ended March 31, 1997
and the unaudited Financial Statements of Airplanes Limited and Airplanes U.S.
Trust for the nine month periods ended December 31, 1996 and 1997 included in
this registration statement.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
-------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
($ MILLIONS) ($ MILLIONS)
------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating loss before
income tax (217) (74) (125) (69) (140) (97) (114)
Add: interest expense 209 258 357 376 400 298 320
---- ---- ---- ---- ---- ---- ----
EARNINGS (8) 184 232 307 260 201 206
---- ---- ---- ---- ---- ---- ----
FIXED CHARGES:-
Interest expense 209 258 357 376 400 298 320
---- ---- ---- ---- ---- ---- ----
DEFICIT OF EARNINGS TO
FIXED CHARGES (217) (74) (125) (69) (140) (97) (114)
---- ---- ---- ---- ---- ---- ----
</TABLE>
<PAGE> 1
EXHIBIT 23.5
[LETTERHEAD OF KPMG]
Independent Auditors' Consent and Report on Schedule
TO THE BOARD OF DIRECTORS OF AIRPLANES LIMITED
AND THE CONTROLLING TRUSTEES OF AIRPLANES US TRUST
Under date of June 26, 1997, we reported on the balance sheets of Airplanes
Limited and Airplanes US Trust as of March 31, 1996 and 1997, and the related
statements of operations, changes in shareholders' deficit/net liabilities and
cash flows for each of the years in the three year period ended March 31, 1997,
which are included in this Registration Statement on Form S-1. In connection
with our audits of the aforementioned financial statements, we also audited the
related financial statement schedule in this Registration Statement on Form S-1.
This financial statement schedule is the responsibility of the entities'
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects the information set forth therein.
We consent to the use of our reports included herein and to references to
our firm under the headings "Summary Combined Financial Data", "Selected
Financial Data" and "Experts" in the Registration Statement.
[Signature KPMG]
KPMG
Chartered Accountants
Dublin, Ireland
February 18, 1998
<PAGE> 1
[AISI LETTERHEAD]
EXHIBIT 23.6
CONSENT OF APPRAISER
We consent to the use of our reports included herein and to the references to
our firm in the Airplanes Limited and Airplanes U.S. Trust Report on
Registration Statement Form S-1 to be filed with the Securities and Exchange
Commission.
Dated: January, 1998
-------------------------------------------------------
Signed on behalf of Aircraft Information Services, Inc.
Name: Fred E. Bearden
----------------------------------
Title: President
----------------------------------
[AISI LETTERFOOT]
<PAGE> 1
[BK ASSOCIATES LETTERHEAD]
EXHIBIT 23.7
CONSENT OF APPRAISER
We consent to the use of our reports included herein and to the references to
our firm in the Airplanes Limited and Airplanes U.S. Trust Report on
Registration Statement Form S-1 to be filed with the Securities and Exchange
Commission.
Date: January 1998 BK ASSOCIATES, INC.
By: /s/ John F. Keitz
---------------------------------
Name: John F. Keitz
Title: President
JFK/kf
<PAGE> 1
EXHIBIT 23.8
CONSENT OF APPRAISER
We consent to the use of our reports included herein and to the references to
our firm in the Airplanes Limited and Airplanes U.S. Trust Report on
Registration Statement Form S-1 to be filed with the Securities and Exchange
Commission.
Dated: January, 1998
-------------------------------------
Signed on behalf of Airclaims Limited
Name: /s/
--------------------------------
Title: Director, Airclaims Ltd.
--------------------------------
<PAGE> 1
[AISI LETTERHEAD]
EXHIBIT 99.1
23 January 1998
Airplanes Limited
22 Grenville Street
St. Helier
Jersey
Airplanes U.S. Trust
1100 North Market Street
Rodney Square North
Wilmington, Delaware
USA
GPA Group plc
GPA House
Shannon
Ireland
Bankers Trust Company
4 Albany Street
New York, New York
USA
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York
USA
Subject: Half Life and Adjusted Base and Current Market Value Opinion - 221
Aircraft.
AISI File number: A8S007BVO
Dear Sirs:
In response to your request, Aircraft Information Services, Inc. (AISI) is
pleased to offer our opinion to the above addressees of the half life and
adjusted base and current market values of the Fleet of Aircraft as identified
in Table I (the "Aircraft").
1. METHODOLOGY AND DEFINITIONS
The historical standard term of reference for commercial aircraft value has
been "half-life fair market value" of an "average" aircraft. However, "fair
market value" could mean a fair value in the given market or a value in a
hypothetical "fair" or balanced market, and the two
[AISI LETTERFOOT]
<PAGE> 2
[AISI LOGO]
----
23 January 1998
AISI File No. A8S007BVO
Page -2-
definitions are not equivalent. Recently, the term 'base value' has been created
to describe the theoretical balanced market condition and to avoid the
potentially misleading term 'fair market value' which has now become synonymous
with the term 'current market value' or a 'fair' value in the actual current
market. AISI value definitions are consistent with those of the International
Society of Transport Aircraft Trading (ISTAT) of 01 January 1994; AISI is a
member of that organization and employs an ISTAT Certified Senior Aircraft
Appraiser.
AISI defines a 'base value' as that of a transaction between equally willing and
informed buyer and seller, neither under compulsion to buy or sell, for a single
unit cash transaction with no hidden value or liability, and with supply and
demand of the sale item roughly in balance. Base values are typically given for
aircraft in 'new' condition, 'average half-life' condition, or in a specifically
described condition unique to a single aircraft at a specific time. An 'average'
aircraft is an operable airworthy aircraft in average physical condition and
with average accumulated flight hours and cycles, with clear title and standard
unrestricted certificate of airworthiness, and registered in an authority which
does not represent a penalty to aircraft value or liquidity, with no damage
history and with inventory configuration and level of modification which is
normal for its intended use and age. AISI assumes average condition unless
otherwise specified in this report. 'Half-life' condition assumes that every
component or maintenance service which has a prescribed interval that determines
its service life, overhaul interval or interval between maintenance services, is
at a condition which is one-half of the total interval. It should be noted that
AISI and ISTAT value definitions apply to a transaction involving a single
aircraft, and that transactions involving more than one aircraft are often
executed at considerable and highly variable discounts to a single aircraft
price, for a variety of reasons relating to an individual buyer or seller.
AISI defines a 'current market value' or 'fair market value' as that value which
reflects the real market conditions, whether at, above or below the base value
conditions. Assumption of a single unit sale and definitions of aircraft
condition, buyer/seller qualifications and type of transaction remain unchanged
from that of base value. Current market value takes into consideration the
status of the economy in which the aircraft is used, the status of supply and
demand for the particular aircraft type, the value of recent transactions and
the opinions of informed buyers and sellers. Current market value assumes that
there is no short term time constraint to buy or sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future value
considerations, or to consider how actual market values vary from theoretical
base values. Base values are less volatile than current market values and tend
to diminish regularly with time. Base values are normally inappropriate to
determine near term values. AISI encourages the use of current market values to
consider the probable near term value of an aircraft.
<PAGE> 3
[AISI LOGO]
23 January 1998
AISI File No. A8S007BVO
Page -3-
AISI determines an 'adjusted market value' by determining the value of known
deviations from half-life condition, which may be better or worse than half-life
condition, and to account for better or worse than average physical condition,
and the inclusion of additional equipment, or absence of standard equipment. Our
opinion of the adjusted base values of the Aircraft are derived from information
and specifications supplied by GPA Group plc. No physical inspection of the
Aircraft or their essential records was made by AISI for the purposes of this
report.
2. VALUATION
Adjustments from half life have been applied based on the current maintenance
status of the Aircraft as indicated in the Aircraft General Specification sheets
supplied to AISI and in accordance with standard AISI methods. Adjustments are
calculated only where there is sufficient information to do so, or where
reasonable assumptions can be made.
With regard to airframe and gear maintenance, if no time between check/overhaul
(TBO) or time since check/overhaul (TSO) information was provided, and if the
total hours/cycles of the airframe do not exceed the TBO limits then the total
hours/cycles of the airframe were assumed to be the TSO. This was typical of
newer aircraft. If no information was provided and if the TSO could not be
calculated, then half life was assumed.
With regard to the engines, due to the lack of information provided, all engines
are considered to be in half life condition.
All hours and cycle information provided for airframe, C Check, D Check, gear
and engines have been projected from the Aircraft General Specification sheet
dates to 23 January 1998 based on a daily utilization factor calculated for each
aircraft.
It is our considered opinion that the half life and adjusted base and current
market values of the Aircraft are as follows in Table I subject to the
assumptions, definitions, and disclaimers herein.
<PAGE> 4
[AISI LOGO]
23 January 1998
AISI File No. A8S007BVO
Page -4-
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft or
equipment. AISI has no past, present, or anticipated future interest in the
subject aircraft or equipment. The conclusions and opinions expressed in this
report are based on published information, information provided by others,
reasonable interpretations and calculations thereof and are given in good faith.
Such conclusions and opinions are judgments that reflect conditions and values
which are current at the time of this report. The values and conditions reported
upon are subject to any subsequent change. AISI shall not be liable to any party
for damages arising out of reliance or alleged reliance on this report, or for
any parties action or failure to act as a result of reliance or alleged reliance
on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
[SIG]
Fred E. Bearden
President
FB/JDM/jm
<PAGE> 5
[AISI LOGO]
TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
- ---- ---------- ------ ----------- -------- --------- ----------- -------------------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 A300-B4-100 9* 12/26/74 347,222 CF6-50C2 $5,100,000 $5,100,000 $5,100,000 $5,100,000
2 A300-B4-100 12 05/20/75 347,222 CF6-50C2 $5,620,000 $5,620,000 $6,250,000 $6,250,000
3 A300-B4-100 20 10/01/75 347,222 CF6-50C2 $5,620,000 $5,620,000 $6,340,000 $6,340,000
4 A300-B4-200 131 02/07/81 363,700 CF6-50C2 $10,120,000 $10,120,000 $11,440,000 $11,440,000
5 A300-B4-200 269 08/11/83 363,700 CF6-50C2 $11,580,000 $11,580,000 $11,630,000 $11,630,000
6 A300-C4-200 83* 05/01/79 363,700 CF6-50C2 $14,150,000 $14,150,000 $14,150,000 $14,150,000
7 A320-200 174 04/01/91 166,446 CFM56-5A1 $29,580,000 $29,600,000 $29,670,000 $29,690,000
8 A320-200 175 04/01/91 166,446 CFM56-5A1 $29,580,000 $29,600,000 $29,690,000 $29,710,000
9 A320-200 203 09/01/91 169,753 CFM56-5A3 $29,830,000 $29,850,000 $29,630,000 $29,650,000
10 A320-200 220 09/01/91 169,753 CFM56-5A3 $29,830,000 $29,850,000 $29,630,000 $29,650,000
11 A320-200 232 10/01/91 166,446 CFM56-5A1 $29,580,000 $29,600,000 $29,320,000 $29,340,000
12 A320-200 284 03/09/92 166,446 CFM56-5A1 $31,130,000 $30,980,000 $30,920,000 $30,770,000
13 A320-200 294 04/02/92 169,753 CFM56-5A3 $31,380,000 $31,230,000 $31,250,000 $31,100,000
14 A320-200 301* 04/22/92 166,446 CFM56-5A3 $31,280,000 $31,130,000 $31,280,000 $31,130,000
15 A320-200 309 05/13/92 166,446 CFM56-5A1 $31,130,000 $30,980,000 $30,950,000 $30,800,000
16 A320-200 348* 07/17/92 169,753 CFM56-5A1 $31,230,000 $31,080,000 $31,230,000 $31,080,000
17 A320-200 349 10/30/92 169,753 CFM56-5A3 $31,380,000 $31,230,000 $31,250,000 $31,100,000
18 A320-200 404 01/01/94 166,446 CFM56-5A1 $35,460,000 $34,930,000 $35,480,000 $34,950,000
19 ATR-42-300 109 10/14/88 37,257 PW120 $5,620,000 $5,320,000 $5,700,000 $5,400,000
20 ATR-42-300 113 11/18/88 36,800 PW120 $5,610,000 $5,310,000 $5,670,000 $5,370,000
21 ATR-42-300 249 06/01/91 37,257 PW120 $7,330,000 $6,940,000 $7,320,000 $6,930,000
22 ATR-42-300 284 01/01/92 36,800 PW121 $7,980,000 $7,560,000 $7,980,000 $7,560,000
23 B727-200A 21346 10/01/80 190,500 JT8D-17R $4,760,000 $5,260,000 $4,360,000 $4,860,000
24 B727-200A 21600 11/01/80 190,500 JT8D-17R $4,760,000 $5,260,000 $4,420,000 $4,920,000
</TABLE>
<PAGE> 6
[AISI LOGO]
TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
-- ---------- ------ ----------- ------ ------- ----------- -------------------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25 B737-200A 20922 08/01/74 117,000 JT8D-9A $3,500,000 $3,930,000 $3,500,000 $3,930,000
26 B737-200A 20958 01/01/75 117,000 JT8D-9A $3,810,000 $4,260,000 $3,810,000 $4,260,000
27 B737-200A 20959 02/04/75 117,000 JT8D-9A $3,810,000 $4,260,000 $3,720,000 $4,170,000
28 B737-200A 21115 12/01/75 117,000 JT8D-9A $3,810,000 $4,260,000 $3,390,000 $3,840,000
29 B737-200A 21192 03/01/76 119,500 JT8D-17 $4,860,000 $5,320,000 $4,570,000 $5,030,000
30 B737-200A 21193 07/01/76 119,500 JT8D-17 $4,860,000 $5,320,000 $4,540,000 $5,000,000
31 B737-200A 21196 07/01/76 119,500 JT8D-17 $4,860,000 $5,320,000 $4,560,000 $5,020,000
32 B737-200A 21206 02/26/76 115,500 JT8D-17 $4,740,000 $5,200,000 $4,300,000 $4,760,000
33 B737-200A 21639 11/01/78 117,000 JT8D-9A $4,750,000 $5,250,000 $4,830,000 $5,330,000
34 B737-200A 21685 01/01/79 119,500 JT8D-17 $6,160,000 $7,030,000 $5,720,000 $6,590,000
35 B737-200A 21712 02/01/79 117,000 JT8D-9A $5,440,000 $6,310,000 $5,300,000 $6,170,000
36 B737-200A 21735 06/01/79 119,500 JT8D-15 $5,960,000 $6,830,000 $5,940,000 $6,810,000
37 B737-200A 21960 03/01/80 117,000 JT8D-15 $6,100,000 $6,990,000 $6,090,000 $6,980,000
38 B737-200A 22090 05/01/80 117,000 JT8D-15 $6,100,000 $6,990,000 $6,110,000 $7,000,000
39 B737-200A 22278 03/19/80 122,468 JT8D-15 $6,260,000 $7,150,000 $6,170,000 $7,060,000
40 B737-200A 22368 09/01/80 117,000 JT8D-15 $6,100,000 $6,990,000 $5,760,000 $6,650,000
41 B737-200A 22369 09/01/80 117,000 JT8D-15 $6,100,000 $6,990,000 $6,290,000 $7,180,000
42 B737-200A 22396 02/01/81 119,500 JT8D-15 $6,370,000 $7,300,000 $6,780,000 $7,710,000
43 B737-200A 22397 02/01/81 117,000 JT8D-15 $6,300,000 $7,230,000 $6,500,000 $7,430,000
44 B737-200A 22407 09/01/80 124,500 JT8D-17A $6,520,000 $7,410,000 $6,720,000 $7,610,000
45 B737-200A 22453 03/01/81 119,500 JT8D-15 $6,370,000 $7,300,000 $5,910,000 $6,840,000
46 B737-200A 22632 02/01/82 117,000 JT8D-15 $6,860,000 $7,460,000 $6,420,000 $7,020,000
47 B737-200A 22633 03/01/81 121,000 JT8D-15 $6,420,000 $7,350,000 $6,950,000 $7,880,000
48 B737-200A 22802 02/01/83 124,500 JT8D-17A $7,140,000 $8,110,000 $6,850,000 $7,820,000
</TABLE>
<PAGE> 7
[AISI LOGO]
TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
-- ---------- ------ ----------- ------- -------- ----------- -------------------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
49 B737-200A 22803 02/14/83 124,500 JT8D-17A $7,140,000 $8,110,000 $6,820,000 $7,790,000
50 B737-200A 22804 02/01/83 124,500 JT8D-17A $7,140,000 $8,110,000 $6,720,000 $7,690,000
51 B737-200A 22873 07/01/82 117,000 IT8D-9A $6,060,000 $7,010,000 $5,760,000 $6,710,000
52 B737-200A 22979 03/01/83 117,000 JT8D-15 $6,720,000 $7,690,000 $6,660,000 $7,630,000
53 B737-200A 23023 03/30/83 117,000 JT8D-17A $6,920,000 $7,890,000 $6,810,000 $7,780,000
54 B737-200A 23024 05/01/83 117,000 JT8D-17A $6,920,000 $7,890,000 $6,440,000 $7,410,000
55 B737-200QC 23065 10/15/83 124,500 JT8D-17A $8,290,000 $9,260,000 $7,910,000 $8,880,000
56 B737-200QC 23066 12/09/83 124,500 JT8D-17A $8,290,000 $9,260,000 $7,860,000 $8,830,000
57 B737-300 23177 04/01/86 135,000 CFM56-3B1 $20,200,000 $20,980,000 $20,440,000 $21,220,000
58 B737-300 23749 05/01/87 137,000 CFM56-3B2 $21,280,000 $22,150,000 $20,970,000 $21,840,000
59 B737-300 23923 04/01/88 138,500 CFM56-3B2 $22,130,000 $23,080,000 $22,210,000 $23,160,000
60 B737-300 24770 10/01/90 135,000 CFM56-3B1 $23,370,000 $24,500,000 $22,910,000 $24,040,000
61 B737-300 24905 02/01/91 130,000 CFM56-3C1 $24,370,000 $25,580,000 $24,300,000 $25,510,000
62 B737-300 24907 03/01/91 130,000 CFM56-3C1 $24,370,000 $25,580,000 $23,800,000 $25,010,000
63 B737-300 25179 02/12/92 138,500 CFM56-3C1 $25,600,000 $26,900,000 $25,340,000 $26,640,000
64 B737-300 25187 03/14/92 138,500 CFM56-3C1 $25,600,000 $26,900,000 $25,340,000 $26,640,000
65 B737-300 26852* 04/20/92 135,000 CFM56-3B2 $25,260,000 $26,560,000 $25,260,000 $26,560,000
66 B737-300QC 23499 06/01/86 135,000 CFM56-3B1 $23,200,000 $23,980,000 $23,200,000 $23,980,000
67 B737-300QC 23500 06/01/86 135,000 CFM56-3B1 $23,200,000 $23,980,000 $23,210,000 $23,990,000
68 B737-400 24345 06/01/89 138,500 CFM56-3C1 $25,400,000 $26,110,000 $25,050,000 $25,760,000
69 B737-400 24493 07/14/89 142,500 CFM56-3C1 $25,560,000 $26,270,000 $25,250,000 $25,960,000
70 B737-400 24520 01/16/90 142,500 CFM56-3C1 $26,360,000 $27,140,000 $25,820,000 $26,600,000
71 B737-400 24683 08/07/90 150,000 CFM56-3C1 $26,660,000 $27,440,000 $26,320,000 $27,100,000
72 B737-400 24684 04/01/90 150,000 CFM56-3C1 $26,660,000 $27,440,000 $26,190,000 $26,970,000
</TABLE>
<PAGE> 8
[AISI LOGO]
TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
-- -------- ------ ----------- ------- --------- ----------- -------------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
73 B737-400 24687 05/25/90 150,000 CFM56-3C1 $26,660,000 $27,440,000 $26,960,000 $27,740,000
74 B737-400 24689 07/03/90 150,000 CFM56-3C1 $26,660,000 $27,440,000 $26,120,000 $26,900,000
75 B737-400 24690 07/01/90 150,000 CFM56-3C1 $26,660,000 $27,440,000 $26,120,000 $26,900,000
76 B737-400 24691 08/09/90 150,000 CFM56-3C1 $26,660,000 $27,440,000 $26,290,000 $27,070,000
77 B737-400 24906 04/01/91 142,500 CFM56-3C1 $27,210,000 $28,000,000 $26,990,000 $27,780,000
78 B737-400 24911 04/01/91 150,000 CFM56-3C1 $27,510,000 $28,300,000 $27,200,000 $27,990,000
79 B737-400 24912 06/14/91 142,500 CFM56-3C1 $27,210,000 $28,000,000 $26,880,000 $27,670,000
80 B737-400 24917 06/24/91 150,000 CFM56-3C1 $27,510,000 $28,300,000 $27,150,000 $27,940,000
81 B737-400 25180 01/21/92 150,000 CFM56-3C1 $28,460,000 $29,260,000 $28,160,000 $28,960,000
82 B737-400 25181 02/03/92 150,000 CFM56-3C1 $28,460,000 $29,260,000 $28,170,000 $28,970,000
83 B737-400 25184 03/02/92 150,000 CFM56-3C1 $28,460,000 $29,260,000 $28,180,000 $28,980,000
84 B737-400 25190 04/07/92 150,000 CFM56-3C1 $28,460,000 $29,260,000 $28,320,000 $29,120,000
85 B737-400 25261 04/09/92 150,000 CFM56-3C1 $28,460,000 $29,260,000 $29,190,000 $28,990,000
86 B737-400 26065 05/01/92 150,000 CFM56-3C1 $28,460,000 $29,260,000 $28,210,000 $29,010,000
87 B737-400 26069 11/02/92 150,000 CFM56-3C1 $28,460,000 $29,260,000 $28,220,000 $29,020,000
88 B737-400 26071 11/13/92 150,000 CFM56-3C1 $28,460,000 $29,260,000 $28,230,000 $29,030,000
89 B737-400 26081 03/10/93 150,000 CFM56-3C1 $29,610,000 $30,520,000 $29,270,000 $30,180,000
90 B737-500 24897 02/26/91 133,500 CFM56-3C1 $21,020,000 $22,470,000 $20,720,000 $22,170,000
91 B737-500 25182 02/03/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,670,000 $23,170,000
92 B737-500 25183 02/14/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,720,000 $23,220,000
93 B737-500 25185 02/18/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,550,000 $23,050,000
94 B737-500 25186 03/11/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,520,000 $23,020,000
95 B737-500 25188 03/12/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,610,000 $23,110,000
96 B737-500 25191 04/10/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,570,000 $23,070,000
</TABLE>
<PAGE> 9
[AISI LOGO]
TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
- -- -------- ------ ----------- ------ ------- ------------ -------------------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
97 B737-500 25192 04/14/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,550,000 $23,050,000
98 B737-500 25288 06/16/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,500,000 $23,000,000
99 B737-500 25289 06/12/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,500,000 $23,000,000
100 B737-500 26075 10/23/92 133,500 CFM56-3C1 $21,870,000 $23,370,000 $21,620,000 $23,120,000
101 B747-200F 21730 06/07/79 805,000 JT9D-7Q $36,040,000 $32,980,000 $35,080,000 $32,020,000
102 B757-200ER 26151 07/23/92 250,000 RB211-535E4 $46,630,000 $44,250,000 $46,640,000 $44,260,000
103 B757-200ER 26154 09/22/92 230,000 RB211-535E4 $45,730,000 $43,350,000 $45,250,000 $42,870,000
104 B757-200ER 26156 11/25/92 240,000 RB211-535E4 $46,180,000 $43,800,000 $46,200,000 $43,820,000
105 B767-200ER 25421 01/14/92 387,000 PW4056 $62,960,000 $55,990,000 $62,670,000 $55,700,000
106 B767-300ER 24948 07/19/91 407,000 PW4060 $67,190,000 $61,390,000 $67,220,000 $61,420,000
107 B767-300ER 25411 01/15/92 407,000 PW4060 $70,950,000 $65,140,000 $70,430,000 $64,620,000
108 B767-300ER 26200 09/01/92 407,000 PW4060 $70,950,000 $65,140,000 $70,390,000 $64,580,000
109 B767-300ER 26204 10/01/92 407,000 PW4060 $70,950,000 $65,140,000 $70,580,000 $64,770,000
110 DC8-71F 45810 05/07/67 328,000 CFM56-2C1 $15,690,000 $15,690,000 $15,750,000 $15,750,000
111 DC8-71F 45811 07/01/67 328,000 CFM56-2C1 $15,690,000 $15,690,000 $15,640,000 $15,640,000
112 DC8-71F 45813 01/26/67 328,000 CFM56-2C1 $15,690,000 $15,690,000 $15,880,000 $15,880,000
113 DC8-71F 45849 04/30/67 328,000 CFM56-2C1 $15,690,000 $15,690,000 $16,130,000 $16,130,000
114 DC8-71F 45941 12/23/67 328,000 CFM56-2C1 $15,690,000 $15,690,000 $15,300,000 $15,300,000
115 DC8-71F 45945 03/01/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,420,000 $15,420,000
116 DC8-71F 45946 03/14/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,790,000 $15,790,000
117 DC8-71F 45947 03/20/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,360,000 $15,360,000
118 DC8-71F 45970 03/29/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,810,000 $15,810,000
119 DC8-71F 45971 05/12/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,470,000 $15,470,000
120 DC8-71F 45973 05/20/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,710,000 $15,710,000
</TABLE>
<PAGE> 10
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TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
- -- -------- ------ ----------- ------ ------ ----------- -------------------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
121 DC8-71F 45975 06/25/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,430,000 $15,430,000
122 DC8-71F 45976 07/26/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $16,040,000 $16,040,000
123 DC8-71F 45977 07/16/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,750,000 $15,750,000
124 DC8-71F 45978 07/31/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,870,000 $15,870,000
125 DC8-71F 45983 04/19/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,420,000 $15,420,000
126 DC8-71F 45993 08/06/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,860,000 $15,860,000
127 DC8-71F 45994 08/27/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,780,000 $15,780,000
128 DC8-71F 45996 10/01/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,300,000 $15,300,000
129 DC8-71F 45997 11/01/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,370,000 $15,370,000
130 DC8-71F 45998 10/22/68 328,000 CFM56-2C1 $15,790,000 $15,790,000 $15,410,000 $15,410,000
131 DC8-71F 46039 03/01/69 328,000 CFM56-2C1 $15,890,000 $15,890,000 $15,890,000 $15,890,000
132 DC8-71F 46065 06/04/69 328,000 CFM56-2C1 $15,890,000 $15,890,000 $15,820,000 $15,820,000
133 DC8-71F 46066 05/01/69 328,000 CFM56-2C1 $15,890,000 $15,890,000 $16,190,000 $16,190,000
134 DC8-73CF 46091 04/04/70 355,000 CFM56-2C1 $19,200,000 $19,200,000 $19,200,000 $19,200,000
135 DC9-14 45736 08/01/66 90,700 JT8D-7B $1,050,000 $1,050,000 $1,050,000 $1,050,000
136 DC9-14 45743 05/01/66 90,700 JT8D-7B $1,050,000 $1,050,000 $1,050,000 $1,050,000
137 DC9-15 45785 11/01/66 90,700 JT8D-7A $1,050,000 $1,050,000 $1,050,000 $1,050,000
138 DC9-15 45786 03/01/67 90,700 JT8D-7B $1,090,000 $1,090,000 $1,090,000 $1,090,000
139 DC9-15 47059 05/01/67 90,700 JT8D-7A $1,090,000 $1,090,000 $1,090,000 $1,090,000
140 DC9-15 47085 07/01/67 90,700 JT8D-7A $1,090,000 $1,090,000 $1,090,000 $1,090,000
141 DC9-15 47122 12/01/67 90,700 JT8D-7A $1,090,000 $1,090,000 $1,090,000 $1,090,000
142 DC9-15 47126 10/01/68 90,700 JT8D-7A $1,140,000 $1,140,000 $1,140,000 $1,140,000
143 DC9-32 48125 04/01/80 108,000 JT8D-17 $4,940,000 $5,290,000 $4,860,000 $5,210,000
144 DC9-32 48126 04/01/80 108,000 JT8D-17 $4,940,000 $5,290,000 $4,790,000 $5,140,000
</TABLE>
<PAGE> 11
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TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
- -- -------- ------ ----------- ------ ------- ----------- -------------------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
145 DC9-32 48127 07/01/80 108,000 JT8D-17 $4,940,000 $5,290,000 $4,970,000 $5,320,000
146 DC9-32 48128 08/01/80 108,000 JT8D-17 $4,940,000 $5,290,000 $5,010,000 $5,360,000
147 DC9-32 48129 11/01/80 108,000 JT8D-17 $4,940,000 $5,290,000 $5,030,000 $5,380,000
148 DC9-32 48130 12/01/80 108,000 JT8D-17 $4,940,000 $5,290,000 $5,130,000 $5,480,000
149 DC9-51 47742 06/01/77 121,000 JT8D-17 $5,080,000 $5,450,000 $5,130,000 $5,500,000
150 DC9-51 47784 05/01/79 121,000 JT8D-17 $5,370,000 $5,750,000 $5,270,000 $5,650,000
151 DC9-51 47796 04/01/79 121,000 JT8D-17 $5,370,000 $5,750,000 $5,500,000 $5,880,000
152 DC9-51 48122 01/26/81 121,000 JT8D-17 $5,650,000 $6,050,000 $5,440,000 $5,840,000
153 DHC8-100 113 09/01/88 34,500 PW120-A $5,380,000 $4,300,000 $5,320,000 $4,240,000
154 DHC8-100 140 03/01/89 34,500 PW120-A $5,940,000 $4,750,000 $5,890,000 $4,700,000
155 DHC8-100 144 03/01/89 34,500 PW120-A $5,940,000 $4,750,000 $5,920,000 $4,730,000
156 DHC8-100 229 09/01/90 34,500 PW121 $6,500,000 $5,200,000 $6,520,000 $5,220,000
157 DHC8-100 258 01/01/91 34,500 PW121 $7,130,000 $5,700,000 $7,110,000 $5,680,000
158 DHC8-100 270 05/01/91 34,500 PW120-A $7,130,000 $5,700,000 $7,120,000 $5,690,000
159 DHC8-300 232 10/20/90 41,100 PW123 $8,250,000 $7,340,000 $8,240,000 $7,330,000
160 DHC8-300 244 12/01/90 41,000 PW123 $8,250,000 $7,340,000 $8,270,000 $7,360,000
161 DHC8-300 266 03/20/91 43,000 PW123 $9,360,000 $8,140,000 $9,340,000 $8,120,000
162 DHC8-300 267 04/04/91 43,000 PW123 $9,360,000 $8,140,000 $9,350,000 $8,130,000
163 DHC8-300 276 05/13/91 43,000 PW123 $9,360,000 $8,140,000 $9,350,000 $8,130,000
164 DHC8-300 283* 09/01/91 43,000 PW123 $9,360,000 $8,140,000 $9,360,000 $8,140,000
165 DHC8-300 293 10/01/91 43,000 PW123 $9,360,000 $8,140,000 $9,360,000 $8,140,000
166 DHC8-300 296 10/01/91 43,000 PW123 $9,360,000 $8,140,000 $9,340,000 $8,120,000
167 DHC8-300 298 06/30/91 43,000 PW123 $9,360,000 $8,140,000 $9,380,000 $8,160,000
168 DHC8-300 300 06/30/91 43,000 PW123 $9,360,000 $8,140,000 $9,400,000 $8,180,000
</TABLE>
<PAGE> 12
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TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
- ---- -------- ------ ----------- ------ ------------ ----------- -------------------- ----------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
169 DHC8-300 307 12/01/91 43,000 PW123 $9,360,000 $8,140,000 $9,410,000 $8,190,000
170 DHC8-300 334 10/08/92 43,000 PW123 $10,410,000 $8,880,000 $10,430,000 $8,900,000
171 DHC8-300 342 06/30/93 43,000 PW123 $11,460,000 $9,620,000 $11,480,000 $9,640,000
172 DHC8-300C 230 10/01/90 43,000 PW123 $9,310,000 $8,400,000 $9,290,000 $8,380,000
173 DHC8-300C 242 11/01/90 43,000 PW123 $9,310,000 $8,400,000 $9,330,000 $8,420,000
174 F100 11266 08/17/90 98,000 RB183MK650-15 $14,530,000 $13,400,000 $14,530,000 $13,400,000
175 F100 11284 07/31/90 98,000 RB183MK650-15 $14,530,000 $13,400,000 $14,640,000 $13,510,000
176 F100 11285 08/01/90 98,000 RB183MK650-15 $14,530,000 $13,400,000 $14,600,000 $13,470,000
177 F100 11304 02/27/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $15,090,000 $14,290,000
178 F100 11305 04/19/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $15,030,000 $14,230,000
179 F100 11309 05/16/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $14,910,000 $14,110,000
180 F100 11319 04/05/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $14,930,000 $14,130,000
181 F100 11336 06/05/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $15,080,000 $14,280,000
182 F100 11339 07/01/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $15,090,000 $14,290,000
183 F100 11347 10/01/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $15,200,000 $14,400,000
184 F100 11348 08/06/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $14,980,000 $14,180,000
185 F100 11371 12/19/91 98,000 RB183MK650-15 $15,250,000 $14,450,000 $15,500,000 $14,700,000
186 F100 11374 01/20/92 98,000 RB183MK650-15 $16,100,000 $15,600,000 $15,730,000 $15,230,000
187 F100 11375 12/01/92 98,000 RB183MK650-15 $16,100,000 $15,600,000 $15,770,000 $15,270,000
188 F100 11382 03/01/92 98,000 RB183MK650-15 $16,100,000 $15,600,000 $15,740,000 $15,240,000
189 F100 11384 03/01/92 98,000 RB183MK650-15 $16,100,000 $15,600,000 $15,750,000 $15,250,000
190 MD11 48499 12/31/91 618,000 CF6-80C2D1F $82,090,000 $74,660,000 $81,980,000 $74,550,000
191 MD11 48500 03/01/92 618,000 CF6-80C2D1F $86,300,000 $78,360,000 $86,560,000 $78,620,000
192 MD11 48501 09/01/92 618,000 CF6-80C2D1F $86,300,000 $78,360,000 $86,430,000 $78,490,000
</TABLE>
<PAGE> 13
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TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
- ---- -------- ------ ----------- ------ ------- ----------- -------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
193 MD-82 49660 03/01/88 149,500 JT8D-217 $20,260,000 $18,000,000 $19,950,000 $17,690,000
194 MD-82 49667 01/21/88 149,500 JT8D-217A $20,260,000 $18,000,000 $19,950,000 $17,690,000
195 MD-83 49390 04/01/86 160,000 JT8D-219 $20,520,000 $17,900,000 $20,840,000 $18,220,000
196 MD-83 49442 04/29/87 160,000 JT8D-219 $21,370,000 $18,700,000 $21,640,000 $18,970,000
197 MD-83 49575 10/01/87 160,000 JT8D-219 $21,370,000 $18,700,000 $21,350,000 $18,680,000
198 MD-83 49620 07/01/88 160,000 JT8D-219 $22,220,000 $19,500,000 $22,030,000 $19,310,000
199 MD-83 49624 08/01/88 160,000 JT8D-219 $22,220,000 $19,500,000 $21,930,000 $19,210,000
200 MD-83 49626 10/22/88 160,000 JT8D-219 $22,220,000 $19,500,000 $21,840,000 $19,120,000
201 MD-83 49631 06/01/89 160,000 JT8D-219 $23,070,000 $20,300,000 $22,790,000 $20,020,000
202 MD-83 49672 07/01/88 160,000 JT8D-219 $22,220,000 $19,500,000 $22,170,000 $19,450,000
203 MD-83 49709 12/01/88 160,000 JT8D-219 $22,220,000 $19,500,000 $21,900,000 $19,180,000
204 MD-83 49789 09/23/89 160,000 JT8D-219 $23,070,000 $20,300,000 $22,900,000 $20,130,000
205 MD-83 49792 11/01/89 160,000 JT8D-219 $23,070,000 $20,300,000 $22,730,000 $19,960,000
206 MD-83 49935 09/26/90 160,000 JT8D-219 $24,030,000 $21,100,000 $23,580,000 $20,650,000
207 MD-83 49936 10/06/90 160,000 JT8D-219 $24,030,000 $21,100,000 $23,640,000 $20,710,000
208 MD-83 49938 12/01/90 160,000 JT8D-219 $24,030,000 $21,100,000 $23,630,000 $20,700,000
209 MD-83 49939 10/26/90 160,000 JT8D-219 $24,030,000 $21,100,000 $23,750,000 $20,820,000
210 MD-83 49941 12/01/90 160,000 JT8D-219 $24,030,000 $21,100,000 $23,730,000 $20,800,000
211 MD-83 49943 07/01/91 160,000 JT8D-219 $24,780,000 $21,900,000 $24,590,000 $21,710,000
212 MD-83 49946 07/18/91 160,000 JT8D-219 $24,780,000 $21,900,000 $24,730,000 $21,850,000
213 MD-83 49949 08/05/91 160,000 JT8D-219 $24,780,000 $21,900,000 $24,560,000 $21,680,000
214 MD-83 49950 11/01/91 160,000 JT8D-219 $24,780,000 $21,900,000 $24,660,000 $21,780,000
215 MD-83 49951 08/25/91 160,000 JT8D-219 $24,780,000 $21,900,000 $24,480,000 $21,600,000
216 MD-83 53120 07/29/92 160,000 JT8D-219 $25,770,000 $22,800,000 $25,660,000 $22,690,000
</TABLE>
<PAGE> 14
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TABLE I - AISI FILE A8S007BVO
JANUARY 23, 1998
FLEET VALUATION - AIRPLANES FLEET
<TABLE>
<CAPTION>
HALF LIFE HALF LIFE ADJUSTED ADJUSTED
DATE OF BASE VALUE CURRENT MARKET VALUE BASE VALUE CURRENT MARKET VALUE
SERIAL MANUFACTURE 1998 1998 1998 1998
NO AIRCRAFT NUMBER (MM/DD/YY) MTOW ENGINE US DOLLARS US DOLLARS US DOLLARS US DOLLARS
- -- -------- ------ ----------- ------- --------- -------------- -------------------- --------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
217 MD-83 53125 04/02/92 160,000 JT8D-219 $25,770,000 $22,800,000 $25,550,000 $22,580,000
218 MD-87 49673 12/01/88 149,000 JT8D-219 $16,810,000 $15,760,000 $16,650,000 $15,600,000
219 METRO III 705 08/01/88 16,000 TPE331-11 $1,820,000 $1,820,000 $1,820,000 $1,820,000
220 METRO III 711 03/01/88 16,000 TPE331-11 $1,820,000 $1,820,000 $1,810,000 $1,810,000
221 METRO III 712 06/01/88 16,000 TPE331-11 $1,820,000 $1,820,000 $1,820,000 $1,820,000
-------------- -------------- -------------- --------------
Totals: $4,009,060,000 $3,909,120,000 $3,980,430,000 $3,880,490,000
============== ============== ============== ==============
</TABLE>
Note: Aircraft Data Sheets were unavailable.
<PAGE> 15
[AISI LETTERHEAD]
AIRPLANES LIMITED
22 GRENVILLE STREET
ST. HELIER
JERSEY
AIRPLANES U.S. TRUST
1100 NORTH MARKET STREET
RODNEY SQUARE NORTH
WILMINGTON, DELAWARE
USA
GPA GROUP PLC
GPA HOUSE
SHANNON
IRELAND
BANKERS TRUST COMPANY
4 ALBANY STREET
NEW YORK, NEW YORK
USA
MORGAN STANLEY & CO. INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK
USA
________________________________________________________________________________
HALF LIFE AND ADJUSTED BASE AND CURRENT MARKET VALUE OPINION
221 AIRCRAFT - AIRPLANES FLEET
AISI FILE NO.: A8S007BVO
DATE: 23 JANUARY 1998
[AISI LETTERFOOT]
<PAGE> 1
EXHIBIT 99.2
CURRENT VALUES
OF AIRCRAFT IN THE
AIRPLANES GROUP PORTFOLIO
Prepared for: Prepared by:
GPA Group plc BK Associates, Inc.
Shannon, Ireland Manhasset, New York
January 23, 1998
<PAGE> 2
TABLE OF CONTENTS
*******************
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
1. INTRODUCTION................................................................1
2. CONCLUSIONS.................................................................2
3. DISCUSSION OF MARKET.......................................................12
3.1 Current Demand and Availability........................................13
3.2 Projected Supply and Demand............................................17
3.2.1 Passenger Traffic..............................................18
3.2.2 Fleet Size and Composition.....................................19
3.2.3 Commuter Traffic and Commuter Fleet............................22
3.2.4 Future Balance Between Demand and Supply.......................28
3.2.5 Cargo Traffic and Freighter Fleet..............................29
3.3 Suitability of the Aircraft............................................31
3.4 Regulatory Factors.....................................................34
3.4.1 Noise Regulations..............................................38
3.4.2 Regulatory Restrictions for Aging Aircraft.....................41
3.5 Aircraft Sales Data....................................................42
3.5.1 Recent Sales Data..............................................42
3.6 Summary of Market Discussion...........................................47
4. VALUE METHODOLOGY..........................................................51
4.1 Definitions............................................................51
4.2 Current Fair Market Value Assumptions..................................53
4.3 Current Value Methodology..............................................55
4.3.1 Comparison with Recent Sales Method............................56
4.3.2 Replacement Cost Method........................................56
4.3.3 Lease-Encumbered Value Method..................................57
5. QUALIFICATIONS OF BK ASSOCIATES, INC. .....................................58
</TABLE>
<PAGE> 3
1. INTRODUCTION
***************
<PAGE> 4
1. INTRODUCTION
***************
In response to a request from GPA Group plc (GPA), BK Associates, Inc. is
pleased to present this report on the current values as of January 23, 1998 of
the aircraft in the Airplanes Group Portfolio (Portfolio). The aircraft include
various types or models of narrow- and wide-body jets as well as turboprop
commuter aircraft. The aircraft are identified in Figure 2-1 by aircraft type,
date of manufacture, serial number, and engine model.
BK Associates presented another appraisal on the Portfolio approximately one
month ago in December 1997. This report represents an update of that appraisal.
The current values have been reviewed to reflect any changes in the market since
then. The report reflects changes in the composition of the Portfolio and
updates the factual data presented on such things as recent sales and aircraft
available for sale.
It should be understood that the aircraft have not been inspected for this
appraisal and their current condition and status relative to major maintenance
events was not known in some cases. GPA provided BK Associates with data on the
specifications and current maintenance status for each aircraft. These data were
used to adjust values to account for current maintenance status.
Section 2 of this report presents the conclusions regarding the values of the
aircraft. Other sections describe the methodology used by BK Associates in
determining appraised values, discuss the factors affecting the market for
aircraft, and describe the experience and qualifications of BK Associates in
undertaking appraisals.
<PAGE> 5
2. CONCLUSIONS
**************
<PAGE> 6
2. CONCLUSIONS
**************
Based upon our familiarity with airline transport aircraft, our knowledge of
their capabilities and the uses to which they are put, our knowledge of the
marketing and leasing of new or used aircraft, and our familiarity with aircraft
generally, it is our opinion that the current values for the aircraft in the
Portfolio are as stated in Figure 2-1, expressed in millions of dollars.
Except for changes in the composition of the Portfolio (several aircraft have
been sold), the values are unchanged from our December report. After reviewing
events that have occurred, we concluded there was no significant change in the
market that would affect current values.
No new specification or maintenance status data have been provided. The
maintenance status is assumed to be as it was in the December appraisal.
All of the aircraft have likely accumulated hours and cycles which would change
their current status and lower the maintenance adjusted values as they move
closer to a maintenance event. However, with a fleet this large it is just as
likely that some aircraft may have had "C" or "D" checks or engine shop
visits since the last appraisal which would increase their values.
Four values are given for each aircraft. Base Values (BV) and Current Market
Values (CMV) are included both assuming half-time between major maintenance
events and allowing for the current maintenance status. These are identified as
either "1/2-time" or "Mt.Adj".
2
<PAGE> 7
According to the International Society of Transport Aircraft Trading's (ISTAT)
definition of Base Value, to which BK Associates subscribes, base value is the
Appraiser's opinion of the underlying economic value of an aircraft in an open,
unrestricted, stable market environment with a reasonable balance of supply and
demand, and assumes full consideration of its "highest and best use". An
aircraft's Base Value is founded in the historical trend of values and in the
projection of value trends and presumes an arm's length, cash transaction
between willing, able and knowledgeable parties, acting prudently, with an
absence of duress and with a reasonable period of time available for marketing.
The Current Market Value is similar to the Base Value. It is the appraiser's
opinion of the most likely trading price that may be generated for an aircraft
under the market circumstances that are perceived to exist at the time in
question. It is assumed the aircraft is sold for cash or equivalent
consideration and that the seller has an adequate amount of time for effective
exposure to prospective buyers, which BK Associates considers to be 12 to 18
months.
The values given in Figure 2-1 are based upon certain definitions and
assumptions regarding aircraft condition, maintenance status, and market
conditions which are described more fully below and later in this report. THESE
VALUES SHOULD NOT BE USED OUTSIDE THE CONTEXT OF, OR WITHOUT KNOWLEDGE OF, THOSE
ASSUMPTIONS AND DEFINITIONS.
For those values given in Figure 2-1 that include adjustments to account for the
current maintenance status, the adjustments are approximate, based on industry
average costs, and normally would include an adjustment for the time remaining
to a "C" check, time remaining to a "D" check, time remaining to landing
gear overhaul and time remaining to a heavy shop visit on engines. Where
estimates of time to a check were provided by months or calendar date, industry
average utilization figures were used to convert to an equivalent hourly rate.
Where "C" checks and "D" checks are accomplished on a phased basis the
aircraft is assumed to be at half-time and no adjustment is included. In many
3
<PAGE> 8
cases, sufficient relevant data were not available to make adjustments for
engines and they were assumed to be at half-time. Where data were available
adjustments were included for engines. In some cases no current maintenance data
were available. Except in the rare case of coincidence, these cases are apparent
from the half-time value equaling the maintenance adjusted value.
Also, no consideration has been given to cash maintenance reserve payments or
security deposits that are likely paid by the lessees on nearly all of the
aircraft in the Portfolio. These payments are intended to offset the very costs
for which the maintenance adjustments are applied to the half-time values.
BK Associates, Inc. has no present or contemplated future interest in the
aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation. It is not given as a recommendation, or as an inducement, for
any financial transaction and further, BK Associates assumes no responsibility
or legal liability for any action taken or not taken by the addressee, or any
other party, with regard to the appraised equipment. By accepting this
appraisal, the addressee agrees that BK Associates shall bear no such
responsibility or legal liability. This appraisal is prepared for the use of the
addressee and shall not be provided to other parties without the express consent
of the addressee.
BK ASSOCIATES, INC.
[SIG]
John F. Keitz
President
ISTAT Senior Certified Appraiser
4
<PAGE> 9
FIGURE 2-1
AIRPLANES GROUP PORTFOLIO CURRENT VALUES
<TABLE>
<CAPTION>
BASE VALUE CURRENT MKT. VAL
------------------- ------------------
# TYPE SERNUM YEAR ENGINE 1/2 TIME MT. ADJ. 1/2 TIME MT. ADJ.
- -- ---- ------ ---- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 A300B4-100 9 1974 CF6-50C2 7.250 7.250 6.000 6.000
2 A300B4-100 12 1975 CF6-50C2 7.550 7.750 6.350 6.550
3 A300B4-100 20 1975 CF6-50C2 7.850 7.980 6.800 6.930
4 A300B4-200 131 1981 CF6-50C2 14.500 15.775 11.500 12.775
5 A300B4-200 269 1983 CF6-50C2 15.900 16.815 12.000 12.915
6 A300C4-200 83 1979 CF6-50C2 18.500 18.695 17.800 17.995
7 A320-211 174 1991 CFM56-5A1 28.650 28.425 28.650 28.425
8 A320-211 175 1991 CFM56-5A1 28.650 28.445 28.650 28.445
9 A320-211 203 1991 CFM56-5A3 30.450 30.330 30.450 30.330
10 A320-211 220 1991 CFM56-5A3 30.450 30.350 30.450 30.350
11 A320-211 232 1991 CFM56-5A1 28.850 28.580 28.850 28.580
12 A320-211 284 1992 CFM56-5A1 30.300 30.005 30.300 30.005
13 A320-212 294 1992 CFM56-5A3 32.100 32.135 32.100 32.135
14 A320-212 301 1992 CFM56-5A3 32.100 31.835 32.100 31.835
15 A320-211 309 1992 CFM56-5A1 30.300 30.030 30.300 30.030
16 A320-231 348 1992 CFM56-5A1 30.300 30.430 30.300 30.430
17 A320-231 349 1992 CFM56-5A3 32.100 31.930 32.100 31.930
18 A320-211 404 1994 CFM56-5A1 35.100 35.120 35.100 35.120
19 B727-2A1 21346 1980 JT8D-17R 5.450 4.970 4.500 4.020
20 B727-2A1 21600 1980 JT8D-17R 5.450 5.005 4.500 4.055
21 B737-275 20922 1974 JT8D-9A 3.350 3.350 3.050 3.050
22 B737-275 20958 1975 JT8D-9A 3.550 3.550 3.200 3.200
23 B737-275 20959 1975 JT8D-9A 3.550 3.550 3.200 3.200
24 B737-275 21115 1975 JT8D-9A 4.000 3.780 3.750 3.530
25 B737-266 21192 1976 JT8D-17 5.565 5.835 5.065 5.335
26 B737-266 21193 1976 JT8D-17 6.350 6.095 5.850 5.595
27 B737-266 21196 1976 JT8D-17 6.335 6.050 5.835 5.550
28 B737-269 21206 1976 JT8D-17 5.810 5.810 5.310 5.310
29 B737-275 21639 1978 JTD8-9A 5.800 6.410 5.250 5.860
30 B737-2L9 21685 1979 JT8D-17 7.390 7.390 6.840 6.840
31 B737-275 21712 1979 JT8D-9A 6.100 6.085 5.000 4.985
32 B737-2Q8 21735 1979 JT8D-15 7.175 6.635 6.625 6.085
33 B737-2Q8 21960 1980 JT8D-15 7.150 7.140 6.435 6.425
34 B737-2M8 22090 1980 JT8D-15 8.295 7.865 7.465 7.035
35 B737-2S3 22278 1980 JT8D-15 7.675 7.615 6.910 6.845
36 B737-2T4 22368 1980 JT8D-15 7.940 7.940 7.145 7.145
</TABLE>
<PAGE> 10
FIGURE 2-1
AIRPLANES GROUP PORTFOLIO CURRENT VALUES
<TABLE>
<CAPTION>
BASE VALUE CURRENT MKT. VAL
------------------ -----------------
# TYPE SERNUM YEAR ENGINE 1/2 TIME MT.ADJ. 1/2 TIME MT.ADJ.
- -- ---- ------ ---- ------ -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
37 B737-2T4 22369 1980 JT8D-15 7.970 8.205 7.175 7.410
38 B737-2T5 22396 1981 JT8D-15 7.950 7.950 7.155 7.155
39 B737-2T5 22397 1981 JT8D-15 8.215 8.435 7.395 7.610
40 B737-2L9 22407 1980 JT8D-17A 8.085 8.420 7.275 7.615
41 B737-2Q8 22453 1981 JT8D-15 8.405 8.405 7.565 7.565
42 B737-2T5 22632 1982 JT8D-15 8.510 7.935 7.660 7.085
43 B737-2S3 22633 1981 JT8D-15 8.445 9.190 8.025 8.765
44 B737-2T4 22802 1983 JT8D-17A 9.390 9.390 8.920 8.920
45 B737-2T4 22803 1983 JT8D-17A 9.520 9.700 9.045 9.225
46 B737-2T4 22804 1983 JT8D-17A 9.505 9.730 9.030 9.255
47 B737-275 22873 1982 JT8D-9A 7.850 7.800 7.100 7.050
48 B737-2T5 22979 1983 JT8D-15 9.350 8.680 8.880 8.215
49 B737-291 23023 1983 JT8D-17A 9.560 9.560 9.080 9.080
50 B737-291 23024 1983 JT8D-17A 9.045 8.500 8.590 8.050
51 B737-2T4C 23065 1983 JT8D-17A 10.425 10.100 10.425 10.100
52 B737-2T4C 23066 1983 JT8D-17A 10.350 10.055 10.425 10.130
53 B737-317 23177 1986 CFM56-3B1 18.250 18.605 18.250 18.605
54 B737-3Y0 23749 1987 CFM56-3B2 20.795 20.820 20.795 20.820
55 B737-3Y0 23923 1988 CFM56-3B2 22.450 22.360 22.450 22.360
56 B737-3Y0 24770 1990 CFM56-3B1 24.540 24.155 24.540 24.155
57 B737-3Y0 24905 1991 CFM56-3C1 26.645 26.370 26.645 26.370
58 B737-3Y0 24907 1991 CFM56-3C1 26.600 26.410 26.600 26.410
59 B737-3Y0 25179 1992 CFM56-3C1 28.000 27.710 28.000 27.710
60 B737-3Y0 25187 1992 CFM56-3C1 28.000 27.720 28.000 27.720
61 B737-3Y0 26852 1992 CFM56-3B2 27.750 27.655 27.750 27.655
62 B737-3Y0C 23499 1986 CFM56-3B1 19.550 19.180 19.550 19.180
63 B737-3Y0C 23500 1986 CFM56-3B1 19.550 19.195 19.550 19.195
64 B737-4Y0 24345 1989 CFM56-3C1 25.330 24.835 25.330 24.835
65 B737-4Y0 24493 1989 CFM56-3C1 25.100 24.790 25.100 24.790
66 B737-4Y0 24520 1989 CFM56-3C1 25.800 25.375 25.800 25.375
67 B737-4Y0 24683 1990 CFM56-3C1 27.185 26.855 27.185 26.855
68 B737-4Y0 24684 1990 CFM56-3C1 27.215 27.290 27.215 27.290
69 B737-4Y0 24687 1990 CFM56-3C1 27.185 27.255 27.185 27.255
70 B737-4Y0 24689 1990 CFM56-3C1 27.145 27.115 27.145 27.115
71 B737-4Y0 24690 1990 CFM56-3C1 27.100 26.875 27.100 26.875
72 B737-4Y0 24691 1990 CFM56-3C1 27.150 26.770 27.150 26.770
</TABLE>
<PAGE> 11
FIGURE 2-1
AIRPLANES GROUP PORTFOLIO CURRENT VALUES
<TABLE>
<CAPTION>
BASE VALUE CURRENT MKT. VAL
------------------- ------------------
# TYPE SERNUM YEAR ENGINE 1/2 TIME MT. ADJ. 1/2 TIME MT. ADJ.
- --- ---- ------ ---- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
73 B737-4Y0 24906 1991 CFM56-3C1 27.350 27.130 27.350 27.130
74 B737-4Y0 24911 1991 CFM56-3C1 28.080 27.710 28.080 27.710
75 B737-4Y0 24912 1991 CFM56-3C1 27.500 27.270 27.500 27.270
76 B737-4Y0 24917 1991 CFM56-3C1 28.120 27.805 28.120 27.805
77 B737-4Y0 25180 1992 CFM56-3C1 29.045 28.660 29.045 28.660
78 B737-4Y0 25181 1992 CFM56-3C1 29.050 28.865 29.050 28.865
79 B737-4Y0 25184 1992 CFM56-3C1 29.050 28.845 29.050 28.845
80 B737-4Y0 25190 1992 CFM56-3C1 29.125 28.615 29.125 28.615
81 B737-4Y0 25261 1992 CFM56-3C1 29.155 28.980 29.155 28.980
82 B737-4Y0 26065 1992 CFM56-3C1 29.305 29.140 29.305 29.140
83 B737-4Y0 26069 1992 CFM56-3C1 29.860 29.900 29.860 29.900
84 B737-4Y0 26071 1992 CFM56-3C1 29.860 29.875 29.860 29.875
85 B737-4Y0 26081 1993 CFM56-3C1 30.500 30.260 30.500 30.260
86 B737-5Y0 24897 1991 CFM56-3C1 20.500 20.315 20.500 20.315
87 B737-5Y0 25182 1992 CFM56-3C1 21.500 21.460 21.500 21.460
88 B737-5Y0 25183 1992 CFM56-3C1 21.500 21.490 21.500 21.490
89 B737-5Y0 25185 1992 CFM56-3C1 21.500 21.200 21.500 21.200
90 B737-5Y0 25186 1992 CFM56-3C1 21.500 21.225 21.500 21.225
91 B737-5Y0 25188 1992 CFM56-3C1 21.500 21.435 21.500 21.435
92 B737-5Y0 25191 1992 CFM56-3C1 21.500 21.300 21.500 21.300
93 B737-5Y0 25192 1992 CFM56-3C1 21.500 21.265 21.500 21.265
94 B737-5Y0 25288 1992 CFM56-3C1 21.950 21.660 21.950 21.660
95 B737-5Y0 25289 1992 CFM56-3C1 21.950 21.640 21.950 21.640
96 B737-5Y0 26075 1992 CFM56-3C1 22.500 22.450 22.500 22.450
97 B747-259F* 21730 1979 JT9D-7Q 37.000 40.120 37.000 40.120
98 B757-2Y0ER 26151 1992 RB211-535E4 43.500 43.500 43.500 43.500
99 B757-2Y0 26154 1992 RB211-535E4 41.900 41.770 41.900 41.770
100 B757-2Y0 26156 1992 RB211-535E4 41.900 41.960 41.900 41.960
101 B767-2Y0ER 25421 1992 PW4056 52.000 51.990 52.000 51.990
102 B767-3Y0ER 24948 1991 PW4060 59.950 59.750 61.150 60.950
103 B767-3Y0ER 25411 1992 PW4060 61.625 61.450 62.860 62.680
104 B767-3Y0ER 26200 1992 PW4060 63.300 62.960 64.570 64.225
105 B767-3Y0ER 26204 1992 PW4060 64.000 63.805 65.280 65.085
106 DC8-71F 45810 1967 CFM56-2C1 14.500 14.765 15.760 16.025
107 DC8-71F 45811 1967 CFM56-2C1 14.500 14.500 15.760 15.760
108 DC8-71F 45813 1967 CFM56-2C1 14.500 15.130 15.760 16.390
</TABLE>
<PAGE> 12
FIGURE 2-1
AIRPLANES GROUP PORTFOLIO CURRENT VALUES
<TABLE>
<CAPTION>
BASE VALUE CURRENT MKT. VAL
------------------- ------------------
# TYPE SERNUM YEAR ENGINE 1/2 TIME MT. ADJ. 1/2 TIME MT. ADJ.
- --- ---- ------ ---- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
109 DC8-71F 45849 1967 CFM56-2C1 14.500 15.355 15.760 16.615
110 DC8-71F 45941 1968 CFM56-2C1 14.500 14.000 15.760 15.260
111 DC8-71F 45945 1968 CFM56-2C1 14.500 13.955 15.760 15.215
112 DC8-71F 45946 1968 CFM56-2C1 14.500 14.500 15.760 15.760
113 DC8-71F 45947 1968 CFM56-2C1 14.500 13.830 15.760 15.090
114 DC8-71F 45970 1968 CFM56-2C1 14.500 13.905 15.760 15.165
115 DC8-71F 45971 1968 CFM56-2C1 14.500 14.240 15.760 15.500
116 DC8-71F 45973 1968 CFM56-2C1 14.775 14.840 16.060 16.125
117 DC8-71F 45975 1968 CFM56-2C1 14.800 14.410 16.090 15.700
118 DC8-71F 45976 1968 CFM56-2C1 14.775 15.655 16.060 16.940
119 DC8-71F 45977 1968 CFM56-2C1 14.775 13.840 16.060 15.125
120 DC8-71F 45978 1968 CFM56-2C1 14.500 14.935 15.760 16.195
121 DC8-71F 45983 1968 CFM56-2C1 12.850 12.230 13.965 13.345
122 DC8-71F 45993 1968 CFM56-2C1 14.500 14.905 15.760 16.165
123 DC8-71F 45994 1968 CFM56-2C1 14.500 14.655 15.760 15.915
124 DC8-71F 45996 1968 CFM56-2C1 14.500 13.790 15.760 15.050
125 DC8-71F 45997 1968 CFM56-2C1 14.500 14.025 15.760 15.285
126 DC8-71F 45998 1968 CFM56-2C1 14.500 14.120 15.760 15.380
127 DC8-71F 46039 1969 CFM56-2C1 14.500 14.500 15.760 15.760
128 DC8-71F 46065 1969 CFM56-2C1 14.500 14.500 15.760 15.760
129 DC8-71F 46066 1969 CFM56-2C1 14.500 15.300 15.760 16.560
130 DC8-73F 46091 1970 CFM56-2C1 20.200 20.200 21.185 21.185
131 DC9-14 45736 1966 JT8D-7 1.290 1.290 1.290 1.290
132 DC9-15 45743 1966 JT8D-7B 1.010 1.010 1.010 1.010
133 DC9-15 45785 1966 JT8D-7A 1.105 1.105 1.105 1.105
134 DC9-14 45786 1967 JT8D-7B 1.385 1.385 1.385 1.385
135 DC9-15 47059 1967 JT8D-7A 1.100 1.100 1.100 1.100
136 DC9-15 47085 1967 JT8D-7A 1.100 1.100 1.100 1.100
137 DC9-15 47122 1967 JT8D-7A 1.100 1.100 1.100 1.100
138 DC9-15 47126 1968 JT8D-7A 1.150 1.150 1.150 1.150
139 DC9-32 48125 1980 JT8D-17 6.250 6.260 5.500 5.510
140 DC9-32 48126 1980 JT8D-17 6.250 6.170 5.500 5.420
141 DC9-32 48127 1980 JT8D-17 6.250 6.400 5.500 5.650
142 DC9-32 48128 1980 JT8D-17 6.250 6.480 5.500 5.730
143 DC9-32 48129 1980 JT8D-17 6.250 6.485 5.500 5.735
144 DC9-32 48130 1980 JT8D-17 6.250 6.665 5.500 5.915
</TABLE>
<PAGE> 13
FIGURE 2-1
AIRPLANES GROUP PORTFOLIO CURRENT VALUES
<TABLE>
<CAPTION>
BASE VALUE CURRENT MKT. VAL
------------------- ------------------
# TYPE SERNUM YEAR ENGINE 1/2 TIME MT. ADJ. 1/2 TIME MT. ADJ.
- -- ---- ------ ---- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
145 DC9-51 47742 1977 JT8D-17 4.550 4.715 4.005 4.170
146 DC9-51 47784 1979 JT8D-17 5.400 5.255 4.755 4.605
147 DC9-51 47796 1979 JT8D-17 5.400 5.505 4.755 4.860
148 DC9-51 48122 1981 JT8D-17 6.250 6.810 5.500 6.060
149 F100 11266 1990 TAY650 15.850 15.850 14.585 14.585
150 F100 11284 1990 TAY650 15.850 15.960 14.585 14.695
151 F100 11285 1990 TAY650 15.850 15.925 14.585 14.660
152 F100 11304 1991 TAY650 16.450 16.450 15.135 15.135
153 F100 11305 1991 TAY650 16.800 16.800 15.460 15.460
154 F100 11309 1991 TAY650 16.800 16.600 15.460 15.255
155 F100 11319 1991 TAY650 16.800 16.605 15.460 15.260
156 F100 11336 1991 TAY650 17.000 17.030 15.640 15.670
157 F100 11339 1991 TAY650 17.000 17.000 15.640 15.640
158 F100 11347 1991 TAY650 17.800 17.800 16.380 16.380
159 F100 11348 1991 TAY650 17.800 17.800 16.380 16.380
160 F100 11371 1991 TAY650 17.950 17.760 16.515 16.325
161 F100 11374 1992 TAY650 18.250 17.990 16.790 16.530
162 F100 11375 1992 TAY650 18.250 18.000 16.790 16.540
163 F100 11382 1992 TAY650 18.250 18.000 16.790 16.540
164 F100 11384 1992 TAY650 18.250 18.010 16.790 16.550
165 MD11 48499 1991 CF6-80C2 80.100 80.470 74.895 75.265
166 MD11 48500 1992 CF6-80C2-D1 81.500 81.500 76.205 76.205
167 MD11 48501 1992 CF6-80C2-D1 84.000 84.000 78.540 78.540
168 MD82 49660 1988 JT8D-217C 19.100 18.865 20.055 19.820
169 MD82 49667 1988 JT8D-217A 17.950 17.495 18.850 18.395
170 MD83 49390 1986 JT8D-219 19.000 20.110 19.380 20.490
171 MD83 49442 1987 JT8D-219 20.000 19.425 20.000 19.425
172 MD83 49575 1987 JT8D-219 21.000 20.340 21.420 20.760
173 MD83 49620 1988 JT8D-219 21.415 21.105 21.415 21.105
174 MD83 49624 1988 JT8D-219 21.250 20.740 21.250 20.740
175 MD83 49626 1988 JT8D-219 21.250 20.615 21.250 20.615
176 MD83 49631 1989 JT8D-219 22.000 22.005 22.000 22.005
177 MD83 49672 1988 JT8D-219 21.250 20.440 21.250 20.440
178 MD83 49709 1988 JT8D-219 21.250 21.030 21.250 21.030
179 MD83 49789 1989 JT8D-219 23.000 22.795 23.460 23.255
180 MD83 49792 1989 JT8D-219 23.000 22.665 23.460 23.125
</TABLE>
<PAGE> 14
FIGURE 2-1
AIRPLANES GROUP PORTFOLIO CURRENT VALUES
<TABLE>
<CAPTION>
BASE VALUE CURRENT MKT. VAL
------------------ ------------------
# TYPE SERNUM YEAR ENGINE 1/2 TIME MT. ADJ. 1/2 TIME MT. ADJ.
- --- ---- ------- ---- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
181 MD83 49935 1990 JT8D-219 24.250 23.935 24.735 24.420
182 MD83 49936 1990 JT8D-219 24.250 23.535 24.735 24.020
183 MD83 49938 1990 JT8D-219 24.055 24.055 24.540 24.540
184 MD83 49939 1990 JT8D-219 23.405 23.855 23.875 24.325
185 MD83 49941 1990 JT8D-219 24.250 23.680 24.735 24.165
186 MD83 49943 1991 JT8D-219 25.775 25.595 26.295 26.110
187 MD83 49946 1991 JT8D-219 24.000 24.330 24.480 24.810
188 MD83 49949 1991 JT8D-219 25.250 24.820 25.755 25.325
189 MD83 49950 1991 JT8D-219 25.250 25.335 25.755 25.840
190 MD83 49951 1991 JT8D-219 25.250 25.000 25.755 25.505
191 MD83 53120 1992 JT8D-219 24.500 24.790 24.990 25.280
192 MD83 53125 1992 JT8D-219 25.250 25.270 25.755 25.775
193 MD87 49673 1988 JT8D-219 16.500 16.365 16.005 15.870
194 ATR42-300 109 1988 PW120 5.600 5.600 5.600 5.600
195 ATR42-300 113 1988 PW120 5.600 5.600 5.600 5.600
196 ATR42-300 249 1991 PW120 7.150 7.150 7.150 7.150
197 ATR42-300 284 1992 PW121 5.800 5.800 5.800 5.800
198 DHC8-102 113 1988 PW120A 4.325 4.305 4.110 4.090
199 DHC8-102 140 1989 PW120A 4.050 4.080 3.850 3.880
200 DHC8-100 144 1989 PW120A 5.250 5.250 4.990 4.990
201 DHC8-100 229 1990 PW121 7.950 7.950 7.555 7.555
202 DHC8-100 258 1991 PW121 6.400 6.380 6.080 6.060
203 DHC8-100 270 1991 PW120A 5.200 5.280 4.940 5.020
204 DHC8-300 232 1990 PW123 7.900 8.070 7.900 8.070
205 DHC8-300 244 1990 PW123 7.900 7.905 7.900 7.905
206 DHC8-300 266 1991 PW123 8.300 8.300 8.300 8.300
207 DHC8-300 267 1991 PW123 8.400 8.405 8.400 8.405
208 DHC8-300 276 1991 PW123 8.500 8.630 8.500 8.630
209 DHC8-300 283 1991 PW123 9.000 9.010 9.000 9.010
210 DHC8-300 293 1991 PW123 9.175 9.200 9.175 9.200
211 DHC8-300 296 1991 PW123 9.175 9.330 9.175 9.330
212 DHC8-300 298 1992 PW123 9.350 9.305 9.350 9.305
213 DHC8-300 300 1992 PW123 9.350 9.385 9.350 9.385
214 DHC8-300 307 1991 PW123 8.675 8.850 8.675 8.850
215 DHC8-300 334 1992 PW123 9.850 9.860 9.850 9.860
216 DHC8-300 342 1992 PW123 10.100 10.205 10.100 10.205
</TABLE>
<PAGE> 15
FIGURE 2-1
AIRPLANES GROUP PORTFOLIO CURRENT VALUES
<TABLE>
<CAPTION>
BASE VALUE CURRENT MKT. VAL
------------------ -------------------
# TYPE SERNUM YEAR ENGINE 1/2 TIME MT. ADJ. 1/2 TIME MT. ADJ.
- --- ---- ------ ---- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
217 DHC8-300C 230 1990 PW123 8.595 8.640 8.595 8.640
218 DHC8-300C 242 1990 PW123 8.450 8.360 8.450 8.360
219 METROIII 705 1988 TPE331-11U 1.700 1.700 1.530 1.530
220 METROIII 711 1988 TPE331-11U 1.700 1.700 1.530 1.530
221 METROIII 712 1988 TPE331-11U 1.700 1.700 1.530 1.530
</TABLE>
* This acft. being converted to freighter.
Valued as a freighter with 18 yrs. remaining useful life.
<PAGE> 1
[AIRCLAIMS LETTERHEAD]
EXHIBIT 99.3
Our Ref: 97454/AIRP0198/CMV/BV/Ep/kw
Airplanes Limited 21st January, 1998
22 Grenville Street
St Helier
Jersey
GPA Group plc
GPA House
Shannon
Ireland
Attention: Mr Gerard Hastings
Financial Accountant
Dear Sirs,
- AIRPLANES GROUP PORTFOLIO VALUATION -
BASE VALUATION AND CURRENT MARKET VALUATION
AS AT 23rd JANUARY, 1998
Further to instructions of Mr Gerard Hastings, Financial Accountant GPA Group,
we are pleased to be able to provide our opinion of the adjusted 'Base Value'
and 'Current Market Value' of each aircraft in the portfolio of GPA ATR, as
indicated in the attached table, referenced 97454/AIRP0198/BV/CMV. Our
valuation is based on the portfolio details as provided by GPA in October and
November 1997. The point of valuation is 23rd January, 1998.
Airclaims' valuation of the portfolio takes into account data supplied in the
past by GPA, as well as updated information made available in October and
November 1997, regarding the specification of the subject aircraft, including
their type and variants, years of build, engine types and variants, accumulated
airframe and engine hours and cycles, and serial/line number (where relevant).
Information has also been provided in many cases concerning the airframe and
engine maintenance status, and, where possible this has been interpreted or
extrapolated and our value opinion adjusted accordingly.
We have additionally referred to the data held in the Airclaims CASE Aviation
Database to supplement the data required for the valuation, including
cumulative airframe hours and cycles and have assumed that, unless otherwise
advised, each aircraft is a typical example of its type, model and age, and is
generally in good condition, with all airworthiness directives and significant
service bulletins complied with.
[AIRCLAIMS LETTERFOOT]
<PAGE> 2
[LOGO]
As requested by GPA, we have provided our value opinion under BASE VALUE and
CURRENT MARKET VALUE scenarios. Airclaims believes it to be very important that
value definitions are understood by all parties and that such values are always
considered in conjunction with their definitions.
BASE VALUE (TO ISTAT DEFINITION)
The Base Values presented in the attached table are based on the definitions as
outlined by the International Society of Transport Aircraft Trading (ISTAT).
ISTAT's definition of Base Value equates in principle to the previously used
appraisal term, Fair Market Value.
The ISTAT definition is as follows:
A Base Value is the Appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a reasonable
balance of supply and demand, and assumes full consideration of its "highest and
best use". An aircraft's Base Value is founded in the historical trend of values
and in the projection of value trends and presumes an arm's length, cash
transaction between willing, able and knowledgeable parties, acting prudently,
with an absence of duress and with a reasonable period of time available for
marketing.
In most cases, the BASE VALUE of an aircraft assumes its physical condition is
average for an aircraft of its type and age, and its maintenance time status is
at mid-life, mid-time (or benefiting from an above average maintenance status if
it is new or nearly new, as the case may be).
In this instance, all the Base Values pertaining to the fleet have been adjusted
for maintenance status where available and appropriate.
CURRENT MARKET VALUE
In Airclaims' considered opinion the CURRENT MARKET VALUE represents that which
the aircraft could best achieve under current (i.e. today's) market conditions.
Under this scenario each value is intended to reflect what might be expected
from the result of an 'arms length, single sale' transaction conducted in an
orderly manner (for which we consider a period of up to 12 months to come to
fruition to be reasonable) between a 'willing buyer and willing seller'. The
value assumes that each aircraft is free of lease or charge, and free of any
onerous restrictions in respect of its ownership and title documentation.
- --------------------------------------------------------------------------------
GPA Group Plc
Page 2
<PAGE> 3
[AIRCLAIMS LETTERHEAD]
As part of our valuation process, we have taken into account recent market
activity covering open market, financial and lessor based sales, the perceived
demand for the types, their current market acceptability and availability, and
have considered the views of informed industry sources.
Further to the above we have also taken account of the data available to us
regarding the specification of the subject aircraft, and their accumulated
airframe hours and cycles. We have also assumed that the aircraft are in good
condition with all Airworthiness Directives (ADs) and significant Service
Bulletins (SBs) complied with.
In this instance, the Current Market Value of each aircraft assumes its
physical condition is average for an aircraft of its type and age, but has been
adjusted to reflect the actual utilisation and given maintenance status of
airframe, engines and undercarriage where possible (the "Adjusted Current
Market Value") as well as under assumed "half-life" condition.
The Current Market Value also assumes that each Aircraft is under a maintenance
programme of international airworthiness standards approved by a civil aviation
authority, with all airworthiness directives (ADs) and manufacturers service
bulletins (SBs) performed in compliance with air carrier rules and regulations.
No physical inspection of the subject aircraft has been undertaken by Airclaims
in conjunction with this assignment, and no attempt made to verify the
information available to us, which is therefore assumed to be correct as given.
Abbreviations used on the tabulated valuation pages include:
Type Aircraft type, model and variant
Eng. Engine Type and Variant
MSN Manufacturers Serial Number
REGN Registration
MTOW Maximum Take-Off Weight
ADJ CMV Adjusted Current Market Value
H-L CMV Half-Life Current Market Value
ADJ BV Adjusted Base Value
H-L BV Half Life Base Value
Whilst the tabulated values are given as single figures, it must be borne in
mind that the determination of such values involves a multiplicity of
variables, and that some variation in perceived values must be expected, due to
for example, any potential inaccuracies in the data provided, and also because
the aircraft have been valued "sight unseen". In this case we consider that a
tolerance of +/- 4% may reasonably apply to the aforementioned calculated
values.
________________________________________________________________________________
97454/CMV/BV/EP/kw GPA Group Plc
06/02/1998 Page 3
<PAGE> 4
[AIRCLAIMS LETTERHEAD]
Please note that valuations given by Airclaims are valid only as at the date of
issue. Subsequent to that date there may be alterations in the world aviation
market, or in the status and physical condition of the subject aircraft or
other general factors that may affect Airclaims' valuation opinion.
I trust the foregoing is satisfactory and to your requirements.
Yours faithfully,
/s/ Edward Pieniazek
- --------------------------------------------
EDWARD PIENIAZEK
Director, Consultancy & Information Services
Encl.
________________________________________________________________________________
97454/CMV/BV/EP/kw GPA Group Plc
06/02/1998 Page 4
<PAGE> 5
[LOGO]
AIRCLAIMS LTD
BASE & CURRENT MARKET VALUES OF THE AIRPLANES GROUP PORTFOLIO
SPECIFICATION/VALUES AS AT 23RD JANUARY 1998
<TABLE>
<CAPTION>
MARKET VALUES BASE VALUES
AIRFRAME ------------- -----------
BUILD MTOW -------------- ADJ H-L ADJ H-L
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT CMV CMV BV BV
---- ---- --- ---- ----- -------- ---- ----- ------ ----- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 A300B4-100 CF6-50C2R 9 RP-C8881 Dec-74 OFF LEASE 338,987 38,131 21,249 31-Oct-97 $4.25m $4.25m $3.25m $3.25m
2 A300B4-100 CF6-50C2R 12 EI-TLB May-75 TRANSAER 347,222 47,601 23,997 31-Oct-97 $4.55m $4.25m $3.55m $3.25m
3 A300B4-100 CF6-50C2R 20 EI-CJK Oct-75 TRANSAER 347,222 40,260 21,847 31-Oct-97 $5.13m $4.25m $4.13m $3.25m
4 A300B4-200 CF6-50C2 131 6Y-JMK Dec-80 OFF LEASE 363,760 31,571 18,322 31-Oct-97 $10.30m $9.20m $9.19m $8.09m
5 A300B4-200 CF6-50C2 269 AP-BEL Aug-83 PIA 363,760 31,385 15,952 31-Oct-97 $9.93m $9.85m $9.51m $9.43m
6 A300C4-200 CF6-50C2 83 EI-BZB May-79 OFF LEASE 363,760 34,057 19,670 31-Oct-97 $14.00m $14.00m $15.59m $15.59m
7 A320-200 CFM56-5A1 174 C-GPWG Feb-91 CANADIAN 166,447 23,187 8,437 31-Oct-97 $31.16m $30.77m $30.22m $29.83m
8 A320-200 CFM56-5A1 175 C-FPWE Feb-91 CANADIAN 166,447 23,319 8,568 31-Oct-97 $31.06m $30.72m $30.13m $29.78m
9 A320-200 CFM56-5A3 203 F-GLGG May-91 AIR CHARTER 166,447 15,765 9,721 31-Oct-97 $29.53m $30.87m $28.60m $29.93m
10 A320-200 CFM56-5A3 220 F-GLGH Jun-91 AIR CHARTER 166,447 15,088 9,422 31-Oct-97 $30.23m $31.27m $29.29m $30.33m
11 A320-200 CFM56-5A1 232 C-FDCA Jul-91 CANADIAN 166,447 21,769 8,165 31-Oct-97 $31.67m $31.17m $30.74m $30.23m
12 A320-200 CFM56-5A1 284 C-FLSS Dec-91 CANADIAN 166,447 20,441 7,623 31-Oct-97 $31.67m $32.07m $30.73m $31.13m
13 A320-200 CFM56-5A3 294 OY-CNP Jan-92 PREMIAIR 166,447 19,596 7,333 31-Oct-97 $32.58m $32.17m $31.54m $31.13m
14 A320-200 CFM56-5A3 301 OY-CNM Feb-92 PREMIAIR 166,447 19,696 7,240 31-Oct-97 $32.17m $32.17m $31.13m $31.13m
15 A320-200 CFM56-5A1 309 C-FLSU Feb-92 CANADIAN 162,067 19,912 7,477 31-Oct-97 $31.43m $31.90m $30.39m $30.86m
16 A320-200 CFM56-5A1 348 F-GLGE Jun-92 AIR CHARTER 162,067 12,151 4,526 31-Oct-97 $32.85m $32.85m $31.81m $31.81m
17 A320-200 CFM56-5A3 349 OY-CNR Jun-92 PREMIAIR 166,447 17,832 6,453 31-Oct-97 $32.98m $32.87m $31.94m $31.83m
18 A320-200 CFM56-5A3 404 C-FNVV Jan-93 CANADIAN 162,067 14,120 5,263 31-Oct-97 $33.34m $33.60m $32.20m $32.46m
19 ATR42-300 PW120 109 G-BUPS Aug-88 TITAN AIRWAYS 36,825 15,829 15,221 31-Aug-97 $5.08m $5.10m $5.24m $5.26m
20 ATR42-310 PW120 113 G-ZAPJ Oct-88 TITAN AIRWAYS 36,825 12,639 12,885 31-Aug-97 $5.19m $5.30m $5.34m $5.46m
21 ATR42-310 PW120 249 N249AT May-91 AMR-SIMMONS 36,825 13,303 16,724 31-Aug-97 $6.37m $6.50m $6.52m $6.65m
22 ATR42-320 PW120 284 HK-3684X Dec-91 ACES COLOMBIA 36,825 13,143 21,668 31-Aug-97 $6.90m $6.75m $7.05m $6.90m
</TABLE>
97454/AIRP0198/BV/CMV 20/01/1998
<PAGE> 6
[LOGO]
AIRCLAIMS LTD
BASE & CURRENT MARKET VALUES OF THE AIRPLANES GROUP PORTFOLIO
SPECIFICATION/VALUES AS AT 23RD JANUARY 1998
<TABLE>
<CAPTION>
MARKET VALUES BASE VALUES
AIRFRAME ------------- -----------
BUILD MTOW -------------- ADJ H-L ADJ H-L
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT CMV CMV BV BV
---- ---- --- ---- ----- -------- ---- ----- ------ ----- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
23 B727-200Adv. JT8D-17R 21346 XA-MXI Sep-80 MEXICANA 190,500 42,822 35,496 30-Sep-97 $4.31m $4.70m $2.95m $3.34m
24 B727-200Adv. JT8D-17R 21600 XA-MXJ Oct-80 MEXICANA 190,500 43,405 36,230 30-Sep-97 $4.11m $4.70m $2.76m $3.34m
25 B737-200Adv. JT8D-9A 20922 C-GAPW Aug-74 CANADIAN 117,000 64,470 69,813 30-Sep-97 $3.50m $4.00m $2.49m $2.99m
26 B737-200Adv. JT8D-9A 20958 C-GBPW Dec-74 AMERICA WEST 117,000 62,860 69,522 30-Sep-97 $4.01m $4.00m $3.00m $2.99m
27 B737-200Adv. JT8D-9A 20959 N126AW Jan-75 AMERICA WEST 117,000 64,119 68,025 30-Sep-97 $3.58m $4.25m $2.52m $3.20m
28 B737-200Adv. JT8D-9A 21115 C-GEPW Oct-75 CANADIAN 117,000 55,498 62,955 30-Sep-97 $3.35m $4.25m $2.30m $3.20m
29 B737-200Adv. JT8D-17 21192 EI-CNP Feb-76 AEROL. ARGENTINAS 119,500 39,197 37,094 30-Sep-97 $4.97m $5.29m $3.82m $4.14m
30 B737-200Adv. JT8D-17 21193 LV- Mar-76 LAPA ARGENTINA 119,500 45,779 35,193 31-May-97 $4.40m $5.29m $3.25m $4.14m
31 B737-200Adv. JT8D-17 21196 LV-PMW Jun-76 LAPA ARGENTINA 119,500 46,888 35,351 30-Sep-97 $4.59m $5.29m $3.43m $4.14m
32 B737-200Adv. JT8D-17 21206 OB-1539 Jan-76 AERO SANTA 119,500 36,363 33,306 30-Sep-97 $5.86m $5.09m $4.71m $3.94m
33 B737-200Adv. JT8D-9A 21639 C-GGPW Oct-78 CANADIAN 117,000 48,009 54,278 30-Sep-97 $5.96m $5.15m $4.57m $3.76m
34 B737-200Adv. JT8D-17 21685 UR-BFA Dec-78 AEROSWEET 119,500 41,858 33,282 30-Sep-97 $5.49m $5.84m $4.10m $4.45m
35 B737-200Adv. JT8D-9A 21712 C-GIPW Jan-79 CANADIAN 117,000 47,436 51,648 30-Sep-97 $5.35m $5.50m $3.81m $3.97m
36 B737-200Adv. JT8D-15 21735 HA-LEA May-79 MALEV 119,500 49,199 38,923 30-Sep-97 $6.72m $5.99m $5.19m $4.46m
37 B737-200Adv. JT8D-15 21960 CC-CLD Feb-80 LAN CHILE 117,000 50,680 32,754 30-Sep-97 $6.47m $6.25m $4.79m $4.57m
38 B737-200Adv. JT8D-15 22090 HA-LEB Apr-80 MALEV 119,500 38,365 24,615 30-Sep-97 $7.07m $6.44m $5.39m $4.76m
39 B737-200Adv. JT8D-15 22278 LV-WJS Feb-80 LAPA ARGENTINA 121,500 55,466 30,209 30-Sep-97 $6.04m $6.51m $4.36m $4.83m
40 B737-200Adv. JT8D-15 22368 LV-WNA Sep-80 LAPA ARGENTINA 119,500 46,440 38,345 30-Sep-97 $6.54m $6.34m $4.86m $4.66m
41 B737-200Adv. JT8D-15 22369 LV-WNB Sep-80 LAPA ARGENTINA 119,500 45,116 37,735 30-Sep-97 $6.58m $6.34m $4.91m $4.66m
42 B737-200Adv. JT8D-15 22396 PK-RIW Dec-80 MANDALA 119,500 47,127 27,429 31-May-97 $7.12m $6.44m $5.45m $4.76m
43 B737-200Adv. JT8D-15 22397 CC-CJW Jan-81 LAN CHILE 119,500 48,335 33,040 30-Sep-97 $6.19m $6.89m $4.32m $5.02m
44 B737-200Adv. JT8D-17A 22407 CC-CEE Sep-80 LAN CHILE 124,500 45,878 31,562 30-Sep-97 $6.76m $6.70m $5.08m $5.02m
45 B737-200Adv. JT8D-15 22453 LY-GPA Feb-81 LITHUANIAN A/L 119,500 43,042 25,780 30-Sep-97 $6.05m $6.89m $4.18m $5.02m
46 B737-200Adv. JT8D-15 22632 CC-CYP Feb-82 LAN CHILE 117,000 43,369 26,467 30-Sep-97 $6.33m $7.35m $4.32m $5.34m
47 B737-200Adv. JT8D-15 22633 VP-BUG Feb-81 OFF LEASE 121,500 44,476 24,278 31-May-97 $7.46m $6.76m $5.59m $4.89m
48 B737-200Adv. JT8D-17A 22802 UR-GAD Jul-82 UKRAINE INT'L 124,500 31,504 23,892 30-Sep-97 $7.89m $7.40m $5.88m $5.39m
49 B737-200Adv. JT8D-17A 22803 HA-LEI Aug-82 MALEV 124,500 31,039 25,937 30-Sep-97 $6.97m $7.40m $4.96m $5.39m
50 B737-200Adv. JT8D-17A 22804 HA-LEM Aug-82 MALEV 124,500 32,292 26,178 30-Sep-97 $6.92m $7.40m $4.91m $5.39m
51 B737-200Adv. JT8D-9A 22873 C-GUPW Jul-82 CANADIAN 117,000 38,202 39,506 30-Sep-97 $6.10m $6.70m $4.08m $4.69m
52 B737-200Adv. JT8D-15 22979 HA-LEC Feb-83 MALEV 119,500 40,382 21,977 30-Sep-97 $7.67m $7.35m $5.48m $5.16m
53 B737-200Adv. JT8D-17A 23023 PK-RIQ Mar-83 MANDALA 117,000 31,675 25,461 30-Sep-97 $7.28m $7.45m $5.09m $5.26m
54 B737-200Adv. JT8D-17A 23024 CC-CDG Apr-83 LAN CHILE 117,000 37,173 29,785 30-Sep-97 $7.37m $7.45m $5.18m $5.26m
55 B737-200C/Adv JT8D-17A 23065 LV-WPA Aug-83 LAPA ARGENTINA 124,500 33,833 31,394 30-Sep-97 $9.07m $9.55m $6.78m $7.26m
56 B737-200C/Adv JT8D-17A 23066 B-2505 Oct-83 XIAMEN 124,500 31,550 28,907 30-Sep-97 $9.52m $9.65m $7.23m $7.36m
</TABLE>
97454/AIRP0198/BV/CMV 20/01/1998
<PAGE> 7
[LOGO]
AIRCLAIMS LTD
BASE & CURRENT MARKET VALUES OF THE AIRPLANES GROUP PORTFOLIO
SPECIFICATION/VALUES AS AT 23RD JANUARY 1998
<TABLE>
<CAPTION>
MARKET VALUES BASE VALUES
------------- -----------
BUILD MTOW AIRFRAME ADJ H-L ADJ H-L
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT CMV CMV BV BV
---- ---- --- ---- ----- -------- ---- ----- ------ ----- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
57 B737-300 CFM56-3B1 23177 N302FL Mar-86 FRONTIER AIRLINES 135,000 31,735 22,190 30-Sep-97 $18.91m $18.55m $17.38m $17.02m
58 B737-300 CFM56-3B2 23749 EC-FKJ Apr-87 AIR EUROPA 137,000 38,480 19,400 30-Sep-97 $20.57m $20.75m $19.22m $19.40m
59 B737-300 CFM56-3B2 23923 EC-FJZ Mar-88 AIR EUROPA 138,500 31,764 15,144 30-Sep-97 $21.80m $21.69m $20.62m $20.51m
60 B737-300 CFM56-3B1 24770 EI-BZN Sep-90 PHILIPPINE AIRLINES 135,000 14,945 11,433 30-Sep-97 $22.71m $22.70m $21.82m $21.82m
61 B737-300 CFM56-3C1 24905 PH-TSU Jan-91 TRANSAVIA AIRLINES 130,000 14,986 9,246 30-Sep-97 $24.16m $24.69m $23.50m $24.04m
62 B737-300 CFM56-3C1 24907 9M-AAA Feb-91 AIR ASIA 130,000 13,420 9,744 30-Sep-97 $23.97m $24.69m $23.31m $24.04m
63 B737-300 CFM56-3C1 25179 EI-CLZ Dec-91 AIR ONE 135,000 14,819 10,285 30-Sep-97 $25.92m $25.55m $25.27m $24.90m
64 B737-300 CFM56-3C1 25187 EI-CLW Feb-92 AIR ONE 135,000 14,715 9,676 30-Sep-97 $24.92m $25.70m $24.24m $25.02m
65 B737-300 CFM58-3B2 26852 PP-VPA Mar-92 VARIG 135,000 12,007 15,498 30-Sep-97 $24.70m $24.70m $24.02m $24.02m
66 B737-300QC CFM56-3B1 23499 N303AL May-86 AMERICA WEST 135,000 28,926 31,429 30-Sep-97 $21.58m $20.80m $20.57m $19.79m
67 B737-300QC CFM56-3B1 23500 N304AL May-86 AMERICA WEST 135,000 29,899 32,612 30-Sep-97 $20.38m $20.80m $19.37m $19.79m
68 B737-400 CFM56-3C1 24345 VT-JAG May-89 JET AIRWAYS 142,500 21,257 12,508 30-Sep-97 $24.79m $24.79m $23.35m $23.35m
69 B737-400 CFM56-3C1 24493 HL7258 Jun-89 ASIANA 142,500 17,025 18,437 30-Sep-97 $24.59m $24.79m $23.15m $23.35m
70 B737-400 CFM56-3C1 24520 HL7260 Dec-89 ASIANA 142,500 18,728 16,909 30-Sep-97 $24.65m $25.29m $23.21m $23.85m
71 B737-400 CFM56-3C1 24683 TC-AYA Jul-90 ISTANBUL AIRLINES 150,000 17,990 10,575 30-Sep-97 $25.22m $26.00m $23.91m $28.68m
72 B737-400 CFM56-3C1 24684 TC-AFK Mar-90 PEGASUS AIRLINES 150,000 24,864 9,794 30-Sep-97 $24.86m $26.00m $23.55m $28.68m
73 B737-400 CFM56-3C1 24687 VT-JAK Apr-90 JET AIRWAYS 150,000 24,237 10,743 30-Sep-97 $26.81m $26.00m $25.50m $24.68m
74 B737-400 CFM56-3C1 24689 EC-EXY Jun-90 FUTURA 150,000 24,358 11,297 30-Sep-97 $26.69m $26.00m $25.37m $24.68m
75 B737-400 CFM56-3C1 24690 SE-DRR Jun-90 NORDIC EUROPEAN 150,000 23,648 12,458 30-Sep-97 $25.28m $26.00m $23.97m $24.68m
76 B737-400 CFM56-3C1 24691 TC-AZA Jul-90 ISTANBUL AIRLINES 150,000 18,599 11,578 30-Sep-97 $25.52m $26.00m $24.21m $24.68m
77 B737-400 CFM56-3C1 24906 EC-GAZ Feb-91 AIR EUROPA 142,500 15,846 14,594 30-Sep-97 $25.87m $26.49m $24.78m $25.40m
78 B737-400 CFM56-3C1 24911 SE-DTB Mar-91 NORDIC EUROPEAN 150,000 16,971 10,560 30-Sep-97 $26.71m $28.95m $25.62m $25.86m
79 B737-400 CFM56-3C1 24912 EC-GBN May-91 AIR EUROPA 142,500 14,727 13,646 30-Sep-97 $25.98m $26.69m $24.89m $25.60m
80 B737-400 CFM56-3C1 24917 TC-JDF May-91 THY-TURKISH 150,000 17,438 9,322 30-Sep-97 $26.65m $26.95m $25.56m $25.86m
81 B737-400 CFM56-3C1 25180 EC-GOB Dec-91 FUTURA 150,000 18,444 8,223 30-Sep-97 $26.71m $27.35m $25.62m $26.26m
82 B737-400 CFM56-3C1 25181 TC-JDG Dec-91 THY-TURKISH 150,000 15,663 8,253 30-Sep-97 $27.03m $27.35m $25.94m $26.26m
83 B737-400 CFM56-3C1 25184 TC-JDH Jan-92 THY-TURKISH 150,000 15,966 8,253 30-Sep-97 $27.19m $27.65m $26.22m $26.69m
84 B737-400 CFM56-3C1 25190 TC-SUT Mar-92 SUN EXPRESS 150,000 19,516 8,390 30-Sep-97 $28.00m $27.85m $27.04m $26.89m
85 B737-400 CFM56-3C1 25261 TC-JDT Mar-92 THY-TURKISH 150,000 15,615 8,042 30-Sep-97 $27.22m $27.85m $26.26m $26.89m
86 B737-400 CFM56-3C1 26065 TC-JDY Apr-92 THY-TURKISH 150,000 15,438 7,932 30-Sep-97 $27.38m $27.95m $26.42m $26.99m
87 B737-400 CFM56-3C1 26069 HA-LEN Aug-92 MALEV 150,000 13,161 6,823 30-Sep-97 $27.85m $28.05m $26.89m $27.09m
88 B737-400 CFM56-3C1 26071 HA-LEO Aug-92 MALEV 150,000 12,872 6,464 30-Sep-97 $27.75m $28.05m $26.79m $27.09m
89 B737-400 CFM56-3C1 26081 D-ABAF Feb-93 AIR BERLIN 150,000 16,658 6,559 30-Sep-97 $28.37m $28.95m $27.48m $28.06m
</TABLE>
<PAGE> 8
[LOGO]
AIRCLAIMS LTD
BASE & CURRENT MARKET VALUES OF THE AIRPLANES GROUP PORTFOLIO
SPECIFICATION/VALUES AS AT 23RD JANUARY 1998
<TABLE>
<CAPTION>
MARKET VALUES BASE VALUES
AIRFRAME --------------- ---------------
BUILD MTOW ----------------------- ADJ H-L ADJ H-L
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT CMV CMV BV BV
---- --------- ----- ------ ------ ---------------- ------- ------ ------ --------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
90 B737-500 CFM56-3C1 24897 B-2542 Jan-91 GUANGXI AIRLINES 133,500 15,772 12,892 30-Sep-97 $22.22m $22.13m $20.87m $20.77m
91 B737-500 CFM56-3C1 25182 B-2548 Jan-92 CHINA SOUTHERN 133,500 13,532 9,553 30-Sep-97 $22.85m $23.13m $21.41m $21.70m
92 B737-500 CFM56-3C1 25183 B-2549 Jan-92 CHINA SOUTHERN 133,500 13,405 10,312 30-Sep-97 $22.98m $23.13m $21.55m $21.70m
93 B737-500 CFM56-3C1 25185 G-OBMR Jan-92 BRITISH MIDLAND 133,500 16,900 10,763 30-Sep-97 $22.30m $23.13m $20.87m $21.70m
94 B737-500 CFM56-3C1 25186 PT-SLU Feb-92 RIO SUL 133,500 16,329 12,730 30-Sep-97 $22.25m $23.16m $20.82m $21.73m
95 B737-500 CFM56-3C1 25188 B-2550 Feb-92 CHINA SOUTHERN 133,500 13,547 10,425 30-Sep-97 $22.47m $23.16m $21.04m $21.73m
96 B737-500 CFM56-3C1 25191 VT-JAL Mar-92 JET AIRWAYS 133,500 15,741 9,524 30-Sep-97 $22.36m $23.18m $20.93m $21.75m
97 B737-500 CFM56-3C1 25192 PT-SSA Mar-92 RIO SUL 133,500 15,890 11,047 30-Sep-97 $22.10m $22.98m $20.66m $21.55m
98 B737-500 CFM56-3C1 25288 TC-JDU Apr-92 THY-TURKISH 133,500 17,150 7,091 30-Sep-97 $22.17m $22.78m $20.74m $21.35m
99 B737-500 CFM56-3C1 25289 TC-JDV Apr-92 THY-TURKISH 133,500 17,424 7,264 30-Sep-97 $22.18m $22.78m $20.75m $21.55m
100 B737-500 CFM56-3C1 26075 PT-SLN Sep-92 RIO SUL 133,500 13,924 14,150 30-Sep-97 $22.20m $22.98m $20.77m $21.55m
101 B747-200SF JT9D-7Q 21730 N621FF Apr-79 TOWER AIR 805,000 55,418 16,098 30-Sep-97 $37.33m $37.20m $37.22m $37.09m
102 B757-200 RB211-535E4-3 26151 SE-DUL Jun-92 BLUE SCANDINAVIAN 250,000 17,703 7,637 30-Sep-97 $38.17m $39.35m $36.77m $37.96m
103 B757-200 RB211-535E4-3 26154 E1-CEZ Aug-92 AVIANCA 250,000 16,452 6,476 30-Sep-97 $39.79m $39.55m $38.40m $38.16m
104 B757-200 RB211-535E4-3 26156 B-2827 Oct-92 CHINA SOUTHWEST 250,000 11,598 7,145 30-Sep-97 $40.46m $40.65m $39.07m $39.26m
105 B767-200ER PW4056 25421 PT-TAK Nov-91 TRANSBRASIL 387,000 17,561 3,609 30-Sep-97 $44.37m $44.45m $43.69m $43.76m
106 B767-300ER PW4060 24948 PT-TAE Jun-91 TRANSBRASIL 387,000 30,015 7,220 30-Sep-97 $61.70m $62.40m $59.60m $60.30m
107 B767-300ER PW4060 25411 SE-DKY Nov-91 SAS 407,000 16,950 4,384 30-Sep-97 $64.68m $63.80m $62.58m $61.70m
108 B767-300ER PW4060 26200 XA-RKI Jul-92 AEROMEXICO 407,000 19,339 4,316 30-Sep-97 $65.62m $66.30m $63.26m $63.94m
109 B767-300ER PW4060 26204 XA-RKJ Oct-92 LAN CHILE 407,000 19,176 4,490 30-Sep-97 $65.87m $66.65m $63.51m $64.29m
</TABLE>
<PAGE> 9
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AIRCLAIMS LTD
BASE & CURRENT MARKET VALUES OF THE AIRPLANES GROUP PORTFOLIO
SPECIFICATION/VALUES AS AT 23RD JANUARY 1998
<TABLE>
<CAPTION>
MARKET VALUES BASE VALUES
------------- -----------
BUILD MTOW AIRFRAME ADJ H-L ADJ H-L
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT CMV CMV BV BV
---- ---- --- ---- ---- -------- ---- ----- ------ ----- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
110 DC8-71F(M) CFM56-2C1 45810 PT-ABS 66 ABSA CARGO 328,000 84,744 31,742 31-OCT-97 $15.01m $15.10m $17.08m $17.16m
111 DC8-71F(M) CFM56-2C1 45811 N821BX 67 A T INTL/BAX GLOBAL 328,000 76,269 31,824 31-OCT-97 $13.59m $15.10m $15.65m $17.16m
112 DC8-71F(M) CFM56-2C1 45813 N822BX 67 A T INTL/BAX GLOBAL 328,000 78,721 32,345 31-Oct-97 $14.97m $15.00m $17.03m $17.06m
113 DC8-71F(M) CFM56-2C1 45849 HK-3786X 67 TAMPA 328,000 81,971 32,278 31-Oct-97 $15.94m $15.10m $18.00m $17.16m
114 DC8-71F(M) CFM56-2C1 45941 N8076U 67 EMERY WORLDWIDE 328,000 76,003 30,886 31-Oct-97 $15.09m $15.10m $17.15m $17.16m
115 DC8-71F(M) CFM56-2C1 45945 EC-FVA 68 OFF LEASE 328,000 77,992 31,985 31-Oct-97 $14.53m $15.10m $16.59m $17.16m
116 DC8-71F(M) CFM56-2C1 45946 N824BX 68 A T INTL/BAX GLOBAL 328,000 74,801 31,031 31-Oct-97 $14.85m $15.10m $16.91m $17.16m
117 DC8-71F(M) CFM56-2C1 45947 N8079U 68 EMERY WORLDWIDE 325,000 80,760 31,599 31-Oct-97 $14.39m $15.00m $16.45m $17.06m
118 DC8-71F(M) CFM56-2C1 45970 CC-CAX 68 FAST AIR CHILE 328,000 85,181 32,238 31-Oct-97 $14.82m $15.10m $16.88m $17.16m
119 DC8-71F(M) CFM56-2C1 45971 N827BX 68 A T INTL/BAX GLOBAL 328,000 76,356 31,287 31-Oct-97 $15.95m $15.10m $18.01m $17.16m
120 DC8-71F(M) CFM56-2C1 45973 N830BX 68 A T INTL/BAX GLOBAL 328,000 66,629 25,679 31-Oct-97 $15.03m $15.10m $17.09m $17.16m
121 DC8-71F(M) CFM56-2C1 45975 N8085U 68 EMERY WORLDWIDE 328,000 68,866 25,165 31-Oct-97 $15.11m $15.10m $17.17m $17.16m
122 DC8-71F(M) CFM56-2C1 45976 CC-CAR 68 FAST AIR CHILE 328,000 76,281 26,623 31-Oct-97 $15.69m $15.10m $17.75m $17.16m
123 DC8-71F(M) CFM56-2C1 45977 N8087U 68 EMERY WORLDWIDE 328,000 71,892 26,314 31-Oct-97 $15.87m $15.10m $17.94m $17.16m
124 DC8-71F(M) CFM56-2C1 45978 N825BX 68 A T INTL/BAX GLOBAL 328,000 76,035 29,400 31-Oct-97 $15.34m $15.10m $17.40m $17.16m
125 DC8-71F(M) CFM56-2C1 45983 N8177U 68 EMERY WORLDWIDE 325,000 63,390 40,456 31-Oct-97 $14.48m $15.00m $16.55m $17.06m
126 DC8-71F(M) CFM56-2C1 45993 N828BX 68 A T INTL/BAX GLOBAL 328,000 72,746 29,512 31-Oct-97 $15.37m $15.10m $17.44m $17.16m
127 DC8-71F(M) CFM56-2C1 45994 N829BX 68 A T INTL/BAX GLOBAL 325,000 78,523 30,877 31-Oct-97 $14.63m $15.00m $16.69m $17.06m
128 DC8-71F(M) CFM56-2C1 45996 CC-CDS 68 FAST AIR CHILE 328,000 65,767 30,523 31-Oct-97 $16.80m $15.10m $18.86m $17.16m
129 DC8-71F(M) CFM56-2C1 45997 CC-CDU 68 FAST AIR CHILE 328,000 81,815 29,071 31-Oct-97 $14.70m $15.10m $16.77m $17.16m
130 DC8-71F(M) CFM56-2C1 45998 N826BX 68 A T INTL/BAX GLOBAL 328,000 77,947 30,870 31-Oct-97 $14.23m $15.10m $16.29m $17.16m
131 DC8-71F(M) CFM56-2C1 46039 N801GP 69 EMERY WORLDWIDE 328,000 74,583 28,655 31-Oct-97 $15.45m $15.10m $17.52m $17.16m
132 DC8-71F(M) CFM56-2C1 46065 N820BX 69 A T INTL/BAX GLOBAL 328,000 74,426 30,943 31-Oct-97 $15.94m $15.10m $18.00m $17.16m
133 DC8-71F(M) CFM56-2C1 46066 HK-3785X 69 TAMPA 328,000 74,389 30,262 31-Oct-97 $15.30m $15.10m $17.36m $17.16m
134 DC8-73F(M) CFM56-2C1 46091 N873SJ 70 SAT 355,000 78,856 19,968 31-Oct-97 $18.65m $18.50m $19.77m $19.52m
135 DC9-14 JT8D-7B 45736 XA-LMM 66 AEROCALIFORNIA 90,700 78,843 77,038 31-Oct-97 $0.57m $0.70m $0.61m $0.74m
136 DC9-14 JT8D-7B 45786 XA-AGS 67 AEROCALIFORNIA 90,700 78,237 74,616 31-Oct-97 $0.59m $0.70m $0.63m $0.74m
137 DC9-15 JT8D-7B 45743 XA-CSL 66 AEROCALIFORNIA 90,700 84,151 87,735 31-Oct-97 $0.42m $0.70m $0.46m $0.74m
138 DC9-15 JT8D-7A 45785 XA-RRY 66 AEROCALIFORNIA 90,700 82,090 84,031 31-Oct-97 $0.48m $0.70m $0.52m $0.74m
139 DC9-15 JT8D-7A 47059 XA-RNQ 67 AEROCALIFORNIA 90,700 83,746 86,327 31-Oct-97 $0.44m $0.70m $0.47m $0.74m
140 DC9-15 JT8D-7A 47085 XA-GDL 67 AEROCALIFORNIA 90,700 83,630 86,430 31-Oct-97 $0.44m $0.70m $0.47m $0.74m
141 DC9-15 JT8D-7A 47122 XA-RKT 67 AEROCALIFORNIA 90,700 87,232 90,806 31-Oct-97 $0.34m $0.70m $0.37m $0.74m
142 DC9-15 JT8D-7A 47126 XA-LAC 68 AEROCALIFORNIA 90,700 82,463 85,021 31-Oct-97 $0.47m $0.70m $0.51m $0.74m
</TABLE>
97454/AIRP0198/BV/CMV 20/01/1998
<PAGE> 10
[LOGO]
AIRCLAIMS LTD
BASE & CURRENT MARKET VALUES OF THE AIRPLANES GROUP PORTFOLIO
SPECIFICATION/VALUES AS AT 23RD JANUARY 1998
<TABLE>
<CAPTION>
MARKET VALUES BASE VALUES
AIRFRAME ------------- -----------
BUILD MTOW -------------- ADJ H-L ADJ H-L
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT CMV CMV BV BV
---- ---- --- ---- ----- -------- ---- ----- ------ ----- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
143 DC9-32 JT8D-17 48125 XA-AMA 80 AEROMEXICO 108,000 49,785 48,462 31-Oct-97 $4.65m $4.90m $3.40m $3.65m
144 DC9-32 JT8D-17 48126 XA-AMB 80 AEROMEXICO 108,000 49,593 47,528 31-Oct-97 $4.87m $4.90m $3.62m $3.65m
145 DC9-32 JT8D-17 48127 XA-AMC 80 AEROMEXICO 108,000 48,548 46,492 31-Oct-97 $4.43m $4.90m $3.18m $3.65m
146 DC9-32 JT8D-17 48128 XA-AMD 80 AEROMEXICO 108,000 48,734 47,235 31-Oct-97 $4.46m $4.90m $3.22m $3.65m
147 DC9-32 JT8D-17 48129 XA-AME 80 AEROMEXICO 108,000 47,912 46,139 31-Oct-97 $4.55m $4.90m $3.30m $3.65m
148 DC9-32 JT8D-17 48130 XA-AMF 80 AEROMEXICO 108,000 46,682 44,329 31-Oct-97 $5.04m $4.90m $3.79m $3.65m
149 DC9-51 JT8D-17 47742 N662HA 77 HAWAIIAN 121,000 31,664 53,699 31-Oct-97 $3.52m $3.60m $2.64m $2.91m
150 DC9-51 JT8D-17 47784 N603DC 79 HAWAIIAN 121,000 35,759 53,371 31-Oct-97 $4.19m $4.20m $3.16m $3.17m
151 DC9-51 JT8D-17 47796 N661HA 79 HAWAIIAN 121,000 33,697 55,554 31-Oct-97 $3.92m $4.20m $2.89m $3.17m
152 DC9-51 JT8D-17 48122 N660HA 81 HAWAIIAN 121,000 28,967 50,840 31-Oct-97 $4.40m $4.60m $3.27m $3.48m
153 DHC-8-100 PW120A 113 V2-LDQ Jul-88 LIAT 34,500 18,874 31,972 03-Jul-97 $4.96m $5.10m $5.14m $5.28m
154 DHC-8-100 PW120A 140 V2-LDP Jan-89 LIAT 34,500 17,761 31,863 06-Jul-97 $5.32m $5.45m $5.51m $5.63m
155 DHC-8-100 PW120A 144 V2-LEF Mar-89 LIAT 33,900 11,604 9,924 07-Dec-94 $5.42m $5.55m $5.60m $5.73m
156 DHC-8-100 PW120A 229 VH-LAR Aug-90 NATIONAL JET
SYSTEMS 34,500 5,019 4,147 31-Mar-96 $6.29m $6.40m $6.53m $6.64m
157 DHC-8-100 PW121 258 EI-CHP Jan-91 USAIR EXPRESS 34,500 15,710 16,530 13-May-97 $6.36m $6.35m $6.61m $6.60m
158 DHC-8-100 PW120A 270 V2-LDU Apr-91 LIAT 34,500 14,276 26,433 06-Jul-97 $6.36m $6.45m $6.61m $6.70m
159 DHC-8-300 PW123 232 PH-SDU Oct-90 SCHREINER
AIRWAYS 41,100 11,125 9,878 07-Feb-97 $7.27m $7.10m $8.16m $8.01m
160 DHC-8-300 PW123 244 YR-GPV Dec-90 DAC AIR 41,100 10,820 9,895 31-Dec-96 $7.14m $7.10m $8.05m $8.01m
161 DHC-8-300 PW123 266 YR-GPX Mar-91 DAC AIR 43,000 11,274 10,275 31-Dec-96 $7.73m $7.70m $8.51m $8.47m
162 DHC-8-300 PW123 267 YR-GPW Apr-91 DAC AIR 43,000 10,810 9,733 31-Dec-96 $7.79m $7.70m $8.56m $8.47m
163 DHC-8-300 PW123 276 PH-SDT May-91 SCHREINER
AIRWAYS 43,000 10,203 9,638 10-Feb-97 $7.61m $7.70m $8.58m $8.47m
164 DHC-8-300 PW123 283 PH-SDR Jun-91 SCHREINER
AIRWAYS 43,000 5,688 5,698 31-Dec-95 $7.75m $7.75m $8.52m $8.52m
165 DHC-8-300 PW123 293 LN-WFB Sep-91 IDEROE'S
FLYVESELSKAP 43,000 4,806 5,365 30-Nov-96 $7.90m $7.85m $8.67m $8.62m
166 DHC-8-300 PW123 296 G-BRYS Dec-91 BRYMON AIRWAYS 43,000 12,484 10,069 24-Apr-97 $8.41m $8.23m $9.18m $9.00m
167 DHC-8-300 PW123 298 PH-SDM Mar-92 SCHREINER
AIRWAYS 43,000 7,728 8,316 12-Feb-97 $8.29m $8.40m $8.92m $9.03m
168 DHC-8-300 PW123 300 PH-SDP Mar-92 SCHREINER
AIRWAYS 43,000 5,673 6,408 12-Feb-97 $8.41m $8.40m $9.04m $9.03m
169 DHC-8-300 PW123 307 OE-LRW Oct-91 RHEINTALFLUG 43,000 7,319 6,281 05-May-97 $7.90m $7.65m $8.67m $8.42m
170 DHC-8-300 PW123 334 G-BRYT Sep-92 BRYMON AIRWAYS 43,000 10,356 8,624 03-Mar-97 $6.84m $8.80m $9.47m $9.43m
171 DHC-8-300 PW123 342 LN-WFA Dec-92 IDEROE'S
FLYVESELSKAP 43,000 5,432 5,291 11-Mar-97 $8.99m $8.93m $9.62m $9.56m
172 DHC-8-300C PW123 230 PJ-DHI Sep-90 ALM ANTILLEAN 43,000 6,717 5,804 30-Jun-96 $7.57m $7.55m $8.26m $8.24m
173 DHC-8-300C PW123 242 PJ-DHE Sep-90 ALM ANTILLEAN 43,000 7,347 6,578 23-Dec-96 $7.52m $7.55m $8.21m $8.24m
</TABLE>
97454/AIRP0198/BV/CMV 20/01/1998
<PAGE> 11
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AIRCLAIMS LTD
BASE & CURRENT MARKET VALUES OF THE AIRPLANES GROUP PORTFOLIO
SPECIFICATION/VALUES AS AT 23RD JANUARY 1998
<TABLE>
<CAPTION>
MARKET VALUES BASE VALUES
AIRFRAME --------------- ---------------
BUILD MTOW -------------- ADJ H-L ADJ H-L
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT CMV CMV BV BV
---- ---- --- ---- ----- -------- ---- ----- ------ ----- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
174 FOKKER 100 TAY650 11266 PK-JGD Aug-90 SEMPATI 98,000 21,153 15,922 31-Dec-96 $15.15m $15.37m $15.99m $16.22m
175 FOKKER 100 TAY650 11284 PT-MRA Aug-90 TAM 98,000 14,358 15,515 31-Dec-96 $15.60m $15.37m $16.45m $16.22m
176 FOKKER 100 TAY650 11285 PT-MRB Aug-90 TAM 98,000 14,349 15,707 31-Dec-96 $15.61m $15.37m $16.45m $16.22m
177 FOKKER 100 TAY650 11304 PT-MRG Feb-91 TAM 98,000 10,060 10,781 31-Dec-96 $15.69m $15.72m $16.46m $16.49m
178 FOKKER 100 TAY650 11305 PT-MRH Mar-91 TAM 98,000 10,402 11,062 31-Dec-96 $15.77m $15.82m $16.55m $16.59m
179 FOKKER 100 TAY650 11309 XA-SHI Apr-91 MEXICANA 98,000 8,729 8,797 31-Dec-96 $15.74m $16.02m $16.51m $16.79m
180 FOKKER 100 TAY650 11319 XA-SHJ Mar-91 MEXICANA 98,000 8,589 8,570 31-Dec-96 $15.58m $15.92m $16.35m $16.69m
181 FOKKER 100 TAY650 11336 PK-JGG May-91 SEMPATI 98,000 16,647 13,051 31-Dec-96 $16.22m $15.82m $16.99m $16.59m
182 FOKKER 100 TAY650 11339 PK-JGH Jun-91 SEMPATI 98,000 16,732 12,424 31-Oct-96 $16.39m $15.92m $17.17m $16.69m
183 FOKKER 100 TAY650 11347 PK-JGF Jul-91 SEMPATI 98,000 17,498 13,394 31-Oct-96 $16.71m $15.92m $16.48m $16.69m
184 FOKKER 100 TAY650 11348 PT-MRE Jul-91 TAM 98,000 10,795 11,943 31-Dec-96 $16.11m $15.92m $16.88m $16.69m
185 FOKKER 100 TAY650 11371 PT-MQC Dec-91 TAM 98,000 9,724 10,892 10-May-97 $17.12m $16.42m $17.89m $17.19m
186 FOKKER 100 TAY650 11374 XA-TCG Jan-92 MEXICANA 98,000 9,765 9,936 31-Dec-96 $16.59m $17.07m $17.04m $17.52m
187 FOKKER 100 TAY650 11375 XA-TCH Mar-92 MEXICANA 98,000 9,634 9,685 31-Dec-96 $16.72m $17.17m $17.16m $17.62m
188 FOKKER 100 TAY650 11382 XA-SGE Mar-92 MEXICANA 98,000 9,532 9,622 31-Dec-96 $16.72m $17.17m $17.17m $17.62m
189 FOKKER 100 TAY650 11384 XA-SGF Mar-92 MEXICANA 98,000 9,484 9,478 31-Dec-96 $16.89m $17.17m $17.33m $17.62m
190 MD-11 CF6-80C2D1F 48499 PP-VPN Nov-91 VARIG 618,000 22,875 5,436 31-Oct-97 $66.78m $66.25m $68.95m $68.42m
191 MD-11 CF6-80C2D1F 48500 PP-VPO Mar-92 VARIG 618,000 21,523 4,839 31-Oct-97 $68.74m $68.25m $70.87m $70.38m
192 MD-11 CF6-80C2D1F 48501 EI-CDK Aug-92 GARUDA 618,000 19,481 4,271 31-Oct-97 $69.65m $68.75m $71.79m $70.88m
</TABLE>
97454/AIRP0198/BV/CMV 20/01/1998
<PAGE> 12
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AIRCLAIMS LTD
BASE & CURRENT MARKET VALUES OF THE AIRPLANES GROUP PORTFOLIO
SPECIFICATION/VALUES AS AT 23RD JANUARY 1998
<TABLE>
<CAPTION>
AIRFRAME
BUILD MTOW --------------
TYPE ENG. MSN REGN DATE OPERATOR (LB) HOURS CYCLES AS AT
---- ---- --- ---- ----- -------- ---- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
193 MD82 JT8D-217C 49660 EI-BTX Feb-88 AEROMEXICO 149,500 23,788 18,251 31-Oct-97
194 MD83 JT8D-219 49390 EI-CMZ Mar-86 EUROFLY 160,000 26,070 16,945 31-Oct-97
195 MD83 JT8D-219 49442 EI-CBO Mar-87 NOUVELAIR TUNISIE 160,000 26,369 13,600 31-Oct-97
196 MD83 JT8D-219 49575 EI-BWD Sep-87 TWA 160,000 25,819 15,129 31-Oct-97
197 MD83 JT8D-219 49620 D-ALLV Jun-88 AERO LLYOD 160,000 23,212 10,555 31-Oct-97
198 MD83 JT8D-219 49624 EI-CGI Jul-88 NOUVELAIR TUNISIE 160,000 24,613 12,442 31-Oct-97
199 MD83 JT8D-219 49626 EC-GBA Oct-88 SPANAIR 160,000 26,505 14,177 31-Oct-97
200 MD83 JT8D-219 49631 EI-CEK MAY-89 EUROFLY 160,000 22,772 10,389 31-Oct-97
201 MD83 JT8D-217C 49667 EI-BTY Apr-88 AEROMEXICO 149,500 24,256 18,578 31-Oct-97
202 MD83 JT8D-219 49672 EI-CNO Jun-88 NOUVELAIR TUNISIE 160,000 29,456 14,427 31-Oct-97
203 MD83 JT8D-219 49709 EC-GAT Nov-88 SPANAIR 160,000 19,903 12,304 31-Oct-97
204 MD83 JT8D-219 49789 9Y-THX Sep-89 BWIA 160,000 19,013 14,351 31-Oct-97
205 MD83 JT8D-219 49792 TC-INA Oct-89 OFF LEASE 160,000 22,910 8,209 31-Oct-97
206 MD83 JT8D-219 49935 HB-IKM Sep-90 EDELWEISS AIR 160,000 26,891 9,926 31-Oct-97
207 MD83 JT8D-219 49936 TC-INB Oct-90 OFF LEASE 160,000 27,926 9,096 31-Oct-97
208 MD83 JT8D-219 49938 EC-FXA Oct-90 SPANAIR 160,000 18,566 10,937 31-Oct-97
209 MD83 JT8D-219 49939 EI-CBR Oct-90 AVIANCA 160,000 10,427 13,831 31-Oct-97
210 MD83 JT8D-219 49941 N881RA Nov-90 RENO AIR 160,000 25,326 10,829 31-Oct-97
211 MD83 JT8D-219 49943 TC-INC Jul-91 OFF LEASE 160,000 18,054 5,936 31-Oct-97
212 MD83 JT8D-219 49946 EI-CCC Sep-91 AVIANCA 160,000 11,683 14,592 31-Oct-97
213 MD83 JT8D-219 49949 N882RA Sep-91 RENO AIR 160,000 21,990 9,427 31-Oct-97
214 MD83 JT8D-219 49950 P4-MDE Oct-91 AIR ARUBA 160,000 14,272 6,360 31-Oct-97
215 MD83 JT8D-219 49951 HB-IKN Oct-91 EDELWEISS AIR 160,000 22,406 8,225 31-Oct-97
216 MD83 JT8D-219 53120 EI-CFZ Jun-92 AVIANCA 160,000 10,815 13,903 31-Oct-97
217 MD83 JT8D-219 53125 EI-CER May-92 AVIANCA 160,000 11,658 11,158 31-Oct-97
218 MD87 JT8D-219 49673 XA-SFO Nov-88 AEROMEXICO 149,500 20,503 12,870 31-Oct-97
219 METRO III TPE331- 705 ZK-NSU Aug-88 AIR NELSON 14,500 12,846 21,415 24-Feb-97
11U-621G
220 METRO III TPE331- 711 ZK-NSY May-88 AIR NELSON 14,500 12,648 21,034 24-Feb-97
11U-621G
221 METRO III TPE331- 712 ZK-NSZ Jun-88 AIR NELSON 14,500 12,487 21,024 24-Feb-97
11U-621G
</TABLE>
<TABLE>
MARKET VALUES BASE VALUES
------------------ ------------------
ADJ H-L ADJ H-L
CMV CMV BV BV
--- --- --- ---
<S> <C> <C> <C> <C>
193 $16.43m $17.10m $15.57m $16.24m
194 $18.16m $17.65m $16.80m $16.28m
195 $18.22m $17.25m $17.06m $16.09m
196 $17.55m $18.25m $16.40m $17.09m
197 $17.22m $18.05m $16.18m $17.01m
198 $16.67m $17.85m $15.63m $16.81m
199 $16.72m $17.85m $15.68m $16.81m
200 $18.58m $18.65m $17.50m $17.58m
201 $17.80m $18.55m $16.75m $17.51m
202 $18.53m $17.85m $17.48m $16.81m
203 $17.95m $18.05m $16.86m $16.96m
204 $19.43m $19.65m $18.36m $18.58m
205 $19.03m $19.65m $17.96m $18.58m
206 $20.02m $20.75m $19.01m $19.75m
207 $19.86m $20.75m $18.86m $19.75m
208 $20.29m $20.75m $19.29m $19.75m
209 $20.66m $20.75m $19.66m $19.75m
210 $20.10m $20.75m $19.10m $19.75m
211 $21.40m $21.60m $20.52m $20.72m
212 $21.06m $21.60m $20.17m $20.72m
213 $20.80m $21.60m $19.92m $20.72m
214 $21.54m $21.60m $20.66m $20.72m
215 $20.95m $21.60m $20.07m $20.72m
216 $22.58m $22.15m $21.42m $20.99m
217 $22.15m $22.60m $21.29m $21.74m
218 $11.96m $12.20m $12.13m $12.37m
219 $0.90m $0.90m $0.93m $0.93m
220 $0.93m $0.90m $0.96m $0.93m
221 $0.85m $0.90m $0.88m $0.93m
---------- ---------- ---------- ----------
$3,739.49m $3,772.22m $3,648.32m $3,681.05m
========== ========== ========== ==========
</TABLE>
97454/AIRP0198/BV/CMV 20/01/1998
