MORGAN STANLEY AIRCRAFT FINANCE
Report to Noteholders
All amounts in US dollars unless otherwise stated
Month July-00
Payment Date 15th of each month
Convention Modified Following Business Day
Current Payment Date 17-Jul-00
Current Calculation Date 11-Jul-00
Previous Payment Date 15-Jun-00
Previous Calculation Date 9-Jun-00
--------------------------------------------------------------------------------
1. Account Activity Summary between Calculation Dates
<TABLE>
---------------------------------------------------------------------------------------------
Prior Deposits Withdrawals Balance on
Balance Calculation Date
9-Jun-00 11-Jul-00
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expense Account 710,383.71 2,836,208.40 (2,855,468.55) 691,123.56
Collection Account 22,851,183.05 25,845,541.43 (23,302,875.80) 25,393,848.68
Aircraft Purchase Account - - - -
Liquidity Reserve cash
balance 41,785,203.00 5,000,000.00 - 46,785,203.00
---------------------------------------------------------------------------------------------
Total 65,346,769.76 33,681,749.83 (26,158,344.35) 72,870,175.24
---------------------------------------------------------------------------------------------
2. Analysis of Expenses Account Activity
---------------------------------------------------------------------------------------------
Opening Balance on Previous Calculation Date 710,383.71
Transfer from Collection Account on previous Payment Date 2,827,476.50
Permitted Aircraft Accrual -
Interim Transfer from Collection Account -
Transfers from Aircraft Purchase Account -
Interest Income 8,731.90
Balance on current Calculation Date
- Payments on previous payment date (827,476.50)
- Interim payments (2,039,959.05)
- Other 11,967.00
---------------------------------------------------------------------------------------------
Balance on current Calculation Date 691,123.56
---------------------------------------------------------------------------------------------
3. Analysis of Collection Account Activity
---------------------------------------------------------------------------------------------
Opening Balance on Previous Calculation Date 22,851,183.05
Collections during period
- Lease rentals 18,923,579.67
- Maintenance reserves 2,395,436.47
- Other leasing income 4,218,917.75
- Interest income 307,607.54
- Lease rental received in error (451,692.75)
- Interim transfer to Expense A/C
Transfers from Aircraft Purchase Account
Drawings under Credit or Liquidity Enhancement Facilities -
Repayment of Drawings under Credit or Liquidity Enhancement Facilities -
Transfer to Expense Account on previous Payment Date
- Required Expense Amount (2,827,476.50)
- Permitted Aircraft Modifications -
Net Swap payments on previous Payment Date (101,180.56)
---------------------------------------------------------------------------------------------
Aggregate Note Payments on previous Payment Date (19,922,525.99)
---------------------------------------------------------------------------------------------
Balance on current Calculation Date 25,393,848.68
Analysis of Liquidity Reserve Amount
First Collection Account Reserve 30,000,000.00
Cash Held
- Accrued Expenses 691,123.56
- Security Deposits 16,785,203.00 17,476,326.56
Morgan Stanley Facility 30,000,000.00
ILFC Facility
- Letter of Credit 20,000,000.00
-----------------
-Security Deposits 22,229,539.00 42,229,539.00
-----------------
Liquidity Reserve Amount 119,705,865.56
Minimum Liquidity Reserve Amount 30000000
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
REPORT TO NOTEHOLDERS
All amounts in US dollars unless otherwise noted
Current Payment Date 17-Jul-00
Current Calculation Date 11-Jul-00
Previous Payment Date 15-Jun-00
Previous Calculation Date 9-Jun-00
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Balance in Collection Account 25,393,848.68
Liquidity Reserve Amount 119,705,865.56
------------------
Available Collections 145,099,714.24
==================
3. Analysis of Collection Account Activity (Continued)
----------------------------------------------------------------------------------------------------------------
Analysis of Current Payment Date Distributions
(I) Required Expense Amount
- Servicer Fee 683,644.70
- Administration Agent Fee 111,152.24
- Other Service Providers 12,500.01
- Accrued Expenses 2,500,000.00
------------------
Total Required Expense Amount 3,307,296.95
(II) a) Class A Interest but excluding Step-up 8,805,354.94
b) Swap Payments other than subordinated swap payments 218,266.67
(iii) a) Repayment of Primary Eligible Credit Facilities -
b) First Collection Account top-up (Minimum liquidity reserve $30 m) 30,000,000.00
(iv) Class A Minimum principal payment -
(v) Class B Interest 1,084,676.21
(vi) Class B Minimum principal payment 417,503.66
(vii) Class C Interest 1,013,390.00
(viii) Class C Minimum principal payment -
(ix) Class D Interest 797,500.00
(x) Class D Minimum principal payment -
(xi) a) Secondary Eligible Credit Facilities (ILFC and Morgan Stanley Facilities) -
b) Second collection account top-up 89,705,865.56
(xii) Class A Scheduled principal -
(xiii) Class B Scheduled principal 146,298.07
(xiv) Class C Scheduled principal 70,000.00
(xv) Class D Scheduled principal -
(xvi) Permitted accruals for Modifications
(xvii) Step-up interest -
(xviii) Beneficial interest -
(xix) Class A Supplemental principal 9,533,562.17
(xx) Class B Supplemental principal -
(xxi) Class D Redemption Price -
(xxii) Class C Redemption Price -
(xxiii) Class B Redemption Price -
(xxiv) Class A Redemption Price -
(xxv) Subordinated Swap payments -
(xxvi) all remaining amounts to holders of Beneficial interests
Total Payments with respect to Payment Date 145,099,714.24
less collection Account Top Ups (iii) (b) and (xi) (b) above 119,705,865.56
------------------
25,393,848.68
==================
</TABLE>
Page 2 of 4
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
Report to Noteholders
All amounts in US dollars unless otherwise stated
Current Payment Date 17-Jul-00
Current Calculation Date 11-Jul-00
Previous Payment Date 15-Jun-00
Previous Calculation Date 9-Jun-00
--------------------------------------------------------------------------------
4. Payments on the Notes by Subclass
<TABLE>
--------------------------------------------------------------------------------------------------------------------
Subclass Subclass Subclass Subclass Total
Floating Rate Notes A-2 A-3 A-4 A-5 Class A
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Applicable LIBOR 6.65125% 6.65125% 6.65125% 6.65125%
Applicable Margin 0.3500% 0.5200% 0.5400% 0.5800%
Applicable Interest Rate 7.00125% 7.17125% 7.19125% 7.23125%
Day Count Act/360 Act/360 Act/360 Act/360
Actual Number of Days 32 32 32 32
Interest Amount Payable 1,384,536.55 3,697,177.78 1,278,444.44 2,445,196.17
Step-up Interest Amount Payable NA NA NA NA
--------------------------------------------------------------------------------------------------------------------
Total Interest Paid 1,384,536.55 3,697,177.78 1,278,444.44 2,445,196.17 8,805,354.94
Expected Final Payment Date 15-Sep-05 15-Mar-02 15-Mar-03 15-Jun-08
Excess Amortisation Date 15-Apr-98 15-Mar-02 15-Mar-03 15-Apr-00
--------------------------------------------------------------------------------------------------------------------
Original Balance 340,000,000.00 580,000,0002.00 200,000,000.00 400,000,000.00
Opening Outstanding Principal
Balance 222,475,075.00 580,000,0002.00 200,000,000.00 380,410,812.85 1,382,885,888.14
--------------------------------------------------------------------------------------------------------------------
Extended Pool Factors 79.61% 100.00% 100.00% 100.00%
Pool Factors 70.05% 100.00% 100.00% 94.89%
--------------------------------------------------------------------------------------------------
Extension Amount - - - -
Pool Factor Amount - - - 850,812.85
Surplus Amortisation 3,208,609.25 - - 5,474,140.08
--------------------------------------------------------------------------------------------------------------------
Total Principal Distribution Amount 3,208,609.25 - - 6,324,952.93 9,533,562.18
-------------------------------------------------------------------------------------------------------------------
Redemption Amount
- amount allocable to principal
- amount allocable to premium
--------------------------------------------------------------------------------------------------------------------
Closing Outstanding Principal
Balance 219,266,466.04 580,000,000.00 200,000,000.00 374,085,859.92 1,373,352,325.96
--------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Subclass Subclass Total
Floating Rate Notes B-1 B-2 Class B
---------------------------------------------------------------------------------
Applicable LIBOR 6.6513% 6.6513%
Applicable Margin 0.6500% 1.0500%
Applicable Interest Rate 7.30125% 7.70125%
Day Count Act/360 Act/360
Actual Number of Days 32 32
Interest Amount Payable 571,259.55 513,416.67
Step-up Interest Amount Payable NA NA
---------------------------------------------------------------------------------
Total Interest Paid 571,259.55 513,416.67 1,084,676.21
---------------------------------------------------------------------------------
Expected Final Payment Date 15-Mar-13 15-Mar-07
Excess Amortisation Date 15-Apr-98 15-Mar-07
---------------------------------------------------------------------------------
Original Balance 100,000,000.00 75,000,000.00
Opening Outstanding Principal
Balance 88,021,501.65 75,000,000.00 163,021,501.65
---------------------------------------------------------------------------------
Extended Pool Factors 94.77% 100.00%
Pool Factors 90.76% 100.00%
---------------------------------------------------------------------------------
Extension Amount - -
Pool Factor Amount - -
Surplus Amortisation 563,801.73 -
---------------------------------------------------------------------------------
Total Principal Distribution Amount 563,801.73 - 563,801.73
---------------------------------------------------------------------------------
Redemption Amount
- amount allocable to principal
- amount allocable to premium
---------------------------------------------------------------------------------
Closing Outstanding Principal
Balance 87,457,699.92 75,000,000.00 162,457,699.92
---------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
Subclass Subclass Total Subclass
Fixed Rate Notes C-1 C-2 Class C D-1
--------------------------------------------------------------------------------------------------
Applicable Interest Rate 6.90000% 9.60000% 8.70000%
Day count 30 / 360 30 / 360 30 / 360
Number of Days 30 30 30
Interest Amount Payable 573,390.00 440,000.00 797,500.00
--------------------------------------------------------------------------------------------------
Total Interest Paid 573,390.00 440,000.00 1,013,390.00 797,500.00
--------------------------------------------------------------------------------------------------
Expected Final Payment Date 15-Mar-13 15-Oct-16 15-Mar-14
Excess Amortisation Date 15-Mar-13 15-Oct-16 15-Mar-10
Original Balance 100,000,000.00 55,000,000.00 110,000,000.00
Opening Outstanding Principal
Balance 99,720,000.00 55,000,000.00 154,720,000.00 110,000,000.00
--------------------------------------------------------------------------------------------------
Extended Pool Factors 100.00% 100.00% 100.00%
Expected Pool Factors 99.65% 100.00% 100.00%
--------------------------------------------------------------------------------------------------
Extended Amount - - -
Expected Pool Factor Amount 70,000.00 - -
Surplus Amortisation - -
--------------------------------------------------------------------------------------------------
Total Principal Distribution Amount 70,000.00 - 70,000.00 -
--------------------------------------------------------------------------------------------------
Redemption Amount - - -
- amount allocable to principal - - -
- amount allocable to premium - - -
--------------------------------------------------------------------------------------------------
Closing Outstanding Principal
Balance 99,650,000.00 55,000,000.00 154,650,000.00 110,000,000.00
--------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 4
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
Report to Noteholders
Amounts in US Dollars unless otherwise stated
Current Payment Date 17-Jul-00
Current Calculation Date 11-Jul-00
Previous Payment Date 15-Jun-00
Previous Calculation Date 9-Jun-00
--------------------------------------------------------------------------------
<TABLE>
5. Floating Rate Note information for next Interest Accrual Period
Start of Interest Accrual Period 17-Jul-00
End of Interest Accrual Period 15-Aug-00
Reference Date 11-Aug-00
----------------------------------------------------------------------------------------------------------------------------
A-2 A-3 A-4 A-5 B-1 B-2
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Applicable LIBOR 6.62625% 6.62625% 6.62625% 6.62625% 6.62625% 6.62625%
Applicable Margin 0.3500% 0.5200% 0.5400% 0.5800% 0.6500% 1.0500%
Applicable Interest Rate 6.9763% 7.1463% 7.1663% 7.2063% 7.2763% 7.6763%
Actual Pool Factor 64.49% 100.00% 100.00% 93.52% 87.46% 100.00%
----------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Fixed Rate Notes C-1 C-2 D-1
------------------------------------------------------------------------------------
Actual Pool Factor 99.65% 100.00% 100.00%
------------------------------------------------------------------------------------
6. Payments per $ 100,000 Inital Outstanding Principal Balance of Notes
----------------------------------------------------------------------------------------------------------------------------
(a) Floating Rate Notes A-2 A-3 A-4 A-5 B-1 B-2
----------------------------------------------------------------------------------------------------------------------------
Opening Outstanding Principal Balance 65,433.85 100,000.00 100,000.00 95,102.70 88,021.50 100,000.00
Total Principal Payments 943.71 - - 1,581.24 563.80 -
Closing Outstanding Principal Balance 64,490.14 100,000.00 100,000.00 93,521.46 87,457.70 100,000.00
Total Interest 407.22 637.44 639.22 611.30 571.26 684.56
Total Premium 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% 0.0000%
----------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
(b) Fixed Rate Notes C-1 C-2 D-1
------------------------------------------------------------------------------------
Opening Outstanding Principal Balance 99,720.00 100,000.00 100,000.00
Total Principal Payments 70.00 - -
Closing Outstanding Principal Balance 99,650.00 100,000.00 100,000.00
Total Interest 573.39 800.00 725.00
Total Premium - - -
</TABLE>
Page 4 of 4
<PAGE>
<TABLE>
Cumulative Performance to Date - March 15, 2000 to June 15, 2000 MORGAN STANLEY AIRCRAFT FINANCE
All amounts in millions
of US dolars
----------------------------------------------------------------------------------------------------------------------
unless otherwise stated
Mar-00 Apr-00 May-00 Jun-00 Jul-00 Cummlative to Date
Actual Basecase Variance
----------------------------------------------------------------------------------------------------------------------
CASH COLLECTIONS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
[1] Lease Rentals 26.3 18.2 22.7 16.9 84.1 84.1 -
[2] - Renegotiated Leases - - -
[3] - Rental Resets (0.1) 0.0 0.0 (0.1) - (0.1)
-----------------------------------------------------------
[4] Sum of [1].[3] Contracted Lease Rentals 26.3 18.1 22.7 17.0 84.1 84.1 (0.1)
-
[5] Movement in Current Arrears Balance (1.7) (0.5) (0.5) 2.1 (0.6) - (0.6)
less Net Stress-related Costs
[6] - Bad Debts - - - - - - -
[7] - Security Deposits Drawn Down - - - - - -
[8] - Restructured Arrears - - - - - -
[9] - AOG (0.4) (0.3) (0.8) (0.5) (2.1) (2.1)
[10] - Other Leasing Income - (0.6) 0.7 4.2 4.4 4.4
[11] - Repossession Costs - (0.1) (0.1) (0.1) (0.3) (0.3)
-----------------------------------------------------------
[12] Sum of [6].[11] sub-total (0.4) (1.0) (0.2) 3.6 2.1 (3.8) 5.8
-
[13] [4]+[5]+[12] Net2Lease Rentals 24.2 16.6 22.1 22.7 85.5 80.4 5.2
[14] Interest Earned 0.2 0.3 0.3 0.3 1.2 0.8 0.4
[15] Drawings from Expense Account 2.0 2.0 - 2.0
Maintenance Receipts 1.9 2.1 2.4 2.3 8.7 - 8.7
Maintenance Payments (0.1) (5.2) (3.4) (2.0) (10.7) - (10.7)
-----------------------------------------------------------
[16] Net Maintenance 1.8 (3.1) (1.0) 0.3 (2.0) - (2.0)
[17] Sum of [13].[16] Total Cash Collections 26.3 13.8 21.3 25.4 86.8 81.1 5.7
----------------------------------------------------------------------------------------------------------------------
CASH EXPENSES
Aircraft Operating Expenses
[18] - Insurance (0.2) (0.1) (0.3)
[19] - Re-leasing and other overheads (0.1) (0.5) (0.6)
-----------------------------------------------------------
[20] [18]+[19] subtotal (0.3) (0.1) (0.5) - (0.9) (0.7) (0.2)
SG&A Expenses
[21] Aircraft Servicer Fees
- Base Fee (0.2) (0.2) (0.2) (0.2) (0.8)
- Rent Collected Fee (0.3) (0.2) (0.3) (0.3) (1.1)
- Rent Contracted Fee (0.2) (0.2) (0.2) (0.2) (0.8)
- Incentive Fee - - - -
-----------------------------------------------------------
sub-total (0.7) (0.6) (0.7) (0.7) (2.7) (2.9) (0.2)
[22] Other Servicer Fees (0.8) (0.1) (0.1) (0.1) (1.1) (0.7) (0.4)
-----------------------------------------------------------
[23] [21]+[22] subtotal (1.5) (0.7) (0.8) (0.8) (3.8) (3.5) (0.2)
[24] [20]+[23] Total Cash Expenses (1.8) (0.8) (1.3) (0.8) (4.6) (4.2) (0.4)
----------------------------------------------------------------------------------------------------------------------
NET CASH COLLECTIONS
[25] [17] Total Cash Collections 26.3 13.8 21.3 25.4 86.8 81.1 5.7
[26] [24] Total Cash Expenses (1.8) (0.8) (1.3) (0.8) (4.6) (4.2) (0.4)
[27] Accrued Expenses (2.5) (2.5) - (2.5)
[28] Interest Payments (11.3) (9.8) (11.3) (11.7) (44.1) (41.6) (2.5)
[29] Swap Payments (0.6) (0.8) (0.1) (0.2) (1.7) (3.5) 1.8
[30] Exceptional Item - - - - - -
-----------------------------------------------------------
[31] Sum of [25].[30] TOTAL 12.6 2.4 8.7 10.2 33.8 31.8 2.0
===========================================================
----------------------------------------------------------------------------------------------------------------------
[32] PRINCIPAL PAYMENTS -
subclass A2 1.1 0.1 1.0 3.2 5.4 5.7 (0.3)
subclass A3 - - - - - - -
subclass A4 - - - - - - -
subclass A5 10.9 1.6 7.1 6.3 25.9 23.7 2.2
subclass B1 0.6 0.6 0.6 0.6 2.4 2.3 0.1
subclass B2 - - - - - - -
subclass C1 - 0.1 0.1 0.1 0.194 0.230 (0.0)
subclass C2 - - - - - -
subclass D1 - - - - - - -
Total 12.6 2.4 8.7 10.2 33.8 31.8 2.0
===========================================================
----------------------------------------------------------------------------------------------------------------------
Debt Balances
subclass A2 224.7 223.6 223.5 222.5 219.3 219.3 219.0 0.3
subclass A3 580.0 580.0 580.0 580.0 580.0 580.0 580.0 -
subclass A4 200.0 200.0 200.0 200.0 200.0 200.0 200.0 -
subclass A5 400.0 389.1 387.5 380.4 374.1 374.1 376.3 (2.2)
subclass B1 89.7 89.1 88.5 87.9 87.4 87.4 87.5 (0.1)
subclass B2 75.0 75.0 75.0 75.0 75.0 75.0 75.0 -
subclass C1 99.9 99.9 99.8 99.8 99.7 99.7 99.6 0.0
subclass C2 55.0 55.0 55.0 55.0 55.0 55.0 55.0 -
subclass D1 110.0 110.0 110.0 110.0 110.0 110.0 110.0 -
TOTAL 1,834.3 1,821.7 1,819.3 1,810.5 1,800.5 1,800.5 1,802.5 (2.0)
(Table to be continued)
<PAGE>
(Table continued)
Dollar amounts expressed as
a percentage
----------------------------------------------------------- ---------------------------
2000 Base Case Lease Rentals
Cummlative to Date
Actual Basecase Variance
----------------------------------------------------------- ---------------------------
CASH COLLECTIONS
[1] Lease Rentals 100.0% 100.0% 0.0%
[2] - Renegotiated Leases 0.0%
[3] - Rental Resets -0.1%
---------------------------
[4] Sum of [1].[3] Contracted Lease Rentals 99.9% 100.0% 0.0%
[5] Movement in Current Arrears Balance -0.7% -0.7%
less Net Stress-related Costs
[6] - Bad Debts 0.0%
[7] - Security Deposits Drawn Down 0.0%
[8] - Restructured Arrears 0.0%
[9] - AOG -2.4%
[10] - Other Leasing Income 5.2%
[11] - Repossession Costs -0.3%
---------------------------
[12] Sum of [6].[11] sub-total 2.4% -4.5% 6.9%
[13] [4]+[5]+[12] Net2Lease Rentals 101.6% 95.5% 6.1%
[14] Interest Earned 1.4% 0.9% 0.5%
[15] Drawings from Expense Account 2.4% 0.0% 2.4%
Maintenance Receipts 10.4% 0.0% 10.4%
Maintenance Payments -12.8% 0.0% -12.8%
---------------------------
[16] Net Maintenance -2.4% 0.0% -2.4%
[17] Sum of [13].[16] Total Cash Collections 103.2% 96.4% 6.7%
----------------------------------------------------------- ---------------------------
CASH EXPENSES
Aircraft Operating Expenses
[18] - Insurance -0.4% -0.4%
[19] - Re-leasing and other overheads -0.7% -0.7%
---------------------------
[20] [18]+[19] subtotal -1.0% -0.8% -0.2%
SG&A Expenses
[21] Aircraft Servicer Fees
- Base Fee -1.0%
- Rent Collected Fee -1.3%
- Rent Contracted Fee -0.9%
- Incentive Fee 0.0%
---------------------------
sub-total -3.2% -3.4% 0.2%
[22] Other Servicer Fees -1.3% -0.8% -0.5%
---------------------------
[23] [21]+[22] subtotal -4.5% -4.2% -0.3%
[24] [20]+[23] Total Cash Expenses -5.5% -5.0% -0.5%
----------------------------------------------------------- ---------------------------
NET CASH COLLECTIONS
[25] [17] Total Cash Collections 103.2% 96.4% 6.7%
[26] [24] Total Cash Expenses -5.5% -5.0% -0.5%
[27] Accrued Expenses -3.0% 0.0% -3.0%
[28] Interest Payments -52.4% -49.4% -3.0%
[29] Swap Payments -2.0% -4.2% 2.2%
[30] Exceptional Item 0.0% 0.0% 0.0%
---------------------------
[31] Sum of [25].[30] TOTAL 40.2% 37.8% 2.4%
===========================
----------------------------------------------------------- ---------------------------
[32] PRINCIPAL PAYMENTS
subclass A2 6.4% 6.7% -0.4%
subclass A3 0.0% 0.0% 0.0%
subclass A4 0.0% 0.0% 0.0%
subclass A5 30.8% 28.1% 2.7%
subclass B1 2.8% 2.7% 0.1%
subclass B2 0.0% 0.0% 0.0%
subclass C1 0.2% 0.3% 0.0%
subclass C2 0.0% 0.0% 0.0%
subclass D1 0.0% 0.0% 0.0%
Total 40.2% 37.8% 2.4%
============================
----------------------------------------------------------- ---------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
Note: Report Line Name Description
-------------------------------------------------------------------------------------------------------------------
CASH COLLECTIONS
[1] Lease Rentals Assumptions per the March 1998 Prospectus
[2] - Renegotiated Leases Change in contracted rental cash flow caused by a
renegotiated lease
[3] - Rental Resets Re-leasing events where new lease rate deviated from the
1998 Base Case
[4] Sum of [1]....[3] Contracted Lease Rentals Current Contracted Lease Rentals due as at the latest
Calculation Date
[5] Movement in Current
Arrears Balance Current contracted lease rentals not received as at the
latest Calculation Date, excluding Bad debts
less Net Stress related
Costs
[6] - Bad debts Arrears owed by former lessees and deemed irrecoverable.
[7] - Capitalised arrears Current arrears that have been capitalised and
restructured as a Note Payable.
[8] - Security deposits drawn
down Security deposits received following a lesse default
[9] - AOG Lost of rental due to an aircraft being off-lease and
non-revenue earning
[10] - Other Leasing Income Includes lease termination payments, rental guarantees
and late payments charges
[11] - Repossession Legal and technical costs incurred in repossessing aircraft.
[12] Sum of [6]....[11] sub-total
[13] [4]+[5]+[12] Net Lease Rentals Contracted Lease Rentals less Movement in Current Arrears
Balance and Net Stress related costs
[14] Interest Earned Interest earned on monthly cash balances
[15] Net Maintenance Maintenance Revenue Reserve received less and reimbursements
to lessees.
[16] Sum of [13]...[15] Total Cash Collections Net Lease Rentals + Interest Earned + Net Maintenance
-------------------------------------------------------------------------------------------------------------------
CASH EXPENSES
Aircraft Operating Expenses All operational costs related to the leasing of aircraft.
[17] - Insurance Premium for contingent insurance policies
[18] - Re-leasing and other Costs associated transferring an aircraft from one lessee to
another
[19] [17]+[18] subtotal
SG&A Expenses
[20] Aircraft Servicer Fees Monthly and annual fees paid to Aircraft Servicer
- Base Fee Fixed amount per month per aircraft
- Rent Contracted Fee 1.00% of rental contracted for the month
- Rent Collected Fee 1.25% of rental received for the month
- Incentive Fee Annual fee paid to Servicer for performance above an annually
agreed target
[21] [20] subtotal
[22] Other Servicer Fees Administrative Agent, trustee and professional fees paid to
other service providers.
[23] [21]+[22] subtotal
[24] [19]+[23] Total Cash Expenses Aircraft Operating Expenses + SG&A Expenses
--------------------------------------------------------------------------------------------------------------------
NET CASH COLLECTIONS
[25] [16] Total Cash Collections line 16 above
[26] [24] Total Cash Expenses line 24 above
[27] Interest Payments Interest paid on all outstanding debt
[28] Swap payments Net swap payments (paid) /received
[29] Proceeds from Aircraft Sales Proceeds, net of fees and expenses, from the sale of aircraft
[30] Sum of [25]...[29] Exceptional Items Includes adjustment for aircraft included in the 1998
Basecase but not acquired by MSAF
TOTAL
--------------------------------------------------------------------------------------------------------------------
[31]
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Coverage Ratios 2000
Closing Actual Base Case
----------------------------------------------------------------------------------------------------
Net Cash Collections 33.8 31.8
Add Back Interest 44.1 41.6
Add Back Swap Payments 1.7 3.5
a Net Cash Collections 79.6 76.9
b Swaps 1.7 3.5
c Class A Interest 32.8 30.6
d Class A Minimum 5.6 4.8
e Class B Interest 4.1 3.8
f Class B Minimum 1.8 1.9
g Class C Interest 4.0 4.1
h Class C Minimum - -
I Class D Interest 3.2 3.2
j Class D Minimum - -
k Class A Scheduled 1.2 0.1
l Class B Scheduled 0.3 0.4
m Class C Scheduled 0.3 0.2
n Class D Scheduled - -
o Permited Aircraft Modifications -
p Class A Supplemental 24.5 24.4
------------------------------------------------
Total 79.6 76.9
------------------------------------------------
[1] Interest Coverage Ratio
Class A 2.31 2.26 = a / (b+c)
Class B 1.80 1.80 = a / (b+c+d+e)
Class C 1.59 1.58 = a / (b+c+d+e+f+g)
Class D 1.50 1.49 = a / (b+c+d+e+f+g+h+i)
[2] Debt Coverage Ratio
Class A 1.45 1.47 = a / (b+c+d+e+f+g+h+i+ j+k)
Class B 1.45 1.47 = a / (b+c+d+e+f+g+h+i+j+k+l)
Class C 1.45 1.47 = a / (b+c+d+e+f+g+h+i+j+k+l+m)
Class D 1.45 1.47 = a / (b+c+d+e+f+g+h+i+j+k+l+m+n)
Loan-to-Value Ratios
</TABLE>
<TABLE>
-------------------------------------------------------------------
2000 Base Case Actual 2000 Base Case
15-Mar-00 15-Jul-00 15-Jul-00
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[3] Assumed Portfolio Value 2,000.9 1,973.3 1,973.3
Liquidity Reserve Amount
Cash 30.0 30.0 30.0
- Accrued Expenses 6.0 3.2 3.2
- Security Deposits 7.1 16.8 16.8
----------- ----------- --------------
subtotal cash 43.1 50.0 50.0
Letters of Credit 82.1 72.2 72.2
----------- ----------- --------------
Total Liquidity Reserve 125.2 122.2 122.2
[4] Total Asset Value 2,126.1 2,095.5 2,095.5
Note Balance
Class A 1,404.7 66.1% 1,373.4 65.5% 1,375.3 65.6%
Class B 164.7 73.8% 162.5 73.3% 162.5 73.4%
Class C 154.9 81.1% 154.6 80.7% 154.6 80.8%
Class D 110.0 86.3% 110.0 85.9% 110.0 86.0%
----------- ----------- --------------
Total 1,834.3 1,800.5 1,802.5
</TABLE>
--------------------
[1] Interest Coverage Ratio is equal to Net Cash Collections, before Interest
and swap payments, expressed as a ratio of the swap costs and interest
payable on each subclass of Notes plus the interest and minimum principal
payments payable on each subclass of Notes that rank senior in priority of
payment to the relevant subclass of Notes.
[2] Debt Service Ratio is equal to Net Cash Collections before interest and
swap payments, expressed as a ratio of the interest and minimum and
scheduled principal payments payable on each subclass of Notes plus the
interest and minimum and scheduled principal payments payable on each
subclass of Notes that ranks equally with or senior to the relevant
subclass of Notes in the priority of payments.
[3] Assumed Portfolio Value represents the Inital Appraised Value of each
aircraft in the Portfolio multipled by the Depreciation Factor at
Calculation date divided by the Depreciation Factor at Closing date.
[4] Total Asset Value is equal to Total Portfolio Value plus Liquidity Reserve
Amount.
<PAGE>
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
Cash Analysis of Financial Condition and Results of Operations
Three Month Period from March 2000 to May 2000
Page 1 of 29
<PAGE>
CONTENTS
I Background and General Information
II (a) Comparison of Actual Cash Flows versus the 1998 Base Case for
March 2000.
II (b) Comparison of Actual Cash Flows versus the 2000 Base Case for
April / May 2000
III Other Financial Data
IV Recent Developments
Appendices
Page 2 of 29
<PAGE>
I Background and General Information
Morgan Stanley Aircraft Finance ("MSAF"), a Delaware business trust, is a
special purpose vehicle which owns aircraft subject to operating leases. Under
the terms of its Indenture, MSAF may acquire additional aircraft and sell
aircraft from the fleet. Any acquisition of additional aircraft will be subject
to certain confirmations with respect to the Notes from rating agencies and
compliance with certain operating covenants of MSAF set out in the Indenture.
Initial Portfolio
On March 3, 1998, MSAF issued $1,050 million of Notes in connection with its
acquisition of 33 aircraft plus an engine with a total appraised value at
September 30, 1997 of $1,115.5 million from International Lease Finance
Corporation ("ILFC"). All but one of the 33 aircraft was acquired by MSAF.
New Issuance
On March 15, 2000, MSAF refinanced the A-1 subclass Notes of $400 million as
part of a total issuance of $1,310 million of New Notes in five subclasses
(A-3, A-4, A-5, B-2 and C-2). In addition to the refinancing of the A-1
subclass, these Notes were issued in association with MSAF's acquisition of 29
aircraft with a total appraised value of $1,047.8 million as of November 30,
1999 from a subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"). MSDW
acquired two aircraft from an affiliate of GE Capital Corporation on March 19,
1999 and 27 aircraft from ILFC on August 6, 1999.
Combined Portfolio
As a result, the overall size of the combined aircraft fleet is now 61 aircraft
plus an engine with a total appraised value of $2,000.9 million as of November
30, 1999. As of July 1, 2000, MSAF had 60 lease contracts in effect with 41
lessees based in 25 countries and two aircraft were off-lease as shown in
Appendix A attached.
Management Discussion and Analysis
The discussion and analysis that follows in Section II is based on the results
of MSAF and its subsidiaries as a single entity (collectively the "MSAF Group")
for the reporting periods from March 2000 to May 2000.
Section II (a) covers the one-month period, March 2000, prior to the New
Issuance and the aircraft acquisition on March 15, 2000 and therefore relates
to the Initial Portfolio of 32 aircraft and engine only. The March 2000 cash
flows are compared against the 1998 Base Case.
For the purposes of this report, "March 2000", referred to in Section II (a)
shall comprise information from the monthly cash report dated March 15, 2000.
The financial data in this reports includes cash receipts from February 10,
2000 (first day of the Collection Period for the March 2000 Report) up to March
9, 2000 (last day of the Collection Period for the March 2000 Report). It also
includes payments made by MSAF Group between February 16, 1999 and up to March
15, 2000 (the Note Payment Date for the March 2000 Report).
Page 3 of 29
<PAGE>
Section II (b) covers the two month period, April / May 2000, after the New
Issuance and the aircraft acquisition on March 15, 2000 and therefore relates
to the Combined Portfolio of 61 aircraft plus an engine. The April / May 2000
cash flows are compared against the 2000 Base Case.
For the purposes of this report, "April / May 2000", referred to in Section II
(b), shall comprise information from the monthly cash reports dated April 15,
2000 through to May 15, 2000. The financial data in these reports includes cash
receipts from March 10, 2000 (first day of the Collection Period for the April
/ May 2000 Report) up to May 9, 2000 (last day of the Collection Period for the
April / May 2000 Report). It also includes payments made by MSAF Group between
March 16, 2000 and up to May 15, 2000 (the Note Payment Date for the April /
May 2000 Report).
The discussion and analysis in Section III - "Recent Developments" relates to
the combined fleet of 61 aircraft plus an engine.
MSAF Group's cash receipts and disbursements are determined, in part, by the
overall economic condition of the operating leasing market. The operating
leasing market, in turn, is affected by various cyclical factors. These include
the level and volatility of interest rates, the availability of credit, fuel
costs and both general and regional economic conditions affecting lessee
operations and trading. Other factors to consider are manufacturer production
levels, passenger demand, retirement and obsolescence of aircraft models,
manufacturers exiting or entering the market or ceasing to produce aircraft
types or re-introduction into service of aircraft previously in storage. In
addition, state regulations and air traffic control infrastructure constraints,
such as limitations on the number of landing slots, can also impact the
operating leasing market.
MSAF Group's ability to compete against other lessors is determined, in part,
by the composition of its fleet in terms of mix, relative age and popularity of
aircraft type. In addition, operating restrictions imposed by the Indenture,
and the ability of other lessors, who may possess substantially greater
financial resources, to offer leases on more favorable terms than MSAF Group,
may also impact MSAF Group's ability to compete against other lessors.
Page 4 of 29
<PAGE>
II (a) Comparison of Actual Cash Flows versus the 1998 Base Case
for March 2000
The February 20, 1998 Offering Memorandum (the "Offering Memorandum") and the
November 4, 1998 Prospectus (the "Prospectus") for the Notes contain
assumptions in respect of MSAF Group's future cash flows and cash expenses (the
"1998 Base Case"). For the purpose of this report, "Net Cash Collections" is
defined as Total Cash Collections less Total Cash Expenses, Accrued Expenses,
Interest Payments, Swap Payments and Exceptional Items. A discussion of the
Cash Collections, Cash Expenses, Accrued Expenses, Interest Payments, Swap
Payments, Exceptional Items and Principal Payments is given below and should be
read in conjunction with the analysis in Appendix B.
CASH COLLECTIONS
"Total Cash Collections" include Net Lease Rentals (Contracted Lease Rentals
plus Movement in Current Arrears Balance less Net Stress-related Costs),
Interest Earned, Drawings from Expense Account and Net Maintenance.
Cash Collections Actual Base Case Variance
$ M $ M $ M
Lease Rentals 12.2 12.2 -
- Renegotiated Leases (0.1) - (0.1)
- Rental Resets (0.4) - (0.4)
----------------------------------------
Contracted Lease Rentals 11.7 12.2 (0.5)
Movement in Current Arrears Balance 0.2 - 0.2
Net Stress Related Costs (1.1) (0.5) (0.6)
----------------------------------------
Net Lease Rentals 10.8 11.7 (0.9)
Interest Earned 0.1 0.1 0.0
Drawings from Expense Account 1.2 - 1.2
Net Maintenance (0.2) - (0.2)
----------------------------------------
Total Cash Collections 11.9 11.8 0.1
----------------------------------------
In March 2000, MSAF Group generated approximately $11.9 million in Total Cash
Collections, $0.1 million more than assumed in the 1998 Base Case. This
difference is due to a combination of the factors set out below (the numbers in
square brackets refer to the line item number shown in Appendix B).
[2] Renegotiated Leases
Renegotiated Leases refers to the loss in rental revenue caused by a
lessee negotiating a reduction in the lease rental. Typically, this can be
a permanent reduction over the remaining lease term in exchange for other
contractual concessions. In March 2000, the amount of revenue loss
attributed to Renegotiated Leases of $0.1 million is due to a 14%
reduction from the 1998 Base Case rental on a B767-300ER on lease to Air
Pacific. The new rental was reset at the then prevailing market rate for
B767-300ERs in exchange for a lease extension.
Page 5 of 29
<PAGE>
[3] Rental Resets
Rental Resets is a measure of the loss in rental revenue when new lease
rates are lower than those assumed in the 1998 Base Case. In March 2000,
no new leases were written, however, lost revenue attributable to lease
resets in previous quarters amounted to $0.4 million. The loss primarily
relates to the decline in rentals received for two A310-300s. See Section
IV - "Recent Developments" for a discussion of current re-leasing events.
[4] Contracted Lease Rentals
Contracted Lease Rentals represents the current contracted lease rental
rollout which equates to the 1998 Base Case Lease Rentals less adjustments
for Renegotiated Leases and Rental Resets. For March 2000, Contracted
Lease Rentals were $11.7 million, $0.5 million less than assumed in the
1998 Base Case. The difference is due to losses from renegotiated leases
and rental resets as discussed above.
[5] Movement in Current Arrears Balance
Current Arrears are the total contracted lease rentals outstanding from
current lessees at a given date and excludes any amounts classified as Bad
Debts. The current arrears balance at the start of the March 2000 payment
period was $3.4 million versus $3.2 million at the end of the March 2000
payment period, a decrease in arrears of $0.2 million.
Aircraft Type Country Current Current Movement Security
Arrears Arrears in Current Deposits
2/15/00 3/15/00 Arrears Held
$ M $ M $M $ M
A320-200 Canada 0.2 0.5 (0.3) 0.3
A310-300 Brazil 0.4 0.7 (0.3) -
B737-300 Brazil 1.6 0.5 1.1 0.7
A321-100 Turkey 0.9 1.2 (0.3) 0.7
A320-200 Ireland 0.3 0.3 0.0 0.5
----------------------------------------------------
Total 3.4 3.2 0.2 2.2
----------------------------------------------------
As at March 15, 2000, five lessees were in arrears, owing $3.2 million,
against which MSAF Group held security deposits of $2.2 million. See
Section IV - "Recent Developments" for information on the current level of
arrears as of July 1, 2000.
Net Stress-related Costs
Net Stress-related Costs is a combination of all the factors which can
cause actual lease rentals received to differ from the Contracted Lease
Rentals. The 1998 Base Case assumed net stress-related costs equal to 4.5%
of the 1998 Base Case Lease Rentals.
Page 6 of 29
<PAGE>
Net Stress Related Costs Actual Base Case Variance
$ M $ M $ M
Bad Debts -
Security Deposits Drawn Down -
Restructured Arrears (0.1)
AOG (1.2)
Other Leasing Income 0.3
Repossession Costs (0.1)
----------------------------------------
Net Stress Related Costs (1.1) (0.5) (0.6)
----------------------------------------
For the March 2000 Payment Period, net stress-related costs amounted to
$1.1 million (9.0% of 1998 Base Case Lease Rentals) compared to $0.5
million assumed in the 1998 Base Case, a variance of $0.6 million that is
due to the following six factors described in items [6] to [11] below.
[6] Bad Debts and [7] Security Deposits Drawn Down
Bad Debts are rental arrears owed by lessees who have defaulted and which
are deemed irrecoverable. These arrears are partially offset by the draw
down of security deposits held and amounts subsequently recovered from the
defaulted lessee.
In March 2000, no arrears were transferred to Bad Debts and no security
deposits were drawn down. See Section IV - "Recent Developments" for
information on the current level of Bad Debts as of July 1, 2000.
[8] Restructured Arrears
Restructured Arrears refer to current arrears that have been capitalized
and restructured into a note payable, which is repaid over an agreed
period. Losses from restructured leases were $0.1 million in March 2000
and were due to a restructuring of arrears and lease payments of two
lessees. See Section IV - "Recent Developments" for information on the
current level of Restructured Arrears as of July 1, 2000.
[9] Aircraft on Ground ("AOG")
AOG is defined as the Base Case Lease Rental lost when an aircraft is
off-lease and non-revenue earning.
AOG Analysis for March 2000
Aircraft Type Old Lessee New Lessee Lost Rental
$ M
1 B747-300 VARIG Air Atlanta Icelandic 0.8
2 A310-300 Oman Air Region Air 0.1
3 A310-300 Oman Air Region Air 0.1
4 B737-400 TAESA LOI 0.2
------------
Total 1.2
------------
The impact of AOG downtime amounted to $1.2 million during March 2000.
This was in respect of four aircraft; one B747-300 previously on lease to
VARIG which terminated early, two A310-300s previously on lease to Oman
Air which terminated as scheduled and one B737-400 previously on lease to
TAESA which terminated early. See Section IV - "Recent Developments" below
for information on the current level of AOG costs as of July 1, 2000.
[10] Other Leasing Income
Other leasing income consists of miscellaneous income received in
connection with a lease other than contracted rentals, maintenance
receipts and security deposits, such as early termination payments or
default interest. In March 2000, other leasing income amounted to $0.3
million.
[11] Repossession Costs
Repossession costs consist of legal and aircraft technical costs
incurred as a result of repossessing an aircraft. In March 2000,
repossession costs amounted to $0.1 million, which consists of
consultancy fees incurred during the repossession of a B737-400
previously on lease to TAESA.
[13] Net Lease Rentals
Net Lease Rentals is Contracted Lease Rentals plus the movement in
Current Arrears Balance less Net Stress-related Costs. In March 2000,
net lease rentals amounted to $10.8 million, $0.9 million less than
assumed in the 1998 Base Case. The variance was attributable to the
combined effect of lower contracted lease rentals, the decrease in
current arrears and an increase in net stress-related costs discussed
above.
[14] Interest Earned
Interest earned relates to interest received on cash balances held in
the Collection and Expense Accounts. Cash held in the Collection Account
in March 2000 consisted of the cash liquidity reserve amount of $25.0
million plus the intra-month cash balances for all the rentals and
maintenance payments collected prior to the monthly payment date. The
Expense Account contains cash set aside to pay for expenses which are
expected to be payable over the next three months ("Accrued Expenses").
The average interest rate for the period was 5.75%, the same as assumed
in the 1998 Base Case. In March 2000, interest earned amounted to $0.1
million the same as assumed in the 1998 Base Case.
[15] Drawings from Expense Account
The Expense Account contains cash set aside each month from current cash
collections to pay for expenses which are expected to be payable over the
next three months. The level of Accrued Expenses is set each month by the
Administrative Agent. In March 2000, $1.2 million was drawn from the
Expense Account to pay for current expenses. The 1998 Base Case makes no
assumption as to the level of Accrued Expenses. Accrued Expenses are
discussed separately as line item number [28] in the Net Cash Collections
section below.
Page 8 of 29
<PAGE>
[16] Net Maintenance
Net maintenance refers to maintenance receipts less any maintenance
reimbursements paid to lessees. In March 2000, actual maintenance
receipts amounted to $0.9 million and maintenance expenditure amounted to
$1.1 million, generating negative net maintenance of $0.2 million.
Maintenance expenditure included costs incurred in the overhaul of the
airframe for two A310-300s. The 1998 Base Case makes no assumptions for
net maintenance as it assumes that, over time, maintenance receipts will
equal maintenance expenditure. However, it is unlikely that in any
particular Note Payment Period, maintenance receipts will exactly equal
maintenance expenditure.
Page 9 of 29
<PAGE>
CASH EXPENSES
"Total Cash Expenses" include Aircraft Operating Expenses and Selling, General
and Administrative ("SG&A") Expenses. In March 2000, total cash expenses were
$0.6 million, $0.6 million lower than the 1998 Base Case, which assumed total
cash expenses of $1.2 million.
Total Cash Expenses Actual Base Case Variance
$ M $ M $ M
Aircraft Operating Expenses (0.1) (0.4) 0.3
SG&A Expenses (0.5) (0.8) 0.3
--------------------------------
Total Cash Expenses (0.6) (1.2) 0.6
--------------------------------
The difference is due to a combination of lower Aircraft Operating Expenses and
SG&A Expenses as discussed below.
Aircraft Operating Expenses include all operational costs related to the
leasing of an aircraft including costs of insurance, re-leasing and other
overhead costs. In March 2000, Aircraft Operating Expenses were $0.1 million
compared to $0.4 million per the 1998 Base Case, which assumes these costs to
be 3.5% of the 1998 Base Case Lease Rentals.
[18] Insurance
No insurance costs were incurred in March 2000.
[19] Re-leasing and other overhead costs
Re-leasing and other overhead costs consist of miscellaneous re-delivery
and leasing costs associated with re-leasing events. In March 2000 these
costs were $0.1 million.
SG&A Expenses relate to fees paid to the Aircraft Servicer and to other service
providers. In March 2000, SG&A Expenses were $0.5 million or $0.3 million lower
than assumed in the 1998 Base Case. The variance is described in items numbered
[21] and [23] below.
[21] Aircraft Servicer Fees
The Aircraft Servicer Fees are defined as amounts paid to the Aircraft
Servicer, ILFC, in accordance with the terms of the Servicing Agreement.
In March 2000, the total Aircraft Servicer fee paid was $0.3 million, $0.2
million lower than assumed in the 1998 Base Case, reflecting lower actual
rentals achieved relative to 1998 Base Case Lease Rentals.
Page 10 of 29
<PAGE>
Aircraft Servicer Fees consist of:
$ M
Base Fee 0.1
Rent Collected Fee 0.1
Rent Contracted Fee 0.1
Incentive Fee 1999/2000* 0.0
---
Total Servicer Fee 0.3
*For financial year ended November 30, 2000
The Base Fee is a fixed amount per month per aircraft and changes only as
aircraft are acquired or sold. The Rent Contracted Fee is equal to 1% of
all rentals contracted. The Rent Collected Fee is equal to 1% of all
rentals received. The Incentive fee is 10% of all cash flow received above
a targeted annual amount set at the beginning of each financial year. No
incentive fee was payable to ILFC in March 2000 for the financial year
ended November 2000.
[23] Other Servicer Fees
Other Servicer Fees relate to fees and expenses paid to other service
providers including the Administrative Agent, Financial Advisor, legal
advisors, accountants and Independent Trustees. In March 2000, Other
Servicer Fees amounted to $0.2 million as compared to an assumed expense
of $0.3 million in the 1998 Base Case, a positive variance of $0.1
million. The variance is due primarily to lower than expected
Administrative Agent fees and other overhead costs. The Administrative
Agent fee is equal to 1.5% of rentals collected and declined in line with
the reduced rentals actually received.
Page 11 of 29
<PAGE>
NET CASH COLLECTIONS
"Net Cash Collections" equals Total Cash Collections less Total Cash Expenses,
Accrued Expenses, Interest Payments, Swap Payments and Exceptional Items.
Net Cash Collections Actual Base Case Variance
$ M $ M $ M
Total Cash Collections 11.9 11.8 0.1
Total Cash Expenses (0.6) (1.2) 0.6
Accrued Expenses (0.8) - (0.8)
Interest Payments (4.9) (4.9) -
Swap Payments (0.4) (0.5) 0.1
Exceptional Items - - -
---------------------------------
Net Cash Collections 5.2 5.2 0.0
---------------------------------
[26] Total Cash Collections
As discussed above in line items [1] to [17] above in Cash Collections,
MSAF Group generated approximately $11.9 million in Total Cash
Collections, $0.1 million more than assumed in the 1998 Base Case.
[27] Total Cash Expenses
As discussed above in line items [18] to [25] above in Cash Expenses, MSAF
Group incurred approximately $0.6 million in Total Cash Expenses, $0.6
million less than assumed in the 1998 Base Case.
[28] Accrued Expenses
Accrued Expenses represent the level of cash set aside in the Expense
Account each month to pay for expenses which are expected to be payable
over the next 3 months. In March 2000, $0.8 million was added to the
Closing Expense Account balance of $4.9 million (a total of to $5.7
million) to fund future expenses, primarily maintenance.
[29] Interest Payments and [30] Swap Payments
In March 2000, interest payments to Noteholders amounted to $4.9 million,
which was in line with the 1998 Base Case. While the total debt balance
outstanding during the quarter was lower than expected in the 1998 Base
Case, the interest payments were increased due to a higher than assumed
LIBOR rate. The LIBOR rate for March 2000 was 5.89% versus an assumed
LIBOR rate of 5.75%. The higher interest costs were offset by a reduction
in the amount of swap payments. MSAF paid $0.4 million in swap costs, $0.1
million less than assumed in the 1998 Base Case.
[31] Exceptional Items
Exceptional items refer to cash flows that occur infrequently and are
outside the normal business activities of MSAF. There were no
exceptional cash flows in March 2000.
Page 12 of 29
<PAGE>
[33] Principal Payments
In the First Quarter 2000, total principal payments to Noteholders
amounted to $5.2 million, the same as assumed in the 1998 Base Case.
Page 13 of 29
<PAGE>
II(b) Comparison of Actual Cash Flows versus the 2000 Base Case for
April / May 2000
The March 8, 2000 Offering Memorandum for the New Notes contain assumptions in
respect of MSAF Group's future cash flows and cash expenses (the "2000 Base
Case"). For the purpose of this report, "Net Cash Collections" is defined as
Total Cash Collections less Total Cash Expenses, Accrued Expenses, Interest
Payments, Swap Payments and Exceptional Items. A discussion of the Cash
Collections, Cash Expenses, Accrued Expenses, Interest Payments, Swap Payments,
Exceptional Items and Principal Payments is given below and should be read in
conjunction with the analysis in Appendix C.
CASH COLLECTIONS
"Total Cash Collections" include Net Lease Rentals (Contracted Lease Rentals
plus Movement in Current Arrears Balance less Net Stress-related Costs),
Interest Earned, Drawings from Expense Account and Net Maintenance.
Total Cash Collections Actual Base Case Variance
$ M $ M $ M
Lease Rentals 44.5 44.5 -
- Renegotiated Leases - - -
- Rental Resets - - -
--------------------------------------
Contracted Lease Rentals 44.5 44.5 -
Movement in Current Arrears Balance (0.9) - (0.9)
Net Stress Related Costs (2.0) (2.0) -
--------------------------------------
Net Lease Rentals 41.6 42.5 (0.9)
Interest Earned 0.6 0.4 0.2
Drawings from Expense Account 5.1 - 5.1
Net Maintenance (3.1) - (3.1)
--------------------------------------
Total Cash Collections 44.2 42.9 1.3
--------------------------------------
In April / May 2000, MSAF Group generated approximately $44.2 million in Total
Cash Collections, $1.3 million more than assumed in the 2000 Base Case. This
difference is due to a combination of the factors set out below (the numbers in
brackets refer to the line item number shown in Appendix C).
[2] Renegotiated Leases
Renegotiated Leases refers to the loss in rental revenue caused by a
lessee negotiating a reduction in the lease rental. Typically, this can be
a permanent reduction over the remaining lease term in exchange for other
contractual concessions. In April / May 2000, one lease was renegotiated
resulting in a small decrease in the present value of the rental cash
flows over the lease term. The new rental was agreed in exchange for an
extension of the lease term.
[3] Rental Resets
Rental Resets is a measure of the loss in rental revenue when new lease
rates are
Page 14 of 29
<PAGE>
lower than those assumed in the 2000 Base Case. In April / May 2000, no
new leases were written. See Section IV - "Recent Developments" for a
discussion of current re-leasing events as at July 1, 2000.
[4] Contracted Lease Rentals
Contracted Lease Rentals represents the current contracted lease rental
rollout which equates to the 2000 Base Case Lease Rentals less adjustments
for Renegotiated Leases and Rental Resets. For April / May 2000,
Contracted Lease Rentals were $44.5 million, in line with rentals assumed
in the 2000 Base Case.
[5] Movement in Current Arrears Balance
Current Arrears is the total contracted lease rentals outstanding from
current lessees at a given date and excludes any amounts classified as Bad
Debts. The current arrears balance at the New Issuance date (March 15,
2000) was assumed to be nil versus $1.5 million at the end of April / May
2000, a difference in arrears of $0.9 million.
Aircraft Country Current Current Movement Security
Type Arrears Arreras in Current Deposits
3/15/00 3/15/00 Arrears Held
$ M $ M $ M $ M
A310-300 Brazil 0.0 0.7 0.7 0.0
B737-300 USA 0.0 0.2 0.2 0.2
------------------------------------------------
Total 0.0 0.9 0.9 0.2
------------------------------------------------
As at May 15, 2000, two lessees were in arrears, owing $0.9 million,
against which MSAF Group held security deposits of $0.2 million. One of
the two lessees, B.R.A., based in Brazil, defaulted in April / May 2000
and the aircraft was repossessed. Rental arrears, associated with the
lessee, at the time of the repossession totaled $1.3 million are now
deemed irrecoverable and will be re-classified from Current Arrears to Bad
Debts. See the discussion on Bad Debts below.
Actual Current Arrears and Base Case Arrears
The Movement in Current Arrears Balance measures the difference in arrears
balances between the start of the new Base Case, March 15, 2000, and May
15, 2000. For the purposes of the Base Case only, any arrears owed by
lessees as at March 15, 2000 were assumed to be zero. Actual current
arrears were $3.2 million as at March 15, 2000 and these pertain to the
Initial Portfolio only. Actual Current Arrears as at May 15, 2000 were
$3.6 million and relate to the Combined Portfolio. See Section IV -
"Recent Developments" for information on the current level of arrears as
of July 1, 2000 which covers total arrears owed by lessees.
Net Stress-related Costs
Net Stress-related Costs is a combination of all the factors which can
cause actual lease rentals received to differ from the Contracted Lease
Rentals. The 2000 Base Case assumed net stress-related costs equal to 4.5%
of the 2000 Base Case Lease Rentals.
Page 15 of 29
<PAGE>
Net Stress Related Costs Actual Base Case Variance
$ M $ M $ M
Bad Debts -
Security Deposits Drawn Down -
Restructured Arrears -
AOG (0.7)
Other Leasing Income (1.2)
Repossession Costs (0.1)
------------------------------------
Net Stress Related Costs (2.0) (2.0) 0.0
------------------------------------
For April / May 2000, net stress-related costs amounted to $2.0 million
(4.5% of 2000 Base Case Lease Rentals), in line with the 2000 Base Case
assumptions. A detailed analysis of net stress-related costs is provided
in item [6] to [11] below.
[6] Bad Debts and [7] Security Deposits Drawn Down
Bad Debts are rental arrears owed by lessees who have defaulted and which
are deemed irrecoverable. These arrears are partially offset by the draw
down of security deposits held and amounts subsequently recovered from the
defaulted lessee.
In April / May 2000, no amounts were written off and no security deposits
were drawn down. See Section IV - "Recent Developments" for information on
the current level of Bad Debts as of July 1, 2000.
[8] Restructured Arrears
Restructured arrears refer to current arrears that have been capitalized
and restructured into a note payable, which is repaid over an agreed
period. There were no losses from restructured arrears in April / May
2000. See Section IV - "Recent Developments" for information on the
current level of Restructured Arrears as of July 1, 2000.
[9] Aircraft on Ground ("AOG")
AOG is defined as the Base Case Lease Rental lost when an aircraft is
off-lease and non-revenue earning.
AOG Analysis for April / May 2000
Aircraft Type Old Lessee New Lessee Lost Rental
$ M
1 A310-300 Oman Air Region Air 0.2
2 B737-400 TAESA LOI 0.5
----------
Total 0.7
----------
The impact of AOG downtime amounted to $0.7 million during April / May
2000. This was in respect of two aircraft; one A310-300 previously on
lease to Oman Air and terminated as scheduled and one B737-400
previously on lease to TAESA and terminated early. See Section IV -
"Recent Developments" below for information on the current level of AOG
costs as of July 1, 2000.
Page 16 of 29
<PAGE>
[10] Other Leasing Income
Other leasing income consists of miscellaneous income received in
connection with a lease other than contracted rentals, maintenance
receipts and security deposits, such as early termination payments or
default interest. In April / May 2000, other leasing income amounted to
a negative $1.2 million which relates to rentals which the Base Case
assumed would be received in this period but are due in the following
month.
[11] Repossession Costs
Repossession costs consist of legal and aircraft technical costs
incurred as a result of repossessing an aircraft. In April / May 2000,
repossession costs amounted to $0.1 million, which primarily related to
consultancy fees incurred during the repossession of the B747-300
previously on lease to VARIG.
[13] Net Lease Rentals
Net Lease Rentals is Contracted Lease Rentals plus the Movement in
Current Arrears Balance less Net Stress-related Costs. In April / May
2000, net lease rentals amounted to $41.6 million, $0.9 million less
than assumed in the 2000 Base Case. The variance was primarily
attributable to the increase in current arrears discussed above.
[14] Interest Earned
Interest earned relates to interest received on cash balances held in
the Collection and Expense Accounts. Cash held in the Collection Account
in April / May 2000 consisted of the cash liquidity reserve amount of
$30.0 million plus the intra-month cash balances for all the rentals and
maintenance payments collected prior to the monthly payment date. The
Expense Account contains cash set aside to pay for expenses which are
expected to be payable over the next three months. The average interest
rate for the two-month period was 5.93%, slightly less than the 5.97%
assumed in the 2000 Base Case. In April / May 2000, interest earned
amounted to $0.6 million, $0.2 million more than assumed in the 2000
Base Case. The difference is due primarily to interest earned on the
Aircraft Purchase Account prior to the acquisition of the Lithuanian
B737-300 on May 1, 2000.
[15] Drawings from Expense Account
The Expense Account contains cash set aside each month from current cash
collections to pay for expenses which are expected to be payable over the
next three months. The level of Accrued Expenses is set each month by the
Administrative Agent. In April / May 2000, $5.1 million was drawn from
the Expense account to pay current expenses. The 2000 Base Case makes no
assumption as to the level of Accrued Expenses. Accrued Expenses are
discussed separately as line item number [28] in the Net Cash Collections
section below.
Page 17 of 29
<PAGE>
[16] Net Maintenance
Net maintenance refers to maintenance receipts less any maintenance
reimbursements paid to lessees. In April / May 2000, actual maintenance
receipts amounted to $4.0 million and maintenance expenditure amounted to
$7.1 million, generating negative net maintenance of $3.1 million.
Maintenance expenditure included costs incurred in the overhaul of two
engines on a B747-300 repossessed from Varig ($2.0 million), the overhaul
of two A310-300 airframes previously on lease to Oman air ($2.8 million)
and the reimbursement from reserves for the overhaul of two engines ($2.0
million). The 2000 Base Case makes no assumptions for net maintenance as
it assumes that, over time, maintenance receipts will equal maintenance
expenditure. However, it is unlikely that in any particular Note Payment
Period, maintenance receipts will exactly equal maintenance expenditure.
Page 18 of 29
<PAGE>
CASH EXPENSES
"Total Cash Expenses" include Aircraft Operating Expenses and SG&A Expenses. In
April / May 2000, total cash expenses were $2.6 million, $0.4 million higher
than the 2000 Base Case, which assumed total cash expenses of $2.2 million.
Total Cash Expenses Actual Base Case Variance
$ M $ M $ M
Aircraft Operating Expenses (0.3) (0.3) -
SG&A Expenses (2.3) (1.9) 0.4
-----------------------------------
Total Cash Expenses (2.6) (2.2) 0.4
-----------------------------------
The difference is due to higher SG&A Expenses as discussed below.
Aircraft Operating Expenses include all operational costs related to the
leasing of an aircraft including costs of insurance, re-leasing and other
overhead costs. In April / May 2000, Aircraft Operating Expenses amounted to
$0.3 million, the same as assumed in the 2000 Base Case, which assumes these
costs to be 0.8% of the 2000 Base Case Lease Rentals.
[18] Insurance
Insurance costs of $0.2 million were incurred in April / May 2000 and
relate to the payment of the quarterly premium in respect of the
aircraft contingent insurance programme.
[19] Re-leasing and other overhead costs
Re-leasing and other overhead costs consist of miscellaneous re-delivery
and leasing costs associated with re-leasing events. In April / May 2000
these costs amounted to $0.1 million.
SG&A Expenses relate to fees paid to the Aircraft Servicer and to other service
providers. In April / May 2000, SG&A Expenses were $2.3 million or $0.4 million
higher than assumed in the 2000 Base Case. The variance is described in items
numbered [21] and [23] below.
[21] Aircraft Servicer Fees
The Aircraft Servicer Fees are defined as amounts paid to the Aircraft
Servicer, ILFC, in accordance with the terms of the Servicing Agreement.
In April / May 2000, the total Aircraft Servicer fee paid was $1.5
million, in line with 2000 Base Case assumptions.
Page 19 of 29
<PAGE>
Aircraft Servicer Fees consist of:
$ M
Base Fee 0.5
Rent Collected Fee 0.5
Rent Contracted Fee 0.5
Incentive Fee 1999/2000* 0.0
---
Total Servicer Fee 1.5
*For financial year ended November 30, 2000
The Base Fee is a fixed amount per month per aircraft and changes only
as aircraft are acquired or sold. The Rent Contracted Fee is equal to
1% of all rentals contracted. The Rent Collected Fee is equal to
approximately 1.25% of all rentals received. The Incentive fee applies
to the Initial Portfolio only and is set at 10% of all cash flow
received above a targeted annual amount set at the beginning of each
financial year. No incentive fee was payable to ILFC in April / May
2000 for the financial year ended November 2000.
[23] Other Servicer Fees
Other Servicer Fees relate to fees and expenses paid to other service
providers including the Administrative Agent, Financial Advisor, legal
advisors, accountants and Independent Trustees. In April / May 2000,
Other Servicer Fees amounted to $0.8 million as compared to an assumed
expense of $0.4 million in the 2000 Base Case, a positive variance of
$0.4 million. The variance is due primarily to the payment of the
annual premium for the Directors and Officers insurance coverage ($0.2
million).
Page 20 of 29
<PAGE>
NET CASH COLLECTIONS
"Net Cash Collections" equals Total Cash Collections less Total Cash Expenses,
Accrued Expenses, Interest Payments, Swap Payments and Exceptional Items.
Net Cash Collections Actual Base Case Variance
$ M $ M $ M
Total Cash Collections 44.2 42.9 1.3
Total Cash Expenses (2.6) (2.2) (0.4)
Accrued Expenses (3.9) - (3.9)
Interest Payments (21.1) (20.9) (0.2)
Swap Payments (1.6) (1.8) 0.2
Exceptional Items - - -
------------------------------------
Net Cash Collections 15.0 18.0 (3.0)
------------------------------------
[26] Total Cash Collections
As discussed above in line items [1] to [17] above in Cash Collections,
MSAF Group generated approximately $44.2 million in Total Cash
Collections, $1.3 million more than assumed in the 2000 Base Case.
[27] Total Cash Expenses
As discussed above in line items [18] to [25] above in Cash Expenses, MSAF
Group incurred approximately $2.6 million in Total Cash Expenses, $0.4
million more than assumed in the 2000 Base Case.
[28] Accrued Expenses
Accrued Expenses represent the level of cash set aside in the Expense
Account each month to pay for expenses which are expected to be payable
over the next 3 months. In April / May 2000, $2.9 million was added to the
Closing Expense Account balance of $1.6 million (a total of to $4.5
million) to fund future expenses, primarily maintenance.
[29] Interest Payments and [30] Swap Payments
In April / May 2000, interest payments to Noteholders amounted to $21.1
million. This is $0.2 million higher than the 2000 Base Case, which
assumed interest costs for April / May 2000 to be $20.9 million. The
higher interest cost was due to a higher than assumed debt balance
outstanding during the two month period and a higher than assumed average
LIBOR rate. The average LIBOR rate for April / May 2000 was 6.07% versus
an assumed LIBOR rate of 5.97%. The higher interest costs were offset by a
reduction in the amount of swap payments. MSAF paid $1.6 million in swap
costs, $0.2 million less than assumed in the 2000 Base Case.
[31] Exceptional Items
Exceptional items refer to cash flows that occur infrequently and are
outside the normal business activities of MSAF. There were no
exceptional cash flows in April / May 2000.
Page 21 of 29
<PAGE>
[33] Principal Payments
In April / May 2000, total principal payments to Noteholders amounted to
$15.0 million, $3.0 million less than assumed in the 2000 Base Case,
reflecting the lower Net Cash Collections available during this period,
mainly as a result of the higher than expected maintenance costs.
Page 22 of 29
<PAGE>
III Other Financial Data
An analysis of MSAF's Performance to Date as of May 15, 2000 versus the
2000 Base Case and details of interest and debt coverage ratios and
Loan-to-Value ratios (LTV's) as of May 15, 2000 are shown in Appendix D.
Cash
Cash held at May 15, 2000 was $44.7 million. This includes $30.0 million
that represents the cash portion of the Liquidity Reserve Amount at that
time. This is a source of liquidity for, among other things, maintenance
obligations, security deposit return obligations, and cash operating
expenses and contingent liabilities. The balance consists of $10.2 million
in lessee security deposits and $4.5 million in accrued expenses held in
the Expense Account in respect of future maintenance obligations and other
costs.
In addition to the $44.7 million cash balance held at May 15, 2000, the
Liquidity Reserve Amount also contained credit and liquidity facilities
provided by MSDW and ILFC aggregating to $78.9 million. Neither of these
facilities was drawn upon in April / May 2000.
Aircraft Values
Under the terms of the Notes, MSAF Group is required to obtain new
appraisals of the Base Value of each aircraft from a minimum of three
independent appraisers each year. The annual appraisal must be delivered
to the Trustee no later than October 31 of each year. The next appraisal
is due to deliver to the Trustee no later than October 31, 2000. The
current appraisals as of November 30, 1999 are shown in Appendix A.
A-D Note Balance
As of May 15, 2000, the aggregate amount of Class A-D Notes outstanding
was $1,819.3 million, approximately $3.0 million higher than assumed in
the 2000 Base Case due to lower than assumed principal repayments with
respect to the Class A-2 and A-5 Notes.
Page 23 of 29
<PAGE>
IV Recent Developments
Information is as of July 1, 2000.
Securitisation of 29 aircraft
On March 15, 2000, MSAF Group issued additional subclasses of Notes,
amounting to $1,310 million, in association with the refinancing of the
subclass A-1 Note of $400 million and the acquisition, from a subsidiary
of MSDW, of a portfolio of 29 commercial aircraft with an appraised value
of $1,047.8 million as of November 30, 1999. All but one of the 29
aircraft was delivered on March 15, 2000. The remaining aircraft, a
B737-300 on lease to Lithuanian Airlines, was delivered on May 1, 2000.
The following discussion refers to the portfolio of 62 aircraft assets,
which was owned by MSAF Group as of July 1, 2000.
Re-marketing Task for Portfolio of 62 Aircraft Assets
As of July 1, 2000, two aircraft from a portfolio of 62 aircraft assets
were off-lease. Both aircraft are currently the subject of non-binding
letters of intent.
Summary
No. of
Aircraft
No. of Aircraft Assets subject to Lease Agreements 60
No. of Aircraft Assets off-lease 2
----------
Total No. of Aircraft Assets 62
----------
No. of Aircraft Assets scheduled to expire before Dec 31, 2000 2
No. of Aircraft Assets scheduled to expire in the year to
Dec 31, 2001 11
----------
Equals Total Near-term re-marketing task 13
----------
Of which LOI signed 2
----------
Re-marketing Task: By Number of Aircraft
Year ending 2000 2001 2002 2003 2004 > 2005 Total
----------------------------------------------------------------------
A300 1 1 2
A310 2 1 3
A320 1 1 3 1 6
A321 1 1 2
A330 1 1
A340 1 1
B737 2 6 1 4 4 3* 20
B747 1 1 2
B757 2 1 5 8
B767 2 1* 1 2 6
F50 2 2
F70 1 2 3
MD82 1 1
MD83 1 1 2 4
Engine 1 1
Total 2 11 8 17 9 15 62
* Includes one aircraft currently subject to a non-binding letter of
intent.
Page 24 of 29
<PAGE>
Re-marketing Task: By Appraised Value*
Year ending 2000 2001 2002 2003 2004 > 2005 Total
----------------------------------------------------------------------
A300 2.55% 2.31% 4.86%
A310 2.25% 1.38% 3.63%
A320 1.52% 1.61% 4.59% 1.49% 9.21%
A321 1.95% 1.98% 3.93%
A330 4.00% 4.00%
A340 4.58% 4.58%
B737 2.37% 6.59% 1.26% 5.13% 4.83% 2.85% 23.03%
B747 4.87% 2.45% 7.32%
B757 3.93% 1.48% 9.67% 15.08%
B767 5.50% 1.47% 3.01% 6.52% 16.50%
F50 0.62% 0.62%
F70 0.68% 1.45% 2.13%
MD82 0.89% 0.89%
MD83 0.95% 0.99% 2.00% 3.94%
Engine 0.28% 0.28%
Total 2.37% 16.99% 16.95% 24.74% 12.73% 26.22% 100%
*Appraised Value as at November 30,1999
As of July 1, 2000 47 leases, representing 73.78% of the appraised value
at November 30, 1999 are scheduled to expire before December 31, 2004. As
of July 1, 2000 the average remaining term to lease expiry date, weighted
by appraised value at November 30, 1999 was 41 months.
Re-marketing task for aircraft expiring prior to December 2000
Two leases, representing 2.37% of the appraised value at November 30, 1999
are scheduled to expire before December 31, 2000. One of the two aircraft,
a B737-300, is likely to stay with its current operator and the Servicer
is currently negotiating extended lease terms. The second aircraft, a
B737-400, is not yet subject to a non-binding letter of intent, however
the Servicer is in discussions with a potential operator.
Aircraft on Ground (AOG)
As of July 1, 2000, there are two aircraft on the ground. The two
aircraft are subject to non-binding letters of intent.
AOG Analysis July 1, 2000
Aircraft Type Old Lessee Status Expected
Re-lease Date
A310-300 B.R.A. Subject to LOI September 2000
B737-300 VASP Subject to LOI August 2000
One A310-300 aircraft was repossessed from B.R.A. in May 2000 and is
currently subject to a non-binding letter of intent.
One B737-300 aircraft was repossessed from VASP in May 2000 and is
currently subject to a non-binding letter of intent.
One B737-400 aircraft which was previously AOG, was released to a new
lessee on June 20, 2000 on a short-term four-month lease.
Page 25 of 29
<PAGE>
Lessee Difficulties
Current and Restructured Arrears
As of July 1, 2000, five lessees were in arrears. The nine aircraft on
lease to these lessees represented 13.9% of the portfolio by appraised
value at November 30, 1999. The total amount of rental payments and
maintenance reserves that was in arrears with respect to these five
lessees was $3.1 million. MSAF Group holds security deposits of $4.9
million against these arrears. The current arrears amount represents 1.4%
of annual lease rental payments. The weighted average number of days past
due of such arrears was 39 days.
In addition to the current arrears mentioned above, one lessee owes an
additional $0.7 million of arrears which were restructured in January 2000
for payment in July and August 2000.
Regional Analysis of Current Arrears
The categorization of countries into the geographical regions of Developed
Markets, Emerging Markets and Other is determined using Morgan Stanley
Capital International, Inc. ("MSCI") designations. A regional analysis of
current arrears as of July 1, 2000 is shown below.
<TABLE>
% No. of No. of No. of Current Security
Region Appraised Countries Aircraft Lessees Arrears Deposit
Value $ M $ M
<S> <C> <C> <C> <C> <C> <C>
Developed Europe 3.1% 1 2 1 0.7 1.0
North America 5.3% 1 4 1 1.1 2.0
Pacific - 0 0 0 0 0
Emerging Europe and Middle 2.0% 1 1 1 0.7 0.6
Asia - 0 0 0 0.0 0.0
Latin America - 0 0 0 0 0
Other Other 3.5% 2 2 2 0.6 1.3
-------------------------------------------------
Total Arrears 13.9% 5 9 5 3.1 4.9
-------------------------------------------------
</TABLE>
Europe (Developed)
MSAF Group currently leases 27.5% of the portfolio by appraised value at
November 30, 1999 in the Europe (Developed) region. One of the five
lessees in arrears is based in this region. In January 2000, Transaer, a
lessee based in Ireland, restructured rental and maintenance arrears into
a note payable of $1.4 million. $0.7 million of these restructured
payments were due but unpaid in June 2000 and are categorized as current
arrears.
Transaer has informed MSAF Group that it will not be able to meet its
payment obligations due in July ($0.5 million) and August 2000 ($0.2
million) under the restructuring agreement. Transaer is meeting its
current obligations under the leases. MSAF Group holds security deposits
of $1.0 million against the deferred arrears. These aircraft, both
A320-200s, represented 3.1% of the portfolio by appraised value at
November 30, 1999.
North America (Developed)
MSAF Group currently leases 15.4% of the portfolio by appraised value at
November 30, 1999 in the North America (Developed) region. One of the five
lessees currently in arrears is based in the North America. As of July 1,
2000,
Page 26 of 29
<PAGE>
the lessee owed rental arrears of $1.1 million against which MSAF Group
holds security deposits of $2.0 million. This lessee habitually makes its
rental payments approximately one week later than its contracted due date
and therefore this is not deemed to be a receivables issue. The lessee
leases one B757-200, one MD-82 and two MD83s, representing a total of 5.3%
of the portfolio by appraised value at November 30, 1999.
Pacific (Developed)
MSAF Group currently leases 10.0% of the portfolio by appraised value
at November 30, 1999 in the Pacific (Developed) region. As of July 1,
2000, none of these lessees were in arrears.
Europe and Middle East (Emerging)
MSAF Group currently leases 7.7% of the portfolio by appraised value
at November 30, 1999 in the Europe and Middle East (Emerging) region.
One of the five lessees in arrears is based in this region. As of July
1, 2000, Air Alfa owed rental and maintenance arrears of $0.7 million,
against which MSAF Group holds a security deposit of $0.6 million. In
April 2000 the Servicer instituted legal steps in Turkey to draw down
the guarantee and repossess the aircraft from Air Alfa. Since then the
airline has made certain payments towards reducing its arrears
balance. This aircraft, an A321-100, represented 2.0% of the portfolio
by appraised value at November 30, 1999.
Asia (Emerging)
MSAF Group currently leases 16.5% of the portfolio by appraised value
at November 30, 1999 in the Asia (Emerging) region. As of July 1,
2000, none of the lessees in this region were in arrears.
Latin America (Emerging)
MSAF Group currently leases 5.0% of the portfolio in Latin America
(all in Mexico) by appraised value at November 30, 1999. None of the
lessees currently in arrears are based in Latin America. However the
two aircraft repossessed during the quarter were leased in Latin
America and had been in arrears. See the Bad Debts Section below.
Other
MSAF Group currently leases 15.6% of the portfolio by appraised value
at November 30, 1999 in the Other region. Two of the five lessees
currently in arrears are based in the Other region.
As of July 1, 2000, one lessee, based in Iceland, owed rental and
maintenance reserves of $0.5 million, against which MSAF Group holds a
security deposit of $0.6 million. This is a B747-300 and represented
2.5% of the portfolio by appraised value at November 30, 1999. The
other lessee is based in Lithuania and as at July 1, 2000 maintenance
reserves of $0.1 million, against which MSAF Group holds a security
deposit of $0.7 million. This is a B737-300 and represented 1.0% of
the portfolio by appraised value at November 30, 1999. The lessee is
experiencing financial difficulties and its ability to meet future
payment obligations under the lease remain uncertain.
Page 27 of 29
<PAGE>
Bad Debts
In addition to the current arrears of $3.1 million and restructured
arrears of $0.7 million, as of July 1, 2000, $1.3 million of rental
and maintenance payments due to MSAF Group remain unpaid from one of
its former lessees.
<TABLE>
Analysis of Bad Debts Balance as of July 1, 2000
Repossession Date Aircraft Former Country Bad Debts Bad Debts Security Total
Type Lessee Total Recovered Deposits
$ M $ M $ M $ M
<S> <C> <C> <C> <C> <C> <C> <C>
May 2000 A310-300 B.R.A. Brazil (1.3) 0.0 0.0 (1.3)
May 2000 B737-300 VASP Brazil (0.5) 0.0 0.7 0.2
----------------------------------------
Total (1.8) 0.0 0.7 (1.1)
----------------------------------------
</TABLE>
A former Brazilian lessee, B.R.A., defaulted on its obligations under its
lease of an A310-300 aircraft and the aircraft was repossessed in May
2000. The lease was scheduled to expire in July 2007. The total amount of
rental payments due under the lease at the date of the repossession was
$1.3 million. There was no security deposit held by MSAF Group to offset
against the arrears balance. The aircraft is currently subject to a
non-binding letter of intent and is scheduled to deliver to a new lessee
in September 2000. This aircraft represents approximately 1.4% of the
portfolio by appraised value at November 30, 1999.
A second Brazilian lessee, VASP, defaulted on its obligations under its
lease of a B737-300 aircraft and the aircraft was repossessed on May 19,
2000 following legal proceedings against VASP. The lease was scheduled to
expire in March 2003. The total amount of rental payments due under the
lease at the date of the repossession was $0.5 million against which we
drew down a security deposit of $0.7 million. The aircraft is currently
subject to a non-binding letter of intent and is scheduled to deliver to a
new lessee in August 2000. This aircraft represents approximately 1.0% of
the portfolio by appraised value at November 30, 1999.
Note Payable
A former Brazilian lessee, VARIG, negotiated an early termination of its
lease of a B747-300 aircraft in July 1999. The total amount of rental
payments and maintenance reserves due under this lease, at the date of the
termination agreement, was $4.8 million against which we drew down a
security deposit of $1.1 million. Under the terms of the termination
agreement, VARIG is scheduled to repay $10.8 million over eight years to
offset arrears of $4.8 million and approximately $6.0 million for
maintenance and downtime costs. Provided no default has occurred by
October 2005 under this note payable, the total remaining payments will be
reduced by approximately $1.1 million on a pro-rata basis between October
2005 and October 2007, the scheduled final payment date under the note. As
of July 1, 2000 VARIG had made all payments due under the note payable.
This aircraft represents approximately 2.5% of the portfolio by appraised
value at November 30, 1999.
Insurance Claim
On April 2, 1999, one B757-200ER on lease to Guyana Airways was terminated
by agreement. Certain of the technical records were incomplete and/or
missing. An insurance claim under our Technical Records policy was
submitted in
Page 28 of 29
<PAGE>
respect of the maintenance work, repairs and services required to
reconstruct the technical records. The insurance claim was approved and
MSAF Group received $3.9 million in June 2000 to partially offset the
substantial maintenance costs incurred in the Guyana repossession.
Airworthiness Directive
On May 25, 2000, the United States Federal Aviation Administration issued
an Airworthiness Directive relating to fire safety standards in certain
types of aircraft. The Airworthiness Directive, which applies to our one
MD-82 and four MD-83 aircraft, together representing 4.8% of our portfolio
by appraised value at November 30, 1999, requires operators of those
aircraft to replace fire insulation blankets covered with metalized Mylar.
Under the leases of the affected aircraft, all costs of compliance with
Airworthiness Directives are the obligation of the lessees.
Page 29 of 29
<PAGE>
Morgan Stanley Aircraft Finance Appendix A
Portfolio Analysis
July 1, 2000
<TABLE>
Region (1) Country of Lessee Lessee Type
<S> <C> <C> <C> <C>
1 Europe France Air Liberte MD-83
2 (Developed) France L'Aeropostale B737-300QC
3 Ireland Aer Lingus A330-300
4 Ireland TransAer A320-200
5 Ireland TransAer A320-200
6 The Netherlands KLM Engine
7 The Netherlands KLM Cityhopper F50
8 The Netherlands KLM Cityhopper F50
9 The Netherlands Transavia B737-300
10 Norway Braathens B737-500
11 Norway Braathens B737-500
12 Spain Air Europa B737-400
13 United Kingdom Air 2000 B757-200ER
14 United Kingdom Air 2000 B767-300ER
15 United Kingdom Britannia B757-200ER
16 United Kingdom Britannia B767-200ER
17 United Kingdom JMC Airlines A320-200
18 United Kingdom JMC Airlines B757-200ER
19 United Kingdom Monarch A320-200
subtotal
20 North America Canada Canada 3000 A320-200
21 (Developed) Canada Air Canada A320-200
22 United States of America Alaska Airlines B737-400
23 United States of America Alaska Airlines B737-400
24 United States of America Continental B737-300
25 United States of America National Airlines B757-200ER
26 United States of America Southwest B737-300
27 United States of America Southwest B737-300
28 United States of America TWA B757-200ER
29 United States of America TWA MD-83
30 United States of America TWA MD-82
31 United States of America TWA MD-83
subtotal
32 Pacific Hong Kong Cathay Pacific B747-400
33 (Developed) New Zealand Air New Zealand B767-300ER
34 Singapore Regionair A310-300
35 Singapore Regionair A310-300
subtotal
36 Europe and Czech Republic Travel Service a.s., B737-400
37 Middle East Greece Olympic B737-400
38 (Emerging) Hungary Malev F70
39 Hungary Malev F70
40 Hungary Malev F70
41 Turkey Air Alfa A321-100
42 Turkey Pegasus B737-400
subtotal
43 Asia China China Hainan B737-300
44 (Emerging) South Korea Asiana B767-300ER
45 South Korea Asiana B767-300ER
46 South Korea Asiana B737-400
47 South Korea Asiana B737-400
48 Taiwan China Airlines A300-600R
49 Taiwan China Airlines A300-600R
50 Taiwan F.E.A.T. B757-200ER
subtotal
51 Latin America Mexico Aeromexico B757-200ER
52 (Emerging) Mexico Aeromexico MD-83
53 Mexico Mexicana B757-200ER
subtotal
54 Other Fiji Air Pacific B767-300ER
55 Iceland Icelandair B737-300
56 Iceland Air Atlanta Icelandic B747-300
57 Macau Air Macau A321-100
58 Malta Air Malta B737-300
59 Mauritius Air Mauritius A340-300
60 Lithuania Lithuanian Airlines B737-300
subtotal
61 Available for
lease AOG AOG A310-300
62 AOG AOG B737-300
subtotal
(1) Regions are defined according to the Morgan Stanley Capital
International designations
(Table to be continued)
<PAGE>
(Table continued)
Appraised
Value as of
Engine Serial Date of Nov 30, 1999 % of
Region (1) Configuration Number Manufacture ($MM) Fleet Regional
1 Europe JT8D-219 49822 Dec-88 19.1 1.0%
2 (Developed) CFM 56-3C1 23788 May-87 19.2 1.0%
3 CF6-80E1 54 Apr-94 80.0 4.0%
4 V2500-A1 414 May-93 30.6 1.5%
5 V2500-A1 428 May-94 32.1 1.6%
6 CF6-80C2B6F 704279 Jul-95 5.5 0.3%
7 PW100-125B 20233 Oct-91 6.2 0.3%
8 PW100-125B 20232 Oct-91 6.3 0.3%
9 CFM 56-3C1 27635 May-95 27.3 1.4%
10 CFM 56-3B1 25165 Apr-93 19.7 1.0%
11 CFM 56-3C1 26304 Sep-94 21.2 1.1%
12 CFM 56-3C1 24707 Jun-91 24.7 1.2%
13 RB211-535-E4 23767 Apr-87 29.7 1.5%
14 CF6-80C2B6F 26256 Apr-93 63.8 3.2%
15 RB211-535-E4-37 26266 Feb-93 41.2 2.1%
16 CF6-80A 23807 Aug-87 29.5 1.5%
17 V2500-A1 393 Feb-93 30.4 1.5%
18 RB211-535-E4-37 24367 Feb-89 31.7 1.6%
19 CFM 56-5A3 446 Oct-93 30.5 1.5%
subtotal 27.5%
20 North America CFM 56-5A3 397 Mar-93 30.8 1.5%
21 (Developed) CFM 56-5A3 279 Feb-92 29.9 1.5%
22 CFM 56-3C1 25104 May-93 26.6 1.3%
23 CFM 56-3C1 25105 Jul-93 26.6 1.3%
24 CFM 56-3B1 26309 Dec-94 26.3 1.3%
25 RB211-535-E4 24260 Dec-88 33.5 1.7%
26 CFM 56-3B1 23255 Jun-85 14.4 0.7%
27 CFM 56-3B1 23256 Jul-85 15.3 0.8%
28 PW 2037 28160 Jul-96 47.8 2.4%
29 JT8D-219 49657 Apr-88 19.6 1.0%
30 JT8D-217C 49825 Mar-89 17.8 0.9%
31 JT8D-219 49824 Mar-89 20.4 1.0%
subtotal 15.4%
32 Pacific RB211-252H2/19 24955 Sep-91 97.4 4.9%
33 (Developed) CF6-80C2B6 24875 Jun-91 57.0 2.9%
34 JT9D-7R4E1 409 Nov-85 22.3 1.1%
35 JT9D-7R4E1 410 Nov-85 22.7 1.1%
subtotal 10.0%
36 Europe and CFM 56-3B2 24234 Oct-88 21.9 1.1%
37 Middle East CFM 56-3C1 25371 Jan-92 25.1 1.3%
38 (Emerging) TAY MK620-15 11564 Dec-95 13.7 0.7%
39 TAY MK620-15 11565 Feb-96 14.3 0.7%
40 TAY MK620-15 11569 Mar-96 14.7 0.7%
41 V2530-A5 597 May-96 39.7 2.0%
42 CFM 56-3C1 26279 Jun-92 25.7 1.3%
subtotal 7.7%
43 Asia CFM 56-3C1 26295 Dec-93 25.5 1.3%
44 (Emerging) CF6-80C2B6F 24798 Oct-90 53.1 2.7%
45 CF6-80C2B6F 25132 Feb-92 60.1 3.0%
46 CFM 56-3C1 26291 Aug-93 27.6 1.4%
47 CFM 56-3C1 26308 Oct-94 27.9 1.4%
48 PW 4158 555 Mar-90 46.3 2.3%
49 PW 4158 625 Mar-92 51.1 2.6%
50 PW 2037 25044 May-91 37.5 1.9%
subtotal 16.4%
51 Latin America PW 2037 26272 Mar-94 41.4 2.1%
52 (Emerging) JT8D-219 53050 May-90 19.7 1.0%
53 PW 2040 24965 Mar-92 39.1 2.0%
subtotal 5.0%
54 Other CF6-80C2B4 26260 Sep-94 66.6 3.3%
55 CFM 56-3B2 23811 Oct-87 19.8 1.0%
56 CF6-80C2 24106 Apr-88 49.0 2.5%
57 V2530-A5 557 Dec-95 38.9 2.0%
58 CFM 56-3B2 25161 Feb-92 24.6 1.2%
59 CFM 56-5C3G 94 Mar-95 91.6 4.6%
60 CFM 56-3B2 24449 Apr-90 21.7 1.1%
subtotal 15.6%
61 Available for JT9D-7R4E1 437 Nov-86 27.6 1.4%
lease
62 CFM 56-3B2 24299 Nov-88 19.8 1.0%
subtotal 2.4%
----------------------------
Total 2,000.9 100.0% 100.0%
============================
Number of aircraft on lease 60
Number aircraft off-lease 2
Total number of aircraft 62
Number of lessees 41
Number of countries 25
Total developed 52.8%
Total emerging 29.2%
Total other 15.6%
Total AOG 2.4%
--------
100.0%
========
</TABLE>
<PAGE>
Morgan Stanley Aircraft Finance Appendix B
Comparison of Actual Cash Flows versus the 1998 Base Case for March 2000
<TABLE>
Amounts stated in millions of USD % of 1998 Base Case
----------------------------- -----------------------------
Actual Assumed Variance Actual Assumed Variance
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH COLLECTIONS
[1] Lease Rentals 12.2 12.2 (0.0) 100.0% 100.0% 0.0%
[2] - Renegotiated Leases (0.1) - (0.1) -0.8% 0.0% -0.8%
[3] - Rental Resets (0.4) - (0.4) -3.3% 0.0% -3.3%
----------------------------- -----------------------------
[4] Sum of [1]..[3] Contracted Lease Rentals 11.7 12.2 (0.5) 95.9% 100.0% -4.1%
[5] Movement in Current Arrears Balance 0.2 - 0.2 1.6% 0.0% 1.6%
less Net Stress-related Costs
[6] - Bad Debts - 0.0%
[7] - Security Deposits Drawn Down - 0.0%
[8] - Restructured Arrears (0.1) -0.8%
[9] - Aircraft on Ground ("AOG") (1.2) -9.8%
[10] - Other Leasing Income 0.3 2.5%
[11] - Repossession costs (0.1) -0.8%
----------------------------- -----------------------------
[12] Sum of [6]..[11] sub-total (1.1) (0.5) (0.6) -9.0% -4.5% -4.5%
[13] [4]+[5]+[12] Net Lease Rentals 10.8 11.7 (0.9) 88.5% 95.5% -7.0%
----------------------------- -----------------------------
[14] Interest Earned 0.1 0.1 (0.0) 0.8% 1.0% -0.2%
----------------------------- -----------------------------
[15] Drawings from Expense Account 1.2 - 1.2 9.8% 0.0% 9.8%
Maintenance Receipts 0.9 - 0.9 7.4% 0.0% 7.4%
Maintenance Expenditure (1.1) - (1.1) -9.0% 0.0% -9.0%
[16] Net Maintenance (0.2) - (0.2) -1.6% 0.0% -1.6%
[17] [13]+[14]+[15]+[16] Total Cash Collections 11.9 11.8 0.1 97.5% 96.5% 1.0%
--------------------------------------------------------------------------------------------------- -----------------------------
CASH EXPENSES
Aircraft Operating Expenses
[18] - Insurance - 0.0%
[19] - Re-leasing and other overheads (0.1) -0.8%
----------------------------- -----------------------------
[20] [18]+[19] sub-total (0.1) (0.4) 0.3 -0.3% -3.5% 3.2%
SG&A Expenses
[21] Aircraft Servicer Fees
- Base Fee (0.1) -1.3%
- Rent Collected Fee (0.1) -0.8%
- Rent Contracted Fee (0.1) -0.7%
- Incentive Fee - 0.0%
----------------------------- -----------------------------
[22] sub-total (0.3) (0.5) 0.2 -2.8% -4.1% 1.3%
- Cabot (0.1) (0.2) 0.1 -1.2% -1.4% 0.2%
- Other (0.1) (0.1) - -0.3% -1.0% 0.7%
----------------------------- -----------------------------
[23] Other Servicer Fees (0.2) (0.3) 0.1 -1.5% -2.4% 0.9%
[24] [22]+[23] sub-total (0.5) (0.8) 0.3 -4.3% -6.5% 2.2%
[25] [20] +[24] Total Cash Expenses (0.6) (1.2) 0.6 -4.6% -10.0% 5.4%
--------------------------------------------------------------------------------------------------- -----------------------------
NET CASH COLLECTIONS
[26] [17] Total Cash Collections 11.9 11.8 0.1 97.5% 96.5% 1.1%
[27] [25] Total Cash Expenses (0.6) (1.2) 0.6 -4.6% -10.0% 5.4%
[28] Accrued Expenses (0.8) - (0.8) -6.6% 0.0% -6.6%
[29] Interest Payments (4.9) (4.9) 0.0 -40.7% -40.7% 0.0%
[30] Swap Payments (0.4) (0.5) 0.1 -3.1% -3.2% 0.1%
[31] Exceptional Items - - - 0.0% 0.0% 0.0%
----------------------------- -----------------------------
[32] Sum of [26]..[31] TOTAL 5.2 5.2 0.0 42.6% 42.6% 0.0%
============================= =============================
--------------------------------------------------------------------------------------------------- -----------------------------
[33] PRINCIPAL PAYMENTS
subclass A1 - - - 0.0% 0.0% 0.0%
subclass A2 4.8 4.8 - 39.3% 39.3% 0.0%
subclass A3 - - - 0.0% 0.0% 0.0%
subclass A4 - - - 0.0% 0.0% 0.0%
subclass A5 - - - 0.0% 0.0% 0.0%
subclass B1 0.3 0.3 - 2.5% 2.5% 0.0%
subclass B2 - - - 0.0% 0.0% 0.0%
subclass C1 0.1 0.1 - 0.8% 0.8% 0.0%
subclass C2 - - - 0.0% 0.0% 0.0%
subclass D1 - - - 0.0% 0.0% 0.0%
----------------------------- -----------------------------
Total 5.2 5.2 - 42.6% 42.6% 0.0%
============================= =============================
--------------------------------------------------------------------------------------------------- -----------------------------
Debt Balances as at March 15, 2000
subclass A1 400.0 400.0 -
subclass A2 224.7 232.0 (7.3)
subclass B1 89.7 89.7 (0.0)
subclass C1 99.9 99.9 -
subclass D1 110.0 110.0 -
-----------------------------
TOTAL 924.3 931.6 (7.3)
=============================
</TABLE>
<PAGE>
Morgan Stanley Aircraft Finance Appendix C
Comparison of Actual Cash Flows versus the 2000 Base Case for April / May 2000
<TABLE>
Amounts stated in millions of USD % of 2000 Base Case
----------------------------- -----------------------------
Actual Assumed Variance Actual Assumed Variance
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH COLLECTIONS
[1] Lease Rentals 44.5 44.5 - 100.0% 100.0% 0.0%
[2] - Renegotiated Leases - - - 0.0% 0.0% 0.0%
[3] - Rental Resets - - - 0.0% 0.0% 0.0%
----------------------------- -----------------------------
[4] Sum of [1]..[3] Contracted Lease Rentals 44.5 44.5 - 100.0% 100.0% 0.0%
- -
[5] Movement in Current Arrears Balance (0.9) - (0.9) -2.0% 0.0% -2.0%
less Net Stress-related Costs
[6] - Bad Debts - - - 0.0%
[7] - Security Deposits Drawn Down - - - 0.0%
[8] - Restructured Arrears - - - 0.0%
[9] - Aircraft on Ground ("AOG") (0.7) - - -1.6%
[10] - Other Leasing Income (1.2) - - -2.7%
[11] - Repossession costs (0.1) - - -0.2%
----------------------------- -----------------------------
[12] Sum of [6]..[11] sub-total (2.0) (2.0) - -4.5% -4.5% 0.0%
[13] [4]+[5]+[12] Net Lease Rentals 41.6 42.5 (0.9) 93.5% 95.5% -2.0%
----------------------------- -----------------------------
[14] Interest Earned 0.6 0.4 0.2 1.3% 1.0% 0.3%
----------------------------- -----------------------------
[15] Drawings from Expense Account 5.1 - 5.1 11.5% 0.0% 11.5%
Maintenance Receipts 4.0 - 4.0 9.0% 9.0%
Maintenance Expenditure (7.1) - (7.1) -16.0% -16.0%
----------------------------- -----------------------------
[16] Net Maintenance (3.1) - (3.1) -7.0% 0.0% -7.0%
[17] [13]+[14]+[15]+[16] Total Cash Collections 44.2 42.9 99.3% 99.3% 2.8%
-------------------------------------------------------------------------------------------------- -----------------------------
CASH EXPENSES
Aircraft Operating Expenses
[18] - Insurance (0.2) -0.5%
[19] - Re-leasing and other overheads (0.1) -0.3%
----------------------------- -----------------------------
[20] [18]+[19] sub-total (0.3) (0.3) - -0.8% -0.8% 0.0%
SG&A Expenses
[21] Aircraft Servicer Fees
- Base Fee (0.5) -1.1%
- Rent Collected Fee (0.5) -1.1%
- Rent Contracted Fee (0.5) -1.1%
- Incentive Fee - 0.0%
----------------------------- -----------------------------
[22] sub-total (1.5) (1.5) - -3.4% -3.4% 0.0%
- Cabot (0.2) (0.2) - -0.4% -0.4% 0.0%
- Other (0.6) (0.2) (0.4) -1.3% -0.4% -0.9%
----------------------------- -----------------------------
[23] Other Servicer Fees (0.8) (0.4) (0.4) -1.7% -0.8% -0.9%
[24] [22]+[23] sub-total (2.3) (1.9) (0.4) -5.1% -4.2% -0.9%
[25] [20] +[24] Total Cash Expenses (2.6) (2.2) (0.4) -5.9% -5.0% -0.9%
-------------------------------------------------------------------------------------------------- -----------------------------
NET CASH COLLECTIONS
[26] [17] Total Cash Collections 44.2 42.9 1.3 99.3% 96.5% 2.8%
[27] [25] Total Cash Expenses (2.6) (2.2) (0.4) -5.9% -5.0% -0.9%
[28] Accrued Expenses (3.9) - (3.9) -8.8% 0.0% -8.8%
[29] Interest Payments (21.1) (20.9) (0.2) -47.4% -47.0% -0.4%
[30] Swap Payments (1.6) (1.8) 0.2 -3.6% -4.0% 0.4%
[31] Exceptional Items - - - 0.0% 0.0% 0.0%
----------------------------- -----------------------------
[32] Sum of [26]..[31] TOTAL 15.0 18.0 (3.0) 33.7% 40.5% -6.8%
============================= =============================
-------------------------------------------------------------------------------------------------- -----------------------------
[33] PRINCIPAL PAYMENTS
subclass A2 1.3 2.4 (1.1) 2.9% 5.4% -2.5%
subclass A3 - - - 0.0% 0.0% 0.0%
subclass A4 - - - 0.0% 0.0% 0.0%
subclass A5 12.5 14.4 (1.9) 28.1% 32.4% -4.3%
subclass B1 1.1 1.1 - 2.5% 2.5% 0.0%
subclass B2 - - - 0.0% 0.0% 0.0%
subclass C1 0.1 0.1 - 0.2% 0.2% 0.0%
subclass C2 - - - 0.0% 0.0% 0.0%
subclass D1 - - - 0.0% 0.0% 0.0%
----------------------------- -----------------------------
Total 15.0 18.0 (3.0) 33.7% 40.5% -6.8%
============================= =============================
-------------------------------------------------------------------------------------------------- -----------------------------
Debt Balances 15-May-00 15-May-00
------------- --------- ---------
subclass A2 223.4 222.3 1.1
subclass A3 580.0 580.0 -
subclass A4 200.0 200.0 -
subclass A5 387.5 385.6 1.9
subclass B1 88.6 88.6 -
subclass B2 75.0 75.0 -
subclass C1 99.8 99.8 -
subclass C2 55.0 55.0 -
subclass D1 110.0 110.0 -
------------------------------
TOTAL 1,819.3 1,816.3 3.0
------------------------------
-------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Morgan Stanley Aircraft Finance Appendix D
Debt Coverage Ratios
2nd Quarter - May 15, 2000
<TABLE>
-----------------------------------------------------------------------------------------------------------------------------
2000 Variance
Closing Actual Base Case
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Source of Funds
Net Cash Collections 15.0 18.0 (3.00)
Add Back Interest Payments 21.1 20.9 0.20
Add Back Swap Payments 1.6 1.8 (0.20)
----------- ----------- -----------
a 37.7 40.7 (3.00)
----------- ----------- -----------
Application of funds
b Swaps 1.6 1.8 (0.20)
c Class A Interest 15.6 15.4 0.20
d Class A Minimum 4.9 4.9 0.00
e Class B Interest 1.9 1.9 0.00
f Class B Minimum 1.0 1.0 0.00
g Class C Interest 2.0 2.0 0.00
h Class C Minimum - - 0.00
I Class D Interest 1.6 1.6 0.00
j Class D Minimum - - 0.00
k Class A Scheduled 0.1 0.1 0.00
l Class B Scheduled 0.1 0.1 0.00
m Class C Scheduled 0.1 0.1 0.00
n Class D Scheduled - - 0.00
o Permitted Aircraft Modifications - - 0.00
p Class A Supplemental 8.8 11.8 (3.00)
-------------------------------------------------
Total 37.7 40.7 (3.00)
-----------------------------------------------------------------------------------------------------------------------------
[1] Interest Coverage Ratio
Class A 2.19 2.37 = a / (b+c)
Class B 1.57 1.70 = a / (b+c+d+e)
Class C 1.40 1.51 = a / (b+c+d+e+f+g)
Class D 1.32 1.43 = a / (b+c+d+e+f+g+h+i)
[2] Debt Coverage Ratio
Class A 1.31 1.42 = a / (b+c+d+e+f+g+h+i+ j+k)
Class B 1.31 1.42 = a / (b+c+d+e+f+g+h+i+j+k+l)
Class C 1.30 1.41 = a / (b+c+d+e+f+g+h+i+j+k+l+m)
Class D 1.30 1.41 = a / (b+c+d+e+f+g+h+i+j+k+l+m+n)
----------------------------------------------------------------------------------------------------------------------------
Loan-to-Value Ratios 2000 Base Case Actual 2000 Base Case
15-Mar-00 15-May-00 15-May-00
------------------------------------------------------
[3] Assumed Portfolio Value 2,000.9 1,987.1 1,987.1
Cash 30.0 30.0 30.0
- Accrued Expenses 6.0 4.5 4.5
- Security Deposits 7.1 10.2 10.2
----------- ----------- -----------
subtotal cash 43.1 44.7 44.7
Letters of Credit 82.1 78.9 78.9
----------- ----------- -----------
Total Liquidity Reserve 125.2 123.6 123.6
[4] Total Asset Value 2,126.2 2,109.1 2,109.1
Note Balance
Class A 1,404.7 66.1% 1,390.9 65.9% 1,387.9 65.8%
Class B 164.7 73.8% 163.6 73.7% 163.6 73.6%
Class C 154.9 81.1% 154.8 81.0% 154.8 80.9%
Class D 110.0 86.3% 110.0 86.3% 110.0 86.1%
----------- ---------- -----------
Total 1,834.3 1,819.3 1,816.3
----------------------------------------------------------------------------------------------------------------------------
[1] Interest Coverage Ratio is equal to Net Cash Collections, before Interest and
swap payments, expressed as a ratio of the swap costs and interest payable on each subclass
of Notes plus the interest and minimum principal payments payable on each subclass
of Notes that rank senior in priority of payment to the relevant subclass of Notes.
[2] Debt Service Ratio is equal to Net Cash Collections before interest and swap payments,
expressed as a ratio of the interest and minimum and scheduled principal payments payable on
each subclass of Notes plus the interest and minimum and scheduled
principal payments payable on each subclass of Notes that ranks equally
with or senior to the relevant subclass of Notes in the priority of payments.
[3] Assumed Portfolio Value represents the Inital Appraised Value of each
aircraft in the Portfolio multipled by the Depreciation Factor at Calculation
date divided by the Depreciation Factor at Closing date.
[4] Total Asset Value is equal to Total Portfolio Value plus Liquidity
Reserve Amount.
</TABLE>
