MORGAN STANLEY AIRCRAFT FINANCE
Report to Noteholders
All amounts in US dollars unless otherwise stated
Month October-00
Payment Date 15th of each month
Convention Modified Following Business Day
Current Payment Date 16-Oct-00
Current Calculation Date 10-Oct-00
Previous Payment Date 15-Sep-00
Previous Calculation Date 11-Sep-00
--------------------------------------------------------------------------------
<TABLE>
1. Account Activity Summary between Calculation Dates
------------------------------------------------------------------------------------------------
Prior Deposits Withdrawals Balance on
Balance Calculation Date
11-Sep-00 10-Oct-00
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expense Account 2,054,880.49 3,960,338.25 (965,370.46) 5,049,848.28
Collection Account 26,610,194.97 21,752,876.28 (26,610,194.97) 21,752,876.28
Aircraft Purchase Account - - - -
Liquidity Reserve cash balance 48,359,891.00 1,200,000.00 - 49,559,891.00
----------------------------------------------------------------------------------------------
Total 77,024,966.46 26,913,214.53 (27,575,565.43) 76,362,615.56
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
2. Analysis of Expenses Account Activity
----------------------------------------------------------------------------------------------
<S> <C> <C>
Opening Balance on Previous Calculation Date 2,054,880.49
Transfer from Collection Account on previous Payment Date 3,939,325.10
Permitted Aircraft Accrual -
Interim Transfer from Collection Account -
Transfers from Aircraft Purchase Account -
Interest Income 21,013.15
Balance on current Calculation Date
- Payments on previous payment date (839,325.10)
- Interim payments (126,045.36)
- Other
----------------------------------------------------------------------------------------------
Balance on current Calculation Date 5,049,848.28
----------------------------------------------------------------------------------------------
3. Analysis of Collection Account Activity
----------------------------------------------------------------------------------------------
Opening Balance on Previous Calculation Date 26,610,194.97
Collections during period
- Lease rentals 18,523,301.49
- Maintenance reserves 2,873,646.65
- Other leasing income 1,710.65
- Interest income 354,217.49
- Lease rental received in error -
- 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 (3,939,325.10)
- Permitted Aircraft Modifications -
Net Swap payments on previous Payment Date 14,854.18
Aggregate Note Payments on previous Payment Date (22,685,724.05)
----------------------------------------------------------------------------------------------
Balance on current Calculation Date 21,752,876.28
----------------------------------------------------------------------------------------------
Analysis of Liquidity Reserve Amount
First Collection Account Reserve 30,000,000.00
Cash Held
- Accrued Expenses 5,049,848.28
- Security Deposits 19,559,891.00 24,609,739.28
Morgan Stanley Facility 30,000,000.00
ILFC Facility
- Letter of Credit 20,000,000.00
-Security Deposits 19,706,351.00 39,706,351.00
-----------------
Liquidity Reserve Amount 124,316,090.28
-----------------
Minimum Liquidity Reserve Amount 30,000,000.00
----------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 4
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
Report to Noteholders
All amounts in US dollars unless otherwise stated
Current Payment Date 16-Oct-00
Current Calculation Date 10-Oct-00
Previous Payment Date 15-Sep-00
Previous Calculation Date 11-Sep-00
<TABLE>
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance in Collection Account 21,752,876.28
Liquidity Reserve Amount 124,316,090.28
------------------
Available Collections 146,068,966.56
==================
3. Analysis of Collection Account Activity (Continued)
----------------------------------------------------------------------------------------------------------------
Analysis of Current Payment Date Distributions
(i) Required Expense Amount
- Servicer Fee 667,590.71
- Administration Agent Fee 114,151.26
- Other Service Providers 12,500.01
- Accrued Expenses 2,000,000.00
------------------
Total Required Expense Amount 2,794,241.98
(ii) a) Class A Interest but excluding Step-up 8,352,355.88
b) Swap Payments other than subordinated swap payments 247,612.48
(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 1,035,930.67
(vi) Class B Minimum principal payment 329,650.40
(vii) Class C Interest 1,012,125.00
(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 94,316,090.28
(xii) Class A Scheduled principal -
(xiii) Class B Scheduled principal 241,343.45
(xiv) Class C Scheduled principal 90,000.00
(xv) Class D Scheduled principal -
(xvi) Permitted accruals for Modifications
(xvii) Step-up interest -
(xviii) Beneficial interest -
(xix) Class A Supplemental principal 6,852,116.42
(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 146,068,966.56
less collection Account Top Ups (iii) (b) and (xi) (b) above 124,316,090.28
------------------
21,752,876.28
==================
</TABLE>
Page 2 of 4
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
Report to Noteholders
All amounts in US dollars unless otherwise stated
Current Payment Date 16-Oct-00
Current Calculation Date 10-Oct-00
Previous Payment Date 15-Sep-00
Previous Calculation Date 11-Sep-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> <C>
Applicable LIBOR 6.62125% 6.62125% 6.62125% 6.62125%
Applicable Margin 0.3500% 0.5200% 0.5400% 0.5800%
Applicable Interest Rate 6.97125% 7.14125% 7.16125% 7.20125%
Day Count Act/360 Act/360 Act/360 Act/360
Actual Number of Days 31 31 31 31
Interest Amount Payable 1,290,072.95 3,566,657.64 1,233,326.39 2,262,298.90
Step-up Interest Amount Payable NA NA NA NA
============ ============ ============ ============ ================
Total Interest Paid 1,290,072.95 3,566,657.64 1,233,326.39 2,262,298.90 8,352,355.88
------------------------------------------------------------------------------------------------------------
Expected Final Payment Date 15-Sep-05 15-Mar-02 15-Mar-03 15-Jun-08
Excess Amortization Date 15-Apr-98 15-Mar-02 15-Mar-03 15-Apr-00
------------------------------------------------------------------------------------------------------------
Original Balance 340,000,000.00 580,000,000.00 200,000,000.00 400,000,000.00
Opening Outstanding
Principal Balance 214,903,960.98 580,000,000.00 200,000,000.00 364,823,581.32 1,359,727,542.30
------------------------------------------------------------------------------------------------------------
Extended Pool Factors 77.21% 100.00% 100.00% 100.00%
Pool Factors 66.77% 100.00% 100.00% 92.01%
------------------------------------------------------------------------------------------------------------
Extension Amount - - - -
Pool Factor Amount - - - -
Surplus Amortisation 2,540,067.28 - - 4,312,049.14
------------------------------------------------------------------------------------------------------------
Total Principal
Distribution Amount 2,540,067.28 - - 4,312,049.14 6,852,116.42
------------------------------------------------------------------------------------------------------------
Redemption Amount
- amount allocable to principal
- amount allocable to premium
------------------------------------------------------------------------------------------------------------
Closing Outstanding
Principal Balance 212,363,893.70 580,000,000.00 200,000,000.00 360,511,532.18 1,352,875,425.88
------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------
Subclass Subclass Total
Floating Rate Notes B-1 B-2 Class B
---------------------------------------------------------------------------
Applicable LIBOR 6.6213% 6.6213%
Applicable Margin 0.6500% 1.0500%
Applicable Interest Rate 7.27125% 7.67125%
Day Count Act/360 Act/360
Actual Number of Days 31 31
Interest Amount Payable 540,545.32 495,385.35
Step-up Interest Amount Payable NA NA
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total Interest Paid 540,545.32 495,385.35 1,035,930.67
---------------------------------------------------------------------------
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 86,330,417.37 74,992,500.00 161,322,917.37
---------------------------------------------------------------------------
Extended Pool Factors 93.79% 100.00%
Pool Factors 89.72% 99.99%
---------------------------------------------------------------------------
Extension Amount - -
Pool Factor Amount - -
Surplus Amortisation 570,993.85 -
---------------------------------------------------------------------------
Total Principal
Distribution Amount 570,993.85 - 570,993.85
---------------------------------------------------------------------------
Redemption Amount
- amount allocable to principal
- amount allocable to premium
---------------------------------------------------------------------------
Closing Outstanding
Principal Balance 85,759,423.52 74,992,500.00 160,751,923.52
---------------------------------------------------------------------------
-------------------------------------------------------------------------- --------------
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 572,125.00 440,000.00 797,500.00
-------------------------------------------------------------------------- --------------
Total Interest Paid 572,125.00 440,000.00 1,012,125.00 797,500.00
-------------------------------------------------------------------------- --------------
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 99,500,000.00 55,000,000.00 154,500,000.00 110,000,000.00
-------------------------------------------------------------------------- --------------
Extended Pool Factors 100.00% 100.00% 100.00%
Expected Pool Factors 99.41% 100.00% 100.00%
-------------------------------------------------------------------------- --------------
Extended Amount - - -
Expected Pool Factor Amount 90,000.00 - -
Surplus Amortisation - -
-------------------------------------------------------------------------- --------------
Total Principal
Distribution Amount 90,000.00 - 90,000.00 -
-------------------------------------------------------------------------- --------------
Redemption Amount - - -
- amount allocable to principal - - -
- amount allocable to premium - - -
-------------------------------------------------------------------------- --------------
Closing Outstanding
Principal Balance 99,410,000.00 55,000,000.00 154,410,000.00 110,000,000.00
-------------------------------------------------------------------------- --------------
</TABLE>
Page 3 of 4
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
Report to Noteholders
All amounts in US dollars unless otherwise stated
Current Payment Date 16-Oct-00
Current Calculation Date 10-Oct-00
Previous Payment Date 15-Sep-00
Previous Calculation Date 11-Sep-00
--------------------------------------------------------------------------------
5. Floating Rate Note information for next Interest Accrual Period
Start of Interest Accrual Period 16-Oct-00
End of Interest Accrual Period 15-Nov-00
Reference Date 13-Nov-00
<TABLE>
-----------------------------------------------------------------------------------------------------------------------
A-2 A-3 A-4 A-5 B-1 B-2
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Applicable LIBOR 6.62000% 6.62000% 6.62000% 6.62000% 6.62000% 6.62000%
Applicable Margin 0.3500% 0.5200% 0.5400% 0.5800% 0.6500% 1.0500%
Applicable Interest Rate 6.9700% 7.1400% 7.1600% 7.2000% 7.2700% 7.6700%
Actual Pool Factor 62.46% 100.00% 100.00% 90.13% 85.76% 99.99%
--------------------------------------------------------------------------------
Fixed Rate Notes C-1 C-2 D-1
--------------------------------------------------------------------------------
Actual Pool Factor 99.41% 100.00% 100.00%
</TABLE>
6. Payments per $ 100,000 Initial Outstanding Principal Balance of Notes
<TABLE>
---------------------------------------------------------------------------------------------------------------------------
(a) Floating Rate Notes A-2 A-3 A-4 A-5 B-1 B-2
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Opening Outstanding Principal Balance 63,207.05 100,000.00 100,000.00 91,205.90 86,330.42 99,990.00
Total Principal Payments 747.08 - - 1,078.01 570.99 -
Closing Outstanding Principal Balance 62,459.97 100,000.00 100,000.00 90,127.88 85,759.42 99,990.00
Total Interest 379.43 614.94 616.66 565.57 540.55 660.51
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 99,500.00 100,000.00 100,000.00
Total Principal Payments 90.00 - -
Closing Outstanding Principal Balance 99,410.00 100,000.00 100,000.00
Total Interest 572.13 800.00 725.00
Total Premium - - -
-----------------------------------------------------------------------------------
</TABLE>
Page 4 of 4
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
Cumulative Performance to Date - March 15, 2000 to October 15, 2000
all amounts in millions of US dollars unless otherwise stated
<TABLE>
All amounts in millions of
US dollars unless
otherwise stated
-----------------------------------------------------------------------------------------------------------------------------------
Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Cumulative to Date
Actual Base Case Variance
-----------------------------------------------------------------------------------------------------------------------------------
CASH COLLECTIONS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[1] Lease Rentals 26.3 18.2 22.7 17.0 18.2 22.7 17.5 142.5 142.5 (0.0)
[2] - Renegotiated Leases 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 - 0.0
[3] - Rental Resets - - - 0.0 0.0 0.0 0.0 0.1 - 0.1
---------------------------------------------------------------------------------------
[4] Sum [1]..[3] Contracted Lease Rentals 26.3 18.2 22.7 17.0 18.2 22.7 17.5 142.6 142.5 0.1
[5] Movement in Current
Arrears Balance (0.3) (0.5) 0.7 (0.3) 0.4 (0.7) 0.4 (0.3) - (0.3)
less Net Stress-related
Costs
[6] - Bad Debts - - (1.8) - - - - (1.8)
[7] - Security Deposits
Drawn Down - - 0.7 - - - - 0.7
[8] - Restructured Arrears - - - - - - - -
[9] - AOG (0.3) (0.3) (0.7) (0.5) (0.5) (0.5) (0.5) (3.6)
[10] - Other Leasing Income (1.5) 0.4 0.6 6.6 (1.5) 1.1 1.1 7.0
[11] - Repossession Costs (0.0) (0.1) (0.1) (0.1) (0.1) (0.1) - (0.4)
---------------------------------------------------------------------------------------
[12] Sum [6]..[11] sub-total (1.9) 0.0 (1.3) 6.0 (2.2) 0.5 0.6 1.9 (6.4) 8.3
[13] [4]+[5]+[12] Net Lease Rentals 24.1 17.7 22.1 22.7 16.4 22.6 18.5 144.2 136.1 8.0
[14] Interest Earned 0.2 0.3 0.4 0.3 0.4 0.4 0.4 2.4 1.4 1.0
Maintenance Receipts 1.9 2.1 2.4 2.3 2.1 3.6 2.9 17.3 - 17.3
Maintenance Payments (3.1) (4.2) (5.3) (2.0) (3.0) (1.8) (0.0) (19.5) - (19.5)
---------------------------------------------------------------------------------------
[15] Net Maintenance (1.2) (2.1) (3.0) 0.3 (0.9) 1.8 2.8 (2.1) - (2.1)
[16] Sum [13]..[15] Total Cash Collections 23.2 15.9 19.5 23.4 15.9 24.8 21.7 144.4 137.6 6.9
-----------------------------------------------------------------------------------------------------------------------------------
CASH EXPENSES
Aircraft Operating
Expenses
[17] - Insurance (0.2) - (0.0) - (0.1) (0.1) (0.1) (0.6)
[18] - Re-leasing and other
overheads (0.1) (0.1) (0.1) (0.0) - (0.1) (0.0) (0.2)
---------------------------------------------------------------------------------------
[19] [17]+[18] sub-total (0.3) (0.1) (0.1) (0.0) (0.1) (0.2) (0.1) (0.8) (1.1) 0.3
SG&A Expenses
Aircraft Servicer Fees
- Base Fee (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (1.7) (1.7) 0.0
- Rent Collected Fee (0.3) (0.2) (0.3) (0.3) (0.2) (0.3) (0.3) (1.8) (1.7) (0.0)
- Rent Contracted Fee (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.1) (1.4) (1.4) 0.1
- Incentive Fee - - - - - - - - - -
---------------------------------------------------------------------------------------
[20] sub-total (0.8) (0.6) (0.7) (0.7) (0.6) (0.7) (0.7) (4.9) (4.9) 0.0
Other Servicer Fees
Cabot (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.7) (0.7) 0.0
Other Service Providers (0.7) (0.0) (0.4) (0.0) (0.1) (0.0) (0.0) (1.3) (0.4) (0.8)
---------------------------------------------------------------------------------------
[21] sub-total (0.8) (0.1) (0.5) (0.1) (0.1) (0.1) (0.1) (1.9) (1.1) (0.8)
[22] S [19]..[21] Total Cash Expenses (1.9) (0.8) (1.3) (0.8) (0.9) (1.1) (0.9) (7.6) (7.1) (0.5)
-----------------------------------------------------------------------------------------------------------------------------------
NET CASH COLLECTIONS
[23] [16] Total Cash Collections 23.2 15.9 19.5 23.4 15.9 24.8 21.7 144.4 137.6 6.9
[24] [22] Total Cash Expenses (1.9) (0.8) (1.3) (0.8) (0.9) (1.1) (0.9) (7.6) (7.1) (0.5)
[25] Drawings from Expense
Account 4.1 4.6 5.9 2.0 3.3 2.1 0.1 22.1 - 22.1
[26] Transfer to Expense
Account (0.9) (6.4) (4.1) (2.5) (4.2) (3.1) (2.0) (23.3) - (23.3)
[27] Interest Payments (11.2) (9.9) (11.3) (11.7) (10.7) (11.3) (11.2) (77.3) (72.5) (4.7)
[28] Swap Payments (0.6) (1.0) (0.1) (0.2) 0.0 0.0 (0.2) (2.1) (6.1) 4.0
[29] Exceptional Items - - - - - - - - - -
---------------------------------------------------------------------------------------
[30] Sum [23..[29] TOTAL 12.7 2.3 8.6 10.2 3.5 11.4 7.5 56.2 51.9 4.4
=======================================================================================
-----------------------------------------------------------------------------------------------------------------------------------
[31] PRINCIPAL PAYMENTS
subclass A2 1.1 0.1 1.0 3.2 1.1 3.3 2.5 12.3 11.2 1.1
subclass A3 - - - - - - - - - -
subclass A4 - - - - - - - - - -
subclass A5 10.9 1.6 7.1 6.3 1.8 7.5 4.3 39.5 36.3 3.2
subclass B1 0.6 0.6 0.6 0.6 0.6 0.6 0.6 4.0 4.0 0.0
subclass B2 - - - - - 0.0 - 0.0 0.0 -
subclass C1 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.5 0.5 (0.0)
subclass C2 - - - - - - - - - -
subclass D1 - - - - - - - - - -
-----------------------------------------------------------------------------------------
Total 12.7 2.3 8.6 10.2 3.5 11.4 7.5 56.2 51.9 4.4
=========================================================================================
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
Debt Balances
subclass A2 224.7 223.5 223.4 222.5 219.3 218.2 214.9 212.4 212.4 213.5 1.1
subclass A3 580.0 580.0 580.0 580.0 580.0 580.0 580.0 580.0 580.0 580.0 -
subclass A4 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0 -
subclass A5 400.0 389.1 387.5 380.4 374.1 372.3 364.8 360.5 360.5 363.7 3.2
subclass B1 89.7 89.1 88.6 88.0 87.5 86.9 86.3 85.8 85.8 85.8 0.0
subclass B2 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 -
subclass C1 99.9 99.8 99.8 99.7 99.7 99.6 99.5 99.4 99.4 99.4 (0.0)
subclass C2 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 -
subclass D1 110.0 110.0 110.0 110.0 110.0 110.0 110.0 110.0 110.0 110.0 -
----------------------------------------------------------------------------------------------------------
TOTAL 1,834.3 1,821.6 1,819.3 1,810.6 1,800.5 1,797.0 1,785.6 1,778.0 1,778.0 1,782.4 4.4
=====================================================================================================
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[Financial Data -- To be continued]
<PAGE>
[Financial Data -- Continued]
<TABLE>
Dollar amounts expressed as
a percentage 2000 Base Case
Lease Rentals
-------------------------------------------------------------------------------
Cumulative to Date
Actual Base Case Variance
-------------------------------------------------------------------------------
CASH COLLECTIONS
<S> <C> <C> <C>
[1] Lease Rentals 100.0% 0.0% 0.0%
[2] - Renegotiated Leases 0.0%
[3] - Rental Resets 0.1%
-------------------------------
[4] Sum [1]..[3] Contracted Lease Rentals 100.1% 100.0% 100.0%
[5] Movement in Current
Arrears Balance -0.2% 0.0% -0.2%
less Net Stress-related
Costs
[6] - Bad Debts -1.3%
[7] - Security Deposits
Drawn Down 0.5%
[8] - Restructured Arrears 0.0%
[9] - AOG -2.5%
[10] - Other Leasing Income 4.9%
[11] - Repossession Costs -0.3%
-------------------------------
[12] Sum [6]..[11] sub-total 1.3% -4.5% 5.8%
[13] [4]+[5]+[12] Net Lease Rentals 101.1% 95.5% 5.6%
[14] Interest Earned 1.7% 1.0% 0.7%
Maintenance Receipts 12.1% 0.0% 12.1%
Maintenance Payments -13.6% 0.0% -13.6%
-------------------------------
[15] Net Maintenance -1.5% 0.0% -1.5%
[16] Sum [13]..[15] Total Cash Collections 101.3% 96.5% 4.8%
-------------------------------
CASH EXPENSES
Aircraft Operating
Expenses
[17] - Insurance -0.4%
[18] - Re-leasing and other
overheads -0.2%
-------------------------------
[19] [17]+[18] sub-total -0.6% -0.8% 0.2%
SG&A Expenses
Aircraft Servicer Fees
- Base Fee -1.2% -1.2% 0.0%
- Rent Collected Fee -1.2% -1.2% 0.0%
- Rent Contracted Fee -1.0% -1.0% 0.0%
- Incentive Fee 0.0% 0.0% 0.0%
-------------------------------
[20] sub-total -3.4% -3.4% 0.0%
Other Servicer Fees
Cabot -0.5% -0.5% 0.0%
Other Service Providers -0.9% -0.3% -0.6%
-------------------------------
[21] sub-total -1.4% -0.8% -0.6%
[22] S [19]..[21] Total Cash Expenses -5.3% -5.0% -0.3%
-------------------------------
NET CASH COLLECTIONS
[23] [16] Total Cash Collections 101.3% 96.5% 4.8%
[24] [22] Total Cash Expenses -5.3% -5.0% -0.3%
[25] Drawings from Expense
Account 15.5% 0.0% 15.5%
[26] Transfer to Expense
Account -16.4% 0.0% -16.4%
[27] Interest Payments -54.2% -50.9% -3.3%
[28] Swap Payments -1.5% -4.3% 2.8%
[29] Exceptional Items 0.0% 0.0% 0.0%
-------------------------------
[30] Sum [23..[29] TOTAL 39.5% 36.4% 3.1%
===============================
[31] PRINCIPAL PAYMENTS
subclass A2 8.6% 7.8% 0.8%
subclass A3 0.0% 0.0% 0.0%
subclass A4 0.0% 0.0% 0.0%
subclass A5 27.7% 25.4% 2.3%
subclass B1 2.8% 2.8% 0.0%
subclass B2 0.0% 0.0% 0.0%
subclass C1 0.3% 0.3% 0.0%
subclass C2 0.0% 0.0% 0.0%
subclass D1 0.0% 0.0% 0.0%
-------------------------------
Total 39.5% 36.4% 3.1%
===============================
</TABLE>
<TABLE>
Actual 2000 Base Case Variance
------ -------------- --------
<S> <C> <C> <C>
Source of Funds
Net Cash Collections 56.2 51.9 4.3
Add Back Interest 77.3 72.5 4.8
Add Back Swap Payments 2.1 6.1 (4.0)
------- ------- -------
a 135.6 130.5 5.1
------- ------- -------
Application of Funds
b Swap Payments 2.1 6.1 (4.0)
c Class A Interest 57.5 53.2 4.3
d Class A Minimum 5.8 4.8 1.0
e Class B Interest 7.1 6.6 0.5
f Class B Minimum 2.9 2.9 -
g Class C Interest 7.1 7.1 -
h Class C Minimum - - -
I Class D Interest 5.6 5.6 -
j Class D Minimum - - -
k Class A Scheduled 0.8 0.2 0.6
l Class B Scheduled 1.0 1.0 -
m Class C Scheduled 0.5 0.5 -
n Class D Scheduled - - -
o Permitted Aircraft Modifications - - -
p Class A Supplemental 45.2 42.5 2.7
------- ------- -------
135.6 130.5 5.1
------- ------- -------
-----------------------------------------------------------------------------------------------------------------------------------
[1] Interest Coverage Ratio
Class A 2.28 2.20 = a / (b+c)
Class B 1.87 1.85 = a / (b+c+d+e)
Class C 1.64 1.62 = a / (b+c+d+e+f+g)
Class D 1.54 1.51 = a / (b+c+d+e+f+g+h+i)
[2] Debt Coverage Ratio
Class A 1.53 1.51 = a / (b+c+d+e+f+g+h+i+j+k)
Class B 1.51 1.49 = a / (b+c+d+e+f+g+h+i+j+k+l)
Class C 1.50 1.48 = a / (b+c+d+e+f+g+h+i+j+k+l+m)
Class D 1.50 1.48 = a / (b+c+d+e+f+g+h+i+j+k+l+m+n)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Loan-to-Value Ratios 2000 Base Case Actual 2000 Base Case
15-Mar-00 15-Oct-00 15-Oct-00
--------- --------- ---------
<S> <C> <C> <C> <C>
[3] Assumed Portfolio Value 2,000.9 1,952.3 1,952.3
Liquidity Reserve Amount
- Cash 30.0 30.0 30.0
- Accrued Expenses 6.0 7.0 7.0
- Security Deposits 7.1 19.6 19.6
------- ------- -------
subtotal cash 43.1 56.6 56.6
- Letters of Credit 82.1 69.5 69.5
------- ------- -------
Total Liquidity Reserve 125.2 126.1 126.1
[4] Total Asset Value 2,126.1 2,078.4 2,078.4
Note Balance
Class A 1,404.7 66.1% 1,352.9 65.6% 1,357.3 65.6%
Class B 164.7 73.8% 160.8 73.3% 160.7 73.3%
Class C 154.9 81.1% 154.4 80.7% 154.4 80.7%
Class D 110.0 86.3% 110.0 86.0% 110.0 86.0%
------- ------- -------
Total 1,834.3 1,778.0 1,782.4
</TABLE>
<PAGE>
[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 Coverage 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 Initial Appraised Value of each
aircraft in the Portfolio multiplied 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>
--------------------------------------------------------------------------------
Note: Report Line Name Description
--------------------------------------------------------------------------------
CASH COLLECTIONS
[1] Lease Rentals Assumptions per the March 2000 Prospectus,
the "2000 Base Case".
[2] - Renegotiated Loss in rental revenue caused by a lessee
Leases negotiating a reduction in the lease
rental.
[3] - Rental Resets Loss in rental when new lease rates are
lower than those assumed in the 2000 Base
Case.
[4] S[1]..[3] Contracted Lease Current Contracted Lease Rentals less
Rentals adjustments for renegotiated leases and
rental resets.
[5] Movement in Current Current Contracted Lease Rentals not
Arrears Balance received as at the latest Calculation
Date, excluding Bad Debts.
less Net Stress-related Costs
[6] - Bad Debts Rental Arrears owed by lessees who have
defaulted and which are deemed
irrecoverable.
[7] - Security Deposits Amounts drawn down from Security Deposits
Drawn Down to offset arrears or Bad Debts.
[8] - Restructured Arrears Current Arrears that have been capitalized
and restructured into a note payable.
[9] - AOG Base Case lease rental lost when an air-
craft is off-lease and non-revenue
earning.
[10] - Other Leasing Income Includes lease termination payments,
rental guarantees and late payments
charges.
[11] - Repossession Costs Legal and technical costs incurred as a
result of repossessing an aircraft.
[12] S[6]..[11] sub-total
[13] Net Lease Rentals Contracted Lease Rentals less Movement in
[4]+[5]+[12] Current Arrears Balance and Net Stress
related costs
[14] Interest Earned Interest earned on monthly cash balances
held in Collection and Expense Accounts.
[15] Net Maintenance Maintenance Revenue Reserve received less
any reimbursements paid to lessees.
[16] Total Cash Collections Net Lease Rentals + Interest Earned +
S[14]..[16] Net Maintenance
--------------------------------------------------------------------------------
CASH EXPENSES
Aircraft Operating All operational costs related to the
Expenses leasing of aircraft.
[17] - Insurance Premium for contingent insurance policies.
[18] - Re-leasing and other Miscellaneous re-delivery and leasing
overheads costs associated with re-leasing events.
[19] [17]+[18] sub-total
SG&A Expenses All fees paid to the Aircraft Servicer and
to other service providers.
[20] Aircraft Servicer Fees Monthly and annual fees paid to the Air-
craft Servicer, ILFC.
- Base Fee Fixed amount per month per aircraft and
changes only as aircraft are acquired or
sold.
- Rent Collected Fee Amount equal to approximately 1.25% of
rentals received during the previous
calendar month.
- Rent Contracted Fee Amount equal to 1.00% of rentals
contracted in the current calendar month.
- Incentive Fee Annual fee paid to Servicer for per-
formance above an annually agreed target.
[21] Other Servicer Fees Fees paid to other service providers
including the Administrative Agent,
Financial Advisor and Independent Trustees
[22] Total Cash Expenses Aircraft Operating Expenses + SG&A
S [19]..[21] Expenses
--------------------------------------------------------------------------------
NET CASH COLLECTIONS
[23] [16] Total Cash Collections as per line 17 above.
[24] [22] Total Cash Expenses as per line 24 above.
[25] Drawings from Expense Cash drawn from the Expense Account and
Account used to pay for expenses during the
period.
[26] Transfer to Expense Cash set aside in the Expense Account to
Account pay for future expected expense
obligations.
[27] Interest Payments Interest Payments to Noteholders on all
outstanding debt.
[28] Swap Payments Net Swap Payments (paid) / received.
[29] Exceptional Items Cash flows that occur infrequently and are
outside the normal business activities of
MSAF Group.
[30] TOTAL
S [24]...[29]
--------------------------------------------------------------------------------
[31] PRINCIPAL PAYMENTS Principal Payments to Noteholders.
<PAGE>
MORGAN STANLEY AIRCRAFT FINANCE
Cash Analysis of Financial Condition and Results of Operations
Three Month Period from June 2000 to August 2000
Page 1 of 18
<PAGE>
CONTENTS
I Background and General Information
II Comparison of Actual Cash Flows versus the 2000 Base Case for the Third
Quarter 2000
III Other Financial Data
IV Recent Developments
Appendices
Page 2 of 18
<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 as 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, the New 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 of the acquisition, the overall size of MSAF's 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 October 1, 2000, MSAF had 61
lease contracts in effect with 41 lessees based in 25 countries and one
aircraft was off-lease as shown in Appendix A.
Management Discussion and Analysis
The discussion and analysis that follows in Section II and III are based on the
results of MSAF and its subsidiaries as a single entity (collectively the "MSAF
Group") for the Third Quarter 2000 and relates to the combined portfolio of 61
aircraft plus an engine.
For the purposes of this report, the "Third Quarter 2000", discussed in Section
II shall comprise information from the monthly cash reports dated June 15, 2000
to August 15, 2000. The financial data in this report includes cash receipts
from May 10, 2000 (first day of the Collection Period for the June 2000 Report)
up to August 9, 2000 (last day of the Collection Period for the August 2000
Report). It also includes payments made by MSAF Group between May 16, 2000 and
up to August 15, 2000 (the Note Payment Date for the August 2000 Report).
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
Page 3 of 18
<PAGE>
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 18
<PAGE>
II Comparison of Actual Cash Flows versus the 2000 Base Case for the
Third Quarter 2000
The March 8, 2000 Offering Memorandum for the New Notes contains 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, Drawings from and Transfers to
Expense Account, Interest Payments, Swap Payments and Exceptional Items. A
discussion of the Cash Collections, Cash Expenses, Drawings from and Transfers
to Expense Account, 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, and Net Maintenance.
Cash Collections Actual Base Case Variance
$ MM $ MM $ MM
Lease Rentals 57.9 57.9 -
- Renegotiated Leases - - -
- Rental Resets - - -
-----------------------------
Contracted Lease Rentals 57.9 57.9 -
Movement in Current Arrears Balance 0.1 - 0.1
Net Stress-related Costs 3.2 (2.7) 5.9
-----------------------------
Net Lease Rentals 61.2 55.2 6.0
Interest Earned 1.1 0.6 0.5
Net Maintenance (3.5) - (3.5)
------------------------------
Total Cash Collections 58.8 55.8 3.0
------------------------------
In the Third Quarter 2000, MSAF Group generated approximately $58.8 million in
Total Cash Collections, $3.0 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 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. No lease was renegotiated during the Third
Quarter 2000.
[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 2000 Base Case. In the Third
Quarter 2000, one
Page 5 of 18
<PAGE>
new lease was written. To compensate for a short lease term (4 months),
the lease rate was above market, resulting in a small increase over the
2000 Base Case assumptions for this aircraft. See Section IV - "Recent
Developments" for a discussion of current re-leasing events as of October
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 the Third Quarter 2000,
Contracted Lease Rentals were $57.9 million, the same as assumed in the
2000 Base Case.
[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 end of the Second Quarter 2000
(payment date of May 15, 2000) was $0.9 million versus $0.8 million at the
end of the Third Quarter 2000, a decrease in arrears of $0.1 million.
Aircraft Type Country Current Current Movement in Security
Arrears Arrears in Current Deposits
5/15/00 8/15/00 Arrears Held
$ MM $ MM $ MM $ MM
A310-300 Brazil 0.7 0.0 (0.7) -
B737-300 USA 0.2 0.0 (0.2) -
A320-200 Ireland 0.0 0.7 0.7 1.0
Engine Netherlands 0.0 0.1 0.1 0.1
--------------------------------------------
Total 0.9 0.8 (0.1) 1.1
--------------------------------------------
As of the Noteholders Report on August 15, 2000, two lessees were in
arrears, owing $0.8 million, against which MSAF Group held security
deposits of $1.1 million. See Section IV - "Recent Developments" for a
discussion of Current Arrears as of October 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 2000 Base Case assumed Net Stress-related Costs equal to 4.5%
of the 2000 Base Case Lease Rentals.
Net Stress-related Costs Actual Base Case Variance
$ MM $ MM $ MM
Bad Debts
(1.8)
Security Deposits Drawn Down 0.7
Restructured Arrears
AOG
Other Leasing Income 6.4
Repossession Costs (0.3)
--------------------------------------
Net Stress-related Costs 3.2 (2.7) 5.9
--------------------------------------
Page 6 of 18
<PAGE>
For the Third Quarter 2000, Net Stress-related Costs amounted to positive
income of $3.2 million. A detailed analysis of Net Stress-related Costs is
provided below in line items [6] to [11].
[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 the Third Quarter 2000, rental arrears associated
with two lessees were deemed irrecoverable and classified as Bad Debts.
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 repossession was $1.3
million. There was no security deposit held by MSAF Group to offset
against the arrears balance.
A second Brazilian lessee, VASP, defaulted on its obligations under its
lease of a B737-300 aircraft and the aircraft was repossessed in May 2000
following legal proceedings against VASP. The lease was scheduled to
expire in March 2003. The total rental payments due under the lease at the
date of repossession totaled $0.5 million. A security deposit of $0.7
million, held by MSAF Group, was drawn down against this lessee, covering
the arrears and a portion of the expenditure incurred in returning the
aircraft to a deliverable condition.
[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 the Third
Quarter 2000. See Section IV - "Recent Developments" for information on
the current level of Restructured Arrears as of October 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 the Third Quarter 2000
Aircraft Type Old Lessee New Lessee Lost Rental
$ MM
1 A310-300 B.R.A. Region Air 0.9
2 B737-300 VASP - 0.7
3 B737-400 TAESA Travel Service 0.2
------------
Total 1.8
------------
The impact of AOG downtime amounted to lost rental of $1.8 million
during the Third Quarter 2000. This was in respect of three aircraft,
one A310-300 (previously on lease to B.R.A.), one B737-300 (previously
on lease to VASP) and one B737-400 (previously on lease to TAESA). All
three leases were terminated early and the aircraft repossessed. See
Section IV - "Recent Developments" for an analysis of AOG Costs as of
October 1, 2000.
Page 7 of 18
<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,
default interest or payment for excess flight hours flown. In the Third
Quarter 2000, Other Leasing Income amounted to $6.4 million. This mainly
related to $4.0 million received in respect of an insurance claim
submitted for the maintenance work, repairs and services required to
reconstruct the technical records following repossession of a B757-200
aircraft from Guyana Airways. The remainder consisted of $2.1 million
received against arrears due before the New Issuance Date (March 15,
2000) and $0.3 million received from a lessee in respect of the fee
payable upon exercise of an early termination option.
[11] Repossession Costs
Repossession Costs consist of legal and aircraft technical costs
incurred as a result of repossessing an aircraft. In the Third Quarter
2000, Repossession Costs amounted to $0.3 million, which primarily
related to consultancy and legal fees incurred during the repossession
of the A310-300 previously on lease to B.R.A. and repossession of the
B737-300 previously on lease to VASP.
[13] Net Lease Rentals
Net Lease Rentals is Contracted Lease Rentals plus the Movement in
Current Arrears Balance less Net Stress-related Costs. In the Third
Quarter 2000, Net Lease Rentals amounted to $61.2 million, $6.0 million
greater than assumed in the 2000 Base Case. The variance was primarily
attributable to the increase in Other Leasing Income, which is discussed
above in line item [10].
[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 the Third Quarter 2000 consisted of the cash liquidity reserve amount
of $30.0 million, lessee Security Deposits of $18.3 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
three-month period was 6.50%, 53 basis points greater than the 5.97%
assumed in the 2000 Base Case. In the Third Quarter 2000, Interest
Earned amounted to $1.1 million, $0.5 million more than assumed in the
2000 Base Case. The difference was due primarily to a higher interest
rate and interest earned on Other Leasing Income received during the
Third Quarter 2000.
[15] Net Maintenance
Net Maintenance refers to maintenance receipts less any maintenance
reimbursements paid to lessees. In the Third Quarter 2000, actual
maintenance receipts amounted to $6.8 million while maintenance
expenditure amounted to $10.3 million, generating negative Net
Maintenance of $3.5 million.
Maintenance expenditure included costs incurred in the overhaul of two
A310-300 airframes previously on lease to Oman air ($2.4 million), the
overhaul of one B737-400 airframe previously on lease to TAESA ($1.0
million), the
Page 8 of 18
<PAGE>
reimbursement from reserves for the overhaul of five engines ($6.2
million) and two C-Checks ($0.7 million). The 2000 Base Case made no
assumptions for Net Maintenance as it assumed 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.
CASH EXPENSES
"Total Cash Expenses" include Aircraft Operating Expenses and SG&A Expenses. In
the Third Quarter 2000, Total Cash Expenses were $3.0 million, the same as
assumed in the 2000 Base Case, which assumed these costs to be 5.0% of the 2000
Base Case Lease Rentals.
Cash Expenses Actual Base Case Variance
$ MM $ MM $ MM
Aircraft Operating Expenses (0.2) (0.5) 0.3
SG&A Expenses (2.8) (2.5) (0.3)
--------------------------------------
Total Cash Expenses (3.0) (3.0) -
--------------------------------------
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 the Third Quarter 2000, Aircraft Operating Expenses amounted
to $0.2 million, $0.3 million less than the 2000 Base Case, which assumed these
costs to be 0.8% of the 2000 Base Case Lease Rentals.
[17] Insurance
Insurance costs of $0.1 million were incurred in the Third Quarter 2000
and related to the payment of the quarterly premium in respect of the
aircraft contingent insurance program.
[18] 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 the Third
Quarter 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 the Third Quarter 2000, SG&A Expenses were $2.8 million, $0.3
million higher than assumed in the 2000 Base Case. The variance is described
below in line items [20] and [21].
[20] 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 the Third Quarter 2000, the total Aircraft Servicer Fees paid was
$2.0 million, in line with the 2000 Base Case assumptions.
Page 9 of 18
<PAGE>
Aircraft Servicer Fees consist of:
$ MM
----
Base Fee 0.7
Rent Collected Fee 0.7
Rent Contracted Fee 0.6
Incentive Fee 1999/2000* 0.0
---
Total Servicer Fee 2.0
*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 in the current calendar month. The Rent
Collected Fee is equal to approximately 1.25% of all rentals received
during the previous calendar month. 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 in the Operating Budget at the
beginning of each financial year. No Incentive Fee was payable to ILFC
in the Third Quarter 2000 for the financial year ended November 2000.
[21] 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 the Third Quarter
2000, Other Servicer Fees amounted to $0.8 million as compared to an
assumed expense of $0.5 million in the 2000 Base Case, a variance of
$0.3 million. The variance was due primarily to the payment of $0.3
million for the registration of the New Notes with the Securities and
Exchange Commission.
NET CASH COLLECTIONS
"Net Cash Collections" equals Total Cash Collections less Total Cash Expenses,
Drawings from and Transfers to Expense Account, Interest Payments, Swap
Payments and Exceptional Items.
Net Cash Collections Actual Base Case Variance
$ MM $ MM $ MM
Total Cash Collections 58.8 55.8 3.0
Total Cash Expenses (3.0) (3.0) -
Drawings from Expense Account 11.2 - 11.2
Transfers to Expense Account (10.8) - (10.8)
Interest Payments (33.7) (31.1) (2.6)
Swap Payments (0.2) (2.5) 2.3
Exceptional Items - - -
---------------------------------------
Net Cash Collections 22.3 19.2 3.1
---------------------------------------
[23] Total Cash Collections
As discussed in line items [1] to [15], MSAF Group generated
approximately
Page 10 of 18
<PAGE>
$58.8 million in Total Cash Collections, $3.0 million more than assumed
in the 2000 Base Case.
[24] Total Cash Expenses
As discussed in line items [17] to [21], MSAF Group incurred
approximately $3.0 million in Total Cash Expenses, the same as assumed
in the 2000 Base Case.
[25] 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 Administrative Agent determines the
level of cash set aside each month. In the Third Quarter 2000, $11.2
million was drawn from the Expense account to pay expenses incurred and
which were payable during the period. The 2000 Base Case made no
assumption as to the level of these Drawings.
[26] Transfers to Expense Account
Transfers to the Expense Account represents the level of cash set aside
each month to pay for expenses which are expected to be payable over
the next three months. During the Third Quarter 2000, $10.8 million was
transferred to the Expense Account. As at August 15, 2000, the closing
balance on the Expense Account was $4.1 million, which will be used to
fund future expenses, primarily maintenance.
[27] Interest Payments and [28] Swap Payments
In the Third Quarter 2000, Interest Payments to Noteholders amounted to
$33.7 million. This is $2.6 million higher than the 2000 Base Case,
which assumed interest costs for the Third Quarter 2000 to be $31.1
million. The higher interest payments are due to a higher than assumed
debt balance outstanding during the three month period and a higher
than assumed average LIBOR. The average LIBOR for the Third Quarter
2000 was 6.60% versus an assumed LIBOR of 5.97%. The higher interest
costs were offset by a reduction in the amount of Swap Payments. MSAF
paid $0.2 million in swap costs, $2.3 million less than assumed in the
2000 Base Case.
[29] 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 the Third Quarter 2000.
[31] Principal Payments
In the Third Quarter 2000, total Principal Payments to Noteholders
amounted to $22.3 million, $3.1 million greater than assumed in the
2000 Base Case, reflecting the higher Net Cash Collections available
during this period, mainly as a result of Other Leasing Income.
Page 11 of 18
<PAGE>
III Other Financial Data
An analysis of MSAF Group's Performance to Date versus the 2000 Base Case as of
August 15, 2000 is shown in Appendix C. Details of interest and debt coverage
ratios and Loan-to-Value ratios (LTV's) as of August 15, 2000 are shown in
Appendix D.
Cash
Cash held at August 15, 2000 was $52.4 million. This includes $30.0 million
representing the cash portion of the Liquidity Reserve Amount at that time.
This is a source of liquidity for, among other things, maintenance obligations,
operating expenses and contingent liabilities. The balance consists of $18.3
million in lessee security deposits and $4.1 million in accrued expenses held
in the Expense Account in respect of future maintenance obligations and other
costs.
In addition to the $52.4 million cash balance held at August 15, 2000, the
Liquidity Reserve Amount also contained credit and liquidity facilities
provided by MSDW and ILFC aggregating to $71.0 million. Neither of these
facilities was drawn upon in the Third Quarter 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 Security
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 August 15, 2000, the aggregate amount of Class A-D Notes outstanding was
$1,797.0 million, slightly ahead of the 2000 Base Case assumptions.
Page 12 of 18
<PAGE>
IV Recent Developments
The following discussion refers to information pertaining to the portfolio of
62 aircraft assets, which were owned by MSAF Group as of October 1, 2000.
Re-marketing Task for Portfolio of 62 Aircraft Assets
As of October 1, 2000, one aircraft from a portfolio of 62 aircraft assets was
off-lease. The aircraft, a B737-300, is currently being marketed by the
Servicer.
Summary
No. of Aircraft
No. of Aircraft Assets subject to Lease Agreements 61
No. of Aircraft Assets off-lease 1
---------
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 12
---------
Equals Total Near-term re-marketing task 14
------ ---------
---------
Of which LOI signed 5
---------
Two leases are scheduled to expire before December 31, 2000. One of the two
aircraft, a B767-200, is subject to a non-binding letter of intent. The second
aircraft, a B737-400, is not yet subject to a non-binding letter of intent, but
the Servicer is currently negotiating with the current operator and with other
interested parties.
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 2o 7* 2 4 3 2 20
B747 1 1 2
B757 2* 1 5 8
B767 1* 1 1 1 2 6
F50 2 2
F70 1 2 3
MD82 1 1
MD83 1 1 2 4
Engine 1 1
Total 3 12 8 17 8 14 62
--------------------------------------------------------------
* Includes aircraft currently subject to a non-binding letter of intent.
o Includes one aircraft currently off-lease.
Page 13 of 18
<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 2.09% 7.96% 2.53% 5.13% 3.84% 1.48% 23.03%
B747 4.87% 2.45% 7.32%
B757 3.93% 1.47% 9.68% 15.08%
B767 1.47% 2.85% 2.66% 3.00% 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 3.56% 18.36% 15.56% 25.93% 11.73% 24.86% 100%
---------------------------------------------------------------------
*Appraised Value as of November 30, 1999
As of October 1, 2000, 48 leases, representing 75.14% of the portfolio by
appraised value as of November 30, 1999, are scheduled to expire before
December 31, 2004. As of October 1, 2000, the average remaining term to lease
expiry date, weighted by appraised value as of November 30, 1999 was 34 months.
This would extend to 38 months if the five aircraft currently the subject of
non-binding letters of intent were progressed to signed leases.
Aircraft on Ground (AOG)
As of October 1, 2000, there were two aircraft on the ground. One aircraft was
subject to a signed lease and one aircraft was unplaced.
AOG Analysis October 1, 2000
Aircraft Type Old Lessee Status Expected
Delivery Date
A310-300 B.R.A. Lease Signed October 2000
B737-300 VASP Available n/a
One A310-300 aircraft was repossessed from B.R.A. in May 2000. The aircraft is
currently subject to a signed lease and is scheduled to deliver to a new lessee
in October 2000. This aircraft represents approximately 1.4% of the portfolio
by appraised value as of November 30, 1999.
One B737-300 aircraft was repossessed from VASP in May 2000. At the
repossession date one of the engines was off-wing and in VASP's possession.
Following a recent ruling by a Brazilian court, the engine has now been
returned to MSAF Group. This aircraft represents approximately 1.0% of the
portfolio by appraised value as of November 30, 1999.
Page 14 of 18
<PAGE>
Lessee Difficulties
Current Arrears
As of October 1, 2000, five lessees were in arrears. The eight aircraft on
lease to these lessees represented 11.6% of the portfolio by appraised value as
of November 30, 1999. The total Current Arrears amount with respect to these
five lessees was $3.5 million, of which $1.9 million related to rental payments
and $1.6 million related to maintenance reserves. MSAF Group held security
deposits of $3.7 million against these arrears. The Current Arrears amount
represented 1.5% of annual lease rental payments. The weighted average number
of days past due of such arrears was 52 days.
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 October 1, 2000 is shown below.
<TABLE>
% No. of No. of No. of Current Security
Region Appraised Countries Aircraft Lessees Arrears Deposit
Value $ MM $ MM
<S> <C> <C> <C> <C> <C> <C> <C>
Developed Europe 3.1% 1 2 1 1.4 1.0
North America 2.9% 1 3 1 0.7 1.0
Pacific - 0 0 0 0.0 0.0
Emerging Europe and Middle 3.1% 2 2 2 1.0 1.2
Asia - 0 0 0 0.0 0.0
Latin America - 0 0 0 0.0 0.0
Other Other 2.5% 1 1 1 0.4 0.5
-------------------------------------------------------------
Total Arrears 11.6% 5 8 5 3.5 3.7
-------------------------------------------------------------
</TABLE>
Europe (Developed)
MSAF Group currently leases 27.4% of the portfolio by appraised value as of
November 30, 1999 in the Europe (Developed) region. One of the five lessees
currently 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. All of these restructured payments were due but
unpaid on October 1, 2000. MSAF Group holds security deposits of $1.0 million
against the arrears. These aircraft, both A320-200s, represent 3.1% of the
portfolio by appraised value as of November 30, 1999. See "Restructured
Arrears" below for a further discussion of these arrears.
North America (Developed)
MSAF Group currently leases 15.4% of the portfolio by appraised value as of
November 30, 1999 in the North America (Developed) region. One of the five
lessees currently in arrears is based in the North America region. As of
October 1, 2000, TWA, a lessee based in the U.S.A., owed rental arrears of $0.7
million against which MSAF Group held security deposits of $1.0 million. This
lessee habitually makes its rental payments approximately one week later than
its contracted due date and this is, therefore, not deemed to be a receivables
issue. These three aircraft, one MD-82 and two MD-83s, represent a total of
2.9% of the portfolio by appraised value as of November 30, 1999.
Page 15 of 18
<PAGE>
Pacific (Developed)
MSAF Group currently leases 11.3% of the portfolio by appraised value as of
November 30, 1999 in the Pacific (Developed) region. As of October 1, 2000,
none of these lessees were in arrears.
Europe and Middle East (Emerging)
MSAF Group currently leases 7.8% of the portfolio by appraised value as of
November 30, 1999 in the Europe and Middle East (Emerging) region. Two of the
five lessees in arrears are based in this region. As of October 1, 2000, Air
Alfa, a lessee based in Turkey, owed total arrears of $0.7 million, of which
$0.3 related to rental payments and $0.4 related to maintenance reserves. MSAF
Group held a security deposit of $0.7 million against these arrears. This
aircraft, an A321-100, represents 2.0% of the portfolio by appraised value as
of November 30, 1999.
The other lessee, Travel Service, based in the Czech Republic, owed maintenance
arrears of $0.3 million as at October 1, 2000, against which MSAF Group held a
security deposit of $0.5 million. This aircraft, a B737-400, represents 1.1% of
the portfolio by appraised value as of November 30, 1999.
Asia (Emerging)
MSAF Group currently leases 16.5% of the portfolio by appraised value as of
November 30, 1999 in the Asia (Emerging) region. As of October 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 as of November 30, 1999. None of the lessees
currently in arrears are based in Latin America. However, arrears that were
categorized as Bad Debts during the Third Quarter 2000 related to two aircraft
that were leased in Latin America. See "Bad Debts" below and Section II -
"Comparison of Actual Cash Flows versus the 2000 Base Case for the Third
Quarter 2000", line items [6] and [7] for a discussion of these Bad Debts.
Other
MSAF Group currently leases 15.6% of the portfolio by appraised value as of
November 30, 1999 in the Other region. One of the five lessees currently in
arrears is based in this region. As of October 1, 2000, Air Atlanta Icelandic,
a lessee based in Iceland, owed total arrears of $0.4 million, of which $0.1
million related to rental payment and $0.3 million related to maintenance
reserves. MSAF Group held a security deposit of $0.5 million against these
arrears. The aircraft, a B747-300, represents 2.5% of the portfolio by
appraised value as of November 30, 1999.
Page 16 of 18
<PAGE>
Bad Debts
With the exception of the Current Arrears of $3.5 million that was discussed
under Lessee Difficulties above, as of October 1, 2000 there were no other
arrears amounts due to be paid to the MSAF Group.
During the Third Quarter 2000, rental arrears associated with a former
Brazilian lessee, B.R.A, were deemed irrecoverable and classified as Bad Debts.
The Servicer is currently negotiating with B.R.A. to try and recover some of
these Bad Debts. Notwithstanding the outcome of these negotiations there is no
certainty that the Bad Debts will be recovered.
Restructured Arrears
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 MSAF Group 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 October 1, 2000, VARIG had made all payments
due under the note payable. This aircraft represents approximately 2.5% of the
portfolio by appraised value as of November 30, 1999.
In January 2000, TransAer, a lessee based in Ireland, restructured rental and
maintenance arrears for two A320-200 aircraft into a note payable of $1.4
million. The terms of the restructuring agreement were that amounts totaling
$1.4 million would be repaid during June and July 2000, but remain unpaid as of
October 1, 2000. The lessee is meeting its current obligations under both
leases. TransAer had been experiencing financial difficulties but has recently
merged with another airline carrier. TransAer believes that this merger will
provide it with the capital necessary to secure its future. MSAF Group is
negotiating the deferral of the note payable of $1.4 million to be paid during
2001. The two aircraft represent approximately 3.1% of the portfolio by
appraised value as of November 30, 1999.
Airworthiness Directive
On September 14, 2000, the United States Federal Aviation Administration (FAA)
announced a proposal for the long-term redesign of the Boeing 737 rudder system
and several short-term initiatives designed to enhance rudder safety on all
Boeing 737 models. The redesign would increase the overall safety of the B737
by simplifying the rudder system and eliminating a range of both previously
known and recently discovered failure possibilities. It may be some time before
the FAA issues a formal airworthiness directive (AD). There are currently
twenty B737s in the portfolio, together representing 23.0% of the portfolio by
appraised value as of November 30, 1999. One of the twenty B737
Page 17 of 18
<PAGE>
aircraft is currently off-lease, but under the remaining nineteen leases all
costs of compliance with Airworthiness Directives are the obligation of the
lessees.
The FAA issued an AD in each of July and August 2000 requiring special detailed
inspections to detect cracking of the main deck cargo door frames of
Pemco-converted Boeing 737-200 and 737-300 freighters. The FAA is now
considering a further AD to supersede the first two ADs, the result of which
may be a requirement to replace the main deck cargo door frames. There are two
aircraft in the portfolio, which may be subject to the findings of the FAA,
together representing 2.0% of the portfolio by appraised value as of November
30, 1999. Under the lease of the first aircraft, all costs of compliance with
ADs are the obligation of the lessee. Under the lease of the second aircraft,
the costs of compliance of this potential AD are to be shared by lessor and
lessee.
Page 18 of 18
<PAGE>
Appendix A
Coverage Ratios
as of October 1, 2000
Morgan Stanley Aircraft Finance
<TABLE>
Appraised
Value
Date of as of
Engine Serial Manufac- Nov. 30, % of
Region (1) Country Lessee Type Configuration Number turer 1999 ($MM) Fleet Regional
--------- ------- ------ ---- ------------- ------ -------- --------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Europe France Air Liberte MD-83 PW JT8D-219 49822 20-Dec-88 19.1 1.0%
2 (Developed) France l'Aeropostale B737-300 CFM 56-3C1 23788 29-May-87 19.2 1.0%
3 Ireland Aer Lingus A330-300 CF6-80E1 54 19-Apr-94 80.0 4.0%
4 Ireland TransAer A320-200 V2500-A1 414 18-May-93 30.6 1.5%
5 Ireland TransAer A320-200 V2500-A1 428 04-May-94 32.1 1.6%
6 Netherlands KLM Engine CF6-80C2-B6F 704279 01-Jul-95 5.5 0.3%
7 Netherlands KLM Cityhopper F50 PW100-125B 20232 01-Oct-91 6.3 0.3%
8 Netherlands KLM Cityhopper F50 PW100-125B 20233 01-Oct-91 6.2 0.3%
9 Netherlands Transavia B737-300 CFM 56-3C1 27635 17-May-95 27.3 1.4%
10 Norway Braathens B737-500 CFM 56-3B1 25165 23-Apr-93 19.7 1.0%
11 Norway Braathens B737-500 CFM 56-3C1 26304 15-Sep-94 21.2 1.1%
12 Spain Air Europa B737-400 CFM 56-3C1 24707 01-Jun-91 24.7 1.2%
13 UK Air 2000 B757-200ER RB211-535E4 23767 01-Apr-87 29.7 1.5%
14 UK Air 2000 B767-300ER CF6-80C2-B6F 26256 01-Apr-93 63.8 3.2%
15 UK Britannia Airways B767-200 CF6-80A 23807 25-Aug-87 29.5 1.5%
16 UK Britannia Airways B757-200 RB211-535E4 26266 13-Jan-93 41.2 2.1%
17 UK JMC Airlines A320-200 V2500-A1 393 26-Feb-93 30.4 1.5%
18 UK JMC Airlines B757-200 RB211-535E4 24367 01-Feb-89 31.7 1.6%
19 UK Monarch Airlines A320-200 CFM 56-5A3 446 28-Oct-93 30.5 1.5%
- subtotal 27.4%
20 North America Canada Canada 3000 A320-200 CFM 56-5A3 397 25-May-93 30.8 1.5%
21 (Developed) Canada Canadian Airlines A320-200 CFM 56-5A3 279 18-Feb-92 29.9 1.5%
22 U.S.A. Alaska Airlines B737-400 CFM 56-3C1 25104 21-May-93 26.6 1.3%
23 U.S.A. Alaska Airlines B737-400 CFM 56-3C1 25105 27-Jul-93 26.6 1.3%
24 U.S.A. Continental Airline B737-300 CFM 56-3B1 26309 05-Dec-94 26.3 1.3%
25 U.S.A. National Airlines B757-200ER RB211-535E4 24260 20-Dec-88 33.5 1.7%
26 U.S.A. Southwest Airlines B737-300 CFM 56-3B1 23255 26-Jun-85 14.4 0.7%
27 U.S.A. Southwest Airlines B737-300 CFM 56-3B2 23256 11-Jul-85 15.3 0.8%
28 U.S.A. TWA B757-200ER PW 2037 28160 22-Jul-96 47.8 2.4%
29 U.S.A. TWA MD-83 PW JT8D-219 49657 01-Apr-88 19.6 1.0%
30 U.S.A. TWA MD-83 PW JT8D-219 49824 31-Mar-89 20.4 1.0%
31 U.S.A. TWA MD-82 PW JT8D-217C 49825 31-Mar-89 17.8 0.9%
- subtotal 15.4%
32 Pacific Hong Kong Cathay Pacific B747-400 RB211-525H2-19 24955 25-Sep-91 97.4 4.9%
33 (Developed) New Zealand Air New Zealand B767-300ER CF6-80C2-B6 24875 14-Jun-91 57.0 2.8%
34 Singapore Region Air A310-300 PW JT9D-7R4E1 409 21-Nov-85 22.3 1.1%
35 Singapore Region Air A310-300 PW JT9D-7R4E1 410 29-Nov-85 22.7 1.1%
36 Singapore Region Air A310-300 PW JT9D-7R4E1 437 01-Nov-86 27.6 1.4%
- subtotal 11.3%
37 Europe and Czech Republic Travel Service B737-400 CFM 56-3B2 24234 15-Oct-88 21.9 1.1%
38 Middle East Greece Olympic Airways B737-400 CFM 56-3C1 25371 13-Jan-92 25.1 1.3%
39 (Emerging) Hungary Malev F-70 TAY MK620-15 11564 20-Dec-95 13.7 0.7%
40 Hungary Malev F-70 TAY MK620-15 11565 14-Feb-96 14.3 0.7%
41 Hungary Malev F-70 TAY MK620-15 11569 08-Mar-96 14.7 0.7%
42 Turkey Air Alfa A321-100 V2530-A5 597 21-May-96 39.7 2.0%
43 Turkey Pegasus B737-400 CFM 56-3C1 26279 01-Feb-92 25.7 1.3%
- subtotal 7.8%
44 Asia China China Hainan B737-300 CFM 56-3C1 26295 09-Dec-93 25.5 1.3%
45 (Emerging) South Korea Asiana Airlines B767-300ER CF6-80C2-B6F 24798 05-Oct-90 53.1 2.7%
46 South Korea Asiana Airlines B767-300ER CF6-80C2-B6F 25132 24-Feb-92 60.1 3.0%
47 South Korea Asiana Airlines B737-400 CFM 56-3C1 26291 09-Aug-93 27.6 1.4%
48 South Korea Asiana Airlines B737-400 CFM 56-3C1 26308 31-Oct-94 27.9 1.4%
49 Taiwan China Airlines A300-600 PW 4158 555 22-Mar-90 46.3 2.3%
50 Taiwan China Airlines A300-600 PW 4158 625 31-Mar-92 51.1 2.6%
51 Taiwan F.E.A.T. B757-200ER PW 2037 25044 28-May-91 37.5 1.9%
- subtotal 16.5%
52 Latin America Mexico AeroMexico B757-200ER PW 2037 26272 01-Mar-94 41.4 2.1%
53 (Emerging) Mexico AeroMexico MD-83 PW JT8D-219 53050 01-May-90 19.7 1.0%
54 Mexico Mexicana B757-200ER PW 2040 24965 24-Mar-92 39.1 2.0%
- subtotal 5.0%
55 Other Fiji Air Pacific B767-300ER CF6-80C2-B4F 26260 16-Sep-94 66.6 3.3%
56 Iceland Air Atlanta Icelandic B747-300B CF6-80C2 24106 30-Apr-88 49.0 2.5%
57 Iceland Icelandair B737-300F CFM 56-3B2 23811 01-Oct-87 19.8 1.0%
58 Lithuania Lithuanian Airlines B737-300 CFM 56-3B2 24449 01-Apr-90 21.7 1.1%
59 Macau Air Macau A321-100 V2530-A5 557 04-Dec-95 38.9 1.9%
60 Malta Air Malta B737-300 CFM 56-3B2 25161 25-Feb-92 24.6 1.2%
61 Mauritius Air Mauritius A340-300 CFM 56-5C3G 94 31-Mar-95 91.6 4.6%
- subtotal 15.6%
62 Available
for lease AOG AOG B737-300 CFM 56-3B2 24299 01-Nov-88 19.8 1.0%
- subtotal 1.0%
------------------------
Total 2,000.9 100% 100%
========================
(1) Regions are defined according to the Morgan Stanley Capital International designations
Number of aircraft on lease 61
Number of aircraft off-lease 1
------
Total number of aircraft 62
======
Number of lessees 41
Number of countries 25
Total developed 54.1%
Total emerging 29.3%
Total other 15.6%
Total AOG 1.0%
------
100.0%
======
</TABLE>
Page 1 of 4
<PAGE>
Appendix B
Comparison of Actual Cash Flows versus the
2000 Base Case for the Third Quarter 2000
Morgan Stanley Aircraft Finance
<TABLE>
------------------------------------------------------------------------------------------ ---------------------------------
Amounts in millions of USD % of 2000 Base Case
--------------------------------- ---------------------------------
Actual Base Case Variance Actual Base Case Variance
------------------------------------------------------------------------------------------ ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH COLLECTIONS
[1] Lease Rentals 57.9 57.9 - 100.0% 100.0% -
[2] - Renegotiated Leases - - - - - -
[3] - Rental Resets - - - - - -
--------------------------------- ---------------------------------
[4] Sum of [1]..[3] Contracted Lease Rentals 57.9 57.9 - 100.0% 100.0% -
[5] Movement in Current Arrears Balance 0.1 - 0.1 0.1% - 1.4%
less Net Stress-related Costs
[6] - Bad Debts (1.8) -3.1%
[7] - Security Deposits Drawn Down 0.7 1.2%
[8] - Restructured Arrears - -
[9] - AOG (1.8) -3.1%
[10] - Other Leasing Income 6.4 11.2%
[11] - Repossession Costs (0.3) -0.5%
--------------------------------- ---------------------------------
[12] Sum of [6]..[11] sub-total 3.2 (2.7) 5.9 5.7% -4.5% 10.2%
[13] [4]+[5]+[12] Net Lease Rentals 61.2 55.2 6.0 105.8% 95.5% 10.3%
[14] Interest Earned 1.1 0.6 0.5 1.9% 1.0% 0.9%
Maintenance Receipts 6.8 - 6.8 11.8% - 11.8%
Maintenance Payments (10.3) - (10.3) -17.8% - -17.8%
[15] Net Maintenance (3.5) - (3.5) -6.0% - -6.0%
[16] Sum of [13]..[15] Total Cash Collections 58.8 55.8 3.0 101.7% 96.5% 5.2%
------------------------------------------------------------------------------------------ ---------------------------------
CASH EXPENSES
Aircraft Operating Expenses
[17] - Insurance (0.1) -0.2%
[18] - Re-leasing and other overheads (0.1) -0.1%
--------------------------------- ---------------------------------
[19] [17]+[18] sub-total (0.2) (0.5) 0.3 -0.3% -0.8% 0.5%
SG&A Expenses
Aircraft Servicer Fees
- Base Fee (0.7) (0.7) - -1.2% -1.2% -
- Rent Collected Fee (0.7) (0.7) - -1.2% -1.2% -
- Rent Contracted Fee (0.6) (0.6) - -1.0% -1.0% -
- Incentive Fee - - - - - -
--------------------------------- ---------------------------------
[20] sub-total (2.0) (2.0) - 3.4% -3.4% -
Other Servicer Fees
- Cabot (0.3) (0.3) - -0.5% -0.5% -
- Other Service Providers (0.5) (0.2) (0.3) -0.8% -0.3% -0.5%
--------------------------------- ---------------------------------
[21] sub-total (0.8) (0.5) (0.3) -1.3% -0.8% -0.5%
[22] Sum of [19]..[21] Total Cash Expenses (3.0) (3.0) - -5.0% -5.0% -
------------------------------------------------------------------------------------------ ---------------------------------
NET CASH COLLECTIONS
[23] [16] Total Cash Collections 58.8 55.8 3.0 101.7% 96.5% 5.2%
[24] [22] Total Cash Expenses (3.0) (3.0) - -5.0% -5.0% -
[25] Drawings from Expense Account 11.2 - 11.2 19.3% - 19.3%
[26] Transfers to Expense Account (10.8) - (10.8) -18.7% - -18.7%
[27] Interest Payments (33.7) (31.1) (2.6) -58.5% -53.8% -4.7%
[28] Swap Payments (0.2) (2.5) 2.3 -0.3% -4.5% 4.2%
[29] Exceptional Items - - - - - -
--------------------------------- ---------------------------------
[30] Sum of [23]..[29] TOTAL 22.3 19.2 3.1 38.5% 33.2% 5.3%
================================= =================================
[31] PRINCIPAL PAYMENTS
subclass A2 5.2 4.9 0.3 9.0% 8.5% 0.5%
subclass A3 - - - - - -
subclass A4 - - - - - -
subclass A5 15.2 12.4 2.8 26.3% 21.5% 4.8%
subclass B1 1.7 1.7 - 2.9% 2.9% -
subclass B2 - - - - - -
subclass C1 0.2 0.2 - 0.3% 0.3% -
subclass C2 - - - - - -
subclass D1 - - - - - -
--------------------------------- ---------------------------------
Total 22.3 19.2 3.1 38.5% 33.2% 5.3%
================================= =================================
</TABLE>
Page 2 of 4
<PAGE>
Appendix C
Performance to Date versus the 2000 Base Case
as of August 15, 2000
Morgan Stanley Aircraft Finance
<TABLE>
----------------------------------------------------------------------------------------- -----------------------------
Amounts in millions of USD % of 2000 Base Case
----------------------------- -----------------------------
Actual Base Case Variance Actual Base Case Variance
----------------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH COLLECTIONS
[1] Lease Rentals 102.4 102.4 - 100.0% 100.0% -
[2] - Renegotiated Leases - - - - - -
[3] - Rental Resets - - - - - -
----------------------------- -----------------------------
[4] Sumof [1]..[3] Contracted Lease Rentals 102.4 102.4 - 100.0% 100.0% -
[5] Movement in Current Arrears Balance (0.8) - (0.8) -0.8% - -0.1%
less Net Stress-related Costs
[6] - Bad Debts (1.8) -1.8%
[7] - Security Deposits Drawn Down 0.7 0.7%
[8] - Restructured Arrears - -
[9] - AOG (2.5) -2.4%
[10] - Other Leasing Income 5.2 5.1%
[11] - Repossession Costs (0.4) -0.4%
----------------------------- -----------------------------
[12] Sum of [6]..[11] sub-total 1.2 (4.7) 5.9 1.2% -4.5% 5.7%
[13] [4]+[5]+[12] Net Lease Rentals 102.8 97.7 5.1 100.4% 95.5% 4.9%
[14] Interest Earned 1.7 1.0 0.7 1.7% 1.0% 0.7%
Maintenance Receipts 10.8 - 10.8 10.6% - 10.6%
Maintenance Payments (17.4) - (17.4) -17.0% - -17.0%
----------------------------- -----------------------------
[15] Net Maintenance (6.6) - (6.6) -6.4% - -6.4%
[16] Sum of [13]..[15] Total Cash Collections 97.9 98.7 (0.8) 95.7% 96.5% -0.8%
----------------------------------------------------------------------------------------- -----------------------------
CASH EXPENSES
Aircraft Operating Expenses
[17] - Insurance (0.3) -0.3%
[18] - Re-leasing and other overheads (0.2) -0.2%
----------------------------- -----------------------------
[19] [17]+[18] sub-total (0.5) (0.8) 0.3 -0.5% -0.8% 0.3%
SG&A Expenses
Aircraft Servicer Fees
- Base Fee (1.2) (1.2) - -1.2% -1.2% -
- Rent Collected Fee (1.2) (1.2) - -1.2% -1.2% -
- Rent Contracted Fee (1.1) (1.1) - -1.0% -1.0% -
- Incentive Fee - - - - - -
----------------------------- -----------------------------
[20] sub-total (3.5) (3.5) - -3.4% -3.4% -
Other Servicer Fees
- Cabot (0.5) (0.5) - -0.5% -0.5% -
- Other Service Providers (1.0) (0.3) (0.7) -1.0% -0.3% -0.7%
----------------------------- -----------------------------
[21] sub-total (1.5) (0.8) (0.7) -1.5% -0.8% -0.7%
[22] Sum of [19]..[21] Total Cash Expenses (5.5) (5.1) (0.4) -5.4% -5.0% -0.4%
----------------------------------------------------------------------------------------- -----------------------------
NET CASH COLLECTIONS
[23] [16] Total Cash Collections 97.9 98.7 (0.8) 95.7% 96.5% -0.8%
[24] [22] Total Cash Expenses (5.5) (5.1) (0.4) -5.4% -5.0% -0.4%
[25] Drawings from Expense Account 16.3 - 16.3 15.9% - 15.9%
[26] Transfers to Expense Account (14.9) - (14.9) -14.5% - -14.5%
[27] Interest Payments (54.8) (52.0) (2.8) -53.6% -50.9% -2.7%
[28] Swap Payments (1.7) (4.4) 2.7 -1.7% -4.3% 2.6%
[29] Exceptional Items - - - - - -
----------------------------- -----------------------------
[30] Sum of [23]..[29] TOTAL 37.3 37.2 0.1 36.4% 36.3% 0.1%
============================= =============================
----------------------------------------------------------------------------------------- -----------------------------
[31] PRINCIPAL PAYMENTS
subclass A2 6.5 7.3 (0.8) 6.3% 7.1% -0.8%
subclass A3 - - - - - -
subclass A4 - - - - - -
subclass A5 27.7 26.8 0.9 27.1% 26.2% 0.9%
subclass B1 2.8 2.8 - 2.7% 2.7% -
subclass B2 - - - - - -
subclass C1 0.3 0.3 - 0.3% 0.3% -
subclass C2 - - - - - -
subclass D1 - - - - - -
----------------------------- -----------------------------
Total 37.3 37.2 0.1 36.4% 36.3% 0.1%
============================= =============================
----------------------------------------------------------------------------------------- -----------------------------
[33] Debt Balances
subclass A2 218.2 217.4 (0.8)
subclass A3 580.0 580.0 -
subclass A4 200.0 200.0 -
subclass A5 372.3 373.2 0.9
subclass B1 86.9 86.9 -
subclass B2 75.0 75.0 -
subclass C1 99.6 99.6 -
subclass C2 55.0 55.0 -
subclass D1 110.0 110.0 -
------------------------------
TOTAL 1,797.0 1,797.1 0.1
==============================
-----------------------------------------------------------------------------------------
</TABLE>
Page 3 of 4
<PAGE>
Appendix D
Coverage Ratios
as of August 15, 2000
Morgan Stanley Aircraft Finance
<TABLE>
-------------------------------------------------------------------------------------------------------
All Amounts in millions of USD unless otherwise stated
Actual 2000 Base Case Variance
<S> <C> <C> <C>
Source of Funds
Net Cash Collections 37.3 37.2 0.1
Add Back Interest 54.8 52.0 2.8
Add Back Swap Payments 1.7 4.4 (2.7)
------ ------ ------
a 93.8 93.6 0.2
------ ------ ------
Application of Funds
b Swap Payments 1.7 4.4 (2.7)
c Class A Interest 40.7 38.2 2.5
d Class A Minimum 5.8 4.8 1.0
e Class B Interest 5.0 4.7 0.3
f Class B Minimum 2.3 2.3 -
g Class C Interest 5.1 5.1 -
h Class C Minimum - - -
i Class D Interest 4.0 4.0 -
j Class D Minimum - - -
k Class A Scheduled 0.8 0.2 0.6
l Class B Scheduled 0.5 0.5 -
m Class C Scheduled 0.3 0.3 -
n Class D Scheduled - - -
o Permitted Aircraft Modifications - - -
p Class A Supplemental 27.6 29.1 (1.5)
------ ------ ------
93.8 93.6 0.2
------ ------ ------
-------------------------------------------------------------------------------------------------------
[1] Interest Coverage Ratio
Class A 2.21 2.20 = a / (b+c)
Class B 1.76 1.80 = a / (b+c+d+e)
Class C 1.55 1.57 = a / (b+c+d+e+f+g)
Class D 1.45 1.47 = a / (b+c+d+e+f+g+h+i)
[2] Debt Coverage Ratio
Class A 1.43 1.47 = a / (b+c+d+e+f+g+h+i+j+k)
Class B 1.42 1.46 = a / (b+c+d+e+f+g+h+i+j+k+l)
Class C 1.42 1.45 = a / (b+c+d+e+f+g+h+i+j+k+l+m)
Class D 1.42 1.45 = 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-Aug-00 15-Aug-00
-------------- --------- --------------
[3] Assumed Portfolio Value 2,000.9 1,966.3 1,966.3
Liquidity Reserve Amount
- Cash 30.0 30.0 30.0
- Accrued Expenses 6.0 4.1 4.1
- Security Deposits 7.1 18.3 18.3
------- ------- -------
subtotal cash 43.1 52.4 52.4
- Letters of Credit 82.1 71.0 71.0
------- ------- -------
Total Liquidity Reserve 125.2 123.4 123.4
[4] Total Asset Value 2,126.1 2,089.7 2,089.7
Note Balance
Class A 1,404.7 66.1% 1,370.5 65.6% 1,370.6 65.6%
Class B 164.7 73.8% 161.9 73.3% 161.9 73.3%
Class C 154.9 81.1% 154.6 80.7% 154.6 80.7%
Class D 110.0 86.3% 110.0 86.0% 110.0 86.0%
------- ------- -------
Total 1,834.3 1,797.0 1,797.1
-------------------------------------------------------------------------------------------------------
</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 Coverage 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 Initial Appraised Value of each
aircraft in the Portfolio multiplied 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 4 of 4
