<PAGE> 1
AERCO LIMITED
--------------------------------------------------------------------------------
I. Transaction Overview
OFFERED NOTES
<TABLE>
<CAPTION>
SUBCLASS A-3 SUBCLASS A-4 SUBCLASS B-2 SUBCLASS C-2
NOTES NOTES NOTES NOTES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Aggregate Principal Amount $555,000,000 $230,000,000 $90,000,000 $85,000,000
Expected Ratings
Fitch AA AA A BBB
Moody's Aa2 Aa2 A2 Baa2
Standard & Poor's AA AA A BBB
Interest Rate LIBOR + O LIBOR + O LIBOR + O LIBOR + O
Initial Loan to Value(1) 61.1% 61.1% 71.4% 81.9%
Initial Loan to Assumed First Year's Net Revenue 5.39x 5.39x 6.29x 7.22x
Assumed Interest Coverage Ratio 2.61x 2.61x 1.47x 1.27x
Assumed Debt Service Coverage Ratio 1.16x 1.16x 1.16x 1.15x
Expected Average Life (Years) 1.9 5.0 5.3 5.5
Expected Principal Amortization Period June 15, 2002 August 15, 2000 August 15, 2000 September 15, 2000
June 15, 2002 May 15, 2011 June 15, 2008 June 15, 2008
Coupon Step-Up Date June 15, 2002 NA June 15, 2008 June 15, 2008
Final Maturity Date July 15, 2025 July 15, 2025 July 15, 2025 July 15, 2025
</TABLE>
[FN]
(1) "Initial Loan to Value" represents (i) the initial aggregate principal
amount of each subclass of notes plus the initial aggregate principal
amount of any other subclass of notes that ranks equally or senior in
priority of payment ("Initial Loan") divided by (ii) the aggregate
appraised value of the aircraft as of April 30, 2000 plus $65 million, the
expected amount of the liquidity reserve amount (the "Liquidity Reserve
Amount") on the closing date
</FN>
4
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AERCO LIMITED
--------------------------------------------------------------------------------
I. Transaction Overview
(continued)
EXISTING NOTES (Initially issued on July 15, 1998; outstanding as of June 15,
2000) (1)
<TABLE>
<CAPTION>
CLASS
SIZE RATINGS EXPECTED LEGAL FINAL
CLASS ($MM) (MOODY'S/S&P/DUFF &PHELPS) TYPE FINAL PAYMENT DATE MATURITY COUPON
----- ----- -------------------------- --------- ------------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A-1(2) 340.0 Aa2/AA/AA Soft-bullet July 17, 2000 July 15, 2023 1 mo. L + 0.19%
A-2 199.8 Aa2/AA/AA Amortizer December 15, 2005 July 15, 2023 1 mo. L + 0.32%
B-1 75.2 A2/A/A Amortizer July 15, 2013 July 15, 2023 1 mo. L + 0.60%
C-1 84.2 Baa2/BBB/BBB Amortizer July 15, 2013 July 15, 2023 1 mo. L + 1.35%
-----
Subtotal 699.2
</TABLE>
(1) It is intended that Subclass A-1 Notes will be fully repaid on July 17,
2000 with the proceeds from the Offered Notes.
(2) AerFi is the holder of all the subclass D-1 and subclass E-1 notes. AerFi
will be the initial holder of all of the new subclass D-2 and subclass E-2
notes to be issued with the Offered Notes.
5
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AERCO LIMITED
--------------------------------------------------------------------------------
I. Transaction Overview
(continued)
TRANSACTION BACKGROUND In July 1998, AerCo Limited ("AerCo" or the
"Company") purchased a portfolio of 35 modern jet
aircraft appraised at $952 million and their related
leases (the "Original Portfolio") with funds raised
from its issuance of $800 million of notes (the
"Existing Notes") in four subclasses: Subclass A-1,
Subclass A-2, Subclass B- 1 and Subclass C-1. AerFi
subscribed for 100% of the subclass D-1 and E-1
Notes.
AerCo subsequently sold two Fokker-100 aircraft.
AerCo now plans to acquire an additional 30 aircraft
from AerFi appraised at $724 million at April 30,
2000 and refinance its original Subclass A-1 Notes
through the issuance of approximately $960 million
of new notes in four subclasses: Subclass A-3,
Subclass A-4, Subclass B-2 and Subclass C-2 (the
"Offered Notes") and the issuance of the new
Subclass D-2 and E-2 Notes. A portion of the
proceeds from the issuance of the Subclass D-2 Notes
will be used to refinance the existing Subclass D-1
Notes.
INITIAL APPRAISED VALUE At April 30, 2000, the average of the three
appraised base values from Airclaims Limited,
Aircraft Information Systems, Inc. and BK
Associates, Inc., for the aggregate aircraft in the
portfolio (including 30 additional aircraft) was
$1.54 billion (the "Initial Appraised Value").
USE OF PROCEEDS Cash proceeds of the Offered Notes and of the
issuance of Subclass D-2 and E-2 Notes will be used
as follows:
(i) $340 MM to refinance the Subclass A-1 Notes
issued on July 15, 1998 with an expected final
payment date of July 17, 2000
(ii) $80 MM to refinance the Subclass D-1 Notes
issued in July 1998
(iii) $ MM to fund an increase in the liquidity
reserve amount
(iv) $ MM to finance the acquisition of 30
additional aircraft valued at $724 MM; and
(v) $ MM to pay certain expenses in connection
with the offering
6
<PAGE> 4
AERCO LIMITED
--------------------------------------------------------------------------------
I. Transaction Overview
(continued)
ASSETS o AerCo plans to acquire the 30 additional aircraft
during the period from the closing date until July
16, 2001 (the "Delivery Period").Assuming all 30
aircraft are delivered, the combined portfolio will
consist of 63 aircraft with a total value of $1.54
billion, composed of 62 modern Stage 3 commercial
jet aircraft and one B747-200B appraised at its
scrap value of $8.4 million
o 63 contracted leases with 38 lessees in 21 countries
o $65 MM in liquidity reserve amount
o $22 MM of security deposits from lessees
AIRCRAFT SUMMARY o 14 different aircraft types
(% BY INITIAL
APPRAISED VALUE) o Percentages of the aircraft types are as follows:
- 18.8% Boeing B737-400
- 16.9% Boeing B737-300
- 15.8% Airbus A320-200
- 11.0% Boeing B757-200
LESSEES o 38 lessees in 21 countries
(% BY INITIAL
APPRAISED VALUE) o 61.1% in developed regions
- 42.8% in developed Europe
- 18.3% in North America
o 38.9% in emerging regions
- 17.6% in Asia
- 10.4% in Latin America
- 10.9% in Europe and Middle East
o Largest lessee, British Midland, represents 7.3%
of the portfolio
o Largest countries, U.K. and U.S., represent 20.9%
and 12.7%, respectively, of the portfolio
o Average remaining contracted lease terms is 47
months
o Four aircraft representing 7.84% of the portfolio
have purchase options exercisable by the current
lessee
o All existing leases are denominated in U.S.
dollars
7
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AERCO LIMITED
--------------------------------------------------------------------------------
I. Transaction Overview
(continued)
SERVICER o AerFi Group plc ("AerFi") was founded in 1975
o In December 1999, AerFi acquired Indigo Aviation AB
o AerFi focuses on narrowbody aircraft in the
secondary market by financing aircraft ordered by
airlines rather than placing aircraft orders
directly with manufacturers (primary market)
STANDBY SERVICER o debis AirFinance B.V. ("debis") will act as a
standby servicer of the portfolio
o debis is owned by DaimlerChrysler and German banks
and is a significant participant in the leasing and
management of commercial jet aircraft on operating
lease
8
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AERCO LIMITED
--------------------------------------------------------------------------------
I. Transaction Overview
(continued)
TRANSACTION STRUCTURAL DIAGRAM
[Diagram]
9
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AERCO LIMITED
--------------------------------------------------------------------------------
II. Structural Summary
ISSUER AerCo, a Jersey limited liability company, was
established in June 1998. A Jersey charitable trust
beneficially owns 95% of the capital stock. AerFi
holds the remaining 5%.
MASTER TRUST STRUCTURE
o The AerCo structure is a master trust, which
allows additional aircraft to be added to the
existing portfolio
o Increasing the portfolio size provides collateral
diversity and reduces volatility of cash flows
o The AerCo Indenture has pre-agreed concentration
limits for aircraft types, sizes, regions,
countries and lessees
o The AerCo Indenture contains provisions to protect
existing noteholders from extension risk
o The master trust structure is the industry
standard and has been utilized in recent aircraft
transactions.
AIRCRAFT PURCHASE ACCOUNT A part of the proceeds from the Offered Notes will
be held in the Aircraft Purchase Account (the "APA")
until AerCo acquires the new aircraft or substitute
aircraft of similar characteristics.
If any of the proposed 30 additional aircraft have
not been acquired by AerCo by the end of the
Delivery Period, the cash held in the APA with
respect to those aircraft will be distributed to the
noteholders pursuant to the priority of payments set
out in the Indenture on the following payment date
with accrued interest.
OFFERING o Rule 144A and Regulation S, with registration
rights for all Offered Notes
o Failure to register the Offered Notes within 270
days after issuance will result in a 0.50%
increase in their coupons
UNDERWRITERS Lead Manager and Sole Book-Runner:
Co-Lead Manager:
Co-Managers:
EXPECTED PRICING DATE July 11, 2000
EXPECTED SETTLEMENT July 17, 2000
Same-day funds through DTC, Clearstream
and Euroclear
10
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AERCO LIMITED
--------------------------------------------------------------------------------
II. Structural Summary
(continued)
PAYMENT DATES The 15th of every month, beginning August 15, 2000
DAY COUNT BASIS Actual/360
REDEMPTION PROVISIONS o Premium redemption rates for early redemptions
o Redemptions from available cashflow to be made
without premiums
o All payments pro rata within each subclass
o Par redemption for one year if additional aircraft
not acquired
CALL PRICE
<TABLE>
<CAPTION>
REDEMPTION PREMIUM
----------------------
Subclass Subclass Subclass Subclass
REDEMPTION DATE A-3 Notes A-4 Notes B-2 Notes C-2 Notes
--------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
On or after July 15, 2000 101.00% 101.50% 101.75% 103.50%
On or after June 15, 2001 100.50% 101.00% 101.50% 103.00%
On or after June 15, 2002 100.00% 100.75% 101.25% 102.50%
On or after June 15, 2003 100.50% 101.00% 102.00%
On or after June 15, 2004 100.25% 100.75% 101.50%
On or after June 15, 2005 100.00% 100.50% 101.00%
On or after June 15, 2006 100.25% 100.50%
On or after June 15, 2007 100.25% 100.25%
On or after June 15, 2008 100.00% 100.00%
</TABLE>
11
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AERCO LIMITED
--------------------------------------------------------------------------------
II. Structural Summary
(continued)
STEP-UP INTEREST If the following subclass of notes are not fully
repaid by the respective expected final maturity
dates, the following step-up interest will apply.
<TABLE>
<CAPTION>
EXPECTED FINAL
SUBCLASS MATURITY DATE STEP-UP INTEREST
-------- ------------- ----------------
<S> <C> <C>
A-3 Notes June 15, 2002 0.50%
B-2 Notes June 15, 2008 1.50%
C-2 Notes June 15, 2008 2.50%
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL AERCO* ADDITIONAL** COMBINED PORTFOLIO**
JULY 15, 1998 JULY 17, 2000 JULY 17, 2000
--------------- ------------- --------------------
<S> <C> <C> <C>
Aircraft Appraised Value $952.0 MM $724.1 MM $1542.6 MM
Liquidity and Other Cash 40.0 25.0 65.0
------ ------ -------
TOTAL COLLATERAL VALUE $992.0 MM $749.1 MM $1607.6 MM
Class A (rated AA) $630.0 MM $445.0 MM $982.4 MM
LTV*** (%) 63.5% 59.4% 61.1%
Class B (rated A) $ 85.0 MM $ 90.0 MM $164.9 MM
LTV (%) 72.1% 71.4% 71.4%
Class C (rated BBB) $ 85.0 MM $ 85.0 MM $169.2 MM
LTV (%) 80.6% 82.8% 81.9%
</TABLE>
*using appraised values as of March 1, 1998
**using appraised values as of April 30, 2000
***LTV = Cumulative Debt / Total Collateral Value
12
<PAGE> 10
AERCO LIMITED
--------------------------------------------------------------------------------
II. Structural Summary
(continued)
RATED FINAL MATURITY DATE July 15, 2025 for all Offered Notes
MINIMUM DENOMINATIONS The Offered Notes will be issued in denominations of
US$100,000 and integral multiples of US$1,000, in
excess thereof. The Offered Notes will be subject to
certain restrictions on transfer until the exchange
offer therefor is consummated
ERISA ELIGIBILITY All classes of notes are ERISA eligible
LISTING Luxembourg Stock Exchange
LEASES ALL LEASES ARE "TRIPLE NET," HELL OR
HIGH WATER LEASES
The lessees are obliged to make rental payments and
generally assume responsibility for:
o ensuring proper operation and maintenance of the
aircraft
o providing indemnification and insurance for losses
resulting from operation of the aircraft
o paying all costs of operating and maintaining the
aircraft and keeping the aircraft free of liens
o complying with all governmental licensing and
other requirements
o grossing up payments where payments are subject to
withholding or other taxes
13
<PAGE> 11
AERCO LIMITED
--------------------------------------------------------------------------------
II. Structural Summary
(continued)
ANNUAL LEASE ROLLOFFS OF COMBINED PORTFOLIO(1)
% of Initial Appraised Value
(as of 30-Apr-00)
[graphic]
(1) Excludes one lease on B757-200 (3.33% of IAV) that expires in 2017
14
<PAGE> 12
AERCO LIMITED
--------------------------------------------------------------------------------
II. Structural Summary
(continued)
PRIORITY OF PAYMENTS
[GRAPHIC]
15
<PAGE> 13
AERCO LIMITED
--------------------------------------------------------------------------------
III. Portfolio Summary
AIRCRAFT SUMMARY
<TABLE>
<CAPTION>
ORIGINAL AERCO PORTFOLIO(1)* ADDITIONAL PORTFOLIO** COMBINED PORTFOLIO**
JULY 15, 1998 JULY 17, 2000 JULY 17, 2000
--------------------------- ---------------------- --------------------
<S> <C> <C> <C>
Number of Aircraft 35 30 63
NARROWBODY MODELS
A320-200 16.24% 13.95% 15.76%
A321-200 - 7.20% 3.38%
B737-300 12.41% 20.90% 16.93%
B737-300QC - 2.99% 1.40%
B737-400 19.33% 17.07% 18.81%
B737-500 2.22% 14.11% 7.98%
B757-200 13.36% 7.09% 11.02%
F100 8.38% 3.52% 4.21%
MD-82 - 13.17% 6.18%
MD-83 6.83% - 3.84%
----- ------ -----
SUBTOTAL 78.77% 100.00% 89.52%
WIDEBODY MODELS
A300B4-200 1.40% - 0.71%
B747-200 3.28% - 0.55%
B767-300ER 13.19% - 7.39%
----- ------ -----
SUBTOTAL 17.87% - 8.65%
FREIGHTER MODELS
DC8-71F 3.36% - 1.83%
----- ------ -----
TOTAL 100.00% 100.00% 100.00%
</TABLE>
*using appraised values as of March 1, 1998
**using appraised values as of April 30, 2000
(1) Two Fokker-100 aircraft were sold since July 1998
16
<PAGE> 14
AERCO LIMITED
--------------------------------------------------------------------------------
III. Portfolio Summary
(continued)
LESSEE SUMMARY (Additional and Combined Portfolio as of May 31, 2000)
<TABLE>
<CAPTION>
ORIGINAL AERCO PORTFOLIO* ADDITIONAL PORTFOLIO** COMBINED PORTFOLIO**
JULY 15, 1998 JULY 17, 2000 JULY 17, 2000
------------- ------------- -------------
<S> <C> <C> <C>
Number of Lessees 25 20 38
Number of Countries 18 13 21
Developed Regions
- North America 8.34% 23.85% 18.28%
- Europe 36.90% 54.06% 42.81%
SUBTOTAL DEVELOPED 45.24% 77.91% 61.09%
Emerging Markets Region
- Latin America 16.11% 6.56% 10.40%
- Europe and Middle East 13.42% 3.68% 10.92%
- Asia 21.33% 11.86% 17.59%
SUBTOTAL EMERGING MARKETS 50.86% 22.09% 38.91%
Other 2.22% - -
Off-Lease 1.68% - -
TOTAL 100.00% 100.00% 100.00%
</TABLE>
----------
[FN]
* using appraised values as of March 1, 1998
** using appraised values as of April 30, 2000
</FN>
17
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AERCO LIMITED
--------------------------------------------------------------------------------
IV. Servicer
SERVICER Since AerCo's formation in July 1998, Babcock & Brown Limited has
acted as the servicer. Simultaneous with the closing of the
proposed offering on July 17, 2000, AerFi will replace Babcock &
Brown as the servicer of AerCo's entire portfolio of 63 aircraft.
Established in 1975, AerFi acquired Indigo Aviation in December
1999. AerFi is located in Shannon, Ireland and its significant
shareholders are Texas Pacific Group (36.5% ownership) and GE
Capital Corporation (18.4% ownership).
AerFi is engaged in leasing and management of commercial jet
aircraft under operating leases primarily for narrowbody aircraft
in the secondary market. It primarily finances aircraft that have
been ordered by airlines rather than ordering aircraft directly
from manufacturers. As of May 31, 2000, AerFi had 71 commercial
aircraft, of which all were on lease to 36 lessees in 20
countries.
Under the servicing agreement, AerFi is responsible for
generating and collecting the revenue from the portfolio. It is
required to maximize the present value of the cashflows over the
life of the aircraft by sale or lease and to continue to treat
the aircraft as if they owned them.
STANDBY
SERVICER debis will act as a standby servicer of the portfolio. debis is
owned by DaimlerChrysler and German banks.
18
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AERCO LIMITED
--------------------------------------------------------------------------------
V. Assumptions
BASE CASE ASSUMPTIONS
Under the base case assumptions, the chart below summarizes monthly cash
amounts available to service the notes.
<TABLE>
<CAPTION>
% OF LEASE
CASH FLOWS RENTALS AERCO ASSUMPTIONS
---------- ------- -----------------
<S> <C> <C>
LEASE RENTALS 100% Lease rental rollout assumption has changed from original AerCo
Scrap value of 12% of initial value assumed
Less:
NET STRESS-RELATED COSTS (6.0%) 6.0% of lease rentals assumed lost due to downtime, bad debts, and
aircraft repossession costs, offset by security deposits drawn
after an event of default and any other lease income such as default
interest
Plus:
INTEREST EARNED + 2.0% 2.0% of lease rentals (one month LIBOR minus 20 bps on all cash
amounts)
Plus:
NET MAINTENANCE + 0.0% Maintenance receipts assumed to equal maintenance expenses
Less:
OPERATING EXPENSES AND SG&A (7.0%) 7.0% of lease rentals
- 2.0% aircraft operating expenses assumed
- 5.0% SG&A expenses assumed (includes fees payable to AerFi)
Equals:
CASH AVAILABLE TO NOTEHOLDERS 89.0% 89.0% of lease rentals available to service debt
</TABLE>
19
<PAGE> 17
AERCO LIMITED
--------------------------------------------------------------------------------
V. Assumptions
(continued)
ASSUMPTIONS
<TABLE>
<CAPTION>
JULY 1998 JULY 2000
% PER ANNUM % PER ANNUM
----------- -----------
<S> <C> <C>
Annual decline in lease rate:(1)
Age of 1-5 0 2
Aircraft 6-10 0 1
(in years): 11-15 0 1
16-20 6 3
20-25 6 5
Scrap value at end of useful life 0 12
Useful life (yrs) for passenger jets 25 25
Useful life (yrs) for freighters 15 15
Stress Costs (6.0) (6.0)
Maintenance 0.0 0.0
Interest Earned +2.0 +2.0
Operating Expenses and SG&A (9.0) (7.0)
Net Cash to Noteholders + 87.0 + 89.0
</TABLE>
----------
[FN]
(1) for passenger jets
</FN>
20
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AERCO LIMITED
--------------------------------------------------------------------------------
V. Assumptions
(continued)
BASE CASE RESULTS
Percent of Initial Outstanding Principal Balances of the Note Expected
under the Base Case
<TABLE>
<CAPTION>
AGGREGATE CLASS A
NOTES, INCLUDING AGGREGATE AGGREGATE
PAYMENT DATE OCCURRING IN JULY A-3 A-4 B-2 C-2 REFINANCING CERTIFICATES CLASS B NOTES CLASS C NOTES
------------------------------ --- --- --- --- ------------------------ ------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
2000 (Closing Date) 100% 100% 100% 100% 100% 100% 100%
2001 100% 86% 95% 100% 95% 95% 99%
2002 0% 77% 91% 98% 90% 90% 98%
2003 0% 68% 89% 95% 84% 85% 95%
2004 0% 59% 87% 90% 78% 80% 90%
2005 0% 49% 85% 87% 71% 75% 87%
2006 0% 39% 82% 79% 65% 69% 80%
2007 0% 30% 80% 70% 59% 64% 72%
2008 0% 22% 0% 0% 53% 58% 62%
2009 0% 14% 0% 0% 47% 52% 50%
2010 0% 6% 0% 0% 41% 46% 36%
2011 0% 0% 0% 0% 36% 40% 20%
2012 0% 0% 0% 0% 31% 33% 2%
2013 0% 0% 0% 0% 23% 25% 0%
2014 0% 0% 0% 0% 13% 17% 0%
2015 0% 0% 0% 0% 5% 8% 0%
2016 0% 0% 0% 0% 1% 0% 0%
2017 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life 1.9 5.0 5.3 5.5 8.4 8.9 8.5
</TABLE>
21
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AERCO LIMITED
--------------------------------------------------------------------------------
V. Assumptions
(continued)
Declining Balances of the Notes under the Base Case
[AERCO GRAPH]
22
<PAGE> 20
AERCO LIMITED
--------------------------------------------------------------------------------
VI. Stress Tests
1. EFFECT OF INABILITY TO REFINANCE SUBCLASS A-3, SUBCLASS B-2 AND SUBCLASS
C-2 NOTES
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES
<TABLE>
<CAPTION>
EXPECTED MATURITY/WEIGHTED AVERAGE LIFE
-----------------------------------------------
BASE CASE NO REFINANCINGS
-----------------------------------------------
EXP AVG EXP AVG
--- --- --- ---
<S> <C> <C> <C> <C>
Subclass A-3 1.9 1.9 16.7 11.6
Subclass A-4 10.8 5.0 10.8 5.0
Subclass B-2 7.9 5.3 15.8 10.8
Subclass C-2 7.9 5.5 11.6 8.2
</TABLE>
2. MINIMUM REVENUE PERCENTAGE REQUIRED TO REPAY NOTES
PERCENTAGE OF LEASE RENTALS NECESSARY TO REPAY THE NOTES BY THE
APPLICABLE FINAL MATURITY DATE ASSUMING ACTUAL
EXPERIENCE CORRESPONDS TO THE BASE CASE UNTIL THE BEGINNING OF THE YEAR STATED
<TABLE>
<CAPTION>
CLOSING DATE YEAR 3 YEAR 6 YEAR 10
------------ ------ ------ -------
<S> <C> <C> <C> <C>
Class A 62.6% 62.3% 60.8% 58.0%
Class B 72.9% 72.4% 70.8% 67.0%
Class C 84.7% 84.3% 80.9% 71.7%
</TABLE>
PERCENTAGE OF LEASE RENTALS NECESSARY TO REPAY THE NOTES BY THE
APPLICABLE FINAL MATURITY DATE ASSUMING ACTUAL
EXPERIENCE CORRESPONDS TO THE BASE CASE UNTIL THE BEGINNING OF THE YEAR STATED
<TABLE>
<CAPTION>
CLOSING DATE YEAR 3 YEAR 6 YEAR 10
------------ ------ ------ -------
<S> <C> <C> <C> <C>
Subclass A-3 and A-4 62.6% 62.3% 60.8% 58.0%
Subclass B-2 72.9% 72.4% 70.8% 67.0%
Subclass C-2 84.7% 84.3% 80.9% 71.7%
</TABLE>
23
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AERCO LIMITED
--------------------------------------------------------------------------------
VI. Stress Tests
(continued)
3. EFFECT OF A PERMANENT CHANGE IN LEASE RENTALS
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES ASSUMING A
PERMANENT CHANGE IN LEASE RENTALS, BEGINNING IN YEAR 3
<TABLE>
<CAPTION>
PERMANENT CHANGE IN LEASE RENTALS AS A PERCENTAGE OF LEASE RENTALS
------------------------------------------------------------------------------------------------
BASE CASE + 10% BASE CASE + 5% BASE CASE BASE CASE - 5% BASE CASE - 10%
------------------------------------------------------------------------------------------------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
--- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-3 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Subclass A-4 10.8 5.0 10.8 5.0 10.8 5.0 10.8 5.2 10.8 5.2
Subclass B-2 7.9 5.3 7.9 5.3 7.9 5.3 7.9 5.3 7.9 5.3
Subclass C-2 7.9 5.5 7.9 5.5 7.9 5.5 7.9 5.6 7.9 5.6
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES ASSUMING A
PERMANENT CHANGE IN LEASE RENTALS, BEGINNING IN YEAR 6
<TABLE>
<CAPTION>
PERMANENT CHANGE IN LEASE RENTALS AS A PERCENTAGE OF LEASE RENTALS
------------------------------------------------------------------------------------------------
BASE CASE + 10% BASE CASE + 5% BASE CASE BASE CASE - 5% BASE CASE - 10%
------------------------------------------------------------------------------------------------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
--- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-3 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Subclass A-4 10.8 5.0 10.8 5.0 10.8 5.0 10.8 5.0 10.8 5.0
Subclass B-2 7.9 5.3 7.9 5.3 7.9 5.3 7.9 5.3 7.9 5.3
Subclass C-2 7.9 5.5 7.9 5.5 7.9 5.5 7.9 5.5 7.9 5.5
</TABLE>
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AERCO LIMITED
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VI. Stress Tests
(continued)
4. EFFECT OF A PERMANENT DECLINE IN PORTFOLIO VALUE
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES ASSUMING A
PERMANENT CHANGE IN PORTFOLIO VALUE, BEGINNING IN YEAR 1
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE BEGINNING IN YEAR 1
------------------------------------------------------------------------------
100%* 90% 80% 70%
------------------------------------------------------------------------------
EXP AVG EXP AVG EXP AVG EXP AVG
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-3 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Subclass A-4 10.8 5.0 10.8 4.8 10.8 4.8 10.8 4.8
Subclass B-2 7.9 5.3 7.9 5.3 7.9 5.3 7.9 5.3
Subclass C-2 7.9 5.5 7.9 5.6 7.9 5.6 7.9 5.6
</TABLE>
----------
[FN]
* Base Case
</FN>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES ASSUMING A
PERMANENT CHANGE IN PORTFOLIO VALUE, BEGINNING IN YEAR 5
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE BEGINNING IN YEAR 5
------------------------------------------------------------------------------
100%* 90% 80% 70%
------------------------------------------------------------------------------
EXP AVG EXP AVG EXP AVG EXP AVG
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-3 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Subclass A-4 10.8 5.0 10.8 5.0 10.8 5.0 10.8 5.0
Subclass B-2 7.9 5.3 7.9 5.3 7.9 5.3 7.9 5.3
Subclass C-2 7.9 5.5 7.9 5.5 7.9 5.5 7.9 5.5
</TABLE>
----------
[FN]
* Base Case
</FN>
25
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AERCO LIMITED
--------------------------------------------------------------------------------
VI. Stress Tests
(continued)
5A. EFFECT OF CYCLICAL VARIATIONS IN LEASE RENTALS AND PORTFOLIO VALUE -
"RECESSION SCENARIOS"
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS B-2
NOTES ASSUMING A RECESSION LASTING THREE YEARS
<TABLE>
<CAPTION>
Decline in Lease Rentals BASE CASE BASE CASE - 5% BASE CASE - 10%
Adjusted Portfolio Value as a Percentage of
Assumed Portfolio Value 100% 90% 80%
------------------------------------------------------------
EXP AVG EXP AVG EXP AVG
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Recession begins at start of Year 1 7.9 5.3 7.9 5.3 7.9 5.3
3 7.9 5.3 7.9 5.3 7.9 5.3
5 7.9 5.3 7.9 5.3 7.9 5.3
10 7.9 5.3 7.9 5.3 7.9 5.3
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS C-2
NOTES ASSUMING A RECESSION LASTING THREE YEARS
<TABLE>
<CAPTION>
Decline in Lease Rentals BASE CASE BASE CASE - 5% BASE CASE - 10%
Adjusted Portfolio Value as a Percentage of
Assumed Portfolio Value 100% 90% 80%
------------------------------------------------------------
EXP AVG EXP AVG EXP AVG
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Recession begins at start of Year 1 7.9 5.5 7.9 5.6 7.9 5.6
3 7.9 5.5 7.9 5.6 7.9 5.6
5 7.9 5.5 7.9 5.5 7.9 5.5
10 7.9 5.5 7.9 5.5 7.9 5.5
</TABLE>
26
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AERCO LIMITED
--------------------------------------------------------------------------------
VI. Stress Tests
(continued)
5B. EFFECT OF CYCLICAL VARIATIONS IN LEASE RENTALS AND PORTFOLIO VALUE -
"RECESSION SCENARIOS"
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS B-2
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
<TABLE>
<CAPTION>
Decline in Lease Rentals BASE CASE BASE CASE - 5% BASE CASE - 10%
Adjusted Portfolio Value as a Percentage of
Assumed Portfolio Value 100% 90% 80%
------------------------------------------------------------
EXP AVG EXP AVG EXP AVG
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Recession begins at start of Year 1 7.9 5.3 7.9 5.3 7.9 5.3
3 7.9 5.3 7.9 5.3 7.9 5.3
5 7.9 5.3 7.9 5.3 7.9 5.3
10 7.9 5.3 7.9 5.3 7.9 5.3
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS C-2
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
<TABLE>
<CAPTION>
Decline in Lease Rentals BASE CASE BASE CASE - 5% BASE CASE - 10%
Adjusted Portfolio Value as a Percentage of
Assumed Portfolio Value 100% 90% 80%
------------------------------------------------------------
EXP AVG EXP AVG EXP AVG
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Recession begins at start of Year 1 7.9 5.5 7.9 5.6 7.9 5.6
3 7.9 5.5 7.9 5.6 7.9 5.6
5 7.9 5.5 7.9 5.5 7.9 5.5
10 7.9 5.5 7.9 5.5 7.9 5.5
</TABLE>
27
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AERCO LIMITED
--------------------------------------------------------------------------------
VI. Stress Tests
(continued)
6. EFFECT OF PRINCIPAL ALLOCATION ACCORDING TO THE EXTENDED POOL FACTOR ONLY
EFFECT OF PRINCIPAL ALLOCATION ACCORDING TO THE EXTENDED POOL FACTOR ONLY
<TABLE>
<CAPTION>
BASE CASE EXTENDED POOL FACTOR
--------- --------------------
EXP AVG EXP AVG
--- --- --- ---
<S> <C> <C> <C> <C>
Subclass A-4 10.8 5.0 11.8 5.9
Subclass B-2 7.9 5.3 16.8 12.2
Subclass C-2 7.9 5.5 13.1 9.0
</TABLE>
7. EFFECT OF NON-DELIVERY OF ADDITIONAL AIRCRAFT
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF NOTES
ASSUMING NON DELIVERY BY STATED PERCENTAGES IN MONTH TWELVE
<TABLE>
<CAPTION>
NON DELIVERY BY STATED PERCENTAGES IN MONTH TWELVE
-------------------------------------------------------------------------------------------------
BASE CASE + 0% BASE CASE + 10% BASE CASE + 20% BASE CASE + 50%
-------------------------------------------------------------------------------------------------
EXP AVG EXP AVG EXP AVG EXP AVG
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subclass A-3 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Subclass A-4 10.8 5.0 9.4 3.7 7.6 2.5 1.0 0.9
Subclass B-2 7.9 5.3 7.9 5.0 7.9 4.6 7.9 3.4
Subclass C-2 7.9 5.5 7.9 5.1 7.9 4.6 7.9 3.3
</TABLE>
28
