<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1999
REGISTRATION NO. 333-82153
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
AIRCRAFT FINANCE TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6159 51-6512392
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
------------------------
1100 NORTH MARKET STREET
RODNEY SQUARE NORTH
WILMINGTON, DELAWARE 19890
(302) 651-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CORPORATION SERVICE COMPANY
2 WORLD TRADE CENTER
SUITE 8746
NEW YORK, NEW YORK 10048
(800) 221-0770
ATTENTION: JOHN PELLETIER
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
ELLIOT GEWIRTZ, ESQ. MICHAEL LEDYARD, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY LLP MORRIS, JAMES, HITCHENS & WILLIAMS
ONE CHASE MANHATTAN PLAZA 222 DELAWARE AVENUE
NEW YORK, NEW YORK 10005 WILMINGTON, DELAWARE 19899
(212) 530-5474 (302) 888-6917
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
AIRCRAFT FINANCE TRUST MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION RELATING TO
THESE SECURITIES IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION
DECEMBER 14, 1999
$1,145,000,000
AIRCRAFT FINANCE TRUST
OFFER TO EXCHANGE
CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1,
CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1,
CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1
AND CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1
FOR ANY AND ALL OUTSTANDING
CLASS A-1 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1,
CLASS A-2 FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1,
CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 1999-1
AND CLASS C FIXED RATE ASSET BACKED NOTES, SERIES 1999-1
-------------------------
This prospectus and the accompanying letter of transmittal relate to the offer
by Aircraft Finance Trust to exchange up to $1,145,000,000 aggregate principal
amount of new exchange notes for any and all outstanding notes of the same class
that were issued in a private offering by Aircraft Finance on May 5, 1999.
(1) The exchange offer expires 5:00 p.m., New York City time, on
, 1999, unless extended.
(2) The terms of each class of exchange notes are substantially identical
to the terms of the same class of originally issued notes, except that the
exchange notes will be freely transferable and issued free of covenants
regarding exchange and registration rights.
(3) All notes that are validly tendered and not validly withdrawn will be
exchanged.
(4) Tenders of notes may be withdrawn at any time prior to expiration of
the exchange offer.
(5) Holders of originally issued notes do not have any appraisal or
dissenters' rights in connection with the exchange offer. Notes not exchanged in
the exchange offer will remain outstanding and be entitled to the benefits of
the indenture, but except under very limited circumstances will have no further
exchange or registration rights.
(6) The originally issued notes are listed on the Luxembourg Stock Exchange
on May 5, 1999. Aircraft Finance has applied to list the exchange notes on the
Luxembourg Stock Exchange.
-------------------------
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF FACTORS YOU
SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE EXCHANGE NOTES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
AIRCRAFT FINANCE MAY AMEND OR SUPPLEMENT THIS PROSPECTUS FROM TIME TO TIME BY
FILING AMENDMENTS OR SUPPLEMENTS AS REQUIRED. PLEASE READ THIS ENTIRE
PROSPECTUS, THE ACCOMPANYING LETTER OF TRANSMITTAL, THE RELATED DOCUMENTS AND
ANY AMENDMENTS OR SUPPLEMENTS CAREFULLY BEFORE MAKING YOUR INVESTMENT DECISION.
-------------------------
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More
Information....................... iii
Summary............................. 1
Risk Factors........................ 12
Forward-Looking Statements.......... 17
Use of Proceeds of the Exchange
Notes............................. 18
The Exchange Offer.................. 19
Aircraft Finance Trust.............. 31
The Initial Aircraft and Initial
Leases............................ 48
The Commercial Aircraft Industry.... 68
Management of Aircraft Finance...... 80
Capitalization...................... 84
Selected Consolidated Financial
Data.............................. 84
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 85
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Note Payment Assumptions............ 90
Description of the Notes............ 103
Reports to Noteholders.............. 147
Book-Entry Registration, Global
Clearance and Settlement.......... 150
Plan of Distribution................ 154
U.S. Federal Income Tax
Consequences...................... 155
ERISA Considerations................ 160
Legal Matters....................... 161
Luxembourg Listing and General
Information....................... 161
Experts............................. 162
Index to Financial Statements....... F-1
</TABLE>
ii
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
Aircraft Finance is not currently subject to the information reporting
requirements of the Securities Exchange Act of 1934. Aircraft Finance will
become subject to these requirements upon the effectiveness of the Registration
Statement on Form S-4 filed by Aircraft Finance under the Securities Act with
respect to the exchange notes and in accordance with the Exchange Act will file
reports, proxy statements and other information with the Securities and Exchange
Commission. Any reports and other information filed by Aircraft Finance with the
SEC may be inspected and copied at the public reference facilities maintained by
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and will also be available for inspection and copying at the regional
offices of the SEC located at 7 World Trade Center, New York, New York 10048 and
at Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago,
Illinois 60661. The SEC maintains a web site (http://www.sec.gov) that contains
the registration statement of which this prospectus is a part and will contain
future reports and other information filed by Aircraft Finance.
This prospectus does not contain all the information set forth in the
registration statement and its exhibits and schedules, some portions of which
have been omitted as permitted by the rules and regulations of the SEC. For
further information with respect to Aircraft Finance and the exchange notes,
please read the registration statement and the exhibits and schedules filed with
it. They are on file at the offices of the SEC and may be obtained upon payment
of the fee prescribed by the SEC or may be examined without charge at the
offices of the SEC. Statements contained in this prospectus as to the contents
of any documents are not necessarily complete, and, in each such instance, are
qualified in all respects by reference to the applicable documents filed with
the SEC.
The notes originally issued to you were listed on the Luxembourg Stock
Exchange on May 5, 1999, and the exchange notes will be listed upon issuance,
subject only to notice of issuance. The constitutive documents of Aircraft
Finance and the legal notice relating to the issuance of the notes have been
deposited with the Registrar of the District Court in Luxembourg (Greffier en
Chef du Tribunal d'Arrondissement de et a Luxembourg) where they will be
available for inspection and where these documents will be obtainable upon
request. Copies of this prospectus and the reports to the holders of the notes
referred to under "Reports to Noteholders" are available at the office of the
listing agent in Luxembourg: Kredietbank S.A. Luxembourgeoise, 43, Boulevard
Royal, L-2955 Luxembourg. Financial information regarding Aircraft Finance will
be included in Aircraft Finance's quarterly reports on Form 10-Q and annual
reports on Form 10-K and will be available at the office of the listing agent in
Luxembourg after the respective reports are filed with the SEC.
iii
<PAGE> 5
SUMMARY
This summary highlights selected information from this prospectus and does
not contain all the information that is important to you. Please read the entire
prospectus for more complete information about Aircraft Finance, the notes and
the exchange offer and before participating in the exchange offer.
AIRCRAFT FINANCE TRUST
Aircraft Finance was formed on April 13, 1999 as a Delaware business trust.
The authorized business of Aircraft Finance and its present and future
subsidiaries is limited to buying, owning, leasing or selling aircraft. Aircraft
Finance's principal executive offices are located at 1100 North Market Street,
Rodney Square North, Wilmington, Delaware 19890. Its telephone number is (302)
651-1000.
On May 5, 1999, Aircraft Finance issued $1,209 million of its initial
notes. As of that date, the initial notes consisted of $512.5 million of its
initial Class A-1 Notes, $400 million of its initial Class A-2 Notes, $126.5
million of its initial Class B Notes, $106 million of its initial Class C Notes
and $64 million of its initial Class D Notes. As of the date of this prospectus,
the amount outstanding for the notes is approximately $1,187 million,
represented by $512.5 million of the Class A-1 Notes, approximately $79.3
million of the Class A-2 Notes, approximately $125.2 million of the Class B
Notes, $106 million of the Class C Notes and $64 million of the Class D Notes.
Aircraft Finance used the proceeds from the sale of the initial notes and
from the sale of its beneficial interests to pay the aircraft purchase price
referred to below and to fund cash reserves.
On May 5, 1999, Aircraft Finance and its subsidiaries agreed with General
Electric Capital Corporation to purchase 36 aircraft from General Electric
Capital Corporation and some of its affiliates under a master aircraft purchase
agreement and paid the full purchase price of approximately $1,196 million for
all of those initial aircraft. As of October 22, 1999, all of the 36 aircraft
had been delivered to Aircraft Finance.
As of December 31, 1998, the 36 initial aircraft had an aggregate initial
appraised value of approximately $1,323 million. Aircraft Finance currently
leases 35 of the initial 36 aircraft to 22 lessees based in 12 countries. One
aircraft is currently off lease.
1
<PAGE> 6
SELECTED FEATURES OF THE EXCHANGE NOTES AND THE INITIAL CLASS D NOTES
The following table summarizes selected terms and attributes of the
exchange notes and the initial Class D Notes. You should not view the ratings of
the notes as a recommendation to buy, sell or hold the notes. The ratings only
address the likelihood of the timely payment of interest at the rate specified
below and the ultimate payment of principal on those notes. The ratings do not
address other payments on the notes or the effect of any withholding tax on the
notes.
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS B CLASS C CLASS D
NOTES NOTES NOTES NOTES NOTES
------------- ------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Initial Aggregate
Principal Amount.... $512,500,000 $400,000,000 $126,500,000 $106,000,000 $64,000,000
Aggregate Principal
Amount as of
11/30/99.............. $512,500,000 $375,175,810 $124,798,361 $106,000,000 $64,000,000
Ratings:
Moody's............. Aa2 Aa2 A2 Baa2 Ba2
Standard & Poor's... AA AA A BBB BB
Interest Rate......... LIBOR + 0.48% LIBOR + 0.50% LIBOR + 1.15% 8.00% 11.00%
Expected Weighted
Average Life
(Years)............. 5.0 4.9 10.0 10.4 11.0
Expected Final Payment July 15,
Date................ May 15, 2004 June 15, 2008 May 15, 2016 2016 August 15, 2016
Final Maturity Date... May 15, 2024 May 15, 2024 May 15, 2024 May 15, 2024 May 15, 2024
</TABLE>
The outstanding notes are not, and the exchange notes will not be
obligations of, or guaranteed by, General Electric Capital Corporation or any of
its affiliates. The exchange notes are not being offered for sale by any of
them. The initial Class D Notes are not part of the exchange offer.
2
<PAGE> 7
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The Exchange Notes.............. Aircraft Finance will issue the exchange
notes under the Trust Indenture dated as of
May 5, 1999 between it, ReSource/Phoenix,
Inc., as the administrative agent, and
Bankers Trust Company. The exchange offer
applies to the initial Class A, Class B, and
Class C Notes. The exchange offer does not
apply to the initial Class D Notes, but a
few terms of the Class D Notes are described
where useful to understanding the priority
of payments.
Payment Dates................... The 15th day of each month or, if that date
is not a business day in New York, New York,
London, England and, with respect to any
action to be taken there, Luxembourg, the
next day that is a business day.
Interest........................ Aircraft Finance must pay interest on the
exchange notes at rate per annum of LIBOR
plus 0.48% for the Class A-1 Notes, LIBOR
plus 0.50% for the Class A-2 Notes, LIBOR
plus 1.15% for the Class B Notes and 8.00%
for the Class C Notes. Interest is payable
monthly on each payment date.
Calculation of Interest......... Interest based on LIBOR will be calculated
on the basis of a year of 360 days and the
actual number of days elapsed. Interest at a
fixed rate will be calculated on the basis
of a year of 360 days and twelve 30-day
months.
Maturity Step-Up Interest....... If any Class A-1 Note is not paid in full on
or before May 15, 2004, interest for that
Class A-1 Note will accrue at a rate equal
to its existing rate plus 0.50% per annum.
Payments of interest at the increased rate
have a lower payment priority than regular
interest payments and will not be rated.
Additional Interest............. Accrued interest and premium on any note
that is not paid when due will bear interest
at the then current interest rate for that
note.
Expected Principal Payments..... Principal payments are not fixed in amount
but rather are determined monthly based on
revenues collected and costs incurred prior
to the relevant payment date. Effectively,
all revenues collected during each monthly
period are, after payment of expenses, paid
out or reserved in accordance with the
payment priorities set out on page 8.
Aircraft Finance has, however, determined
expected prin-
3
<PAGE> 8
cipal payments of the notes based on revenue
assumptions regarding primarily:
(1) the timing and amount of payments under
current leases and future leases;
(2) the terms of future leases;
(3) Aircraft Finance's ability to refinance
the Class A-1 Notes; and
(4) the amount of operating costs incurred
in the ordinary course of Aircraft Finance's
business.
These expected payments are reflected in the
"Expected Final Payment Date" line item in
the table set out on page 2 and in the table
entitled "Percent of Initial Principal
Balance of the Initial Notes Based on the
Assumed Case" on page 93. It is unlikely
that actual experience will correspond to
those assumptions. The timing and amount of
the principal payments on any note may,
therefore, vary from the expected principal
payments and may vary significantly. If
revenues vary too significantly, Aircraft
Finance may be able to repay only part of
the principal of the notes.
For a more detailed explanation of the
formulas underlying principal payments and
the assumptions on which the expected final
payment dates are based, please see the
following:
On pages 12 to 16 and 32 to 37, we describe
various risk factors and business
conditions, respectively, that can, and
likely will, determine and result in monthly
variances in revenues and expenses which
will affect the principal payments on the
notes.
On pages 104 to 109, we describe the several
mathematical formulas that are applied to
the monthly revenues received to determine
interest, principal and other payments.
On pages 116 to 122, we enumerate the
priorities by which these payments are
allocated among the classes of notes and
Aircraft Finance's other obligations.
On pages 90 to 122, we describe the various
assumptions that were used to determine the
expected final payment dates referred to
above as well as the expected average life
of each of the classes of notes.
4
<PAGE> 9
On pages 93 to 102 we describe the effect
that a variety of specified changes in these
assumptions would have on the expected final
payment dates and average life of the notes.
Sale Premium.................... If any aircraft is sold prior to the May
2010 payment date other than by the security
trustee in exercising its remedies, Aircraft
Finance will calculate and, if there are
sufficient funds to pay, will distribute a
limited premium to the holders of the Class
C Notes and the Class D Notes.
Optional Redemption of the
Notes........................... Aircraft Finance may at any time redeem any
class or subclass of notes by giving
specified required notices and depositing
the necessary funds with the security
trustee. A redemption prior to acceleration
of the notes may be of the whole or any part
of any class or subclass of notes. A
redemption after acceleration of the notes
upon default may only be of all of the
notes. Aircraft Finance may redeem notes
only from funds other than its and its
subsidiaries' operating cash flow, but it
may use the proceeds of notes issued to
refinance the redeemed notes.
Except in a redemption to avoid material
taxes or after acceleration, Aircraft
Finance must pay a premium when it redeems
any notes. Redemption payments are not
subject to the order of payment priorities
described in this summary.
Refinancing Notes and Additional
Notes......................... Aircraft Finance may redeem outstanding
notes by using the proceeds of refinancing
notes issued under the indenture governing
the notes. Refinancing notes need not be of
the same class or subclass as the notes they
refinance and may be issued in any
subclasses of Class A, Class B, Class C and
Class D Notes. Aircraft Finance also has the
right to finance the acquisition of
additional aircraft in part through the
issuance of additional notes under that
indenture and additional beneficial
interests. The additional notes may be
issued in any subclasses of Class A, Class
B, Class C and Class D. Any subclass of
refinancing notes or additional notes will
have the same payment priority as other
notes of the class to which those notes
belong but will never have a payment
priority higher than that of the Class A
Notes.
5
<PAGE> 10
Sources of Payments on the
Notes........................... The only sources of payment for the notes
and the other obligations of Aircraft
Finance and its subsidiaries consist of
(1) payments from the leasing of aircraft
owned or to be acquired by them;
(2) sales and insurance proceeds;
(3) any payments received from General
Electric Capital Corporation as a refund in
respect of the performance of the two leases
to VARIG and the re-lease of one aircraft to
TWA;
(4) amounts drawn under any credit support
facilities;
(5) net payments under any swap or other
hedging agreements;
(6) amounts on deposit in the accounts held
by the security trustee and related
investment earnings; and
(7) net cash proceeds received from the sale
of any refinancing notes.
Aircraft Finance will make payments on the
notes only after the payment of ongoing
expenses.
Security for the Notes.......... The notes are direct obligations of Aircraft
Finance. Holders will not have any lien or
similar interest in any of the aircraft.
Aircraft Finance and its subsidiaries will
grant to the security trustee for the
benefit of the holders of the notes and the
other secured parties a security interest
in:
(1) the ownership interests in the
subsidiaries of Aircraft Finance;
(2) the aircraft leases;
(3) any cash or other assets contained in
the accounts held by the security trustee;
and
(4) rights under the servicing agreement for
the aircraft and other service, credit
support and hedge agreements.
Cash Reserves................... Cash reserves as of the date of this
prospectus are approximately $52 million,
exclusive of security deposits and
maintenance reserves under aircraft leases.
Cash reserves provide a source of liquidity
to pay ongoing expenses, amounts due under
senior swap agreements and interest on the
notes. If cash
6
<PAGE> 11
reserves fall below $33 million, Aircraft
Finance may continue to pay ongoing
expenses, senior swap amounts and interest
on the Class A Notes but may not make any
payments having a lower payment priority
until the reserves have been replenished to
that amount. Similar cash reserves exist for
the other classes of notes. The reserve
levels will reduce as principal is paid and
may be reduced by Aircraft Finance if the
rating agencies confirm that they will not
lower, qualify or withdraw their ratings of
any notes as a result.
Operating Covenants............. Aircraft Finance may not enter into any
future lease unless it is in compliance with
geographic and other concentration limits.
This restriction does not apply to renewals,
extensions or restructurings of existing
leases. Aircraft Finance may enter into a
future lease not meeting these requirements
if the rating agencies confirm that they
will not lower, qualify or withdraw their
ratings of any notes as a result.
Tax Withholding................. Aircraft Finance is not obligated to make
any additional payments on the notes to
offset any withholding or deduction from
payments on the notes required under
applicable law. If any withholding or
deduction is required as to payments on the
notes and Aircraft Finance does not redeem
the notes, the net amount of interest
received by the holders of the notes will be
reduced by the amount of such withholding or
deduction.
7
<PAGE> 12
OVERVIEW OF PRIORITY OF PAYMENTS
The following list summarizes the order of priority of payments on the
notes and other obligations of Aircraft Finance out of all funds received by
Aircraft Finance and its subsidiaries other than security deposits and funds
required by any lease to be segregated and funds to be used to redeem the notes.
Aircraft Finance may incur any amount of additional notes at any and all levels
of payment priority if the proceeds are used to acquire more aircraft and for
related purposes and if the rating agencies confirm that they will not lower,
qualify or withdraw their ratings of any notes as a result. For definitions of
the terms used below and further information about the priority of payments and
changes in the order of priorities upon acceleration of the notes, please see
"Description of the Notes -- Priority of Payments".
- Regularly occurring fees, indemnities and other ongoing expenses
- Class A Notes interest and interest rate and currency swap payments that
are senior
- Payments under any credit facilities or to cash collateral accounts for
the Class A Notes
- Replenishment of reserves to the lowest required level
- Class A Notes Minimum Principal Payment Amount
- Class B Notes interest
- Payments under any credit facilities or to cash collateral accounts for
the Class B Notes
- Replenishment of reserves to the next required level
- Class B Notes Minimum Principal Payment Amount
- Class C Notes interest
- Payments under any credit facilities or to cash collateral accounts for
the Class C Notes
- Replenishment of reserves to the next required level
- Class A Notes Supplemental Principal Payment Amount
- Class B Notes Supplemental Principal Payment Amount
- Class C Notes Minimum Principal Payment Amount
- Class D Notes interest
- Payments under any credit facilities or to cash collateral accounts for
the Class D Notes
- Replenishment of reserves to the highest required level
- Class D Notes Minimum Principal Payment Amount
- Anticipated expenses other than for modifications of aircraft and
refinancings
- Increased interest on the Class A-1 Notes and interest on past due
interest and premium
- Class A Notes Scheduled Principal Payment Amount
- Class B Notes Scheduled Principal Payment Amount
- Class C Notes Scheduled Principal Payment Amount
- Class D Notes Scheduled Principal Payment Amount
- Reimbursement of any payments made by the holders of the beneficial
interests in Aircraft Finance to cure note defaults
- Premium on Class C and Class D Notes resulting from aircraft sales
- Expenses related to modifications of aircraft and refinancings
- Class A Notes outstanding principal
- Class B Notes outstanding principal
- Class C Notes outstanding principal
- Class D Notes outstanding principal
- Interest rate and currency swap payments that are subordinated
- Additional fees under the aircraft servicing agreement
- Remainder to Aircraft Finance for distribution to the holders of its
beneficial interests
8
<PAGE> 13
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer.............. Aircraft Finance is offering to exchange up
to $1,145 million aggregate principal amount
of exchange notes for an equal aggregate
principal amount of outstanding notes of the
same class. The form and terms of each class
of exchange notes are substantially the same
as the form and terms of the outstanding
notes of the same class, except that the
exchange notes have been or will be
registered under the Securities Act and will
not bear legends restricting their transfer.
Registration Rights Agreement... You have rights to exchange your Class A,
Class B or Class C Notes for exchange notes
of the same class, and the exchange offer is
intended to satisfy those rights. After the
exchange offer is complete, you will no
longer be entitled to any exchange or
registration rights with respect to your
notes unless you tender your notes and do
not receive freely tradable exchange notes
in the exchange offer or you are ineligible
to participate in the exchange offer.
Resales of the Exchange Notes... Aircraft Finance believes that the exchange
notes may be resold by you without
compliance with the registration and
prospectus delivery provisions of the
Securities Act if:
(1) you are acquiring the exchange notes in
the ordinary course of your business;
(2) you are not participating, do not intend
to participate and have no arrangement or
understanding with any person to
participate, in a distribution of the
exchange notes;
(3) you are not an affiliate of Aircraft
Finance; and
(4) you are not an initial purchaser who
acquired notes directly from Aircraft
Finance in the initial offering.
If you do not meet those conditions, you may
incur liability under the Securities Act if
you transfer any exchange note without
delivering a prospectus meeting the
requirements of the Securities Act. Aircraft
Finance does not assume, or indemnify you
against, that liability.
Each broker-dealer that receives exchange
notes for its own account in exchange for
the notes originally issued to it, where
such original notes were acquired by that
broker-dealer as a result of
9
<PAGE> 14
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of exchange notes. A broker-dealer
may use this prospectus for an offer to
resell or to otherwise transfer the exchange
notes.
Expiration Date................. The exchange offer will expire at 5:00 p.m.,
New York City time, on , 1999,
unless Aircraft Finance decides to extend
the exchange offer.
Conditions to the Exchange
Offer........................... The only conditions to completing the
exchange offer are that the exchange offer
not violate applicable law or any applicable
interpretation of the staff of the SEC; that
no action or proceeding is instituted with
respect to the exchange offer; that no law,
rule or regulation is adopted that Aircraft
Finance expects would impair its ability to
proceed with the exchange offer; and that
Aircraft Finance obtains all necessary
governmental approval for the exchange
offer.
Procedures for Tendering
Notes........................... The outstanding Class A, Class B and Class C
Notes were issued as global securities in
fully registered form. Beneficial interests
in those notes held by direct or indirect
participants in The Depository Trust Company
through depositary interests are shown on
records maintained in book-entry form by DTC
with respect to its participants. Transfers
can be made only on those records. If you
are a holder of a note held in the form of a
book-entry interest and you wish to tender
your note under the exchange offer, you must
transmit through a financial institution
that is a participant in DTC's book-entry
transfer facility system on or prior to the
expiration of the exchange offer a
computer-generated message transmitted by
means of DTC's Automated Tender Offer
Program system together with a part of a
confirmation of book-entry transfer in which
you acknowledge and agree to be bound by the
terms of the letter of transmittal.
Special Procedures for
Beneficial Owners............... If you are the beneficial owner of notes
that are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and you wish to tender your
notes, you should promptly contact the
person in whose name your notes are
registered and instruct that person to
tender on your behalf.
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Guaranteed Delivery
Procedures...................... If you wish to tender your notes and cannot
complete the procedure for book-entry
transfer on a timely basis, you may still
tender your notes in accordance with the
guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures".
Acceptance of Notes and Delivery
of Exchange Notes............... Unless the conditions to the exchange offer
are not met or tendered notes are properly
withdrawn, Aircraft Finance will accept any
and all outstanding Class A, Class B and
Class C Notes that are properly tendered in
the exchange offer prior to 5:00 p.m., New
York City time, on the expiration date.
Withdrawal...................... You may withdraw the tender of your notes at
any time prior to 5:00 p.m., New York City
time, on the expiration date. Aircraft
Finance will return to you any notes not
accepted for exchange for any reason without
expense to you as soon as practicable after
withdrawal.
Exchange Agent.................. Bankers Trust Company is serving as the
exchange agent for the exchange offer.
Federal Income Tax
Consequences.................... The exchange of your notes in the exchange
offer will not be a taxable event for
federal income tax purposes.
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RISK FACTORS
Please consider carefully the risks described below before making a
decision to accept the exchange notes.
AIRCRAFT FINANCE IS A SPECIAL PURPOSE ENTITY AND THEREFORE YOU ARE RELYING ON
ONLY A LIMITED NUMBER OF REVENUE SOURCES FOR THE REPAYMENT OF YOUR NOTES.
It is unlikely that Aircraft Finance would be able to obtain any alternate
source of funds if any of its limited sources of funds are insufficient to pay
the notes and its other obligations. The sole sources of payment for the
exchange notes, the Class D Notes and the other obligations of Aircraft Finance
and its subsidiaries are
(1) funds derived from the aircraft owned or to be acquired by them,
including: rents, deposits, maintenance reserves and other payments under
existing leases and any future leases, insurance proceeds, sales proceeds and
any payments by General Electric Capital Corporation as to several initial
leases;
(2) liquidity reserves funded out of the proceeds of the initial notes or
that may be funded out of the proceeds of any future notes or beneficial
interests in Aircraft Finance or provided through any future credit facilities;
(3) net payments under swap or other hedging agreements;
(4) investment earnings; and
(5) net proceeds from the sale of any notes issued to refinance other
notes.
AIRCRAFT FINANCE WILL NOT RECEIVE ENOUGH REVENUES FROM ITS CURRENT AIRCRAFT
LEASES TO REPAY YOUR NOTES IN FULL AND THEREFORE IT WILL HAVE TO RELEASE OR SELL
THE PLANES IN ORDER TO REPAY YOU IN FULL.
Aircraft Finance will need to re-lease aircraft as current leases expire in
order to continue to generate enough revenue to pay the notes in full. Failing
re-leasing, it will need to attempt to sell the aircraft to provide funds for
note payments.
OVER THE LIFE OF THE AIRCRAFT PORTFOLIO, IT IS LIKELY THAT SOME OF THE AIRCRAFT
LESSEES WILL EXPERIENCE FINANCIAL DIFFICULTIES WHICH WILL CAUSE THEM TO DELAY OR
MISS RENTAL PAYMENTS TO AIRCRAFT FINANCE AND THEREBY ADVERSELY AFFECT THE TIMELY
OR FULL REPAYMENT OF YOUR NOTES.
Some of Aircraft Finance's existing lessees are in a weak financial
position, and this is likely to be the case with future aircraft lessees as
well. In a portfolio the size of Aircraft Finance's, you should expect that some
aircraft lessees will at some point be slow in paying or will fail to pay in
full. In most instances, late payments are recovered, together with default
interest or other similar payments required by the leases. In other instances, a
restructuring of the lease is required, involving anything from a simple
rescheduling of payments to the termination of a lease. With respect to Aircraft
Finance's current lessees, restructuring has been worked out with six lessees
involving ten aircraft. As of November 30, 1999, material amounts were still
owing from four of these lessees, including from Air Holland, with whom Aircraft
Finance terminated its leasing arrangement on November 23, 1999. Air Holland's
past-due basic rent obligations are covered by security.
A delayed or missed rental payment from a lessee decreases Aircraft
Finance's revenues, adversely affecting the timely or full repayment of your
notes. A certain level of delinquency has been assumed for purposes of
calculating the estimated final payment date for your notes. Aircraft Finance
cannot assure you, however, that default levels will not
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<PAGE> 17
increase over time, particularly if the current favorable economic conditions do
not continue.
BECAUSE AIRCRAFT FINANCE IS A NEW ENTITY, IT HAS NO ESTABLISHED OPERATING
HISTORY OR HISTORICAL FINANCIAL STATEMENTS FOR YOU TO RELY ON IN MAKING AN
INVESTMENT DECISION. THIS MAKES YOUR ASSESSMENT OF ITS PROSPECTS AND MANAGEMENT
MORE DIFFICULT.
In the absence of an operating history and historical financial statements
for Aircraft Finance and its subsidiaries, it will be more difficult for you to
evaluate Aircraft Finance's likely future performance based on past experience
than it would be were such information available. Likewise, it will be more
difficult for you to assess the quality of its management.
THE PRINCIPAL PAYMENTS YOU WILL RECEIVE EACH MONTH WILL VARY DEPENDING ON
AIRCRAFT FINANCE'S REVENUES AND EXPENSES FOR THE PREVIOUS MONTH. SINCE THESE
AMOUNTS ARE NOT PRECISELY PREDICTABLE, YOUR MONTHLY PRINCIPAL PAYMENTS WILL ALSO
BE UNPREDICTABLE.
Because principal payments on the notes on any payment date are a function
of the revenues and expenses of the previous month, principal payments will be
particularly sensitive to variations in collections and expenses. Although
Aircraft Finance has determined an expected schedule of installments based on
revenue assumptions, actual payments will be different, and may differ
materially, from those assumed as revenues and expenses are affected by general
economic conditions and factors such as:
(1) changes in the mix of the aircraft portfolio that will change the mix
of lessees and the values of aircraft;
(2) the possible mismatch between the fixed and floating rates on the notes
and fixed and floating rates on aircraft leases;
(3) costs involved in terminating interest hedge arrangements;
(4) reduced revenues from credit problems facing lessees and lease defaults
as a result of competition, weak financial condition, local economic conditions
and "Year 2000" issues;
(5) aging of the aircraft portfolio resulting in reduced values and lease
rates and the resulting need to lease to less creditworthy entities;
(6) increased costs resulting from the enforcement of default leases;
(7) increased maintenance, registration and other operating costs if
lessees fail to perform their obligations or as aircraft age and Aircraft
Finance is required to pay a greater share of those costs under new leases;
(8) possible reduced lease rates and sale proceeds as the current leases
expire; and
(9) the possible inability to re-lease or sell aircraft as the current
leases expire.
AIRCRAFT FINANCE HAS NO EMPLOYEES OR MANAGERS OF ITS OWN, SO ITS ABILITY TO
GENERATE REVENUES TO PAY THE NOTES DEPENDS ON CONTRACTS WITH, AND PERFORMANCE
BY, INDEPENDENT THIRD PARTY SERVICE PROVIDERS.
Inadequate performance and resignations by service providers may materially
and adversely affect revenues and costs and thereby the timing of note payments
and ultimate
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<PAGE> 18
repayment. In the absence of an ownership stake, third party service providers
may have no incentive to perform beyond the strict requirements of their
contract. Aircraft Finance is especially dependent on service providers because
neither Aircraft Finance nor its subsidiaries will have any employees or
executive managers of its own.
Aircraft Finance will instead rely on contracts with GE Capital Aviation
Services, Limited as the servicer, ReSource/Phoenix as the administrative agent,
Bankers Trust as the financial advisor, Lehman Brothers as the capital markets
advisor and perhaps other service providers for all asset servicing, executive
and administrative functions. Regarding these arrangements, please note that:
(1) any of these organizations may fail to perform its contractual
obligations adequately;
(2) any of them may exercise contract termination rights;
(3) Aircraft Finance may find it difficult to recover damages for poor
performance in light of contractual limitations;
(4) Aircraft Finance may not be able to terminate the contract itself -- in
particular its rights to terminate the aircraft servicing agreement are very
limited; and
(5) Aircraft Finance may not have the legal right to locate satisfactory
replacements on favorable terms.
THE AIRCRAFT SERVICER MAY FACE CONFLICTS OF INTEREST THAT COULD RESULT IN
PREFERENTIAL TREATMENT FOR A THIRD PARTY AT THE EXPENSE OF AIRCRAFT FINANCE. IF
THE SERVICER DID PREFER A THIRD PARTY IN A CONFLICT OF INTEREST, IT COULD REDUCE
AIRCRAFT FINANCE'S REVENUES AND ADVERSELY AFFECT THE TIMELY OR FULL REPAYMENT OF
YOUR NOTES.
GE Capital Aviation Services, Limited will from time to time have conflicts
of interest that may adversely affect its ability to perform its obligations as
the servicer to Aircraft Finance because it manages aircraft and other assets of
many other entities, in particular for its affiliate, General Electric Capital
Corporation and its group. These conflicts will arise when Aircraft Finance
aircraft are leased to entities that are also the lessees of other aircraft
managed by the servicer and decisions affecting some aircraft may be adverse to
others. If the servicer makes a decision adverse to Aircraft Finance's
interests, Aircraft Finance's revenues could suffer.
These conflicts may be particularly acute when a lessee in financial
distress needs to return some of its aircraft. Conflicts will also arise when
the aircraft of Aircraft Finance are being marketed for re-lease or sale at a
time when other aircraft managed by the servicer are similarly being marketed.
These circumstances may be especially sensitive where General Electric Capital
Corporation is providing financing for the marketed aircraft or where the
servicer's contractual arrangements have the effect of requiring preferential
treatment for other aircraft.
Under the terms of its servicing agreement with the servicer, Aircraft
Finance is not necessarily entitled to be informed of all conflicts of interest
involving the servicer and is limited in its right to replace the servicer
because of conflicts of interest.
BECAUSE AIRCRAFT FINANCE'S CONTRACT LIMITS ITS REMEDIES AGAINST THE SERVICER FOR
POOR PERFORMANCE, AIRCRAFT FINANCE MAY AT SOME POINT BEAR COSTS THAT WILL REDUCE
ITS AVAILABLE REVENUES AND ADVERSELY AFFECT THE TIMELY OR FULL REPAYMENT OF YOUR
NOTES.
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<PAGE> 19
Under the aircraft servicing agreement, Aircraft Finance may not in many
cases have the right to recover damages for inadequate performance. Aircraft
Finance's right to terminate the servicing agreement by reason of a failure of
the servicer to perform is, moreover, limited to those failures to perform that
materially and adversely affect Aircraft Finance and its subsidiaries as a
whole.
In addition, the servicer is in particular not contractually responsible
for:
(1) any Year 2000 problems relating to the serviced aircraft and leases;
(2) the transfer of aircraft, leases or other assets to any person within
the Aircraft Finance group;
(3) the adequacy of the terms of any aircraft lease, including rent
payments, maintenance reserves or security deposits;
(4) the reliability or creditworthiness of any lessee; and
(5) the terms of the notes and the ability of Aircraft Finance to comply
with the terms of the notes.
Aircraft Finance has agreed to indemnify the servicer and its affiliates
for broad categories of losses arising out of the performance of services for
the aircraft and leases held by subsidiaries of Aircraft Finance, including Year
2000 problems faced by Aircraft Finance or related to any of the aircraft,
unless the losses arise from the servicer's gross negligence or willful
misconduct. Aircraft Finance has also agreed to indemnify the servicer and its
affiliates as to losses arising out of the exchange offer and the disclosures in
this prospectus, except disclosures provided by the servicer.
YOU WILL NOT HAVE ANY LIEN OR SIMILAR INTEREST IN THE AIRCRAFT AND MAY RECOVER
LESS UPON DEFAULT THAN IF A LIEN WERE AVAILABLE
The security trustee will not on your behalf have available the broader
category of protection, such as priority over competing liens, and enforcement
rights upon default, such as seizing the aircraft, that would have been
available with a lien on the aircraft. Although the aircraft leases and the
ownership interest in the Aircraft Finance subsidiaries that own the aircraft
have been or will be pledged to the security trustee for your benefit, the
amount recoverable as to the aircraft may be less in the absence of a direct
lien on the aircraft.
THE NOTES ARE NOT ALL ENTITLED TO THE SAME PAYMENT PRIORITY. A REVENUE SHORTFALL
WILL AFFECT THE MORE JUNIOR CLASSES OF NOTES BEFORE IT AFFECTS THE MORE SENIOR
CLASSES.
Any cash flow shortfall will more directly affect claimants with a lower
payment priority. This effect will be more pronounced after acceleration of the
notes upon any bankruptcy of Aircraft Finance or other defaults when the order
of payment priorities would be changed to favor the senior classes of notes to a
greater degree.
IF THE VALUE OF AIRCRAFT FINANCE'S PLANES DECLINES, THE PRINCIPAL PAYMENTS TO
THE MOST SENIOR CLASS OF NOTES WILL BE ACCELERATED, AND THIS MAY EXTEND THE TIME
OF REPAYMENT FOR THE MORE JUNIOR CLASSES OF NOTES.
The principal payment amounts payable on the Class A Notes will be made
more quickly if the appraisals of the aircraft that Aircraft Finance is to
obtain at least annually reflect a decline in aircraft values that is
significantly greater than expected. These
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<PAGE> 20
accelerated principal payments on the Class A Notes may have the effect of
suspending principal payments on more junior notes and extending the weighted
average lives of those junior notes. You should note that aircraft appraisers
have recently been reducing their appraised values for aircraft, reflecting the
supply effects of new aircraft orders, manufacturers' price discounting and
other factors. Accordingly, Aircraft Finance cannot assure you that the expected
average lives of its more junior notes will not be materially extended.
THE JUNIOR CLASSES OF NOTES WILL NOT BE ABLE TO DIRECT THE EXERCISE OF REMEDIES
UNTIL THE SENIOR CLASSES HAVE BEEN PAID IN FULL AND MAY BE ADVERSELY AFFECTED BY
DECISIONS OF THE SENIOR CLASSES.
Upon default, only the holders of the senior-most class of notes still
outstanding, determined in alphabetical order, and in limited instances the
provider of any future senior credit facility will be able to direct the trustee
and the security trustee as to the exercise of remedies against Aircraft Finance
and the collateral. The holders of the other classes of notes will not be able
to give any direction of that type. In giving directions regarding the exercise
of remedies, the holders of the senior class are entitled to consider their own
interests without regard to the interests of the other classes.
BECAUSE AN ACTIVE TRADING MARKET FOR THE EXCHANGE NOTES MAY NEVER DEVELOP, IT
MAY BE DIFFICULT FOR YOU TO RESELL YOUR NOTES EVEN AFTER REGISTRATION.
Although those holders of exchange notes who are not Aircraft Finance
"affiliates" under the Securities Act may resell exchange notes without
registration under the Securities Act, there is no existing market for the
exchange notes. Aircraft Finance cannot assure you as to the liquidity of any
markets that may develop for the exchange notes, your ability to sell exchange
notes or the prices at which you would be able to sell exchange notes. Future
trading prices of the exchange notes will depend on many factors, including
prevailing interest rates, Aircraft Finance's operating results, the market for
similar securities and the liquidity of any market that may develop for the
exchange notes.
The initial purchasers in the private offering of the notes have advised
Aircraft Finance that they intend to make a market in the exchange notes after
the exchange offer. They are not, however, obligated to do so, and they may
discontinue any market making at any time without notice. In addition,
market-making activity may be limited during the exchange offer.
IF YOU DO NOT EXCHANGE YOUR NOTES, THE RESALE OF YOUR EXISTING NOTES WILL
CONTINUE TO BE HIGHLY RESTRICTED.
If you do not exchange your current Class A, Class B or Class C Notes for
exchange notes in the exchange offer, you will continue to be subject to
existing transfer restrictions after the exchange offer. Aircraft Finance issued
the notes in a private offering exempt from the registration requirements of the
Securities Act. Therefore, you may not offer or sell your current notes except
in compliance with the registration or qualification requirements of the
Securities Act and applicable state securities laws or pursuant to exceptions
from, or in transactions not subject to, those requirements.
In addition, if you do not tender your current notes in the exchange offer,
you will no longer be entitled to any registration rights after the exchange
offer unless you are legally precluded from participating in the exchange offer.
To the extent that your notes are not tendered and accepted in the exchange
offer, any trading liquidity for untendered notes could be adversely affected.
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FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
the securities laws. All statements regarding Aircraft Finance's expected
financial position, business and financing plans are forward-looking statements.
Forward-looking statements also include representations of Aircraft Finance's
expectations or beliefs concerning future events that involve risks and
uncertainties, including those associated with:
(1) the aircraft;
(2) the leases for the aircraft;
(3) the lessees of the aircraft;
(4) the prospects of re-leasing or disposing of the aircraft;
(5) lessee concentrations;
(6) any future acquisition of aircraft;
(7) Aircraft Finance's ability to pay interest, principal and premium on
the notes; and
(8) risks relating to tax withholding.
The expectations reflected in those forward-looking statements may prove to
be incorrect. Important factors that could cause actual results to differ
materially from those expectations have been disclosed by Aircraft Finance in
this prospectus under "Risk Factors". All subsequent written and oral
forward-looking statements attributable to Aircraft Finance or persons acting on
its behalf are expressly qualified by the cautionary statements included in this
prospectus.
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USE OF PROCEEDS OF THE EXCHANGE NOTES
The exchange offer is intended to satisfy a number of Aircraft Finance's
obligations to the initial purchasers of the Class A, Class B and Class C Notes.
Aircraft Finance will not receive any proceeds from the issuance of the exchange
notes offered under this prospectus.
In consideration for issuing the exchange notes, Aircraft Finance will
receive, in exchange, originally issued notes in like principal amount. The form
and terms of the exchange notes are identical in all material respects to the
form and terms of the initial notes of the same class, except as otherwise
described under "The Exchange Offer -- Terms of the Exchange Offer." Notes
surrendered in exchange for the exchange notes will be retired and cancelled and
cannot be reissued. Accordingly, the issuance of the exchange notes will not
result in any increase in Aircraft Finance's outstanding debt.
The net cash proceeds to Aircraft Finance from the initial offering of its
notes was approximately $1,209.0 million after payment of subscription discounts
and commissions to the initial purchasers of the notes in the amount of
approximately $8.7 million. Aircraft Finance also received approximately $39.1
million from the purchasers of its beneficial interests. Aircraft Finance used
the proceeds to fund the $1,196.1 million purchase price for 36 aircraft
acquired from General Electric Capital Corporation and its affiliates and to
fund a cash reserve in the amount of $52.0 million.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
Aircraft Finance initially sold the Class A, Class B and Class C Notes in a
private offering on May 5, 1999 to Lehman Brothers Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Credit Suisse First Boston Corporation, referred
to as the initial purchasers in this prospectus, pursuant to a Purchase
Agreement dated April 21, 1999 between it and the initial purchasers. Those
initial notes are referred to as the "Restricted Notes". The initial purchasers
subsequently resold the Restricted Notes to qualified institutional buyers in
the United States in reliance on, and subject to the restrictions of, Rule 144A
under the Securities Act and outside the United States in accordance with
Regulation S under the Securities Act. The initial Class D Notes were part of
the same private offering but are not subject to the exchange offer.
In connection with the private offering of the Restricted Notes, Aircraft
Finance and the initial purchasers entered into a registration rights agreement
dated May 5, 1999, in which Aircraft Finance agreed, among other things:
(1) to file with the SEC as soon as practicable, a registration statement
relating to an exchange offer for the Restricted Notes;
(2) to use all commercially reasonable efforts to cause that registration
statement to be declared effective under the Securities Act at the earliest
possible time;
(3) upon the effectiveness of that registration statement, to offer the
holders of the Restricted Notes the opportunity to exchange their Restricted
Notes in the exchange offer for a like principal amount of exchange notes;
(4) to keep the exchange offer open for not less than 20 business days or
longer, if required by applicable law, after that registration statement is
declared effective;
(5) to use all commercially reasonable efforts to consummate the exchange
offer on the earliest practicable date after that registration statement has
become effective, but in no event later than 30 business days after
effectiveness; and
(6) to use all commercially reasonable efforts to consummate the exchange
offer on or before January 28, 2000.
Aircraft Finance also agreed that where applicable law or SEC policy makes
the exchange offer itself, or the participation in the exchange offer by one or
more holders of the Restricted Notes, impermissible or impossible, it would:
(1) use its best efforts to file a shelf registration statement relating to
the offer and sale of the Restricted Notes by the holders of the Restricted
Notes;
(2) use its best efforts to cause the shelf registration statement to be
declared effective within 270 days after the obligation to file one arises; and
(3) use its best efforts to keep the shelf registration statement effective
for at least two years, as may be extended under the registration rights
agreement, or until the Restricted Notes covered by the shelf registration
statement have been sold or until the Restricted Notes become eligible for
resale without volume restrictions pursuant to Rule 144 under the Securities
Act.
The exchange offer made by this prospectus is intended to satisfy your
registration rights under the registration rights agreement. If Aircraft Finance
fails to fulfill its
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registration and exchange obligations, you, as a holder of outstanding
Restricted Notes, are entitled to receive additional interest at a rate of 0.50%
per annum.
Restricted Notes that are not tendered for exchange in the exchange offer
will remain outstanding and continue to accrue interest and will be entitled to
the rights and benefits that holders of Restricted Notes have under the
indenture governing the notes and the registration rights agreement. No holder
of Restricted Notes will be entitled to receive any additional interest as noted
in the prior paragraph on its Restricted Notes, if that holder was, at any time
while the exchange offer is pending, eligible to exchange, and did not validly
tender, its Restricted Notes for exchange notes in the exchange offer.
The foregoing is a summary of the material terms of the registration rights
agreement. For a comprehensive understanding of your registration rights, you
should refer to the registration rights agreement, which is included as Exhibit
4.4 to the Registration Statement that relates to this prospectus.
RESALE OF EXCHANGE NOTES
Based on no-action letters issued by the staff of the SEC in unrelated
transactions, Aircraft Finance believes that you may offer for resale, resell or
otherwise transfer any exchange notes issued to you in the exchange offer in
exchange for Restricted Notes without compliance with the registration and
prospectus delivery requirements of the Securities Act, if
(1) you are acquiring the exchange notes issued in the exchange offer in
the ordinary course of your business;
(2) you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate, in a distribution
of the exchange notes;
(3) you are not an "affiliate" of Aircraft Finance, as that term is defined
in Rule 405 under the Securities Act; and
(4) you are not an initial purchaser who is holding exchange notes you
received in exchange for Restricted Notes acquired directly from Aircraft
Finance in the initial offering.
If you are an "affiliate" of Aircraft Finance or an initial purchaser
described above or if you have any arrangement or understanding with any person
to participate in a distribution of the exchange notes
(1) you will not be able to rely on the interpretations of the staff of the
SEC in connection with any offer for resale, resale or other transfer of
exchange notes; and
(2) you must comply with the registration and prospectus delivery
requirements of the Securities Act, or have an exemption available to you, in
connection with any offer for resale, resale or other transfer of the exchange
notes. This prospectus may be used for an offer for sale, resale or other
transfer of the exchange notes only as specifically set forth in this
prospectus.
In addition, Aircraft Finance is not making the exchange offer to, nor will
it accept surrenders of Restricted Notes from, holders of Restricted Notes in
any state in which the exchange offer would not comply with the applicable
securities laws or "blue sky" laws of that state.
Each broker-dealer that receives exchange notes for its own account in
exchange for Restricted Notes, where Restricted Notes were acquired by the
broker-dealer as a result of
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<PAGE> 25
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of exchange notes. See
"Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
On the terms and conditions set forth in this prospectus and in the
accompanying letter of transmittal, Aircraft Finance will accept all outstanding
Restricted Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date, which is defined below in "-- Expiration
Date; Extensions; Amendments". After authentication of the exchange notes by the
trustee or an authenticating agent, Aircraft Finance will issue and deliver
$1,000 principal amount of exchange notes in exchange for each $1,000 principal
amount of outstanding Restricted Notes accepted in the exchange offer. You may
tender some or all of your Restricted Notes pursuant to the exchange offer, but
only in integral multiples of $1,000.
By tendering Restricted Notes in exchange for exchange notes and by
executing the letter of transmittal, you will be representing to Aircraft
Finance that, among other things
(1) any exchange notes to be received by you will be acquired in the
ordinary course of your business;
(2) you are not engaging in a distribution nor do you have an arrangement
or understanding with any person to participate in the distribution of the
exchange notes; and
(3) you are not an "affiliate" of Aircraft Finance, as defined in Rule 405
under the Securities Act, or, if you are an affiliate, that you will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
IN THE CASE OF A BROKER-DEALER THAT RECEIVES EXCHANGE NOTES FOR ITS OWN
ACCOUNT IN EXCHANGE FOR RESTRICTED NOTES THAT WERE ACQUIRED BY IT AS A RESULT OF
MARKET-MAKING OR OTHER TRADING ACTIVITIES, THE LETTER OF TRANSMITTAL WILL ALSO
INCLUDE AN ACKNOWLEDGMENT THAT THE BROKER-DEALER WILL DELIVER A COPY OF THIS
PROSPECTUS IN CONNECTION WITH THE RESALE BY IT OF EXCHANGE NOTES RECEIVED
PURSUANT TO THE EXCHANGE OFFER; HOWEVER, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, THE BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT. SEE "PLAN OF
DISTRIBUTION".
The exchange notes will be issued under and entitled to the benefits of the
indenture that governs the Restricted Notes. The form and terms of the exchange
notes are identical in all material respects to the form and terms of the
outstanding Restricted Notes, except that
(1) the offering of the exchange notes has been registered under the
Securities Act;
(2) the exchange notes will not be subject to transfer restrictions; and
(3) the exchange notes will be issued without registration rights.
As of the date of this prospectus, approximately $1,118,500,000 aggregate
principal amount of the Restricted Notes is outstanding. In connection with the
issuance of the Restricted Notes, Aircraft Finance arranged for the Restricted
Notes to be issued and transferable in book-entry form through the facilities of
The Depository Trust Company, acting as a depositary. The exchange notes will
also be available and transferable in book-entry form through DTC.
This prospectus and the accompanying letter of transmittal are initially
being sent to all registered holders of Restricted Notes as of the close of
business on , 1999. There will be no fixed record date for
determining registered holders of Restricted Notes
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<PAGE> 26
entitled to participate in the exchange offer. The exchange offer is not
conditioned upon the tender of any minimum aggregate principal amount of
Restricted Notes. The exchange offer is, however, subject to customary
conditions, which may be waived by Aircraft Finance, and to the terms and
provisions of the registration rights agreement. See "-- Conditions to the
Exchange Offer."
Aircraft Finance will be deemed to have accepted validly tendered
Restricted Notes when and if it has given oral or written notice to the exchange
agent. See "-- Exchange Agent." The exchange agent will act as agent for the
tendering holders of Restricted Notes for the purpose of receiving exchange
notes from Aircraft Finance and delivering exchange notes to those holders.
If any tendered Restricted Notes are not accepted for exchange because of
an invalid tender or the occurrence of other events set forth in this section,
certificates for any of the unaccepted Restricted Notes will be returned, at the
expense of Aircraft Finance, to the tendering holder as promptly as practicable
after the Expiration Date.
Holders who tender Restricted Notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
Restricted Notes pursuant to the exchange offer. Aircraft Finance will pay all
charges and expenses, other than specified applicable taxes, in connection with
the exchange offer. See "-- Solicitation of Tenders, Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1999, or the latest date to which Aircraft Finance extends the
exchange offer. Aircraft Finance may extend the exchange offer at any time and
from time to time, in its sole discretion, by giving oral or written notice to
the exchange agent and by timely public announcement.
If any of the conditions set forth under "-- Conditions of the Exchange
Offer" has occurred and has not been waived by Aircraft Finance, Aircraft
Finance expressly reserves the right, in its sole discretion, by giving oral or
written notice to the exchange agent, to
(1) extend the exchange offer or delay accepting any Restricted Notes;
(2) amend the terms of the exchange offer; or
(3) terminate the exchange offer and return any tendered notes.
Any delay in accepting any Restricted Note and any extension, amendment or
termination of the exchange offer will be followed as promptly as practicable by
oral or written notice to the registered holders of the Restricted Notes. If
Aircraft Finance amends the exchange offer in a manner that it determines to
constitute a material change, Aircraft Finance will promptly disclose the
amendment in a manner reasonably calculated to inform the holders of the
amendment, and Aircraft Finance will extend the exchange offer to the extent
required by law.
Without limiting the manner in which it may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, Aircraft Finance is not obligated to publish, advise, or
otherwise communicate any public announcement, other than by making a timely
press release.
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INTEREST ON THE EXCHANGE NOTES
Interest on the exchange notes will accrue from the last interest payment
date on which interest was paid on the Restricted Notes that are surrendered in
exchange or, if no interest has been paid on the Restricted Notes, from May 5,
1999. The rate of and payment date for interest on the exchange notes will be
the same as that of the related Restricted Note.
PROCEDURES FOR TENDERING
BOOK-ENTRY INTERESTS. The Restricted Notes were issued as global
securities in fully registered form without interest coupons. Beneficial
interests in the global securities held by direct or indirect participants in
DTC are shown on, and transfers of these interests are effected only through,
records maintained in book-entry form by DTC with respect to its participants.
If you hold your Restricted Notes in the form of book-entry interests and
you wish to tender your Restricted Notes for exchange in the exchange offer, you
must transmit to the exchange agent on or prior to the Expiration Date either:
(1) a written or facsimile copy of a properly completed and duly executed
letter of transmittal, including all other documents required by such letter of
transmittal, to the exchange agent at the address set forth on the cover page of
the letter of transmittal; or
(2) a computer-generated message, or Agent's Message, transmitted by means
of DTC's Automated Tender Offer Program, or ATOP, system and received by the
exchange agent and forming a part of a confirmation of book-entry transfer, in
which you acknowledge and agree to be bound by the terms of the letter of
transmittal.
In addition, in order to deliver Restricted Notes held in the form of
book-entry interests (1) a timely confirmation of book-entry transfer of those
notes into the exchange agent's account at DTC pursuant to the procedure for
book-entry transfers described below under "-- Book-Entry Transfer" must be
received by the exchange agent prior to the Expiration Date; or (2) you must
comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF RESTRICTED NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND
RISK. INSTEAD OF DELIVERY BY MAIL, AIRCRAFT FINANCE RECOMMENDS THAT YOU USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU
SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR RESTRICTED NOTES TO AIRCRAFT
FINANCE OR DTC. YOU MAY REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY, OR NOMINEE TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
CERTIFICATED RESTRICTED NOTES. Only registered holders of certificated
Restricted Notes may tender those notes in the exchange offer. Certificated
notes are notes held in physical, as opposed to book-entry, form. If your
Restricted Notes are certificated notes and you wish to tender those notes for
exchange in the exchange offer, you must transmit to the exchange agent on or
prior to the Expiration Date, a written or facsimile copy of a properly
completed and duly executed letter of transmittal, including all other required
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<PAGE> 28
documents, to the address set forth below under "-- Exchange Agent." In
addition, in order to validly tender your certificated Restricted Notes:
(1) the certificates representing your Restricted Notes must be received by
the exchange agent prior to the Expiration Date or
(2) you must comply with the guaranteed delivery procedures described
below.
PROCEDURES APPLICABLE TO ALL HOLDERS. If you tender a Restricted Note and
you do not withdraw the tender prior to the Expiration Date, you will have made
an agreement with Aircraft Finance in accordance with the terms and subject to
the conditions set forth in this prospectus and in the letter of transmittal.
If your Restricted Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender your
notes, you should contact the registered holder promptly and instruct the
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the letter of transmittal
and delivering your Restricted Notes, either make appropriate arrangements to
register ownership of the Restricted Notes in your name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible institution unless:
(1) Restricted Notes tendered in the exchange offer are tendered either
(a) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal or
(b) for the account of an eligible institution; and
(2) the box entitled "Special Registration Instructions" on the letter of
transmittal has not been completed.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a financial institution,
which includes most banks, savings and loan associations and brokerage houses,
that is a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Program or the Stock Exchanges Medallion
Program.
If the letter of transmittal is signed by a person other than you, your
Restricted Notes must be endorsed or accompanied by a properly completed bond
power and signed by you as your name appears on those Restricted Notes.
If the letter of transmittal or any Restricted Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless Aircraft Finance
waives this requirement, in this instance you must submit with the letter of
transmittal proper evidence satisfactory to Aircraft Finance of their authority
to act on your behalf.
In addition, Aircraft Finance reserves the right in its sole discretion to:
(1) purchase or make offers for, or offer registered notes for, any
Restricted Notes that remain outstanding subsequent to the expiration of the
exchange offer; or
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(2) to the extent permitted by applicable law, purchase notes in the open
market, in privately negotiated transactions or otherwise.
The terms of any of these purchases or offers could differ from the terms
of the exchange offer.
In all cases, Aircraft Finance will issue registered notes for Restricted
Notes that are accepted for exchange in the exchange offer after timely receipt
by the exchange agent of certificates for your Restricted Notes or a timely
book-entry confirmation of your Restricted Notes into the exchange agent's
account at DTC, a properly completed and duly executed letter of transmittal, or
a computer-generated message instead of the letter of transmittal, and all other
required documents. If any tendered Restricted Notes are not accepted for any
reason set forth in the terms and conditions of the exchange offer or if
Restricted Notes are submitted for a greater principal amount than you desire to
exchange and you withdraw tender of such Restricted Notes you do not desire to
exchange, those or substitute Restricted Notes will be returned without expense
to you. In addition, in the case of Restricted Notes tendered by book-entry
transfer into the exchange agent's account at DTC pursuant to the book-entry
transfer procedures described below, the unexchanged Restricted Notes will be
credited to your account maintained with DTC, as promptly as practicable after
the expiration or termination of the exchange offer.
Aircraft Finance will determine, in its sole discretion, all questions
regarding the validity, form, eligibility, time of receipt, acceptance of
tendered Restricted Notes and withdrawal of tendered Restricted Notes, and that
determination will be final and binding on all parties. Aircraft Finance
reserves the absolute right to reject any and all Restricted Notes not properly
tendered or to refuse to accept any Restricted Notes that would, in the opinion
of counsel to Aircraft Finance, be unlawful. Aircraft Finance also reserves the
right to waive, in its sole discretion, to waive any defects, irregularities or
conditions of tender as to any particular Restricted Note. Aircraft Finance's
interpretation of the terms and conditions of the exchange offer and the
instructions in the letter of transmittal will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Restricted Notes must be cured within such time as Aircraft Finance may
determine. Although Aircraft Finance intends to notify any affected holder of
defects or irregularities in the tender of Restricted Notes, none of Aircraft
Finance, the exchange agent, the trustee or any other person undertakes any
liability for any failure to give that notice. Tenders of Restricted Notes will
not be deemed to have been properly made until these defects or irregularities
have been cured or waived.
Any Restricted Notes received by the exchange agent that Aircraft Finance
determines are not properly tendered or the tender of which is otherwise
rejected by it and as to which the defects or irregularities have not been cured
or waived by it will be returned by the exchange agent to the tendering holder
unless otherwise provided in the letter of transmittal, as soon as practicable
following the Expiration Date.
Aircraft Finance will execute, and the trustee will authenticate and
deliver to the surrendering holder of Restricted Notes, exchange notes in the
same aggregate principal amount as the Restricted Notes so surrendered and then
outstanding as promptly as practicable following the Expiration Date whenever
any Restricted Notes are validly tendered for exchange and accepted by Aircraft
Finance. If any Restricted Notes tendered are paid down prior to the
consummation of the exchange offer, the principal amount of Restricted Notes
exchanged will be the amount of those notes tendered that are then outstanding.
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GUARANTEED DELIVERY PROCEDURES. If you desire to tender your Restricted
Notes and your Restricted Notes are not immediately available or one of the
situations described in "-- Book-Entry Transfer" occurs, you may tender if:
(1) you tender through an eligible financial institution;
(2) on or prior to 5:00 p.m., New York City time, on the Expiration Date,
the exchange agent receives from an eligible institution, a written or facsimile
copy of a properly completed and duly executed notice of guaranteed delivery,
substantially in the form provided by Aircraft Finance; and
(3) the certificates for all certificated Restricted Notes, in proper form
for transfer, or a book-entry confirmation, and all other documents required by
the letter of transmittal, are received by the exchange agent within three New
York Stock Exchange trading days after the date of execution of the notice of
guaranteed delivery.
The notice of guaranteed delivery may be sent by facsimile transmission,
mail or hand delivery. The notice of guaranteed delivery must set forth:
(1) your name and address;
(2) the amount of Restricted Notes you are tendering; and
(3) a statement that your tender is being made by the notice of guaranteed
delivery and that you guarantee that within three New York Stock Exchange
trading days after the execution of the notice of guaranteed delivery, the
eligible institution will deliver the following documents to the exchange agent:
(a) the certificates for all certificated Restricted Notes being
tendered, in proper form for transfer or a book-entry confirmation of tender;
(b) a written or facsimile copy of the letter of transmittal, or a
book-entry confirmation instead of the letter of transmittal; and
(c) any other documents required by the letter of transmittal.
BOOK-ENTRY TRANSFER. The exchange agent will establish an account with
respect to the book-entry interests at DTC for purposes of the exchange offer
promptly after the date of this prospectus. You must deliver your book-entry
interest by book-entry transfer to the account maintained by the exchange agent
at DTC. Any financial institution that is a participant in DTC's systems may
make book-entry delivery of book-entry interests by causing DTC to transfer the
book-entry interests into the exchange agent's account at DTC in accordance with
DTC's procedures for transfer.
If you cannot deliver a book-entry confirmation of book-entry delivery of
your book-entry interests into the exchange agent's account at DTC, or you
cannot deliver all other documents required by the letter of transmittal to the
exchange agent prior to the Expiration Date, then you must tender your
book-entry interests according to the guaranteed delivery procedures discussed
above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw tenders
of Restricted Notes at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
For a withdrawal to be effective, the exchange agent must receive a written
or facsimile transmission notice of withdrawal at its address set forth below
under
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"-- Exchange Agent" at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
In any notice of withdrawal, you must
(1) specify your name in the same manner as when you deposited the
Restricted Notes to be withdrawn;
(2) identify the Restricted Notes to be withdrawn, including the principal
amount of the Restricted Notes of each series, as applicable, and the name and
number of the account at DTC to be credited;
(3) sign electronically in the same manner as your original signature on
the letter of transmittal by which your Restricted Notes were tendered or be
accompanied by documents of transfer sufficient to permit the registrar to
register the transfer of the Restricted Notes into your name; and
(4) specify the name in which you want any Restricted Notes to be
registered, if not your own.
All questions as to the validity, form, eligibility and time of receipt of
any withdrawal notices will be determined by Aircraft Finance in its sole
discretion and its determination will be final and binding on all parties. Any
Restricted Notes so withdrawn will be deemed not to have been validly tendered
for purposes of the exchange offer, and no exchange notes will be issued in
exchange for them unless the Restricted Notes so withdrawn are validly
retendered. Any Restricted Notes that have been tendered but are validly
withdrawn will be returned to the relevant holder without cost to that holder as
soon as practicable after withdrawal. Properly withdrawn Restricted Notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Aircraft Finance is not required to accept for exchange, or to exchange
notes for, any Restricted Notes, and may terminate or amend the exchange offer
before the acceptance of any Restricted Notes, if, in its judgement, any of the
following conditions has occurred or has not been satisfied:
(1) the exchange offer, or the making of any exchange by a holder of
Restricted Notes, violates applicable interpretations of the SEC staff;
(2) any action or proceeding is instituted or threatened in any court or by
or before any governmental body with respect to the exchange offer;
(3) there is adopted or enacted any law, rule or regulation that Aircraft
Finance expects to impair its ability to proceed with the exchange offer; or
(4) any governmental approval that Aircraft Finance, in its sole
discretion, deems necessary for the exchange offer is not obtained.
If Aircraft Finance determines to terminate the exchange offer for any of
the reasons set forth above, it will refuse to accept any Restricted Notes and
return any Restricted Notes that have been tendered; alternatively, if Aircraft
Finance determines not to terminate the exchange offer despite the existence of
any of the reasons set forth above, it may extend or otherwise amend the
exchange offer, delay accepting any tendered Restricted Note and retain all
Restricted Notes tendered prior to the Expiration Date of the exchange offer,
subject to the rights of the holders of the tendered Restricted Notes to
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withdraw the Restricted Notes. Aircraft Finance may, in its discretion, waive
any rule or condition and proceed with the exchange offer. If Aircraft Finance
determines that a waiver constitutes a material change in the exchange offer,
Aircraft Finance will promptly disclose that change.
In addition, Aircraft Finance will not accept for exchange any Restricted
Notes tendered, and no exchange notes will be issued in exchange for the
Restricted Notes, if at that time any stop order is threatened or in effect with
respect to either the Registration Statement of which this prospectus is a part
or the qualification of the indenture governing the Note under the Trust
Indenture Act of 1939.
The specified conditions are for the sole benefit of Aircraft Finance, and
it may assert any of the conditions regardless of the circumstances giving rise
to any condition or may waive the condition in whole or in part at any time and
from time to time in its sole discretion. Aircraft Finance's failure at any time
to exercise any of these rights is not to be deemed a waiver of any right, and
each right is an ongoing right that may be asserted at any time and from time to
time.
EXCHANGE AGENT
Bankers Trust, the trustee under the indenture governing the notes, has
been appointed as the exchange agent for the exchange offer. In its capacity as
the exchange agent, Bankers Trust has no fiduciary duties and will be acting
solely on directions from Aircraft Finance. Requests for assistance and requests
for additional copies of this prospectus or of the letter of transmittal should
be directed to the exchange agent addressed as follows:
<TABLE>
<S> <C>
By Mail, Overnight Delivery or
Hand Delivery: BT Services Tennessee Incorporated
Corporate Trust and Agency Group
648 Grassmere Park Road
Nashville, Tennessee 37211
Facsimile Transmission: (615) 835-3701
Information or Confirmation by
Telephone: (800) 735-7777
</TABLE>
Delivery to an address or facsimile number other than those listed above
will not constitute a valid delivery.
SOLICITATION OF TENDERS; FEES AND EXPENSES
Aircraft Finance will bear all expenses of soliciting tenders pursuant to
the exchange offer. The principal solicitation pursuant to the exchange offer is
being made by mail. Additional solicitations may be made by ReSource/Phoenix,
the administrative agent or by Aircraft Finance in person, by telegraph,
telephone or facsimile transmission.
Aircraft Finance has not retained any dealer-manager in connection with the
exchange offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the exchange offer. Aircraft Finance will,
however, pay the exchange agent reasonable and customary fees for its services
and will reimburse the exchange agent for its reasonable out-of-pocket costs and
expenses and will indemnify the exchange agent for all losses and claims
incurred by it as a result of the exchange offer. Aircraft Finance will also pay
the administrative agent its ongoing fees and expenses. Aircraft Finance may
also pay
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brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this prospectus,
letters of transmittal and related documents to the beneficial owners of the
Restricted Notes and in handling or forwarding tenders for exchange.
Aircraft Finance will also pay all other expenses incurred by it in
connection with the exchange offer, including accounting and legal fees and
printing costs.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
Restricted Notes, as reflected in Aircraft Finance's accounting records on the
date of the exchange. Accordingly, Aircraft Finance will not recognize any gain
or loss for accounting purposes as a result of the consummation of the exchange
offer. Aircraft Finance will amortize the expense of the exchange offer over the
term of the exchange notes.
TRANSFER TAXES
Aircraft Finance will pay any transfer taxes imposed in the United States
that are applicable to the exchange of Restricted Notes pursuant to the exchange
offer. If, however, a transfer tax is imposed for any reason other than the mere
exchange of Restricted Notes pursuant to the exchange offer, the amount of any
transfer taxes -- whether imposed on a registered holder or any other
person -- will be payable by the tendering holder. For example, you will be
responsible for transfer taxes, if certificates representing exchange notes are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Restricted Notes tendered. If
satisfactory evidence of payment of those taxes or exemption from them is not
submitted with the letter of transmittal, Aircraft Finance will bill the amount
of the applicable transfer taxes directly to the tendering holder. Any holder
who is subject to taxes outside the United States and who is considering
tendering Restricted Notes for exchange should consult its tax advisors as to
the particular tax consequences to it of exchanging Restricted Notes for
exchange notes.
CONTINUING RESTRICTIONS ON THE TRANSFER OF RESTRICTED NOTES
All Restricted Notes that are not tendered will continue to be subject to
the restrictions on transfer set forth in the indenture governing the notes.
After completion of the exchange offer, Aircraft Finance will no longer have any
obligation to file any further registration statement for any Restricted Notes.
Accordingly, after the completion of the exchange offer, you will be able to
offer for sale, sell or otherwise transfer untendered Restricted Notes only as
follows:
(1) to Aircraft Finance;
(2) pursuant to a registration statement that has been declared effective
under the Securities Act;
(3) for so long as the Restricted Notes are eligible for resale pursuant to
Rule 144A under the Securities Act, to a person you reasonably believe is a
qualified institutional buyer within the meaning of Rule 144A, that purchases
for its own account or for the account of a qualified institutional buyer to
whom notice is given that the transfer is being made in reliance on the
exemption from the registration requirements of the Securities Act provided by
Rule 144A;
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(4) pursuant to offers and sales that occur outside the United States to
foreign persons in transactions complying with the provisions of Regulation S
under the Securities Act;
(5) to an "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act that is an institutional investor purchasing
for its own account or for the account of this type of accredited investor, in
each case in a minimum principal amount of the Restricted Notes of $250,000; or
(6) pursuant to any other available exemption from the registration
requirements of the Securities Act.
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<PAGE> 35
AIRCRAFT FINANCE TRUST
AIRCRAFT FINANCE
Aircraft Finance is a business trust that was established under Delaware
law on April 13, 1999 for the purpose of acquiring aircraft either directly or
through companies or trusts owned by it and issuing the notes and otherwise
carrying out the transactions described in this prospectus. Aircraft Finance
currently has two subsidiaries: AFT Trust-Sub I, which is a Delaware business
trust, and Aircraft Finance Trust Ireland Limited, which is an Irish
corporation. All of the aircraft are owned by AFT Trust-Sub I. Two of the
aircraft are leased by AFT Trust-Sub I to the Irish subsidiary for sublease to
the ultimate user.
Aircraft Finance's registered office is located at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001 care of Wilmington
Trust Company and its telephone number is 1-302-651-1000.
Aircraft Finance was originally owned by UniCapital AFT-I, Inc. (51%) and
UniCapital AFT-II (49%), Inc., each of which were wholly-owned subsidiaries of
UniCapital Air Group Inc., a wholly-owned subsidiary of UniCapital. UniCapital
AFT-I, Inc. subsequently sold 49.9% of Aircraft Finance to three financial
services companies; UniCapital Air Group, Inc. sold its interest in UniCapital
AFT-I, Inc. to one of these financial services companies; and one of these
financial services companies sold 7.5% of Aircraft Finance to two additional
financial services companies. As a result, these five financial services
companies own 51% of Aircraft Finance, and UniCapital Air Group, Inc.'s
remaining subsidiary, UniCapital AFT-II, Inc. owns 49%.
One of those financial service companies acquired its direct and indirect
(13.5%) interests in Aircraft Finance from UniCapital in an installment sale. To
the extent that future installment payments are not timely made, UniCapital Air
Group, Inc. has the right to reacquire all or a portion of the financial service
company's ownership interests in Aircraft Finance. Also, under arrangements
entered into among each of the owners of Aircraft Finance, it is contemplated
that upon completion of the installment payments, Wayne D. Lippman, an officer
of UniCapital and UniCapital Air Group, Inc., will resign as one of three
controlling trustees of Aircraft Finance. Upon his resignation, a replacement
trustee would be appointed by the then holders of at least 51% of the ownership
interest in Aircraft Finance.
UniCapital is headquartered in Miami, Florida and as of November 30, 1999
had 714 employees. UniCapital is a New York Stock Exchange listed company that,
through its seventeen operating companies, originates, acquires, sells and
services equipment leases and arranges various forms of financings in the
equipment leasing industry. UniCapital's leases and other financing arrangements
cover a broad range of equipment, including aircraft and aircraft equipment,
computer and telecommunications equipment, construction and manufacturing
equipment, office equipment, tractor trailers, printing equipment, car washes,
petroleum retail equipment and vending machines. In 1998, more than 60% of
UniCapital's revenues were derived from its activities involving purchasing,
leasing, selling or arranging financing with respect to aircraft and aircraft
engines.
As of November 30, 1999, UniCapital owned 76 aircraft, including the 36
aircraft owned by Aircraft Finance. At that time, those aircraft were on lease
to 45 lessees in 18 countries throughout the world. In 1998, more than 60% of
UniCapital's revenues were derived from purchasing, leasing, selling or
arranging financing for aircraft and aircraft equipment. As of November 30,
1999, UniCapital's fleet consisted of 1 Airbus 310-300 aircraft, 9 Airbus
320-200 aircraft, 6 Boeing 727-200 aircraft, 8 Boeing 737-200 aircraft, 15
Boeing 737-300 aircraft, 9 Boeing 737-400 aircraft, 2 Boeing 747-100 aircraft, 5
Boeing
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747-200 aircraft, 1 Boeing 747-300 aircraft, 2 Boeing 767-200 aircraft, 4 Boeing
767-300ER aircraft, 1 Lockheed L1011 aircraft, 1 DC-8 aircraft, 5 DC-9 aircraft,
2 DC-10 aircraft and 5 MD-83 aircraft.
On May 5, 1999, pursuant to the initial offering of the outstanding notes,
UniCapital purchased $3.8 million of Class D Notes. UniCapital has subsequently
sold all of its Class D Notes.
The outstanding notes are not, and the exchange notes will not be,
obligations of, or guaranteed by, UniCapital or any of its affiliates.
RELATED PARTY
Wayne D. Lippman, one of the three controlling trustees of Aircraft
Finance, is an employee of UniCapital Air Group, Inc., a wholly-owned subsidiary
of UniCapital and the direct intermediate parent company of the holders of
Aircraft Finance's beneficial interests. In his capacity as the equity trustee,
Mr. Lippman has the right to make some decisions for Aircraft Finance without
the approval of the other two controlling trustees, in particular as to the
purchase of aircraft from UniCapital affiliates. Please see "Management of
Aircraft Finance" for a further description of the voting rights of the equity
trustee and "-- Aircraft Finance" for a description of circumstances under which
Mr. Lippman will resign as equity trustee.
BUSINESS OF AIRCRAFT FINANCE
The business of Aircraft Finance and its subsidiaries is limited to buying,
owning, leasing and selling a portfolio of aircraft. These limitations arise
from restrictions in their respective charter documents and covenants in the
indenture for the notes.
The portfolio of aircraft consists initially of the 36 aircraft that have
already been acquired. This portfolio is described under "The Initial Aircraft
and Initial Leases".
Aircraft Finance and its subsidiaries may acquire additional commercial
passenger or freight aircraft from General Electric Capital Corporation,
UniCapital, their affiliates and others. The indenture contains a number of
conditions to the acquisition of additional aircraft and to the financing of
such an acquisition. If those conditions are met, there is no limit in the
indenture on the number of additional aircraft that Aircraft Finance may
acquire. Under a separate agreement between General Electric Capital Corporation
and UniCapital, however, the equity trustee may not approve the purchase of
additional aircraft from General Electric Capital Corporation after May 5, 2004
or at any time in excess of $250 million in appraised value in any one year
unless both those parties agree.
UniCapital has announced its intention to sell additional aircraft to
Aircraft Finance within the next twelve months. No arrangements for any such
sale or for any other purchase of additional aircraft have, however, been
commenced.
GE Capital Aviation Services, Limited has agreed with Aircraft Finance to
act as the servicer of the aircraft portfolio. It has agreed, as the servicer,
to collect rents and other amounts due from lessees, to monitor the maintenance,
insurance and other obligations under the aircraft leases, to enforce rights
against lessees, to remarket aircraft for re-lease or sale and to perform other
specified aircraft-related services. Further information about the servicing
agreement and the servicer is set forth under "-- The Servicing Arrangements".
All of the net revenues of Aircraft Finance and its subsidiaries are used
to pay principal, interest and other amounts due as to the notes or to provide
for cash reserves for
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some or all of the subclasses of notes. Except for accruals for the payment of
anticipated expenses and required reserves, none of the revenues will be re-used
or retained in the business of Aircraft Finance and its subsidiaries. In
addition, none of the earnings of Aircraft Finance may be distributed to the
holders of its beneficial interest until all notes are repaid in full with the
limited exception of reimbursing any payments made by those holders to cure
interest shortfalls.
Because the notes do not provide for fixed principal payments, not just the
ultimate repayment of the notes but the amount of individual payments and the
speed of repayment are fully a function of Aircraft Finance's ability to collect
revenues from the portfolio of the 36 initial aircraft and, if acquired,
additional aircraft. Set forth below are a variety of factors that, in addition
to general economic conditions, could influence materially the collection of
revenues -- principally lease rents and sale proceeds -- available for debt
repayment.
CHANGES IN THE AIRCRAFT PORTFOLIO. The assumptions regarding the expected
cash flow of Aircraft Finance are subject not only to a variety of economic
factors, some of which have been discussed in this prospectus, but also to any
substantial change in the composition of the aircraft portfolio from that
initially contemplated. Any substantial changes in that composition could
significantly change expected cash flows and the nature and degree of risks
affecting cash flow. Three principal factors could affect the fleet composition.
(1) THE EXERCISE OF PURCHASE OPTIONS BY LESSEES. The exercise of a lessee
purchase option may result in sales proceeds lower than target sales prices of
the aircraft if payments on the notes have not been made as assumed. Two lessees
with respect to three of the initial aircraft, representing 11.3% of the
aggregate initial appraised value, have unexpired options to purchase aircraft.
The assumptions described under "Note Payment Assumptions" assume that those
options will not be exercised.
(2) THE LOSS OF AIRCRAFT THROUGH CASUALTY OR GOVERNMENTAL TAKING. The
proceeds of insurance and taking awards may not be sufficient to compensate for
the loss of the revenue of the affected aircraft.
(3) THE PURCHASE OF ADDITIONAL AIRCRAFT. UniCapital has announced its
intention to sell additional aircraft to Aircraft Finance during the next twelve
months, and Aircraft Finance may acquire other aircraft in the future. Although
any additional aircraft may add to the cash flow of Aircraft Finance and their
acquisition is subject to confirmation by the rating agencies rating the notes
that they will not lower, qualify or withdraw any rating on the notes as a
result and other requirements of the indenture governing the notes, Aircraft
Finance cannot predict the effect of any additional aircraft on its cash flows
and ability to repay the notes.
MARKET INTEREST RATE FLUCTUATIONS. Interest rate exposure arises to the
extent that Aircraft Finance's fixed and floating rate obligations under the
notes do not correlate to either or both of the mix of fixed and floating rate
rental payments for different periods and the timing of those payments. Although
Aircraft Finance will attempt to hedge that exposure as described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", it cannot assure you that it will be effective in implementing its
hedging goals. In addition, the premature termination of any lease may result in
Aircraft Finance incurring prepayment or cancellation costs under its hedging
agreements.
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<PAGE> 38
LESSEE CREDIT PROBLEMS AND DEFAULT. The ability of each aircraft lessee to
perform its obligations under its lease with an Aircraft Finance subsidiary will
depend not only on the managerial skills of its employees but also on general
economic conditions in the country or region in which it operates as well as
competition, fare levels, passenger demand, and operating costs. Some of
Aircraft Finance's existing lessees are in a weak financial position, and this
is likely to be the case with future aircraft lessees as well. As the aircraft
approach the end of their realizable useful life, it is likely that the aircraft
will be leased to less creditworthy lessees. In a portfolio of the size of
Aircraft Finance's, you should expect that some number of aircraft lessees at
some time may be slow in paying or to pay in full.
Three of the initial lessees are currently in default as to their payment
obligations. Please see "The Initial Aircraft and Initial Leases -- The
Lessees -- Payment History" for further information regarding these defaults.
Aircraft Finance cannot assure you that default levels will not increase over
time, particularly if the currently favorable economic conditions do not
continue.
LESSEE'S LOCAL ECONOMIC CONDITIONS. The commercial aviation industry
throughout the world generally is highly sensitive to general economic
conditions. Because a substantial portion of business and, especially, leisure
airline travel is discretionary, the industry has tended to suffer during
economic downturns. In addition, local economic and political conditions can
influence the performance of a lessee located in a particular region. The effect
of those local conditions on Aircraft Finance will be more or less intense
depending on the concentration of the number of its lessees in that region.
EUROPEAN CONCENTRATION. As of the date of this prospectus, lessees based
in Europe account for aircraft having 57.0% of the aggregate initial appraised
value, with 51.7% based in "developed" European markets and 5.3% based in
"emerging" European markets. Commercial airlines in Europe face, and can be
expected to continue to face, increased competitive pressures, in part as a
result of the deregulation of the airline industry by the EU. European countries
generally have relatively strict environmental regulations that can restrict
operational flexibility and decrease aircraft productivity. The effect of these
restrictions is illustrated by the noise curfews and environmental slot controls
for some of the larger European airports, as well as higher landing fees.
Meeting these tougher standards could significantly increase aircraft operating
costs of Aircraft Finance's aircraft.
ASIA PACIFIC REGION CONCENTRATION. As of the date of this prospectus,
lessees based in the Asia Pacific region, including China and India, account for
aircraft having about 9.4% of the aggregate initial appraised value. Trading
conditions in the civil aviation industry in Asia have been adversely affected
by the severe economic and financial difficulties experienced recently in the
region. The economies of Indonesia, Thailand, Japan, Korea and Malaysia have
experienced particularly acute difficulties resulting in many business failures,
and in many cases significant depreciation of local currencies and downgrades of
sovereign and corporate credit ratings. The regional economic downturn has
undermined business confidence, reduced demand for air travel and has adversely
impacted the results of operations of Aircraft Finance's lessees in the region.
Several airlines in the region, including some of those lessees, have recently
announced their intention to reschedule their aircraft purchase obligations,
eliminate some routes and reduce employees. The downturn in Asia is likely to be
exacerbated by the large number of aircraft currently on order by Asian
airlines. The recessionary conditions that are now expected to prevail in large
parts of the region for a significant period of time may also have a significant
adverse impact on global aircraft demand.
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<PAGE> 39
LATIN AMERICAN CONCENTRATION. As of the date of this prospectus, lessees
based in Latin America account for aircraft having 8.1% of the initial appraised
value. Although some countries in Latin America have experienced in the past
several years increased political stability, overall increased economic growth,
lower inflation rates and revitalized economies, the progress has not been
regionwide and may not be maintained or furthered.
For example, in 1994, Mexico experienced lower capital inflows, a large
current account deficit leading to diminishing foreign exchange reserves, a
devaluation of the peso and dampened investor confidence. Those circumstances
resulted in lower levels of foreign investment in Latin America in general. More
recently, Brazil has experienced significant downturns in its financial markets,
and, as a result, on January 13, 1999, Brazil devalued its currency. Continued
weakness in Brazil can affect not only leases with Brazilian lessees (accounting
for 8.1% of the aggregate initial appraised value) but, more importantly, could
spread throughout Latin America and other "emerging" economies and affect other
lessees of Aircraft Finance.
NORTH AMERICAN CONCENTRATION. As of the date of this prospectus, lessees
based in North America account for aircraft having 22.9% of the aggregate
initial appraised value. Over the last decade, a number of the major North
American passenger airlines have filed Chapter 11 bankruptcy proceedings and
several major United States airlines have ceased operations altogether. Two
lessees of aircraft to be delivered to Aircraft Finance have recently emerged
from bankruptcy proceedings. While airline profitability in the region has
improved since its cyclical low in the 1990-1992 period, increasing competition
from low-cost air carriers and an inability to reduce labor and other costs to
sustainable levels continues to put pressure on North American airline margins.
Further bankruptcy or similar proceedings by low-cost or other North American
carriers may adversely affect the ability of North American lessees to make
timely and full rental payments.
OFF LEASE. As of the date of this prospectus, one aircraft representing
2.6% of the aggregate initial appraised value was off lease.
HIGHER COSTS FROM LEASE DEFAULT. Although Aircraft Finance has the right
to repossess aircraft and to exercise remedies upon a lease default, it may
incur significant costs in the process. Those costs include legal and other
expenses of court or other governmental proceedings, particularly if the lessee
is contesting the proceeding or is in bankruptcy, to obtain possession and
re-registration of the aircraft and flight and export permissions. Delays
resulting from any such proceedings would also increase the period of time
during which the relevant aircraft are not productively under lease. Aircraft
Finance may, moreover, incur substantial maintenance or repair costs that a
defaulting lessee has failed to pay and may need to pay off liens and
governmental charges on the aircraft to obtain clear possession and to re-market
the aircraft effectively. Any such cost or delays may adversely affect the
amounts available to pay to the holders of the notes.
LESSEE'S YEAR 2000 READINESS. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000 Computer
Issues -- Lessees."
PAYMENT OF MAINTENANCE COSTS AND FUNDING OF MAINTENANCE RESERVES. Any
failure of an aircraft to be maintained or modified properly in accordance with
manufacturer's requirements or airworthiness directives and other governmental
requirements, including those relating to noise and emissions standards, can
impair the safety of the aircraft, result in grounding or penalties and affect
the ability to re-lease or to sell the aircraft. The costs of maintenance can be
substantial and may have a higher payment priority than that of the notes. In
many cases, the lessee is required to provide for maintenance or modifications.
Lessees could, however, fail to pay those costs, and the burden would fall on
Aircraft
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<PAGE> 40
Finance. In addition, Aircraft Finance or its subsidiary as the lessor is, in
some instances, required to bear a portion of the maintenance costs, and the
pressure of competition may require it to bear an increasing portion of those
costs in the future. Although Aircraft Finance established a cash reserve of $52
million on May 5, 1999, any significant variations in the costs required to be
paid directly by Aircraft Finance may materially impair the ability of Aircraft
Finance to make payments on the notes.
OTHER OPERATING COSTS. As in the case of maintenance costs, Aircraft
Finance may incur other operational costs upon a lessee default or where the
terms of the lease require it to pay a portion of those costs. Those costs
include:
(1) the costs of casualty, liability and political risk insurance and the
liability costs or losses when insurance coverage has not been or cannot be
obtained as required or is insufficient in amount or scope;
(2) the costs of licensing, exporting or importing an aircraft, airport
taxes, customs duties, air navigation charges and similar governmental or
quasi-governmental impositions, which can be substantial; and
(3) penalties and costs associated with the failure of lessees to keep the
aircraft registered under all appropriate local requirements.
The failure to pay some of these costs can result in liens on the aircraft,
and the failure to register can result in a loss of insurance. These matters can
prevent the re-lease, sale or other use of the aircraft until the problem is
cured.
THE NEED TO RE-LEASE OR SELL AIRCRAFT. The number and types of the initial
aircraft that Aircraft Finance must place with lessees through December 31, 2003
is presented in the table below. That table shows the years in which the leases
for those aircraft are contractually scheduled to expire or have been
terminated, including expirations of anticipated leases that are currently
represented by existing letters of intent. The table illustrates that the leases
for 19 of the initial aircraft, representing approximately 53.8% of the
aggregate initial appraised value, are currently off lease or are scheduled to
expire or permit early termination as early as December 31, 2003. The table
assumes that, except as indicated, no lease terminates prematurely, no aircraft
are sold and no additional aircraft are purchased. More aircraft will need to be
re-leased to the extent leases terminate prematurely. Aircraft Finance currently
has one aircraft off lease due to an early termination.
AIRCRAFT FINANCE LEASE PLACEMENT REQUIREMENT AT NOVEMBER 30, 1999
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------
AIRCRAFT TYPE 1999 2000 2001 2002 2003
- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
B737-300.............................. 1 -- 1 3 --
B737-400.............................. -- -- -- 2 --
B767-200ER............................ -- -- -- -- --
B767-300ER............................ -- 1 -- 1* --
A310-300.............................. -- -- -- -- 1
A320-200.............................. -- -- -- -- 2
DC-10-30.............................. -- -- -- 2 --
MD-83................................. -- 1*** 1* 2** 1
-- -- -- -- --
Total................................. 1 2 2 10 4
</TABLE>
- -------------------------
* Assuming an early termination option is exercised.
** Includes an aircraft for which an early termination option is assumed to be
exercised.
*** A letter of intent has been signed with the current lessee to extend this
lease through October 2001.
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<PAGE> 41
DIFFICULTIES IN RE-LEASING OR SELLING AIRCRAFT AT FAVORABLE TERMS. The
servicer, GE Capital Aviation Services, Limited, has agreed to seek to re-lease
aircraft serviced by it as they become available upon the termination of any
lease. The servicer has not assured Aircraft Finance, and Aircraft Finance
cannot assure you, that Aircraft Finance will be able to re-lease aircraft on a
timely basis, with equally favorable rental rates and otherwise on lease terms
that will allow Aircraft Finance to make payments in full on the notes. Aircraft
Finance's ability to obtain timely and favorable lease terms or to sell aircraft
at attractive prices may be adversely affected by unpredictable changes in
general economic conditions, passenger demand and the competitive strength of
the airline industry generally. The availability of commercial jet aircraft for
lease or sale has periodically experienced cycles of oversupply and undersupply,
resulting in sharp decreases and increases in aircraft values and lease rates.
Among other factors that could influence lease terms and sales prices are the
following:
(1) cyclical changes in interest rates and the availability of credit;
(2) fluctuations in the cost of fuels and other materials, labor costs,
costs associated with changing governmental regulations and air traffic control
constraints;
(3) manufacturer production levels, particularly increased production of
new aircraft, as announced by Boeing and Airbus, which makes older, used models
less attractive, especially in Asia where an oversupply is already perceived to
exist;
(4) the cessation or announced cessation of production of particular
aircraft models, such as, after the merger of Boeing and McDonnell Douglas, the
MD-80 of which there are four in Aircraft Finance's initial portfolio,
representing approximately 6.9% of the aggregate initial appraised value of the
portfolio;
(5) the operating history of particular aircraft, the identity of its
operators and legal and regulatory requirements affecting its operation and
transfer or leasing;
(6) changes in aircraft technology, either significant advances by
manufacturers or governmentally mandated modifications, that may render older
models substantially less attractive or may result in modification costs that
reduce net sales prices or rentals; and
(7) competition from aircraft manufacturers, airlines, aircraft leasing
companies, financial institutions, aircraft broker and special purpose leasing
vehicles that may have greater financial resources and greater legal and
financial flexibility to structure and offer more favorable leasing, pricing or
financing alternatives.
The concentration of the types of aircraft held by Aircraft Finance may
amplify some of the factors noted above. The initial aircraft include eight
aircraft types, three of which represent together 69.8% of the aggregate initial
appraised value, with Boeing 737-300s constituting 29.0%, Boeing 767-300ERs
constituting 23.4% and Airbus A320-200s constituting 17.4% of that aggregate
value. Also, narrowbody aircraft constitute 65.4% of the aggregate initial
appraised value.
THE SERVICING ARRANGEMENTS
GE Capital Aviation Services, Limited, or GECAS as it is commonly known, is
providing various aircraft-related services to Aircraft Finance and its
subsidiaries. Information about GECAS and a description of the contractual
servicing arrangements with GECAS follow.
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<PAGE> 42
In addition to the servicing arrangements with GECAS, Aircraft Finance may
in the future appoint any UniCapital affiliate as the servicer for any aircraft
acquired from a UniCapital affiliate. To do so, a majority of the controlling
trustees of Aircraft Finance must approve that appointment and the fees and
other terms of such a servicing arrangement. Aircraft Finance must also obtain
confirmation from the rating agencies rating the notes that they will not lower,
qualify or withdraw their ratings as a result. The controlling trustee appointed
by the holders of Aircraft Finance's beneficial interests, who currently are
subsidiaries of UniCapital, is not precluded from voting on that matter.
GECAS is an Irish private limited company headquartered in Shannon,
Ireland. As of December 1, 1999 it had 105 employees.
SERVICER BUSINESS HISTORY
For more than 25 years prior to the formation of GECAS in 1993, General
Electric Capital Corporation provided financial services to airlines and other
aircraft owners and owned aircraft through its Transportation and Industrial
Funding Corporation division and other affiliates.
General Electric Capital Corporation acquired a controlling interest in
Polaris Holding Company in 1986, and then acquired the remaining interest in
1991. Polaris Group was formed in 1974 to acquire aircraft for lease to
commercial airlines. Beginning in the mid 1980's, it acted as an operating
lessor, acquiring and managing aircraft for its own account and for the account
of investment entities sponsored by one of its subsidiaries.
GECAS and its affiliated aircraft servicing entities were formed and
commenced operations in September and October 1993 to focus in one servicing
group various aircraft-related ownership, financing, management and other
servicing activities. This GECAS servicing group did not acquire the assets of
the General Electric Capital Corporation Transportation and Industrial Funding
Corporation division or of Polaris Group, but rather it took over the
responsibility of providing management services for all or substantially all of
the aircraft assets owned or formerly managed by these entities.
In addition, the GECAS servicing group succeeded to the management, but not
the ownership, of substantially all of the aircraft formerly managed by Aerfi
Group plc, which was formerly known as GPA Group plc, in connection with a
restructuring of Aerfi Group as a result of financial difficulties experienced
in late 1992 and in 1993. Aerfi Group was founded in 1975 to provide aircraft
leasing and related services to the commercial aviation industry, and, in 1979,
it began purchasing new aircraft for its own account.
Prior to its formation in 1993, the GECAS servicing group had no operating
history.
GECAS and its servicing affiliates offer their services to aircraft owners,
lenders and investors, including General Electric Capital Corporation and its
affiliates. On December 31 of each of 1994, 1995, 1996, 1997 and 1998, the
servicing group managed 923, 890, 896, 850 and 849 aircraft, respectively, and
its affiliates owned, 408, 420, 445, 484 and 544 aircraft, respectively. The
servicing group has operations in Stamford, Connecticut, Shannon, Ireland,
Miami, Florida, and a number of other locations worldwide, including Beijing,
Hong Kong and Singapore.
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<PAGE> 43
SERVICER OPERATIONS
GECAS and its affiliates manage one of the world's most significant
portfolios of commercial aircraft. As of December 1, 1999, the portfolio of
aircraft managed by GECAS consisted of 903 aircraft, on lease to more than 152
lessees in 53 countries throughout the world. General Electric Capital
Corporation, an affiliate of GECAS, during the period 1996 to April 1, 1999,
entered into contracts for the purchase of up to 119 Boeing 737 aircraft and 13
Boeing 767 aircraft with options to acquire additional aircraft of the same
type. In addition to these new order commitments, General Electric Capital
Corporation separately purchased from Boeing 50 new commercial jet aircraft.
Also, during the period 1996 to 1998, General Electric Capital Corporation
entered into contracts for the purchase of up to 94 Airbus A319, A320, A321 and
A340 aircraft, with options for additional aircraft of the same type. In
addition to these new order commitments, General Electric Capital Corporation
separately purchased from Airbus 15 new commercial jet aircraft.
In addition to acting as the servicer for the aircraft owned by Aircraft
Finance's subsidiaries, GECAS manages aircraft and related assets owned by
Airplanes U.S. Trust and Airplanes Limited, AerFi Group plc, General Electric
Capital Corporation, affiliates of those entities and others. As of December 1,
1999, 604 aircraft, or 67%, of the aircraft managed by GECAS were owned by
General Electric Capital Corporation and its affiliates. In addition, as
indicated above, General Electric Capital Corporation has in place orders for
more than 200 Boeing and Airbus aircraft, and it and its affiliates are likely
to acquire additional new and used aircraft in the future. Many of these
additional aircraft will be managed by GECAS. Moreover, it is also likely that
GECAS will manage additional aircraft owned by others, and it may in the future
sponsor leasing programs with objectives like those of Aircraft Finance.
Finally, General Electric Capital Corporation holds the majority of the most
junior class of the debt of the Airplanes entities, a competitor of Aircraft
Finance. An affiliate of GECAS currently holds a portion of the initial Class D
Notes.
One of GECAS's principal businesses is providing a broad range of financial
products to airlines and aircraft operators and to aircraft owners, lenders and
investors throughout the world. To meet the fleet financing needs of its airline
customers, GECAS and its affiliates offer financing leases, operating leases and
other financial products. In conjunction with this business, GECAS and its
affiliates are responsible for developing, negotiating and consummating
aircraft-related investment opportunities in the aviation industry for General
Electric Capital Corporation, including the acquisition of aircraft for General
Electric Capital Corporation. Also, General Electric Capital Corporation holds
the majority of the most junior class of debt in the aircraft asset
securitization vehicles Airplanes U.S. Trust and Airplanes Limited, and may
acquire beneficial interests in other securitization vehicles that own a
portfolio of aircraft assets.
GECAS intends to continue to market a broad range of products, and to
arrange and negotiate the sale of aircraft and related assets from the portfolio
it manages, and to arrange and negotiate securitization transactions involving
aircraft assets.
GECAS offers a broad range of aircraft management services to aircraft
owners, lenders and investors, including:
(1) collection of rental payments;
(2) arranging and monitoring of aircraft maintenance performed by others;
39
<PAGE> 44
(3) limited technical inspection of aircraft;
(4) arranging and monitoring insurance;
(5) arranging for aircraft appraisals;
(6) registration and deregistration of aircraft;
(7) monitoring compliance with lease agreements;
(8) enforcement of lease provisions against lessees;
(9) investigating compliance with applicable airworthiness directives; and
(10) facilitating delivery and redelivery of aircraft.
40
<PAGE> 45
The table below lists the different aircraft comprising the portfolio
managed by GECAS as of December 1, 1999 by manufacturer and by whether the
aircraft are owned and managed by GECAS or its affiliates or managed for third
parties.
GECAS MANAGED PORTFOLIO
<TABLE>
<CAPTION>
GENERAL ELECTRIC
CAPITAL MANAGED AIRCRAFT
CORPORATION FOR THIRD FINANCE INITIAL
AIRCRAFT TYPE AND CLASS FLEET(1) PARTIES(2) AIRCRAFT TOTAL
- ----------------------- ---------------- ---------- --------------- -----
<S> <C> <C> <C> <C>
Airbus A300..................... 18 5 -- 23
A310............................ 7 -- 1 8
A319.......................... 20 -- -- 20
A320.......................... 36 16 7 59
A321.......................... 4 -- -- 4
A330.......................... 4 -- -- 4
Boeing B727..................... 16 2 -- 18
B737-200...................... 45 34 -- 79
B737-300/400/500(3)........... 187 45 16 248
B737-600...................... 1 -- -- 1
B737-700/800.................. 46 -- -- 46
B747-100/200/300/400.......... 28 1 -- 29
B757-200...................... 27 3 -- 30
B767-200EM.................... 5 -- -- 5
B767-200ER.................... 5 1 2 8
B767-300ER.................... 30 4 4 28
B777-200...................... 8 -- -- 8
McDonnell Douglas
DC-8.......................... 2 19 -- 21
DC-9.......................... 4 34 -- 38
DC-10......................... 9 1 2 12
MD-11......................... 4 5 -- 9
MD-82......................... 35 8 -- 43
MD-83......................... 16 27 4 47
MD-87......................... -- 1 -- 1
MD-88......................... 12 -- -- 12
Fokker F100..................... 10 21 -- 31
Other Jets...................... 22 1 -- 23
Turboprops...................... 3 35 -- 38
Total...................... 604 263 36 903
Body Type:
Widebody...................... 119 17 9 145
Narrowbody.................... 485 246 27 758
Noise Compliance:(4)
Stage 2....................... 29 49 0 78
Stage 3....................... 575 214 36 825
</TABLE>
- -------------------------
(1) Some of the aircraft included in the General Electric Capital Corporation
fleet are owned by joint ventures or under other arrangements in which
unaffiliated parties have interests.
(2) The third parties are primarily the AerFi Group plc, Airplanes U.S. Trust
and Airplanes Limited and their respective affiliates.
(3) For purposes of this table, eight Boeing 737 aircraft have been included in
the General Electric Capital Corporation fleet but both AerFi Group plc
and/or its affiliates and General Electric Capital Corporation are parties
to the relevant leases.
(4) Turboprop aircraft have been classified as compliant with applicable noise
restrictions.
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<PAGE> 46
SERVICER MANAGEMENT
Set forth below is information with respect to the senior officers and
directors of the servicer and its affiliates who are currently involved with the
supervision of the day-to-day servicing obligations of Aircraft Finance.
Henry A. Hubschman, 52, was appointed President of GECAS in October 1997,
and continues in that capacity. Previously, Mr. Hubschman served as General
Counsel of GE Aircraft Engines from March 1992 to October 1997.
Eric Dull, 38, was appointed to his current position of Executive Vice
President, Risk & Portfolio Management in January 1998. Mr. Dull has been with
GECAS since April of 1994, serving in numerous capacities. Prior to his current
role, he held the positions of Executive Vice President, Portfolio Management
from March 1996 to December 1997; Senior Vice President & Manager Restructuring
and Portfolio Operations from March 1995 to March 1996; and Senior Vice
President & Manager, Underwriting & Portfolio Management, Latin America & Asia
from April 1994 to March 1995.
Brian Hayden, 52, has served as Executive Vice President & Manager,
Technical Services for GECAS since November 1993 and is responsible for all
technical aspects of the owned and managed fleet. Mr. Hayden also serves as a
director of Airplanes Limited and a trustee of Airplanes U.S. Trust.
Norman Liu, 42, was appointed to his current position as Executive Vice
President, Sales & Marketing for GECAS in April 1996. Mr. Liu previously served
as Executive Vice President, Capital Funding & Portfolio Management from May
1995 to April 1996.
Paul McElhinney, 38, was appointed Executive Vice President & General
Counsel for GECAS in July 1998. Prior to his current role, he served as Senior
Vice President & Associate General Counsel from 1994 to 1998.
Sean Brennan, 38, was appointed to his present position as Senior Vice
President & Manager, Contracts Management (which position includes supervision
of the deliveries and receivables functions and interaction with the
Administrative Agent) in February 1995. Previously he served as Senior Vice
President, Contracts Management from November 1993 to January 1995.
THE SERVICING AGREEMENT
The servicer and Aircraft Finance have entered into a servicing agreement
dated as of May 5, 1999. The servicing agreement sets forth the various duties
of GECAS as the servicer with respect to the management and administration of
the aircraft and the leases, the aircraft marketing activities to be performed
by the servicer and the aircraft management-related obligations of the servicer
in connection with offers and sales by Aircraft Finance of refinancing or
additional notes.
The servicer has agreed to provide its services in accordance with the
express terms of the servicing agreement. The terms of the servicing agreement
provide that the servicer will act in accordance with laws applicable to it,
with directions given by the administrative agent on behalf of Aircraft Finance,
with specified standards of care and with specified standards regarding
conflicts of interest. The duties and obligations of the servicer are limited to
those expressly set forth in the servicing agreement, and the servicer has not
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<PAGE> 47
undertaken any fiduciary or other implied duties or obligations to the Aircraft
Finance group, the holders of the notes or any other person.
The servicer has agreed to perform the services required by the servicing
agreement with reasonable care and diligence at all times and, if a conflict of
interest arises as to an Aircraft Finance aircraft and other aircraft managed by
GECAS, in good faith. In addition, to the extent that either two or more
particular Aircraft Finance aircraft or an Aircraft Finance aircraft and other
aircraft managed by GECAS have substantially similar objectively identifiable
characteristics that are relevant for purposes of the particular services to be
performed, the servicer has agreed not to discriminate among those Aircraft
Finance aircraft or between any of the Aircraft Finance aircraft and any other
managed aircraft on an unreasonable basis and, in the case of the two aircraft
leased to VARIG, on the basis of General Electric Capital Corporation's interest
in the reserve deposits established for the VARIG leases.
If the servicer in good faith determines that circumstances as to a
particular aircraft or lease require an arm's-length negotiation between the
servicer or any of its affiliates and Aircraft Finance and the servicer believes
it would not be appropriate for the servicer to act on behalf of Aircraft
Finance, the servicer has agreed to notify Aircraft Finance promptly and to
withdraw from acting as the servicer with respect to the matter and Aircraft
Finance has agreed to appoint an independent representative to act on its
behalf. The servicer is entitled to act on its own or its affiliates' behalf in
those negotiations.
Neither Aircraft Finance nor the servicer may assign its rights and
obligations under the servicing agreement without the other's prior consent. The
servicer may, however, delegate some, but not all, of its duties to some of its
affiliates.
AIRCRAFT SERVICES. The main categories of aircraft services being provided
by the servicer under the servicing agreement are:
(1) lease marketing and remarketing, lease negotiation and execution;
(2) collecting rental payments and other amounts due under leases, aircraft
maintenance, insurance monitoring and procurement, lease compliance and
enforcement and accepting delivery and redelivery of aircraft;
(3) sales services and aircraft acquisition;
(4) monitoring aircraft maintenance and providing records and information
about the aircraft;
(5) using commercially reasonable efforts to keep Aircraft Finance in
compliance with terms of the indenture that directly relate to the operation of
the aircraft;
(6) limited assistance in connection with this exchange offer and the
public or private offerings of any notes, such as providing information relating
to the servicer and its affiliates for inclusion in any offering document or
prospectus, participating in marketing activities solely with respect to the
aircraft and providing underwriters, rating agencies and other advisors with the
reasonable opportunity to conduct due diligence with respect to the servicer as
it relates to the aircraft;
(7) legal and other professional services with respect to the lease, sale
or financing of the aircraft, any amendment or modification of any lease, the
enforcement of the rights of Aircraft Finance and its subsidiaries under any
lease, any disputes that arise as to any
43
<PAGE> 48
aircraft or for any other purpose that the servicer reasonably determines is
necessary in connection with the performance of its services; and
(8) periodic reporting of operational information relating to the aircraft.
OPERATING GUIDELINES. Under the servicing agreement, the servicer is
entitled to exercise such authority as is necessary to give it a practicable and
working autonomy in performing its services. The servicing agreement provides
that the servicer will give Aircraft Finance and its agents access to records
related to the aircraft under specified circumstances to enable Aircraft Finance
to monitor the performance by the servicer and not commingle any funds of the
Aircraft Finance group with its own funds. Aircraft Finance, acting through the
administrative agent or directly, has established monitoring and control
procedures that it expects will enable it properly to manage its and its
subsidiaries' business and assets.
The servicing agreement requires all transactions entered into by the
servicer on behalf of Aircraft Finance and its subsidiaries other than
intracompany transactions to be at arm's length and on market terms unless
otherwise agreed or directed by the administrative agent on Aircraft Finance's
behalf. Transactions or matters on behalf of Aircraft Finance and its
subsidiaries that require the specific approval of Aircraft Finance include:
(1) sales of or agreements to sell aircraft, other than as required by a
lease or the purchase agreement for the initial 36 aircraft;
(2) entering into any new leases if the lease does not comply with any
applicable operating covenants set forth under the indenture governing the notes
or if the lease grants a purchase option in favor of the lessee and renewing or
extending existing leases, other than as a result of the exercise of an
extension option;
(3) terminating any lease or leases to any single lessee for aircraft then
having an aggregate depreciated net book value in excess of $75 million unless a
substantially similar replacement or substitute lease is put into place;
(4) unless provided for in the applicable budget, entering into any
contract for the modification or maintenance of aircraft where the costs to be
incurred by Aircraft Finance and its subsidiaries will exceed the greater of the
estimated aggregate cost of a heavy maintenance check for similar aircraft and
total refurbishment of the related engines and available maintenance reserves or
other collateral under the related lease or if those costs would be outside the
ordinary course of the business of Aircraft Finance and its subsidiaries;
(5) issuing any guarantee on behalf of, or otherwise pledging the credit
of, Aircraft Finance or any of its subsidiaries, other than with respect to
trade payables in the ordinary course of business and other than guarantees by
Aircraft Finance of the obligations of its subsidiaries;
(6) entering into, amending or granting a waiver with respect to, any
transaction between Aircraft Finance or its subsidiaries and General Electric
Capital Corporation or any of its affiliates not contemplated in the servicing
agreement;
(7) incurring any actual or contingent liability, unless contemplated in
the applicable budget pursuant to a transaction of a type for which Aircraft
Finance's specific approval is otherwise required, incurred in the ordinary
course of the business of Aircraft Finance and
44
<PAGE> 49
its subsidiaries or incurred in entering into a lease or performing any
obligations under a lease; and
(8) entering into any order or commitment to acquire, or acquiring,
aircraft or aircraft engines unless provided for in a lease, the order or
commitment to acquire a replacement engine has been provided for in the
applicable budget or the servicer determines that the purchase or exchange of an
engine is necessary or appropriate.
BUDGETS. The servicing agreement calls for the administrative agent to
adopt each year a single lease operating budget for all aircraft owned by
Aircraft Finance and its subsidiaries and a single budget for the aircraft
expenses related to all aircraft.
SERVICING FEES AND THEIR PAYMENT PRIORITY. The servicing agreement
provides that Aircraft Finance will pay to the servicer a base fee of $150,000
per month, which increases if additional aircraft are acquired by Aircraft
Finance and a rent fee equal to 1% of the aggregate amount of basic rent due for
all or any part of a month for any Aircraft Finance aircraft and 1% of the
aggregate basic rent actually paid for the month. The servicer also will receive
a disposition fee equal to 1% of the gross proceeds of the sale of any Aircraft
Finance aircraft. The servicer also will be reimbursed for aircraft maintenance
costs and insurance, outside legal and professional advisory fees and other out
of pocket expenses incurred in connection with its performance. The aggregate
reimbursement expenses may be significant. Aircraft Finance has also agreed to
indemnify the servicer as described under "Risk Factors -- Aircraft Finance's
contractual rights to recover against the servicer for inadequate performance
may be limited." The subsidiaries of Aircraft Finance have guaranteed the
obligations of Aircraft Finance to the servicer.
The above fees and expense reimbursements are payable monthly in arrears on
the payment dates for the notes. The payment of those fees and expenses has a
payment priority that is higher than that of all payments on the notes. The
servicer has agreed to allocate a portion of the fees payable to it to
UniCapital to the extent of the two initial and any other aircraft acquired from
UniCapital.
The servicer is also entitled to additional fees (the "Additional Servicing
Fees") consisting of an additional sales fee for each sale of an aircraft, an
additional disposition fee for each sale of an aircraft and an additional
rent-related fee based on basic rent actually paid. Additional Servicing Fees
are payable only after all amounts on the notes have been paid in full.
In addition, the servicer will be entitled to fees for aircraft management
services under the servicing agreement in connection with the offer and sale by
Aircraft Finance of refinancing and additional notes and any resales of notes by
any person who has any right to cause Aircraft Finance to assist in the resale.
TERM AND TERMINATION. The term of the servicing agreement expires on the
later of the payment in full of all amounts due on the notes and other similar
obligations and all amounts due to the holders of the beneficial interest in
Aircraft Finance and Aircraft Finance and its subsidiaries ceasing to hold any
aircraft. Each party also has the right to terminate the servicing agreement
under specified circumstances.
The servicer has the right to terminate the servicing agreement if, among
other things, Aircraft Finance defaults in its payment and other obligations
under the servicing agreement and related documents, any material representation
or warranty made by Aircraft Finance or its subsidiaries is false or misleading
in a manner material to the
45
<PAGE> 50
servicer, Aircraft Finance or its subsidiaries become subject to bankruptcy or
other insolvency proceedings, neither Aircraft Finance nor any of its
subsidiaries holds any aircraft or the indenture or any guaranty in favor of the
servicer ceases to be in effect.
The servicer may resign under the servicing agreement with respect to all
aircraft, or at its election, any affected aircraft if it reasonably determines
that directions given, or services required, would, if carried out be unlawful
under applicable law, be in violation of any corporate policy regarding business
practices or legal, ethical or social matters, be likely to lead to an
investigation by any governmental authority of the servicer or its affiliates,
expose the servicer to liabilities for which, in the servicer's good faith
opinion, adequate bond or indemnity has not been provided or place the servicer
in a conflict of interest with respect to which, in the servicer's good faith
opinion, the servicer could not continue to perform its obligations under the
servicing agreement. Whether or not it resigns, the servicer is not required to
take any action of the foregoing kind. The servicer may also resign in the event
it becomes subject to unindemnified taxes.
Aircraft Finance has the right to terminate the servicing agreement upon
payment in full of the notes and other similar obligations. Aircraft Finance
also has the right to terminate the servicing agreement if, among other things,
the servicer ceases to be at least 75% owned directly or indirectly by General
Electric Capital Corporation or its ultimate parent, General Electric
Corporation, the servicer breaches its obligations under the servicing agreement
in a manner that is material to Aircraft Finance and its subsidiaries as a
whole, the servicer, General Electric Capital Corporation or General Electric
Company becomes subject to bankruptcy or insolvency proceedings, there are
insufficient funds for the payment on any Class A Note for a period of 60 days
or at least 10 aircraft remain off-lease but available for re-lease for a period
of at least 90 days following specified events set forth in the indenture.
Aircraft Finance may remove the servicer for any affected aircraft if the
servicer has reasonably determined that directions given, or services required,
would, if carried out, place the servicer in a conflict of interest with respect
to which, in the servicer's good faith opinion, the servicer could not continue
to perform its obligations under the servicing agreement.
The servicer may not resign or be removed under the servicing agreement and
the servicing agreement may not be terminated, except as described above [and]
unless a replacement servicer, which may be UniCapital, has been appointed and
Aircraft Finance has obtained a confirmation from the rating agencies rating the
notes that they will not lower, qualify or withdraw any rating as a result. If a
replacement servicer has not been appointed within 90 days after notice of any
termination, resignation or removal, the servicer may petition any court
jurisdiction to appoint a replacement servicer. The servicer may terminate the
servicing agreement, whether or not a replacement servicer has been appointed,
if Aircraft Finance fails, after the applicable cure periods, to pay amounts due
to the servicer.
COMPETITION
In leasing and selling aircraft in its portfolio, Aircraft Finance faces
competition from a variety of entities. These include:
(1) the manufacturers of aircraft, such as Boeing and Airbus;
46
<PAGE> 51
(2) financial institutions engaged in the leasing business and other
leasing companies, such as General Electric Capital Corporation and
International Lease Finance Corporation;
(3) banks and other financial institutions that have foreclosed on aircraft
collateral;
(4) airlines which are disposing of excess aircraft; and
(5) other aircraft portfolio entities formed for purposes similar to those
of Aircraft Finance.
Many if not most of these entities have greater resources, greater
financial flexibility and longer operating histories than Aircraft Finance.
Please see "The Aircraft Industry" for a further discussion of the competitive
environment for the leasing and sale of aircraft.
47
<PAGE> 52
THE INITIAL AIRCRAFT AND INITIAL LEASES
THE MASTER AIRCRAFT PURCHASE AGREEMENT
The following is a summary of the material terms of the master aircraft
purchase agreement. For more specific information you should review the actual
text of this agreement, a copy of which is included as Exhibit 10.1 to the
Registration Statement of which this prospectus is a part.
PURCHASE OF THE AIRCRAFT
Aircraft Finance and its subsidiaries have acquired title to 36 Aircraft
from General Electric Capital Corporation and its affiliates under the master
aircraft purchase agreement dated as of May 5, 1999. Two of the aircraft were
acquired by General Electric Capital Corporation affiliates from affiliates of
UniCapital on May 5, 1999.
All of the initial aircraft were transferred between May 5, 1999 and
October 22, 1999. On the delivery date of each aircraft, the seller of that
aircraft represented that it transferred ownership of the aircraft free of all
encumbrances other than those created by or through the lessee of that aircraft
or Aircraft Finance or its subsidiaries.
In accordance with the master aircraft purchase agreement, Aircraft Finance
paid to the sellers of the aircraft the full purchase price of the initial
aircraft on May 5, 1999. The sellers retained all maintenance reserves that they
then held under the leases of the aircraft but on May 5, 1999 transferred to
Aircraft Finance and its subsidiaries all cash security deposits that they held
under the leases and all rents received before then under those leases for the
period starting April 29, 1999. Also on May 5, 1999, the sellers funded a
reserve account for each of the two aircraft leased to VARIG with $3.375
million, for a total of $6.75 million. Aircraft Finance may draw upon a VARIG
reserve account on or after May 5, 1999 to cover rent payment defaults under the
lease of the related aircraft leased to VARIG. At the time of delivery of each
VARIG aircraft, no payment defaults existed under the lease of that aircraft. If
rent not paid by VARIG when due is later paid by VARIG, that rent will be used
to replenish the applicable VARIG reserve account. The unused portion of each
VARIG reserve account may be returned to the sellers before the expiry of the
related lease under limited circumstances.
BANKRUPTCY CONSIDERATIONS RELATING TO "TRUE SALE" AND "CONSOLIDATION" ISSUES
If General Electric Capital Corporation or any of its affiliates that sold
aircraft to Aircraft Finance were to become a debtor in a U.S. federal
bankruptcy proceeding, any creditor, the bankruptcy trustee or the debtor itself
could request the court to recharacterize the transfer of aircraft or leases to
Aircraft Finance as a financing by the sellers rather than as a "true sale" to
Aircraft Finance. If such a claim were made, delays in payments on the notes
could result. Should the bankruptcy court rule in favor of any such claim, the
court could include the assets transferred to Aircraft Finance in the debtor's
bankruptcy estate or take other actions that would be adverse to you and that
could result in reductions in payments on the notes.
Weil, Gotshal & Manges LLP, as counsel to the sellers of the initial
aircraft, delivered a reasoned opinion to Aircraft Finance on May 5, 1999 to the
effect that, based on various assumptions and qualifications set forth in the
opinion, in a proceeding under the U.S. Bankruptcy Code relating to General
Electric Capital Corporation or any
48
<PAGE> 53
affiliated aircraft seller, a court applying federal bankruptcy law and properly
presented with the facts and exercising reasonable discretion would not grant an
order recharacterizing the transfer of the initial aircraft by any seller to
Aircraft Finance as a financing by any seller and would not include those
aircraft or the related leases in the bankruptcy estate of any seller.
If UniCapital were to become a debtor in a U.S. federal bankruptcy, a
similar request to recharacterize the transfer of two aircraft and related
leases by UniCapital to General Electric Capital Corporation -- prior to their
re-sale to Aircraft Finance -- could be made and similar consequences could
ensue. In addition, if UniCapital were to become a debtor in such a proceeding
under the U.S. Bankruptcy Code, a creditor, bankruptcy trustee or the debtor
could request a court to order that the assets and liabilities of either of
Aircraft Finance or the holders of its beneficial interest should be
substantively consolidated with those of UniCapital. If such a claim were made,
delays in payments on the notes could result. Should the bankruptcy court rule
in favor of any such claim, the court could substantively consolidate Aircraft
Finance or those holders with UniCapital or otherwise consider them to be part
of UniCapital's bankruptcy estate or take other actions that would be adverse to
you and that could result in reductions in payments on the notes.
Milbank, Tweed, Hadley & McCloy LLP delivered a reasoned opinion to
Aircraft Finance on May 5, 1999 to the effect that, based on various assumptions
and qualifications set forth in the opinion, in a proceeding under the U.S.
Bankruptcy Code relating to UniCapital, a court properly presented with the
facts and exercising reasonable discretion and applying current bankruptcy law
principles would not grant an order (1) recharacterizing the transfer of the two
initial aircraft and related leases acquired from UniCapital as a financing by
UniCapital and include those aircraft and leases acquired in UniCapital
bankruptcy estate or (2) substantively consolidating the assets and liabilities
of either of Aircraft Finance or those holders of its beneficial interests with
those of UniCapital.
Both opinions note, however, that there is no case law directly on point,
that a court may decide differently from the views expressed in the opinion and
that the opinion represents only counsel's the best judgment and is not binding
in the courts. Moreover, each opinion states that it depends on the accuracy of
many factual assumptions that the counsel has not independently verified and
notes that different facts could lead a court to reach a different conclusion.
APPRAISERS' REPORT
Three appraisers, Aircraft Information Services, Inc., BK Associates, Inc.
and Morten Beyer & Agnew, Inc., provided appraisals of the value of each of the
initial aircraft as of December 31, 1998. The appraisals assume that initial
aircraft are utilized normally in an open, unrestricted and stable market,
adjusted where necessary to account for the reported maintenance standard of the
aircraft. Values calculated under these assumptions are "base values". Copies of
the appraisals are included in Appendix 9. The appraisals were not based on a
physical inspection of the aircraft. The appraisals explain the methodology used
by the appraisers.
Based on the appraisals, the aggregate of the base values calculated by the
appraisers for the initial aircraft as of December 31, 1998 is $1,322,643,333.
The base values of the initial aircraft as of December 31, 1998 are listed below
by type and class of aircraft. You should not rely upon these base values as a
measure of the market or realizable value of any initial aircraft. In addition,
the base values of the aircraft are expected to decline over
49
<PAGE> 54
time due to the aging of the aircraft, increasing maintenance expenses and
similar factors. The appraisals listed below were as of December 31, 1998, and
the base values of the aircraft, if determined as of the date of this prospectus
or on the delivery dates of the aircraft, would be expected to be lower than the
base values in the appraisals.
The appraised base values obtained and to be obtained assume an "open,
unrestricted stable market environment with a reasonable balance of supply and
demand" and other factors common for like appraisals. At any point in the
aircraft leasing cycle, however, there will be imbalances of aircraft supply and
demand and there may be particularly pronounced imbalances for specific aircraft
types. Although some initial aircraft may have market values approximating or
exceeding the appraised values given them, others, such as the older aircraft,
may have market values below, and in some cases significantly below, those
appraised base values. At a cyclical low, the market value of most aircraft
types is likely to be less than, and in some cases significantly less than, the
appraised base values. In addition, the appraised base values of the initial
aircraft will likely decline over time due to aging, increasing maintenance
expenses and similar factors. Finally, appraised base values obtained upon
delivery of the aircraft would likely be less than the initial appraised values,
which were determined as of December 31, 1998. Accordingly, you should not place
undue reliance on the indicated appraised values as an accurate depiction of
current market or realizable values at any one point in time.
50
<PAGE> 55
THE INITIAL AIRCRAFT
All of the initial aircraft hold or are capable of holding a noise
certificate issued under Chapter 3 of Volume I, Part II of Annex 16 of the
Chicago Convention or have been shown to comply with the Stage 3 noise levels
set out in Section 36.5 of Appendix C of Part 36 of the United States Federal
Aviation Regulations.
The following table and pie chart identify the initial 36 aircraft by type
of aircraft.
<TABLE>
<CAPTION>
% OF AIRCRAFT BY
TYPE OF NUMBER OF APPRAISED VALUE AS OF
MANUFACTURER AIRCRAFT AIRCRAFT BODY TYPE DECEMBER 31, 1998
- ------------ ---------- --------- ---------- ---------------------
<S> <C> <C> <C> <C>
Boeing................... B737-300 11 Narrowbody 29.0%
B737-400 5 Narrowbody 12.1%
B767-200ER 2 Widebody 5.4%
B767-300ER 4 Widebody 23.4%
Airbus................... A310-300 1 Widebody 2.6%
A320-200 7 Narrowbody 17.4%
McDonnell Douglas........ DC-10-30 2 Widebody 3.1%
MD-83 4 Narrowbody 6.9%
-- -----
Total............... 36 100.0%
</TABLE>
TYPE OF INITIAL AIRCRAFT
[EXPOSURE TO TYPE OF INITIAL AIRCRAFT PIE CHART]
51
<PAGE> 56
The following table and pie chart identify the countries in which the
initial 36 aircraft are based.
<TABLE>
<CAPTION>
% OF AIRCRAFT BY
NUMBER OF APPRAISED VALUE AS OF
COUNTRY AIRCRAFT DECEMBER 31, 1998
- ------- --------- ---------------------
<S> <C> <C>
U.K............................................. 7 21.8%
U.S............................................. 6 16.0%
Italy........................................... 2 8.7%
Brazil.......................................... 3 8.1%
Canada.......................................... 3 7.0%
France.......................................... 2 6.2%
Turkey.......................................... 2 5.3%
China........................................... 2 5.3%
Ireland......................................... 2 5.2%
Spain........................................... 3 5.0%
Sweden.......................................... 1 4.8%
India........................................... 2 4.1%
Off Lease....................................... 1 2.6%
-- -----
Total...................................... 36 100.0%
</TABLE>
COUNTRIES IN WHICH INITIAL AIRCRAFT ARE BASED
[EXPOSURE TO COUNTRIES IN WHICH INITIAL AIRCRAFT ARE BASED PIE CHART]
52
<PAGE> 57
The following table and pie chart identify the regions in which the initial
36 aircraft are based.
<TABLE>
<CAPTION>
% OF AIRCRAFT BY
NUMBER OF APPRAISED VALUE AS OF
COUNTRY AIRCRAFT DECEMBER 31, 1998
- ------- --------- ---------------------
<S> <C> <C>
Developed Markets
Europe.......................................... 17 51.6%
North America................................. 9 22.9%
Emerging Markets Asia........................... 4 9.4%
Europe and the Middle East.................... 2 5.3%
Latin America................................. 3 8.1%
Off Lease....................................... 1 2.6%
-- -----
Total...................................... 36 100.0%
</TABLE>
REGION IN WHICH INITIAL AIRCRAFT ARE BASED
[EXPOSURE TO REGION IN WHICH INITIAL AIRCRAFT BASED PIE CHART]
The following table and pie chart identify the current lessees of the
initial 36 aircraft.
<TABLE>
<CAPTION>
% OF CURRENT
PORTFOLIO BY
APPRAISED VALUE AS
NUMBER OF OF DECEMBER 31,
LESSEE AIRCRAFT 1998
- ------ --------- ------------------
<S> <C> <C>
Air 2000 Limited.................................... 1 6.8%
Airtours International Airways Limited.............. 2 4.5%
Linie Aerce Italiane S.p.A. ........................ 1 6.8%
America West Airlines, Inc. ........................ 1 2.8%
Britannia Airways Limited........................... 1 4.8%
British Airways..................................... 1 2.7%
British Midland Airways PLC......................... 3 7.8%
Canadian Airlines International Ltd. ............... 2 4.3%
China Eastern Airlines Corporation Limited.......... 2 5.3%
Continental Airlines, Inc. ......................... 2 3.1%
</TABLE>
53
<PAGE> 58
<TABLE>
<CAPTION>
% OF CURRENT
PORTFOLIO BY
APPRAISED VALUE AS
NUMBER OF OF DECEMBER 31,
LESSEE AIRCRAFT 1998
- ------ --------- ------------------
<S> <C> <C>
Eurofly S.p.A. ..................................... 1 1.9%
Frontier Airlines, Inc. ............................ 1 2.7%
Istanbul Hava Yollari A.S. ......................... 2 5.3%
Jet Airways (India) Limited......................... 2 4.1%
Royal Aviation, Inc. ............................... 1 2.6%
Spanair S.A. ....................................... 3 5.0%
Societe de Transport Aerien Regional................ 2 6.2%
TransBrasil S.A. Linhas Aereas...................... 1 2.7%
TransMeridian Airlines, Inc. ....................... 1 2.4%
TWA................................................. 1 5.1%
VARIG............................................... 2 5.4%
Virgin Express S.A. N.V. ........................... 2 5.2%
Off Lease........................................... 1 2.6%
-- -----
Total.......................................... 36 100.0%
</TABLE>
INDIVIDUAL INITIAL LESSEES
[EXPOSURE TO INDIVIDUAL INITIAL LESSEES PIE CHART]
Total Number of Lessees: 22
54
<PAGE> 59
The following table and pie chart identifies the aircraft by year of
aircraft manufacture. The weighted average age of the initial 36 aircraft as of
April 1, 1999 is approximately 4.7 years.
<TABLE>
<CAPTION>
% OF CURRENT
PORTFOLIO BY
APPRAISED VALUE AS
NUMBER OF OF DECEMBER 31,
YEAR OF MANUFACTURE AIRCRAFT 1998
- ------------------- --------- ------------------
<S> <C> <C>
1980.............................................. 1 1.5%
1982.............................................. 1 1.7%
1986.............................................. 1 1.5%
1987.............................................. 2 5.4%
1988.............................................. 1 2.6%
1989.............................................. 1 1.7%
1991.............................................. 6 15.5%
1992.............................................. 4 11.0%
1993.............................................. 1 2.4%
1996.............................................. 5 13.0%
1997.............................................. 10 27.4%
1998.............................................. 1 2.8%
1999.............................................. 2 13.6%
-- -----
Total........................................ 36 100.0%
</TABLE>
YEAR OF INITIAL AIRCRAFT MANUFACTURE
[EXPOSURE TO YEAR OF INITIAL AIRCRAFT MANUFACTURE PIE CHART]
The following table lists the initial 36 aircraft by seat category.
Passenger aircraft are assumed to be configured with the number of seats listed
in Appendix 2 to this prospectus.
<TABLE>
<CAPTION>
% OF CURRENT
PORTFOLIO VALUE AS
NUMBER OF OF DECEMBER 31,
SEAT CATEGORY AIRCRAFT TYPES AIRCRAFT 1998
- ------------- -------------- --------- ------------------
<S> <C> <C> <C>
121-170.............. B737-300, B737-400, MD-83 20 48.0%
135-180.............. A320-200 7 17.4%
171-240.............. A310-300, B767-200ER, B767-300ER 7 31.5%
240+................. DC-10-30 2 3.1%
-- -----
Total........... 36 100.0%
</TABLE>
55
<PAGE> 60
Further particulars of the initial 36 aircraft are contained in the table
below:
<TABLE>
<CAPTION>
APPRAISED
VALUE AS OF
DECEMBER 31,
COUNTRY IN WHICH DATE OF 1998
REGION AIRCRAFT IS BASED INITIAL LESSEE TYPE ENGINE TYPE SERIAL NO. MANUFACTURE ($US 000S)
- ------ ----------------- ----------------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Europe............... France STAR Airlines A320-200 CFM56-5B4 737 9/97 $ 40,893
(Developed) France STAR Airlines A320-200 CFM56-5B4 749 9/97 40,727
Ireland Virgin Express B737-300 CFM56-3C1 28333 8/96 33,673
(Ireland)
Ireland Virgin Express B737-400 CFM56-3C1 28489 11/96 35,090
(Ireland)
Italy Alitalia B767-300ER CF6-80C2B7F 30008 3/99 89,847
Italy Eurofly S.p.A. MD-83 JT8D-219 53199 3/92 24,873
Spain Spanair S.A. MD-83 JT8D-219 49398 11/86 19,737
Spain Spanair S.A. MD-83 JT8D-219 49791 9/89 22,087
Spain Spanair S.A. MD-83 JT8D-219 53198 4/91 24,183
United Kingdom Air 2000 B767-300ER CF6-80C2B7F 29617 3/99 89,727
United Kingdom Airtours A320-200 CFM56-5A3 221 9/91 30,033
United Kingdom Airtours A320-200 CFM56-5A3 222 10/91 30,053
Sweden Britannia(1) B767-300ER CF6-80C2B6F 25221 7/91 63,563
United Kingdom British Airways B737-300 CFM56-3C1 28548 12/97 35,277
United Kingdom British Midland B737-300 CFM56-3C1 28554 12/96 33,303
United Kingdom British Midland B737-300 CFM56-3C1 28557 3/97 34,893
United Kingdom British Midland B737-300 CFM56-3C1 28558 4/97 34,910
North America........ United States America West B737-300 CFM56-3C1 28740 6/98 36,463
(Developed) United States Continental DC-10-30 CF6-50C2 46584 2/80 19,367
United States Continental DC-10-30 CF6-50C2 48292 2/82 21,873
United States Frontier Airlines B737-300 CFM56-3C1 28563 8/97 35,237
United States TransMeridian A320-200 V2500-A1 373 1/93 31,390
Airlines
United States TWA B767-300ER PW4060 25403 1/92 66,810
Canada Canadian Airlines A320-200 CFM56-5A1 210 7/91 28,627
Canada Canadian Airlines A320-200 CFM56-5A1 231 9/91 28,783
Canada Royal Aviation A310-300 CF6-80C2A2 448 2/88 34,773
Asia................. China China Eastern B737-300 CFM56-3C1 28561 6/97 34,893
(Emerging) China China Eastern B737-300 CFM56-3C1 28562 7/97 35,010
India Jet Airways B737-400 CFM56-3C1 25663 11/92 27,303
India Jet Airways B737-400 CFM56-3C1 25664 11/92 27,130
Europe & Middle
East............... Turkey Istanbul B737-400 CFM56-3C1 28490 11/96 35,000
(Emerging) Turkey Istanbul B737-400 CFM56-3C1 28491 11/96 35,027
Latin America........ Brazil TransBrasil B737-300 CFM56-3C1 28564 11/97 35,483
(Emerging) Brazil VARIG B767-200ER CF6-80C2B 23805 7/87 35,827
Brazil VARIG B767-200ER CF6-80C2B 23806 7/87 35,823
Off Lease Off Lease Off Lease B737-300 CFM56-3C1 28559 5/97 34,953
----------
Total............................................................................................................ $1,322,643
</TABLE>
- -------------------------
(1) Leased to Britannia (United Kingdom) and subleased to Britannia Airways AB
(Sweden).
56
<PAGE> 61
THE INITIAL LEASES
The following description relates to the leases for the initial aircraft in
effect on November 30, 1999. Any leases of additional aircraft and any future
leases entered into for the re-lease of any initial aircraft may differ from the
description provided below.
MANAGEMENT, LEASE TERMS, RISK OF LOSS
All leases of the Aircraft will be managed by the servicer under the
servicing agreement. All of the leases for the initial aircraft are operating
leases. Under those leases, the lessees agreed to lease the aircraft for a fixed
term, although in some cases the lessees have purchase options, termination
rights and extension rights. Although most of the lease documentation for the
initial aircraft is fairly standardized in many respects, significant variations
do exist as a result of lessee negotiation.
LEASE PAYMENTS AND SECURITY
Each lease for an initial aircraft requires the lessee to pay periodic
rentals during the lease term. A number of the leases require the lessee to pay
periodic amounts as maintenance reserves.
The lessees are required to make payments without withholding payment on
account of any amounts the lessor may owe the lessee or any claims the lessee
may have against the lessor for any breach of contract. Each lease includes an
obligation of the lessee to gross-up payments under the lease where lease
payments are subject to withholdings and other taxes, although sometimes the
gross-up amount will be limited to the amount that would have been payable if
such lease had never been transferred to Aircraft Finance or its subsidiary. The
leases for the initial aircraft also require the lessee to indemnify the lessor
for some tax liabilities including, in some leases, value added tax and stamp
duties, but generally excluding income tax or its equivalent imposed on the
lessor. The lessees must also pay default interest on any overdue amounts. In
the lease with British Airways, the lessee may exercise remedies if the lessor
breaches its covenant not to interfere with the lessee's use of the aircraft.
Under the leases for the initial aircraft, the lessee must pay operating
expenses accrued or payable during the term of the lease, which would normally
include maintenance, operating, overhaul, airport and navigation charges,
certain taxes, licenses, consents and approvals, aircraft registration and hull
"all risks" and public liability insurance premiums. The lessees are obliged to
remove liens on the aircraft other than liens permitted under the leases.
Under all but three of the leases for the initial aircraft, the lessee has
provided security deposits to secure its obligations. In fifteen of the leases,
the lessee has provided cash security deposits. In seven of the leases, the
lessee has provided a letter of credit. In the remaining ten of the leases, the
lessee provided both letters of credit and cash. One aircraft is currently off
lease.
RENTALS
Most of the rental payments are payable on a fixed rate basis and are not
adjustable by reference to market interest rate changes. Rentals under most of
the leases for the initial aircraft are payable monthly in advance.
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<PAGE> 62
OPERATION OF THE ORIGINAL AIRCRAFT
The leases require the lessees to operate the aircraft in compliance with
all applicable laws and regulations. The initial aircraft generally must remain
in the possession of the lessees, and any subleases of the aircraft must be
approved by the lessor. The Britannia lease, however, permits a sublease to
Britannia Airways GmbH, and TWA will be permitted to sublease to a pre-approved
list of major U.S. airlines. Under some of the leases, the lessee may enter into
charter or other arrangements for the aircraft if the lessee does not part with
operational control of the aircraft. Generally, the lessees are not allowed to
re-register the Aircraft without the lessor's permission, except in connection
with a permitted sublease if operating in specified countries.
All of the leases for the initial aircraft permit the lessees to remove or
replace the engines and in some cases other equipment or components. Sometimes
lessees are allowed to enter into pooling arrangements for the temporary
borrowing of equipment, in some cases without the lessor's consent. Under all of
the leases, the lessees may deliver the aircraft, engines and other equipment or
components to their manufacturer for testing or similar purposes, or to other
parties for service, maintenance, repair or other work required or permitted
under the lease. The lessor's ability to repossess the aircraft or engines,
equipment or components from any sublessee, transferee, manufacturer or other
person may be restricted by liens or similar rights and by applicable bankruptcy
and similar laws.
MAINTENANCE AND MAINTENANCE RESERVES
The leases for the aircraft specify maintenance standards and the required
condition of the aircraft upon redelivery to the lessor. In addition, under some
of the leases, depending on the condition of the aircraft including the
airframe, engines, the auxiliary power unit or landing gear at redelivery, the
lessee may have to make adjustment payments to the lessor. During the term of
each lease, the lessee must ensure that the aircraft is maintained in accordance
with an agreed maintenance program designed to provide that the aircraft meets
applicable airworthiness and other regulatory requirements. Under the leases for
the initial aircraft, maintenance is generally performed by the lessee or, for
some of the regional lessees, by a designated airline or other air authority
approved maintenance provider. Under most of the leases for the initial
aircraft, the lessee must provide monthly maintenance reserves. In some cases
where the lessee has paid maintenance reserves, those payments will be used to
reimburse the lessee for significant maintenance charges, including major
airframe and engine overhauls.
Some of the leases for the initial aircraft do not require maintenance
reserves to be paid. In those cases the lessor must rely on the credit of the
lessee or any credit support the lessee provides to ensure that the lessee
returns the aircraft in the condition required by the lease upon termination,
makes any payments required based on the aircraft's return condition upon
termination of the lease and performs scheduled maintenance throughout the lease
term.
The leases for the initial aircraft require the lessees to comply with the
airworthiness directives of the relevant aviation authorities and with
manufacturers' service bulletins. The lessees primarily bear the cost of
compliance. Some of the leases, however, require the lessor to contribute to the
cost of compliance with selected airworthiness directives or manufacturers'
service bulletins if compliance costs are above a specified threshold.
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<PAGE> 63
LESSEES' OPTIONS
The leases or side agreements between the lessor and the lessee for three
of the initial aircraft, representing 11.3% of the appraised value of the
initial aircraft, grant purchase options to the lessee or its affiliates. None
of the purchase options are exercisable as of November 30, 1999. The latest date
on which a purchase option may be exercised is December 31, 2003 for a purchase
on April 30, 2005, or if all lease extension options are exercised, April 30,
2010. If a purchase option is exercised and the notes have been repaid in
accordance with the assumptions set forth under "Note Payment Assumptions"
through the date of exercise, the exercise of that purchase option would result
in the proceeds realized from the exercise being at least equal to the principal
of the notes allocable to the relevant aircraft. If the notes have not been so
paid, this might not be the case.
Nine of the leases for the initial 36 aircraft give the lessee the option
to extend the term of the lease. The rent payable during the extension period
varies from lease to lease. Six of the leases allow the lessee to terminate its
lease prior to the scheduled expiration date, though sometimes the lessee must
pay a fee or fulfill other requirements.
INDEMNIFICATION AND INSURANCE OF THE AIRCRAFT
INSURANCE REQUIREMENTS. The leases for the initial aircraft require the
lessees to bear responsibility and carry insurance for any liabilities arising
out of the operation of the aircraft. These include any liabilities for death or
injury to persons and damage to property that would ordinarily attach to the
operator of the aircraft, subject to customary exclusions. In addition, the
lessees must carry other types of insurance that are customary in the air
transportation industry. These include aircraft hull all risks and hull war
risks insurance at a value stipulated in the lease and aircraft spares insurance
on a replacement cost basis, in each case subject to customary deductibles. The
servicer must monitor the lessees' compliance with the insurance provisions of
the leases.
In addition, Aircraft Finance and its subsidiaries also have in place their
own contingent liability coverage. That coverage covers both a liability that
exceeds the coverage provided by a lessee's policy and instances in which a
lessee's policy lapses for any reason. Aircraft Finance and its subsidiaries'
contingent third-party liability insurance covers all of the aircraft, and their
contingent hull and hull war risks insurance covers some of the aircraft. The
amount of the contingent liability policies may or may not exceed the amount
required under the relevant lease. The amount of third-party contingent
liability compliance insurance is subject to limitations imposed by the air
transportation insurance industry.
If any of the existing insurance policies are canceled or terminated and if
an aircraft is re-leased, the servicer may from time to time engage insurance
experts at Aircraft Finance's expense to advise and recommend the appropriate
amount of insurance coverage Aircraft Finance should procure.
LIABILITY INSURANCE. The leases for the initial aircraft require third
party liability insurance for a combined single limit for bodily injury and
property damage in minimum amounts ranging between $500 million and $750 million
for each aircraft. In general, liability coverage on each aircraft includes
third party legal liability, passenger legal liability, baggage legal liability,
cargo legal liability, mail and aviation general third party (including
products) legal liability.
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<PAGE> 64
In some jurisdictions Aircraft Finance or its subsidiary may be liable, as
owner of an aircraft, for obligations that may be insured against by the lessees
even if Aircraft Finance or that subsidiary is not responsible for the loss that
results in the obligation. In addition, claims may be made against Aircraft
Finance or its subsidiary on the basis of alleged responsibility for a loss,
even if such claim is not ultimately sustained.
The losses for which coverage is provided include both operating costs
relating to the actual operation of the aircraft as well as losses to persons
and property resulting from the operation of the aircraft. The latter types of
losses are generally covered by the lessees' liability insurance.
AIRCRAFT PROPERTY INSURANCE. In addition to hull risk, hull war and allied
peril risk and aircraft spares insurance coverage obtained by the lessees,
Aircraft Finance will also purchase "total loss only" coverage with respect to
some initial aircraft. As of May 5, 1999, in no case was the sum of the
stipulated loss value and Aircraft Finance's additional coverage for hull all
risks, hull war and allied peril and all risks insurance less than 97% of the
initial appraised value of the applicable aircraft. The average, weighted by
initial appraised value, of the sum of those coverages in place for each initial
aircraft was approximately 106% of the initial appraised value of the applicable
aircraft. In some cases, the lessor is allowed to increase the insured value
above the stipulated loss value consistent with industry practice. In those
cases the lessee is responsible for any increased premium that results.
Permitted deductibles range from $100,000 to $1,000,000; the deductibles,
however, apply only in the case of a partial loss.
The leases for the initial aircraft include provisions defining an event of
loss or a casualty occurrence so that upon total loss of the airframe, with or
without loss of the engines, an agreed value is payable by the lessee. This
payment is generally funded with insurance proceeds. The air transportation
insurance industry practice, however, is to treat only a loss with likely repair
costs of greater than 75% of the insured value of the aircraft, including the
engines, as a total loss. Where insurance proceeds exceed the cost of repair or
the amount required to be insured under the lease, most leases require the
lessor to pay to the lessee the balance of the insurance proceeds received under
the hull all risks or war risks policy after deduction of all amounts payable by
the lessee to the lessor under the lease.
All insurance policies currently in place contain a breach of warranty
endorsement so that the additional insureds continue to be protected even if the
lessee violates one or more of the provisions of the insurance policies. In many
cases, these endorsements also provide that this protection will only apply if
the additional insured has not caused, contributed to or knowingly condoned the
breach.
An insurance advisor has confirmed to the servicer that the insurance
currently detailed in the current insurance certificates as to the initial
aircraft meets customary practices.
Except for one lease, the leases for the initial aircraft require the
lessee to maintain as part of its hull war and allied perils insurance coverage
for loss or damage resulting from a governmental confiscation or requisition of
the applicable aircraft. In some countries, however, such as France and China,
that kind of insurance may not be obtainable by the lessee.
60
<PAGE> 65
THE LESSEES
As of the date of this prospectus, there were 22 lessees under leases for
the initial aircraft in 12 different countries. On November 17, 1999, a notice
of termination was given to Air Holland following the appointment of an
insolvency administrator for Air Holland. On November 23, 1999, the aircraft was
repossessed.
PAYMENT HISTORY
As a general matter, weakly capitalized airlines are more likely than well
capitalized airlines to seek operating leases. You should expect varying numbers
of lessees at any point in time to be experiencing payment difficulties.
The servicer has advised Aircraft Finance that in the servicer's experience
some operating lessees of aircraft similar to the aircraft owned by Aircraft
Finance and its affiliates fail to make timely lease, maintenance and other
payments from time to time over the course of their leases. In most instances,
late payments are recovered, together with default interest or other similar
payments required by the leases. In some instances, the financial difficulties
of a portfolio's lessees may result in a formal or informal restructuring.
Restructurings may involve the voluntary termination of a lease prior to its
expiration and the arrangement of subleases from the lessee to another aircraft
operator. In addition, restructurings may involve reduced rental payments for a
specified period, which may be several months.
With respect to the current lessees of the aircraft owned by Aircraft
Finance, restructuring has been worked out with six lessees involving ten
aircraft in Aircraft Finance's portfolio:
(1) With respect to Istanbul, leases were restructured in April 1999 to
provide for low winter and high summer payments. The lessee is currently in
arrears and owes Aircraft Finance $2.2 million as of December 14, 1999.
(2) Also in April 1999, Air Holland's lease obligations for December 1998
through March 1999 were reduced 50%, with the balance being deferred until
between May and August 1999. Air Holland paid the deferred amounts in July 1999.
On November 2, 1999, however, an insolvency administrator was appointed for Air
Holland, and thereafter on November 23, 1999, the servicer took possession of
the aircraft. Air Holland's $395,000 past-due basic rent obligations are covered
by security.
(3) In January 1997, a restructuring agreement was reached with Canadian
Airlines under which payments of approximately $1.7 million in respect of
obligations owed for aircraft now owned by Aircraft Finance and other aircraft
managed by the servicer were deferred to between July 1997 and August 1999. The
deferred amounts have been timely paid in full.
(4) From January 1999 to April 1999 VARIG suspended payments under its
leases of two aircraft which were acquired by Aircraft Finance on May 5, 1999.
Since May 5, VARIG has made all current payments under those leases, and no
arrearages are due to Aircraft Finance. Please see "The Master Aircraft Purchase
Agreement" for a description of reserves upon which Aircraft Finance may draw
with respect to any future lease payment defaults by VARIG.
(5) A rescheduling of payments was entered into with TransBrasil in August
1998 and again in May 1999. Pursuant to the rescheduling, TransBrasil agreed to
make 24 monthly installments totaling approximately $2.5 million starting in
September 1999. As of
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<PAGE> 66
December 14, 1999, TransBrasil owes Aircraft Finance $912,000 in rentals,
reserves and late payment interest.
(6) During the period from October 1995 through July 1997, approximately
$2.75 million of payments were restructured for Continental. All of the
restructured amounts were timely repaid.
Prior to Aircraft Finance's purchase of the initial thirty-six aircraft
from General Electric Capital Corporation and its affiliates, the servicer
managed each of the aircraft over different lengths of time. During that time
and through December 1, 1999, eleven of the initial thirty-six aircraft managed
by the servicer were off-lease for a total of 797 days. The following chart sets
forth the number of days off-lease for each of these aircraft, which are
identified by aircraft number, for all lessees during this period whether or not
the lessees are still lessees under the leases held by Aircraft Finance and its
subsidiaries:
<TABLE>
<CAPTION>
DAYS UNDER
AIRCRAFT DAYS GECAS
SERIAL NO. OFF-LEASE MANAGEMENT
- ---------- --------- ----------
<S> <C> <C>
448............................... 515(1) 2,224(1)
49398............................... 20 2,224
49791............................... 18 1,356
25663............................... 73 2,224
25664............................... 83 2,224
28740............................... 7 519
28490............................... 3 1,104
28491............................... 1 1,104
373............................... 2 210
25403............................... 66(2) 2,224(2)
28559............................... 9 933
</TABLE>
- ---------------
(1) The servicer commenced its management operation of this aircraft on or about
the date of its formation in October 1993. Period includes the period during
which the aircraft was on lease to Kuwait Airways. The off-lease period for
Kuwait Airways commenced on February 28, 1993 and the aircraft was returned
to lease on March 17, 1995. Thereafter, another off-lease period with a
different lessee occurred.
(2) The period includes the period of aircraft reconfiguration prior to the
commencement of lease term to TWA during which period GECAS paid a
rent-equivalent to Aircraft Finance.
The off-lease time for all of the aircraft now owned by Aircraft Finance
and its subsidiaries including those set forth in the table above for the entire
number of days under management by the servicer through December 1, 1999
represents approximately 1.68% of that entire number of days, and the
corresponding percentage of number of days on-lease for all of the aircraft
during such period was approximately 98.32%.
Aircraft Finance cannot assure you that the foregoing off-lease information
is indicative of the off-lease time that Aircraft Finance and its subsidiaries
will experience or of the results that the servicer will achieve for the leasing
of the aircraft owned by Aircraft Finance and its subsidiaries. Off-lease time
is dependent on a number of factors, many of which are beyond the control of the
servicer and Aircraft Finance and its subsidiaries. See "Aircraft Finance
Trust -- Business of Aircraft Finance -- Difficulties in Re-Leasing or
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<PAGE> 67
Selling Aircraft at Favorable Terms." The servicer has not guaranteed, or made
any other assurances, as to amount of time that the aircraft owned by Aircraft
Finance and its subsidiaries may be off-lease.
Set forth below is a summary, by aircraft type, of the average monthly rent
due on each aircraft owned by Aircraft Finance and its subsidiaries for the
period during which the servicer has managed these aircraft, including the time
that the servicer managed these aircraft prior to their transfer to Aircraft
Finance and its subsidiaries.
<TABLE>
<CAPTION>
AIRCRAFT TYPE AVERAGE MONTHLY RENT
- ------------- --------------------
<S> <C>
B737-300................................. $270,772
B737-400................................. $283,380
B767-200ER............................... $332,321
B767-300ER............................... $632,632
A310-300................................. $214,023
A320-200................................. $246,561
DC-10-30................................. $247,857
MD-83.................................... $200,920
</TABLE>
Aircraft Finance cannot assure you that the foregoing monthly rent
information is indicative of the rates that Aircraft Finance and its
subsidiaries will experience or of the results that the servicer will achieve
for the re-leasing of the aircraft owned by Aircraft Finance and its
subsidiaries. Lease rates are dependent on a number of factors, many of which
are beyond the control of the servicer and Aircraft Finance and its
subsidiaries. See "Aircraft Finance Trust -- Business of Aircraft
Finance -- Difficulties in Re-Leasing or Selling Aircraft at Favorable Terms."
The servicer has not guaranteed, or otherwise provided any assurances, that the
aircraft owned by Aircraft Finance and its subsidiaries can be timely re-leased,
that favorable rates that can be achieved in any re-leasing of aircraft or that
the performance of any lessees will be satisfactory.
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<PAGE> 68
DESCRIPTION OF THE INITIAL LEASES
The table below lists publicly available information with respect to the
country of domicile, first year of operation, service type, nature of ownership
and fleet size and composition of each lessee of the initial 36 aircraft.
<TABLE>
<CAPTION>
BEGAN SERVICE
LESSEE DOMICILE OPERATION TYPE LESSEE OWNERSHIP OPERATING FLEET
- ------ -------- --------- ------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Airtours............. U.K. 1990 Charter Publicly traded; 10 A320-200
Carnival 2 A321-200
Corporation (28); 1 A330-300
Schroder 5 B757-200
Investment 3 B767-300ER
Management (9)% 1 DC-10-30
On Order:
4 A330-200
Air 2000............. U.K. 1987 Charter Publicly traded; 5 A320-200
Principal 3 A321-200
Shareholders: 10 B757-200
First Choice plc, 2 B767-300ER
M&G Investment On Order:
(11%), 1 A321-200
UBS Asset 2 A330-200
Management (11%), 1 B767-300ER
Thomas Cook
Group (10%)
Alitalia............. Italy 1946 Scheduled Publicly traded; 4 A300B4-100/200
I.R.I. SpA (53%) 2 A300 B2
(Italian state 22 A321-100
holding company) 11 B747-200
6 B767-300ER
8 MD-11
90 MD-82
2 DC-9-30
On Order:
19 A320-200
3 A321-100
3 B767-300ER
America West......... United States 1983 Scheduled Publicly traded, 35 A319/A320
Texas Pacific 18 B737-100/200
Group 44 B737-300
(49.1% voting), 2 B737-300QC
Continental 13 B757-200
(8.3% voting) On order:
35 A319/A320
Britannia............ U.K.* 1962 Charter Thomson Travel 1 B737-800
Group (100%) 25 B757-200
6 B767-200ER
5 B767-300ER
On order:
5 B737-800
1B757-200
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
* The lessee is a U.K. Company, but the aircraft is habitually based in Sweden.
</TABLE>
64
<PAGE> 69
<TABLE>
<CAPTION>
BEGAN SERVICE
LESSEE DOMICILE OPERATION TYPE LESSEE OWNERSHIP OPERATING FLEET
- ------ -------- --------- ------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
British Airways...... U.K. 1935 Scheduled Publicly traded; 5 A320-100
Mercury Asset 5 A320-200
Management (10%) 23 B737-200
8 737-300
34 B737-400
10 B747-100
16 B747-200B/
200BSCD
56 B747-400
51 B757-200
28 B767-300ER
5 B777-200
16 B777-200ER
7 Concorde
6 DC-10-30
1 BAE ATP
On order:
39 A319-100
20 A320-200
1 B747-400
6 B757-200
24 B777-200ER
British Midland...... U.K. 1938 Scheduled BBW Partnership 1 A320-300
(60%); SAS (40%) 4 A321-200
7 B737-300
5 B737-400
12 B737-500
6 F-100
3 F-70
11 Saab 340
On Order:
9 A320-200
8 A321-200
Canadian Airlines.... Canada 1986 Scheduled Publicly traded; 12 A320-200
AMR (25%) 38 B737-200
6 B737-200C/200F
4 B747-400
12 B767-300ER
10 DC-10-30
On Order:
10 A320-200
2 B767-300ER
China Eastern
Airlines Corporation
Limited.............. China 1988 Scheduled Publicly traded 10 A300-600R
(38.4%); 5 A340-300
Civil Aviation 6 A320-200
Administration 3 AN-24
of China (61.6%) 6 AN-30
6 B737-300
6 Fokker 100
1 DHC- 6 100/200/300
7 YAK-42
6 MD-11
13 MD-80
7 MD-90
5 Y-7
On Order:
4 A320-200
2 MD-90
</TABLE>
65
<PAGE> 70
<TABLE>
<CAPTION>
BEGAN SERVICE
LESSEE DOMICILE OPERATION TYPE LESSEE OWNERSHIP OPERATING FLEET
- ------ -------- --------- ------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Continental.......... United States 1934 Scheduled Publicly traded; 25 B727-200
Northwest Airlines 3 B737-100/200
(51% voting 132 B737-300/500
in trust) 37 B737-700/800/900
32 B757-200
7 B777-200,200ER
22 DC-9-30
69 MD-81/82/83
32 DC-10-10/30
On order:
2 B737-300/500
57 B737-700/800/900
6 B757-200
10 B767-200ER
26 B767-400ER
7 B777-200/200ER
Eurofly S.p.A........ Italy 1990 Scheduled Alitalia (45%); 2 DC-9-50
and Olivetti (45%) 6 MD-82/83
Charter 2 B767-300ER
Frontier Airlines.... United States 1994 Scheduled Publicly traded; 5 B737-200
B III Capital 3 B737-200H
Partners (35%); 9 B737-300
Wexford
Management (11%)
Istanbul............. Turkey 1986 Scheduled Ocan Toplar (90%) 1 B727-200
and 3 B737-300
Charter 10 B737-400
2 B757-200
Jet Airways.......... India 1993 Scheduled Naresh Goyal 1 B737-300
(100%) 15 B737-400
2 B737-500
4 B737-700
4 B737-800
On Order:
4 B737-800
Royal Aviation....... Canada 1979 Charter Publicly traded; 4 A310-300
Michel LeBlanc 6 B757-200
(76%)
Spanair S.A.......... Spain 1988 Scheduled Viajes Marsans; 2 B767-300ER
and (51%) SAS (49%) 2 B757-200
Charter 3 MD-82
17 MD-83
2 MD-87
STAR Airlines........ France 1995 Charter LOOK Voyages (50%) 4 A320-200
1 Lockheed L-1011
TransBrasil.......... Brazil 1955 Scheduled Fontana family 7 B737-300
(72%); Employees 7 B737-400
(20%) 3 B767-200
5 B767-200ER
3 B767-300ER
TransMeridian
Airlines, Inc........ United States 1995 Charter U.S. private 6 A320-200
investors (55.9%); 1 B727-200A
TransAer
International
Airlines (44.1%)
</TABLE>
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<PAGE> 71
<TABLE>
<CAPTION>
BEGAN SERVICE
LESSEE DOMICILE OPERATION TYPE LESSEE OWNERSHIP OPERATING FLEET
- ------ -------- --------- ------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
TWA.................. United States 1925 Scheduled Publicly traded; 4 B727-100/200
Nicholas- 23 B727-200
Applegate 16 B757-200
Capital Management 12 B767-200
(7% voting); 4 B767-300ER
TCW Group and 6 Lockheed L-1011
Robert Day 7 DC-9-10
(5% voting); 36 DC-9-30/30H/30FH
Employees 3 DC-9-40
(10.6% voting, 12 DC-9-50
excluding election 40 MD-82
of directors) 39 MD-83
On order:
10 A330-300
50 B717-200
11 B757-200
1 B767-300ER
24 MD-83
VARIG................ Brazil 1927 Scheduled Rio Grande do Sul 5 B727-100C/100F
State 17 B737-200
Government 33 B737-300
(1%); 3 B747-300
Ruben Berta 5 B737-700
Foundation (55%); 1 B747-200SF
Public (44%) 5 B747-300
6 B767-200ER
6 B767-300ER
3 DC-10-30
2 DC-10-30F
13 MD-11
On Order:
4 B737-700
5 B737-800
6 B767-300ER
6 B777-200ER
Virgin Express
(Ireland)............ Ireland 1999 Scheduled Virgin Express 1 B737-300
2 B737-400
</TABLE>
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<PAGE> 72
THE COMMERCIAL AIRCRAFT INDUSTRY
The following description of the commercial aircraft industry was prepared
for Aircraft Finance by Simat, Helliesen & Eichner, Inc., or SH&E, an
international air transport consulting firm, relied on as an expert. See
"Experts". Although Aircraft Finance believes the description to be reliable,
Aircraft Finance has not independently verified the information contained in the
description.
INTRODUCTION
The commercial aviation industry has recently experienced a period of
sustained growth and record-breaking financial performance.
(1) Revenue passenger kilometers grew 5.7%, while revenue ton kilometers
grew 11.9% in 1997 over 1996 levels.(1)
(2) Strong traffic growth and lower fuel prices contributed to worldwide
airline industry operating profits of $16.5 billion in 1997.(2)
(3) In 1997 and in 1998, there was a heightened demand for air transport
capacity in the form of both new and used aircraft and rapid growth within the
aircraft leasing industry.
The commercial aviation industry historically has, however, been extremely
cyclical, as evidenced by the periodic market declines experienced from 1974 to
1976, 1980 to 1982 and 1990 to 1992. In addition, there are currently some weak
segments of the industry:
(1) In the last two years, the Asia/Pacific region, once considered to be a
primary source for long-term air transport growth, has experienced a substantial
economic decline.
(2) Some regions of Central and South America are experiencing economic
downturns.
(3) Other current or unanticipated factors, such as the Russian market
collapse, may continue to affect U.S. and other markets and, thus, the demand
for air travel.
AIR TRAFFIC DEMAND
PASSENGER DEMAND
Historically, air traffic demand has increased as economic activity
increases and real income levels rise. Traffic demand has risen despite higher
prices of air transportation. In 1997, the latest full year for which data is
publicly available, international scheduled traffic climbed 7.0% and domestic
traffic rose 4.0% over the previous year.(3) During the preceding eight years,
worldwide air traffic increased from 2,182 billion revenue passenger kilometers
in 1990 to 2,936 billion revenue passenger kilometers in 1997, an annual growth
rate of 4.3%.(4)
Although recent traffic levels remain above the historical trend, the
Asia/Pacific economic situation and other factors are slowing worldwide growth
rates. In the 12-month
- ---------------
(1) ICAO Annual Report of the Council -- 1997 (pg. A-44).
(2) ICAO Annual Report of the Council -- 1997 (pg. A-51).
(3) ICAO Civil Aviation Statistics -- Table 1-14 and Table 4 -- 1997.
(4) Boeing 1998 Current Market Outlook, Appendix A.
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<PAGE> 73
period ending June 1998, the number of Asia/Pacific passengers declined 3.3% and
revenue passenger kilometers declined 1.4%.(5) The Air Service Agreement(6)
between the U.S. and Japan, amended in 1998, may help generate additional
traffic to offset some of the recent declines. Substantial discounting in the
Asia/Pacific region also may stimulate some traffic growth in the region. For
example, the Hong Kong Tourist Authority reported a record amount of tourist
traffic in August 1998. Discounting may not, however, be sustained, and the size
and timing of any offset or growth from any discounting is uncertain.
Aircraft manufacturers, government agencies and airline groups regularly
prepare air traffic forecasts that project demand for periods as long as 20
years. These sources have projected average annual traffic growth of roughly 5%
per annum in the next 10 and 20-year periods. The Boeing 1998 Current Market
Outlook forecast for the next 20 years is set forth below. The most rapid growth
rates are projected for the CIS, Asia/Pacific and Latin American regions. The
smallest growth rates are expected in North America and Europe, where the base
from which to measure growth rates is much larger.
WORLDWIDE GROWTH IN AIR TRAVEL
<TABLE>
<CAPTION>
REVENUE PASSENGER KILOMETERS
(BILLIONS) ANNUAL GROWTH RATE
----------------------------- ---------------------------------
REGION 1990 1997 2007 2017 1990-1997 1997-2000 1997-2017
- ------ ----- ----- ----- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
North America........... 738 998 1,441 2,084 4.4% 3.7% 3.7%
Latin America........... 143 195 351 588 4.5% 6.1% 5.7%
Asia & Pacific.......... 278 519 992 1,811 9.4% 6.7% 6.4%
Middle East............. 54 79 132 222 5.8% 5.2% 5.3%
Africa.................. 75 113 200 337 6.1% 5.8% 5.6%
Europe.................. 647 943 1,493 2,328 5.5% 4.7% 4.6%
CIS..................... 248 87 180 314 (13.9)% 7.5% 6.6%
----- ----- ----- ----- ----- --- ---
TOTAL.............. 2,183 2,934 4,789 7,684 4.3% 5.0% 4.9%
===== ===== ===== ===== ===== === ===
</TABLE>
- -------------------------
SOURCE: Boeing 1998 Current Market Outlook
Forecasts like those above are based on a number of assumptions and
estimates that may not actually occur or may occur in degrees or at times not
similar to those forecast. Accordingly, the growth illustrated may not occur at
the times or rate projected or at all.
- ---------------
(5) Association of Asia Pacific Airlines, June 1998.
(6) "The Air Service Agreement" it refers to an agreement between the U.S. and
another country that reduces restrictions on air service between and beyond
each other's territory. The reduced restrictions include how often carriers
may fly, the type of aircraft that may be flown and the prices that may be
charged.
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<PAGE> 74
CARGO DEMAND
Cargo demand through the end of 1997 has grown 7.9% per annum since
1980.(7) This growth reflects:
(1) the dramatic changes in overnight delivery services, such as Federal
Express and UPS;
(2) the general expansion of the economies of most nations;
(3) improved cargo handling and logistics;
(4) changes in production methods; and
(5) the continued decline of air cargo rates.
Total world air cargo traffic has been projected in the Boeing 1998/1999
World Air Cargo Forecast to grow 6.4% per annum for the next 20 years. The
impact of regional economic crises often does not affect demand for air freight
in the same manner that it impacts air passenger demand. For instance, a rapid
change in exchange rates and other factors that arise in economic crises could
spur demand for exports, which, in turn, could offset some of the decline in
imports.
AIRCRAFT SUPPLY AND DEMAND
CHANGES IN NUMBER OF MANUFACTURERS
The mid-1990s has seen a dramatic transformation of the worldwide aircraft
industry.
(1) Only Boeing Commercial Airplane Group and Airbus Industrie remain the
predominant competitors for the large jet aircraft that dominate the fleets of
the world's major airlines.
(2) The Dutch manufacturer of narrowbody twin-jets, Fokker N.V., declared
bankruptcy in 1995.
(3) In North America, the McDonnell Douglas Corporation was acquired by
Boeing.
(4) The former Soviet Union manufacturers of Tupolev, Ilyushin and Antonov
equipment continue to meet air transport needs of various developing countries,
but so far have been unsuccessful in attracting orders from major airlines and
are not expected to do so in the near future.
(5) The manufacturers of smaller jet aircraft have recently introduced new
types of equipment. Bombardier Aerospace, Empresa Brasileira de Aeronautica
S.A., or Embraer, and Fairchild Aerospace now compete with the larger turboprop
equipment and the regional jets offered by British Aerospace and formerly by
Fokker. In this market, however, there also is a consolidation trend that is
affecting the regional aircraft manufacturers.
CURRENT MARKET CONDITIONS AFFECTING AVAILABILITY OF NEW AND USED AIRCRAFT
The aviation industry, and therefore the aircraft manufacturing segment,
has had its own business cycles due, in part, to the delay between the placement
of orders for commercial aircraft and the delivery of those aircraft. Airlines
have tended to order aircraft during periods of strong relative profitability.
Consequently, Boeing and Airbus now find themselves with large order books and
long backlogs. In 1998, Boeing indicated that it was
- ---------------
(7) Source: Boeing 1996/1997 World Air Cargo Forecast
70
<PAGE> 75
having difficulty delivering aircraft at the rate desired by its customers.
These production and delivery delays have, to a large extent, been corrected,
and both Boeing and Airbus are producing aircraft and delivering them to
customers by the contractual delivery dates.
AIRCRAFT ORDER/DELIVERY TRENDS
[Aircraft Order/Delivery Trends Graph]
- -------------------------
SOURCE: ACAS, Lundkvist
Current orders are at an all-time high in absolute terms. When looked at in
terms of the percentage of the current fleet, however, the orders are still
below the peak reached at the top of the prior cycle, as shown in the table
below. Moreover, Boeing has indicated publicly that it expects orders to decline
after 2000 and to remain in line with passenger and cargo traffic growth
thereafter.(8) The entrance of new aircraft into the markets in which Aircraft
Finance and its subsidiaries compete with other companies, as well as the
availability of used aircraft discussed below, may have a material impact on the
ability of Aircraft Finance and its subsidiaries to lease and acquire aircraft.
While demand for aircraft has been strong, most aircraft ordered during the
past two years have not yet been delivered. If these deliveries occur at a time
when Aircraft Finance and its subsidiaries are seeking to re-lease a large
portion of its aircraft, capacity may exceed demand and force aircraft owners,
including Aircraft Finance and its subsidiaries, and operators to retire more
aircraft or sell assets, perhaps at substantial discounts from today's levels,
or to lease at lower rents.
- ---------------
(8) Boeing 1998 Current Market Outlook.
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<PAGE> 76
AIRCRAFT ORDER BACKLOG
<TABLE>
<CAPTION>
1991 1999
----- ------
<S> <C> <C>
Order Backlog............................................... 3,535 3,655
Commercial Aircraft Fleet................................... 8,936 14,437
Backlog as a percent of fleet............................... 39.6% 25.3%
</TABLE>
- -------------------------
SOURCE: ACAS, April 1999
The availability of used aircraft reflects a balance between used aircraft
supply and demand. Availability has, however, been rising since 1996, as shown
in the table below.
AIRCRAFT AVAILABILITY TRENDS
<TABLE>
<CAPTION>
YEAR END SALE SALE/LEASE LEASE TOTAL
- -------- ---- ---------- ----- -----
<S> <C> <C> <C> <C>
1988......................................... 107 35 75 217
1989......................................... 152 79 154 385
1990......................................... 306 142 105 553
1991......................................... 352 279 131 762
1992......................................... 230 301 116 647
1993......................................... 276 327 113 716
1994......................................... 279 227 69 575
1995......................................... 217 163 90 470
1996......................................... 83 154 62 299
1997......................................... 139 114 91 344
1998......................................... 201 147 86 434
</TABLE>
- -------------------------
SOURCE: FEASI/BACK Commercial Jet Availability
There are additional indications that the demand for aircraft might be
weakening slightly due in part to the financial condition of the Asia/Pacific
carriers. Some of those carriers are experiencing difficulty in funding aircraft
lease payments and scheduled progress payments for new aircraft purchases. This
situation has resulted in the return of widebody and some narrowbody aircraft to
lessors and the deferral or cancellation of orders from the manufacturers. Thus
far in this cycle, many lessors have been able to re-lease these returned
aircraft and to manage the adverse impact. This favorable situation may not
continue, however, and the future levels of returns, deferrals and cancellations
may adversely affect the markets in which Aircraft Finance and its subsidiaries
compete.
COMMERCIAL JETS
The worldwide demand for increased air transport historically has been met
in a number of ways, including:
(1) increases in the number of aircraft in service;
(2) increases in the average number of seats per aircraft; and
(3) utilization of aircraft more intensively and efficiently.
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<PAGE> 77
AIRCRAFT NUMBER. The current size of the worldwide commercial jet fleet is
approximately 14,400 aircraft.(9) As illustrated in the table below, the major
manufacturers currently project this fleet almost to double over the next two
decades. These forecasts project that approximately 7,400 to 8,400 new aircraft
will be added to airline fleets in the next 10 years and, as illustrated by the
Airbus forecast, more than 16,700 of such aircraft will be added in the next 20
years, in each case, both to replace retiring aircraft and to satisfy
requirements created by expected traffic growth.
PROJECTED COMMERCIAL AIRCRAFT FLEET GROWTH
<TABLE>
<CAPTION>
SOURCE: BOEING AIRBUS AIRLINE MONITOR
- ------- --------- --------- ---------------
<S> <C> <C> <C>
Projected Aircraft Additions........... 7,425 16,729 8,086
Growth................................. 5,225 8,243 5,395
Replacement............................ 2,200 8,526 2,691
Forecast Period........................ 1998-2007 1997-2017 1999-2008
Aircraft Additions per year............ 743 838 809
</TABLE>
In addition to new deliveries, the size of the active commercial jet fleet
reflects the increasing longevity of some commercial jets. Some types of modern
jet aircraft are remaining in service much longer than their planned lives due
to, among other things, favorable operating economics as well as successful
aging aircraft maintenance and modernization programs. Although generally more
expensive to maintain, some types of these aircraft may continue to generate
revenues and profitability at ages in excess of 30 years.
SEAT CAPACITY. Demand for aircraft is also influenced by the relative
growth in the average seat capacity of commercial aircraft. If traffic increases
and average seat capacity remains constant, additional aircraft units must be
added to meet demand. The average seat capacity of the world's airlines has
remained relatively constant at 172 to 175 seats per aircraft in the 1990 to
1997 period.(10) This situation has resulted in aircraft unit growth that is
closely correlated to the underlying increase in passenger demand. As indicated
below, industry analysts expect average aircraft seat capacity to increase to
roughly 190 to 200 seats by 2008 and, in the case of the Airbus forecast, to
almost 210 seats by 2017. If this increase occurs, the demand for aircraft units
will be dampened because some capacity growth will be accomplished by adding
seats to aircraft. Increasing capacity growth in this manner also implies that
widebody aircraft demand would increase in the next 10 to 20 years.
AVERAGE AIRCRAFT SEAT CAPACITY
<TABLE>
<CAPTION>
SOURCE: BOEING AIRBUS AIRLINE MONITOR
- ------- --------- --------- ---------------
<S> <C> <C> <C>
Forecast Period........................ 1998-2007 1997-2017 1999-2008
Beginning of Forecast Period........... 190 173 175
End of Forecast Period................. 202 208 188
</TABLE>
- ---------------
(9) ACAS, April 1999.
(10) Airline Monitor, July 1998.
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<PAGE> 78
AIRCRAFT UTILIZATION. Airlines also can increase aircraft productivity
with faster block times(11), shorter turn times(12) and more efficient aircraft
scheduling, all of which will help increase daily utilization. Airlines can
increase utilization by selling more of their available capacity. Capacity
utilization, or load factors, generally has been rising on a worldwide basis, as
shown in the table below. This trend is especially pronounced recently in North
America and Latin America.
1998 PASSENGER LOAD FACTORS BY WORLD REGION
<TABLE>
<CAPTION>
MIDDLE ASIA/ NORTH LATIN WORLD
YEAR EUROPE AFRICA EAST PACIFIC AMERICA AMERICA AVERAGE
- ---- ------ ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1991................. 65% 59% 68% 69% 63% 60% 64%
1992................. 66% 61% 65% 67% 64% 58% 64%
1993................. 66% 61% 66% 68% 64% 58% 64%
1994................. 68% 60% 64% 69% 66% 61% 65%
1995................. 70% 62% 67% 69% 67% 65% 67%
1996................. 70% 62% 67% 71% 69% 66% 68%
1997................. 72% 62% 68% 69% 71% 67% 69%
1998................. 70% 62% 67% 66% 71% 62% 69%
</TABLE>
- -------------------------
SOURCE: ICAO Civil Aviation Statistics
Airbus expects that a 5% increase in annual worldwide traffic will be met
by a 4.4% increase in capacity and a 0.7% increase in productivity. The capacity
increase will represent a 3.1% increase in the number of aircraft in service and
a 1.2% increase in the average size of aircraft.(13)
AIRCRAFT FINANCE AND DEMAND. Historically demand and capacity factors
suggest that the aircraft in the portfolio of Aircraft Finance and its
subsidiaries will remain in demand as operators look to optimize their fleets.
Manufacturers' projections of worldwide fleet growth (net of replacements)
indicate a slow but steady increase in average seat capacity. The Aircraft
Finance portfolio, with an average seat capacity of 168, is slightly lower than
the industry average, but it does include a number of narrowbody aircraft that
have historically remained in high demand by operators. This portfolio also
comprises predominantly advanced technology aircraft that increase equipment
productivity by virtue of increased reliability as compared to older generation
aircraft. This factor adds to the desirability of the aircraft type in the
portfolio.
FREIGHTERS
The currently expected increase in air cargo demand raises the anticipated
demand for dedicated freighter aircraft over the next ten years. Currently, most
of the demand for freighter aircraft is expected to be met by converting
passenger aircraft to all-cargo equipment aircraft. In general, there is
relatively little demand for new freighter aircraft
- ---------------
(11) "Block time" refers to the elapsed time between takeoff and landing of the
aircraft.
(12) "Turn time" refers to the elapsed time between arriving and departing from
a gate.
(13) Airbus Industrie Global Market Forecast, April 1998.
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<PAGE> 79
primarily since it is difficult for aircraft operators to find routes that can
support the high aircraft utilization levels typically required for profitable
operations with new freighter aircraft. Since freighter aircraft generally have
a lower utilization rate than passenger aircraft, the lower utilization rates
translate into relatively high unit ownership costs for new aircraft.
Consequently, the majority of operators acquire used freighter aircraft, and an
important sub-segment of the market will be met through freighter conversions.
SH&E has recently projected that approximately 60 percent of the demand for
freighter aircraft in the 1997-2008 period will be satisfied by converting
passenger aircraft to freighter.
FREIGHTER AIRCRAFT DEMAND FORECAST
(1997 TO 2008)
<TABLE>
<CAPTION>
UNITS REQUIRED OEM PAX CONVERSIONS
-------------- --- ---------------
<S> <C> <C> <C>
Low forecast............................. 364 146 218
High forecast............................ 407 163 244
</TABLE>
- -------------------------
SOURCE: SH&E
AIRCRAFT PRICE TRENDS
Aircraft manufacturers have historically discounted, sometimes
significantly, from list price. Although Airbus and Boeing recently raised list
prices between 3 and 5%(14), both manufacturers already have sold a large
portion of their production in the next few years at price levels that have
already been agreed upon, subject to escalation clauses. Consequently, it may
take several years before the impact of the price increase will be fully
realized by the manufacturers. In addition, if aircraft deliveries of new
aircraft exceed demand, aircraft prices generally decline. Likewise, if aircraft
production rates cannot meet demand, prices generally increase or remain stable.
The overall inability of the aircraft manufacturers to achieve premium prices
for new aircraft has impacted prices of older aircraft. In general, older
aircraft prices historically have had a relationship to new aircraft prices.
AIRCRAFT AGE AND RETIREMENTS
Typically, aircraft are retired when they are no longer the most economical
choice to perform the required task.
In general, the average retirement age of jet aircraft has been climbing.
This trend has been most notable for narrowbody aircraft.
The lease rates of older aircraft are generally lower than new aircraft,
reflecting the older aircraft's lower price. Lease rate factors, which are
determined by the lease rate as a percentage of price, for older aircraft
generally exceed that of new aircraft, however, with lease rate factors that
sometimes exceed 2% of the aircraft's value per month, it is possible to recoup
the cost of the aircraft in four years or less.
This short pay-back period is, however, offset by increased risks of older
aircraft. Older aircraft historically have been more likely to require expensive
modifications imposed
- ---------------
(14) Manufacturer's data.
75
<PAGE> 80
by regulatory action and are liable to experience rapid drops in value during
periods of slow traffic growth.
As shown below, the majority of aircraft worldwide are less than 15 years
old.
COMMERCIAL AIRCRAFT AGE DISTRIBUTION BY SEAT SIZE
<TABLE>
<CAPTION>
WORLD US
---------------------- ----------------------
AGE (YRS) WIDEBODY NARROWBODY WIDEBODY NARROWBODY
- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
<5.............................. 24.7% 19.2% 13.8% 15.1%
>5-10........................... 24.2% 25.6% 16.9% 21.2%
>10-15.......................... 14.6% 13.0% 15.3% 15.4%
>15-20.......................... 19.0% 11.9% 21.8% 13.6%
>0-25........................... 10.1% 8.4% 17.1% 8.9%
>25-30.......................... 7.3% 10.9% 15.2% 12.8%
>30-35.......................... 0.0% 10.5% 0.0% 12.7%
>35............................. 0.0% 0.4% 0.0% 0.3%
</TABLE>
- -------------------------
SOURCE: ACAS
The Aircraft Finance portfolio is relatively young with an average age of 4
years for the narrowbody aircraft and 10 years for the widebody aircraft.
Historical aircraft trends indicate that the majority of this portfolio will
remain in operation for a further 20 years.
AIRCRAFT OPERATING LEASING
GROWTH IN AIRCRAFT LEASING
Over the past 20 years, the world's airlines have leased a growing
proportion of the aircraft that they operate. As shown below, the percentage of
leased aircraft in commercial fleets has risen to 43.4% over the last 10 years.
OPERATING LEASE TRENDS
<TABLE>
<CAPTION>
YEAR % OWNED % LEASED
- ---- ------- --------
<S> <C> <C>
1989............................................... 61.6% 38.4%
1992............................................... 57.1% 42.9%
1995............................................... 55.8% 44.2%
1998............................................... 56.6% 43.4%
</TABLE>
- -------------------------
SOURCE: ACAS
The growth of aircraft leasing has been accompanied by the entry of a wide
range of financial institutions into the leasing market. These companies
include:
(1) large organizations such as International Lease Finance Corporation,
which is owned by American International Group, and General Electric Capital
Corporation; and
(2) many smaller organizations, including public and private financial
institutions, financing arms of manufacturers and public and private
partnerships.
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<PAGE> 81
These lessors supply a mix of new and used aircraft operating leases,
finance or capital leases of new aircraft and sale-leaseback transactions
generally involving used aircraft.
ENTRY OF NEW LESSORS
The health of the airline industry over the past three years has supported
a general strengthening of the prices paid for used aircraft. More banks and
financial institutions have been attracted to the aircraft financing sector and
again have begun competing aggressively for available transactions. Several
aircraft lessors have raised funds in the capital markets for expansion. New
leasing companies also have formed and attracted sources of funding, including
lessors created as part of the securitization of a portfolio of operating leases
that were in another lessor's portfolio.
CURRENT AIRLINE PROFITABILITY
[World Airline Operating Results vs. Percent Change in Real GDP Bar Graph]
- -------------------------
SOURCE: ICAO Civil Aviation Statistics
Many airlines have enjoyed record levels of profitability in 1996 and 1997.
The aviation industry historically has, however, been cyclical. The industry
correlates well with regional and global economic performance, which, in turn,
drives relative demand for air travel. Airline profitability has historically
moved in the same direction as world gross domestic product.
In 1997, the worldwide airline industry earned an operating profit of $16.5
billion. All major world regions shared this profitability, except the Middle
East, which experienced an operating loss of $100 million.(15)
Overall unit costs, as measured by cost per available ton kilometer, have
been steadily decreased in both real and nominal terms since 1991 as a result of
high traffic volume and lower than expected operating costs. Fuel prices for
U.S. carriers, for example, averaged
- ---------------
(15) ICAO Civil Aviation Statistics, 1997 (1-28).
77
<PAGE> 82
56.9 cents per gallon in the first quarter 1998 or nine cents lower than in
1997.(16) Commissions, when expressed as a percentage of sales, have also fallen
as a result of caps that have been implemented in the U.S. and elsewhere. In
contrast, staffing levels have increased 5 percent at eight of the ten U.S.
Majors and compensation rose on average of three percent.(17)
Unit revenue, as expressed by revenue per available ton kilometer, has
increased 1.1% per annum from 1987 to 1997. This unit revenue growth is mostly
attributable to passenger unit revenues, an indication that carriers are pricing
seats accordingly. Freight and mail unit revenue has remained flat or declined
slightly over the period.(18) Real passenger yield, which is a function of real
passenger revenue and revenue per available ton kilometers, has generally
declined since its peak in 1981. Optimal pricing and yield management systems
are now utilized to manage this erosion, resulting in no decline in real
passenger yield from 1996 to 1997.(19)
Although some carriers recently settled with some of their labor unions,
other carriers, including several lessees of the initial 36 aircraft, have
pending contract negotiations that are critical to their economic well being.
The impact of labor relations on industry results has historically been
significant and somewhat unpredictable. For example, the well-publicized labor
unrest involving the pilots at American Airlines in the first quarter of 1999
has reportedly resulted in a loss of between $200 and $225 million for the
carrier. Such a loss could be significant for an airline not so strong
financially as American Airlines is currently.
ALLIANCES AND CONSOLIDATIONS
Global and regional alliances take many forms and involve many different
levels of linking two or more airlines. The U.S. government recently has granted
antitrust immunity to alliances that meet specified conditions. Antitrust
immunity enables the participating airlines to act as a single carrier.
Currently, there are four broad global alliances in various stages of
development:
(1) the "Star Alliance", which links Lufthansa, United Airlines, Air
Canada, Thai Airways, VARIG, Ansett Australia, SAS, ANA and Air New Zealand;
(2) "OneWorld" which links American Airlines, British Airways, Canadian
Airlines, Cathay Pacific and Qantas;
(3) KLM, Northwest Airlines, Alitalia and Continental; and
(4) Delta Air Lines, Swissair, Sabena, Air France, Austrian Airlines and
TAP Air Portugal.
Also, there currently exist some regional alliances, including that of
Grupo TACA that consolidated or aligned TACA in El Salvador, NICA in Nicaragua,
LACSA in Costa Rica, COPA in Panama and Aviateca in Guatemala.
- ---------------
(16) Airline Monitor, August 1998.
(17) Warburg Dillon Read, Airline Quarterly Review, August 1998.
(18) ICAO Financial Data -- Commercial Air Carriers, 1997.
(19) ICAO Financial Data -- Commercial Air Carriers, 1997.
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<PAGE> 83
The authorities in the U.S. and the EU are scrutinizing those alliances
very carefully. This scrutiny could lead to significant changes to the structure
and shape of future alliances.
The creation of alliances is expected to result in somewhat greater
stability for the commercial aviation industry and may well enhance the credit
of some of the participating airlines. The resulting stability may serve to
balance some of the cyclical effects encountered during past industry
recessions.
ENVIRONMENTAL
The EU supports more stringent emission standards and land-use controls
than are currently required in the U.S. In addition, the EU has indicated that
it is considering additional regulatory proposals to address its environmental
goals. For example, the International Civil Aviation Organization's Committee on
Aviation Environmental Protection has decided to decrease Nitrous Oxide levels
by 16% and to require implementation in the year 2000 for new engine designs and
in 2008 for newly manufactured engines. Given the ability of individual
countries to impose even more stringent standards, operators could experience
significant increases in landing fees and fuel taxes.
Of the aircraft in the Aircraft Finance portfolio, only four MD-83s fail to
meet the new EU Nitrous Oxide standards. Pratt & Whitney, the manufacturer of
the engines installed on the MD-83, has, however, developed a modified
combustion system for the engine that will permit operations within the EU
limits. Aircraft Finance and its subsidiaries may not, however, have the
resources or otherwise be able to make use of such a system.
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<PAGE> 84
MANAGEMENT OF AIRCRAFT FINANCE
CONTROLLING TRUSTEES
The trust agreement governing Aircraft Finance provides for four trustees.
One of the four trustees of Aircraft Finance is Wilmington Trust Company, which
is acting as the statutory trustee and the owner trustee. The remaining three
trustees, David H. Treitel, Richard E. Cavanagh and Wayne D. Lippman are the
"controlling trustees" and have the authority to manage the property and affairs
of Aircraft Finance under the trust agreement. All of the controlling trustees
are independent from General Electric Capital Corporation. One of the
controlling trustees, called the "equity trustee", will be appointed by the
holders of Aircraft Finance's beneficial interest, while the two other
controlling trustees, called the "independent controlling trustees" will be
independent of those holders. The holders of the beneficial interest of Aircraft
Finance may remove and replace the equity trustee, and each independent
controlling trustee may be replaced by the other independent controlling
trustee.
The trust agreement requires that any decision relating to insolvency
proceedings, merger or other reorganization of Aircraft Finance must be approved
by a unanimous vote of the controlling trustees. Any sale of any aircraft,
decisions requiring Aircraft Finance's approval under the servicing agreement
for the aircraft or the agreement with the administrative agent and the
reduction of any required level of reserves must be approved by the equity
trustee and at least one of the independent controlling trustees. The
controlling trustees approving aircraft sales on other than pre-approved terms
must also confirm to the indenture trustee, prior to the sale, that the sale
will not materially and adversely affect the holders of the notes. The
acquisition of additional aircraft by Aircraft Finance and the terms of any
related financing need only be approved by the equity trustee.
The controlling trustees, their respective ages and principal activities
are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE/PRINCIPAL ACTIVITIES
- ---- --- --------------------------
<S> <C> <C>
David H. Treitel..................... 44 Independent Controlling Trustee
Richard E. Cavanagh.................. 52 Independent Controlling Trustee
Wayne D. Lippman..................... 52 Equity Trustee
</TABLE>
DAVID H. TREITEL -- Mr. Treitel is the Chairman and Chief Executive Officer
of Simat, Helliesen & Eichner, Inc., a leading aviation consulting firm based in
New York City. Mr. Treitel has been with SH&E since 1977, and prior to taking up
his current position at SH&E in 1996, he served as the firm's President from
1993 to September 1998 and its Executive Vice President from 1989 until 1993.
Mr. Treitel also serves as a director of Midwest Express Holdings, Inc.
RICHARD E. CAVANAGH -- Mr. Cavanagh is the President and Chief Executive
Officer of The Conference Board, Inc., a global business research and membership
enterprise supported by some 3,000 corporate members in 67 counties and based in
New York City. Prior to taking up his current position in 1995, he served for
eight years as the Executive Dean of the Kennedy School of Government at Harvard
University. Before that, he was a partner of McKinsey & Company, Inc., an
international management consulting firm. During his 17 years with McKinsey, he
took a two-year public service leave and held senior positions in The White
House Office of Management & Budget. He co-authored the management book The
Winning Performance. Mr. Cavanagh serves as a director of
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<PAGE> 85
Airplanes Limited and Airplanes U.S. Trust, the BlackRock Mutual Fund family,
Arch Chemicals (formerly Olin), The Fremont Group (formerly Bechtel Investments)
and The Guardian Life Insurance Company.
WAYNE D. LIPPMAN -- Mr. Lippman is the Vice Chairman of UniCapital Air
Group, Inc., a wholly-owned subsidiary of UniCapital Corporation, a New York
Stock Exchange listed company. Mr. Lippman has held the position of Vice
Chairman and Chief Operating Officer of Cauff, Lippman Aviation, Inc. and
affiliated aircraft leasing and trading companies since 1981. Cauff, Lippman
Aviation, Inc. and some of its affiliates were acquired by UniCapital in May
1998. In May 1999 Mr. Lippman was appointed President of UniCapital's Big Ticket
Leasing Division. See "Aircraft Finance Trust -- Aircraft Finance" regarding Mr.
Lippman's possible resignation and replacement.
As is common with many other special purpose companies, neither Aircraft
Finance nor any of its subsidiaries will have any officers or other employees,
except, in the case of a subsidiary, as may be required by applicable law.
Aircraft Finance has arranged for GE Capital Aviation Services, Limited,
ReSource/Phoenix, Inc., Wilmington Trust Company, Bankers Trust Company and
Lehman Brothers, Inc. to provide aircraft servicing, managerial services and
financial advice.
All trustees will be compensated for travel and other expenses incurred by
them in the performance of their duties. Aircraft Finance will pay each of the
independent controlling trustees $60,000 per year for their services in such
capacity as well as additional compensation in the event Aircraft Finance
acquires additional aircraft. The aggregate annual compensation for each
independent controlling trustee may not exceed $100,000. The equity trustee will
not receive any such compensation. The trust agreement states that the trustees
are not liable for money or other damages to Aircraft Finance for a breach of
fiduciary or other duties.
CORPORATE MANAGEMENT
Corporate management services for Aircraft Finance will be provided by the
administrative agent, ReSource/Phoenix, Inc., the financial advisor, Bankers
Trust, the owner trustee, Wilmington Trust Company and the capital markets
advisor, Lehman Brothers Inc.
ADMINISTRATIVE AGENT
ReSource/Phoenix, Inc. will act as the initial administrative agent of
Aircraft Finance. The administrative agent has agreed to provide administrative,
accounting and other services that include:
(1) monitoring the performance of the servicer and reporting its
conclusions to the controlling trustees of Aircraft Finance;
(2) acting as a liaison with various rating agencies to assess the
impact of management decisions on the ratings of the notes and coordinating
responses to rating agency questions;
(3) maintaining accounting ledgers and providing draft accounts on a
quarterly and annual basis;
(4) preparing annual budgets for Aircraft Finance's approval;
(5) authorizing the payment of expenses and determining the amount of
expense accruals;
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<PAGE> 86
(6) coordinating any amendments to the agreements of Aircraft Finance and
its subsidiaries, with the approval of Aircraft Finance;
(7) supervising outside counsel and other professional advisers and
coordinating legal and other professional advice other than with respect to any
service or matter that is the responsibility of the servicer or any additional
servicer;
(8) preparing and coordinating press releases and reports to investors and
to the SEC, and managing investor relations;
(9) preparing or arranging for the preparation of and filing all required
tax returns; and
(10) overseeing the general operation of any liquidity facility and
advising Aircraft Finance as to the appropriate reserve levels for the notes.
In addition to its services on behalf of Aircraft Finance, the
administrative agent has agreed to act as the agent for the trustee and the
security trustee in managing the accounts in which the funds and investments of
Aircraft Finance will be held in the name of the security trustee and related
matters. Aircraft Finance is not entitled to direct the administrative agent as
to these matters. ReSource/Phoenix' duties for the trustee and the security
trustee include:
(1) establishing and maintaining the accounts held in the name of the
security trustee and any other accounts;
(2) directing withdrawals and transfers from those accounts under the
indenture governing the notes;
(3) calculating certain monthly payments and making all other calculations
required under that indenture;
(4) providing reports and other information required under that indenture;
(5) providing the trustee with information required by the trustee to
provide its reports to the holders of the notes; and
(6) subject to specified limitations and at the written direction of the
controlling trustees, directing the investment of the funds in those accounts in
investments permitted by that indenture.
The administrative agent is entitled to a fee of $497,000 per year, plus an
additional amount for any additional aircraft acquired in the future, payable
monthly in arrears in equal installments. The administrative agent is entitled
to be indemnified by Aircraft Finance against any loss or liability incurred by
the administrative agent in connection with its services to Aircraft Finance or
as the agent for the trustee and the security trustee, other than through its
own deceit, fraud, gross negligence or willful misconduct or that of its
officers, directors, agents and employees.
FINANCIAL ADVISOR
Bankers Trust will act as the initial financial advisor. The financial
advisor is responsible for assisting Aircraft Finance in developing models for
the purposes of analyzing the financial impact of aircraft lease, sale and
capital investment decisions. The agreement with the financial advisor may be
terminated by either Aircraft Finance or the financial advisor on 30 days'
written notice.
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<PAGE> 87
OWNER TRUSTEE
Wilmington Trust will act as the initial owner trustee. The owner trustee
will maintain the books and records, including minute books and records and
trust certificate records, of Aircraft Finance. It will make available
telephone, facsimile and post office box facilities and will maintain Aircraft
Finance's principal place of business in Delaware.
CAPITAL MARKETS ADVISOR
Lehman Brothers will act as the initial capital markets advisor. The
capital markets advisor is responsible for providing Aircraft Finance with
investment banking advice in connection with the issuance of additional notes,
financial advice to assist Aircraft Finance in evaluating interest rate risk and
other analytical advice. Aircraft Finance may remove the capital markets advisor
at any time on 90 days' written notice.
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<PAGE> 88
CAPITALIZATION
The following table sets forth the capitalization of Aircraft Finance as of
September 30, 1999 which reflects the issuance of the initial notes and the
issuance of the initial beneficial interests in Aircraft Finance. This table
should be read in conjunction with the consolidated financial statements and the
related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Notes payable...................................... $1,187,024
Beneficial interestholders' equity................. 46,380
----------
Total capitalization............................... $1,233,404
==========
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data in the following table have been
derived from, and should be read in conjunction with, Aircraft Finance's
consolidated financial statements as of and for the period ended September 30,
1999, and the related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Aircraft under operating leases.................... $1,179,962
Total assets.................................. 1,272,381
Notes payable................................. 1,187,024
Total liabilities............................. 1,226,001
Total beneficial interestholders' equity...... 46,380
STATEMENT OF INCOME DATA:
Rental income from operating leases........... 66,148
Interest expense.............................. 31,847
Depreciation expense.......................... 17,823
Net income.................................... 7,293
</TABLE>
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<PAGE> 89
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Aircraft Finance was organized on April 13, 1999, and its subsidiaries were
organized prior to May 5, 1999. Neither Aircraft Finance nor any of its
subsidiaries has engaged in any business activity, other than in connection with
transactions described in this prospectus. Aircraft Finance's business is
expected to consist principally of:
(1) acquiring the initial aircraft,
(2) aircraft leasing activities,
(3) acquisitions of additional aircraft and
(4) sales of aircraft.
Cash flows generated from these activities will be used to service interest and
principal on the initial and future notes, and make distributions of remaining
amounts to the holders of the beneficial interests in Aircraft Finance, in each
case, only after various expenses of Aircraft Finance and its subsidiaries have
been paid for. These expenses include any taxes, obligations to lessees
including maintenance obligations, fees and expenses of the servicer,
administrative agent, financial advisor, capital markets advisor, reference
agent, trustee, security trustee, the paying agent and registrar of the notes
and other service providers. On September 30, 1999, Aircraft Finance had no
indebtedness other than the initial notes, except for ordinary course of
business obligations to suppliers, and obligations to lessees with respect to
security deposits and maintenance reserves.
Aircraft Finance's ability to generate sufficient cash from its initial
aircraft assets to service the initial notes will depend primarily on:
(1) the rental rates it and its subsidiaries can achieve on leases,
(2) the lessees' ability to perform according to the terms of those leases
and
(3) the prices it and its subsidiaries can achieve on the sales of
aircraft.
Aircraft Finance's ability to pay principal, interest and premium, if any, on
the initial notes and the exchange notes will also depend on the level of its
and its subsidiaries' operating expenses, including maintenance obligations that
are expected to increase as the initial aircraft age, and on any unforeseen
contingent liabilities.
The sellers of the aircraft will retain their respective reserve accounts
with respect to maintenance expenses. Aircraft Finance has established a
maintenance reserve account for the initial aircraft that will be funded from
amounts received from lessees as maintenance reserves after May 5, 1999 and
available funds on deposit in the collections account and any cash collateral
account or any other eligible credit facilities. Aircraft Finance cannot assure
you that cash flows generated from the initial aircraft will be sufficient to
provide maintenance reserves and to service interest and principal on the
initial notes and the exchange notes. See "Risk Factors -- Risks Relating to
Cash Flows" and "-- Risks Relating to Collections under Leases".
Aircraft Finance will not use operational cash flow to pay for additional
aircraft but, instead, Aircraft Finance will issue additional notes, additional
equity interests, or both to fund these purchases, if any. Any additional notes
must be issued in compliance with the limitations set forth under "Description
of the Notes -- Indenture Covenants -- Limitation
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<PAGE> 90
on Indebtedness", and any additional equity interests must be issued in
compliance with the limitations set forth in "Description of the
Notes -- Indenture Covenants -- Limitation on the Issuance, Delivery and Sale of
Equity Interests".
Some of the lessees of the initial aircraft were late in the payment of
rent, maintenance reserves and other amounts. For further detail please see "The
Initial Aircraft and Initial Lessees -- The Lessees -- Payment History".
RESULTS OF OPERATIONS
On May 5, 1999, Aircraft Finance group began significant operations through
the acquisition of 36 commercial jet aircraft, which are subject to operating
leases. This acquisition was financed through the issuance of the initial notes.
Aircraft Finance group reported net income of $7.3 million for the period
from inception to September 30, 1999, on total revenues of $67.7 million.
Aircraft Finance group's revenues consisted of rental income from operating
leases and interest income earned on cash balances. Rental income from operating
leases for the period from inception to September 30, 1999 amounted to $66.1
million. Interest income for this same period was $1.6 million.
Aircraft Finance group's expenses for the period from inception to
September 30, 1999 consisted of interest expense, depreciation expense,
operating expense and administration and other expenses.
Interest expense on the notes amounted to $31.8 million for the period from
inception to September 30, 1999. Depreciation expense on the aircraft for the
period from inception to September 30, 1999 was $17.8 million.
Operating expense consists of aircraft maintenance, insurance and other
lease related expenses. Operating expense for the period from inception to
September 30, 1999 was $8.3 million.
Administrative and other expenses consists of fees and reimbursements paid
to the servicer and other service providers as well as other expenses.
Administrative and other expenses for the period from inception to September 30,
1999 were $2.5 million.
CASH RESERVES AND LIQUIDITY
Cash reserves as of the date of this prospectus are approximately $52
million, exclusive of security deposits and maintenance reserves under aircraft
leases. Cash reserves provide a source of liquidity to pay ongoing expenses,
amounts due under senior swap agreements and interest on the notes. If cash
reserves fall below $33 million, Aircraft Finance may continue to pay ongoing
expenses, senior swap amounts and interest on the Class A Notes but may not make
any payments having a lower payment priority until the reserves have been
replenished to that amount. Similar cash reserve levels have been set as to the
Class B Notes, the Class C Notes and the Class D Notes. The reserve levels will
reduce as principal is paid and may be reduced by Aircraft Finance.
Aircraft Finance may put in place cash collateral accounts and other
eligible credit facilities from time to time. Each of these facilities, if put
in place, may be designated by the controlling trustees of Aircraft Finance as a
primary eligible credit facility, a secondary eligible credit facility, a
tertiary eligible credit facility, or a subordinate eligible credit facility.
Amounts available under these accounts or other facilities may be credited
against the reserve levels noted in the prior paragraph. Amounts drawn under any
these facilities
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<PAGE> 91
will be repayable or replenished in the order of priority set forth in
"Description of the Notes -- Priority of Payments". As of the date of this
prospectus, there were no cash collateral accounts or other eligible credit
facilities.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest incurred by Aircraft Finance on the notes and the yield from
rental income received by the Aircraft Finance group under operating leases are
based on combinations of variable and fixed measures of interest rates. The
Aircraft Finance group is exposed to interest rate risk to the extent that the
mix of variable and fixed interest obligations under the notes do not correlate
to the mix of variable and fixed yields from rental income under leases.
Aircraft Finance has engaged advisors to monitor continuously interest rates in
order to mitigate its exposure to unfavorable variations. The Aircraft Finance
group utilizes interest rate swaps that shift the risk of fluctuations in
floating rates to the counterparty in exchange for fixed payments by the
Aircraft Finance group. Risks in the use of these instruments arise from the
possible inability of the counterparties to meet the terms of their contracts
and from market movements in securities values and interest rates.
The terms of each class of the notes, including the outstanding principal
amount at September 30, 1999, are as follows:
<TABLE>
<CAPTION>
CLASS OF OUTSTANDING PRINCIPAL EXPECTED FINAL FINAL ESTIMATED
NOTES AMOUNT INTEREST RATE PAYMENT DATE MATURITY DATE FAIR VALUE
- -------- --------------------- ------------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Class A-1............ $512,500,000 LIBOR + 0.48% May 15, 2004 May 15, 2024 $510,084,998
Class A-2............ 379,346,822 LIBOR + 0.50% June 15, 2008 May 15, 2024 377,475,163
Class B.............. 125,177,379 LIBOR + 1.15% May 15, 2016 May 15, 2024 124,075,505
Class C.............. 106,000,000 8.00% July 15, 2016 May 15, 2024 98,713,507
Class D.............. 64,000,000 11.00% August 15, 2016 May 15, 2024 58,780,096
</TABLE>
Aircraft Finance was a party to five interest rate swap agreements. Under
the agreements, Aircraft Finance will pay a fixed rate of interest on the
notional amount to the counterparty and, in turn, the counterparty will pay the
Aircraft Finance group a rate of interest on the notional amount based on LIBOR.
On September 30, 1999, the estimated fair values of these interest rate swaps
was approximately $22 million.
The following table presents, as of September 30, 1999, the terms of
Aircraft Finance's interest rate swap agreements:
<TABLE>
<CAPTION>
RATE TO BE RECEIVED
RATE TO BE PAID BY AIRCRAFT
NOTIONAL AMOUNT BY AIRCRAFT FINANCE FINANCE MATURITY DATE
- --------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
$ 80,000,000 5.23% LIBOR April 15, 2000
60,000,000 5.50% LIBOR January 15, 2002
175,000,000 5.56% LIBOR October 15, 2002
345,000,000 5.65% LIBOR January 15, 2004
230,000,000 5.71% LIBOR November 15, 2004
</TABLE>
The master swap agreement of Aircraft Finance is attached as Exhibit 10.6
to the Registration Statement of which this prospectus forms a part. The
Aircraft Finance group expects to enter into additional swaps, or sell at market
values or unwind part or all of its initial swaps and any future swaps on a
periodic basis in its efforts to mitigate its exposure to unfavorable changes in
interest rates. Any changes in the Aircraft Finance group's policy regarding its
use of interest rate hedging products will be subject to periodic review by the
rating agencies. The controlling trustees of Aircraft Finance, with the
assistance of Bankers Trust and Lehman Brothers, are responsible for reviewing
and approving the overall interest rate management policies and transaction
authority limits. Counterparty
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<PAGE> 92
risk will be monitored on an ongoing basis. Counterparties will be subject to
the prior approval of the controlling trustees. Currently, Aircraft Finance's
counterparty is an affiliate of Lehman Brothers. Future counterparties will
consist primarily of the affiliates of major United States and European
financial institutions, including special-purpose derivative vehicles, that have
credit ratings, or that provide collateralization arrangements, consistent with
maintaining the ratings of the notes.
YEAR 2000 COMPUTER ISSUES
Many computer programs cannot distinguish between the year 2000 and the
year 1900; unless these programs are corrected, the programs could create
erroneous data or otherwise malfunction. Because Aircraft Finance has no
computer systems of its own, it is not directly exposed to the millennium
computer problem. Aircraft Finance has, however, engaged the administrative
agent to perform its internal corporate functions and the servicer to manage its
aircraft portfolio.
SERVICE PROVIDERS
Based upon inquiries of the administrative agent, Aircraft Finance believes
that the administrative agent's directly controlled computer systems will have
been sufficiently corrected by year end. The ability of the administrative agent
to perform its tasks adequately depends in large part, however, upon information
provided by third parties. The failure of those third parties to provide that
information accurately and timely could materially affect the administrative
agent's performance on behalf of Aircraft Finance. In particular, calculations
of amounts due with respect to the notes could be adversely affected.
Based upon inquiries of the servicer, Aircraft Finance also believes that
the servicer's directly controlled computer systems will be Year 2000 corrected.
As noted below, however, Aircraft Finance's revenues and expenses could be
adversely affected by the failure of lessees to have corrected their own Year
2000 issues.
Although not directly related to Aircraft Finance's operations or revenues,
holders may also be adversely affected if Bankers Trust is unable to perform its
various functions, in particular its function as the operating bank, because of
Year 2000 issues. Those issues could affect calculations of amounts in the
various trust accounts and the timing and accuracy of note payments. Based upon
inquiries of Bankers Trust, Aircraft Finance does not believe that Bankers
Trust's systems will be materially and adversely affected by the millennium
problem.
Should either the administrative agent or Bankers Trust fail to be Year
2000 ready, the most reasonably likely worst case is that the first two or three
payments after January 1, 2000 would be inaccurately calculated or delayed. If a
payment-related error were to occur, Aircraft Finance would work with the
administrative agent and Bankers Trust, as applicable, to correct the error. Any
payment adjustment or delayed payment would be reflected in the payments made on
ensuing payment dates.
Should the servicer fail to be Year 2000 ready, the most reasonably likely
worst case is that the collection of rents would be delayed for a period of
time. Delayed rents, when received, would be distributed as part of the payments
to be made on future payment dates. In addition, the servicing of Aircraft
Finance's aircraft would, for a period of time, be adversely affected. Servicing
problems could increase Aircraft Finance's expense, which would reduce revenues
available for payments on the notes and Aircraft Finance's other
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obligations. Aircraft Finance would, in such a case, work with the servicer to
correct the relevant malfunction.
If any Year 2000 failures resulted in more severe consequences than those
Aircraft Finance anticipates as the most reasonably likely worst case or if
Aircraft Finance's efforts to work with a non-compliant service provider proved
insufficient, Aircraft Finance would, in that contingency, seek to replace the
relevant service provider. Aircraft Finance cannot assure you, however, that any
replacement could be effected in a timely manner or at a comparable cost.
LESSEES
Although Aircraft Finance believes that the servicer's directly controlled
information systems will not be impaired materially by the Year 2000 problem, it
cannot forecast the ability of its lessees to adequately address this issue. In
addition, the inability of governmental agencies, such as the Federal Aviation
Administration and similar foreign agencies, to be Year 2000 ready may result in
the grounding of aircraft for safety reasons or reduced passenger usage due to
fear.
The most reasonably likely worst case in this regard would arise if a
number of lessees were unable to operate their aircraft and generate revenues.
Although a lessee remains contractually liable to Aircraft Finance
notwithstanding groundings, reduced traffic or any other Year 2000 problem, if a
lessee experienced significant and protracted operational problems, it is likely
that it would be unable to make lease payments to Aircraft Finance. If a number
of lessees face these problems, Aircraft Finance would, in turn, be unable, for
a period of time, to make timely or full payments on the notes. Aircraft
Finance's contingency plan under these circumstances would be to seek to
repossess the aircraft from the defaulting lessees and to attempt to re-lease
or, if necessary, sell these aircraft. Aircraft Finance cannot assure you,
however, that any re-leasing could be effected in a timely manner or on
comparable terms or that a sale could be made on favorable terms. If a
significant number of aircraft had to be repossessed and could not be re-leased
in a timely manner or on comparable terms or could not be sold on favorable
terms, it would have a material adverse effect on Aircraft Finance's business
and its ability to make payments on the notes.
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<PAGE> 94
NOTE PAYMENT ASSUMPTIONS
The indenture governing the notes does not provide for fixed principal
payments on any class of notes. No default results from the failure of principal
payments to be at least any amount except in the case of any principal still
unpaid on the final maturity date of a note. Rather, a portion of whatever
revenues are in fact collected are allocated to principal in accordance with the
order of payment priorities described under "Description of the
Notes -- Priority of Payments." Thus, the principal to be paid on any payment
date is entirely a function of the revenues collected and costs incurred during
the preceding month.
Set forth below are assumptions made on May 5, 1999 about the revenues and
expenses of Aircraft Finance. Aircraft Finance has calculated the speed with
which the principal of each class of notes would be repaid if its revenues and
expenses matched those assumptions. The speed of repayment for the principal of
any class is expressed both as its "expected maturity" and its "weighted average
life". The "expected maturity" of a class of notes is the length of time needed
to pay off the entire principal of those notes, and its "weighted average life"
refers to the average length of time that any one dollar of principal remains
outstanding.
The initial tables below set forth this speed of repayment based on
Aircraft Finance's experience in the future matching the assumptions, or the
assumed case. Subsequent tables reflect changes in the speed of principal
repayment in comparison to the assumed case were actual experience to be more
favorable or less favorable than the assumed case based on selected variations
in the assumptions.
The tables also address the anticipated "yield" of the notes under those
assumptions and variations on assumptions. "Yield" refers to the interest rate
derived from the assumed amount of interest paid during the time the notes are
in fact or assumed to be outstanding, giving effect to any original issue
discount. This is distinct from the contractual interest rate and contractual
maturity.
The assumptions and tables set forth below are designed to illustrate some
of the payment characteristics of the notes and are not intended to be
projections, estimates, forecasts or forward-looking statements. The assumptions
and tables do not reflect all factors that may affect the revenues and expenses
of Aircraft Finance. Rather, they reflect those factors that are likely to
affect significantly the performance of Aircraft Finance in future years and the
timing of note repayments. If those factors have a more severe impact than that
assumed, payments of principal on the notes would be delayed or decreased.
Factors that could cause Aircraft Finance's actual revenues to differ materially
include those described below and under "Aircraft Finance Trust" and the risks
set forth under "Risk Factors".
These tables were in the offering memorandum for the initial notes based on
information as of April 1, 1999. Because the formulas used to determine the
structure and priority of principal payments were, in part, derived from the
following analysis, Aircraft Finance has retained these tables, although changes
to the April 1, 1999 information have occurred since then. For example, LIBOR
rates have changed since that time. Appendix 10 illustrates the effect, with
respect to the Class A, Class B and Class C Notes, of revising the revenue
assumptions to reflect the average one-month LIBOR for the month of November
1999, which was 5.58%, and the application of actual payments on the
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<PAGE> 95
notes from issuance until November 30, 1999, on each of the tables set forth on
pages 93 to 102.
It is highly likely that actual experience will vary from the assumptions
and the possible revenue scenarios represented by the tables. As a result,
principal payments on the notes will occur earlier or later than assumed, and
the timing differences may be substantial.
REVENUE ASSUMPTIONS
Aircraft Finance used assumptions (1) to (12) below to estimate its gross
monthly revenue before interest payments, principal payments, swap payments,
selling, general and administrative expenses and before lost rental payments and
expenditures required due to aircraft downtime, lessee defaults, aircraft
repossession costs, bad debts and operating costs incurred in the ordinary
course of the operating lease business. See Appendix 3 to this prospectus for
further data regarding assumed gross revenue.
(1) One-month LIBOR remains constant at 4.93% per annum.
(2) Aircraft Finance's floating rate leases are assumed to reset based upon
one-month LIBOR.
(3) Aircraft coming off lease in the future are assumed to be re-leased at
a monthly rate that is a function of the current contracted lease rate as of May
1, 1999 for aircraft of like age.
Lease rates are assumed to remain constant at the monthly lease rate for
the first 60% of an initial aircraft's expected useful life and then to
depreciate on a straight-line basis to 40% of that lease rate over the remainder
of its expected useful life. The portion of rent subject to adjustment under
each of the leases for the two initial aircraft whose rents periodically re-set
in part based upon six-month U.S. Treasury bill rates has been assumed to be
zero based upon the relevant U.S. Treasury bill rate in effect on the
commencement date of the lease. Future lease rates for each of those aircraft
have been assumed to be the average lease rate for the relevant aircraft under
the related initial lease computed on the basis of the foregoing assumption over
the entire term of the relevant initial lease.
Three aircraft that have recently had their leases amended to adjust
rentals on a seasonal basis without negatively affecting total rent payments are
deemed to have their original rental profiles.
(4) Aircraft are sold at the end of 25 years, or in the case of the
DC-10-30 aircraft 30 years, from the date of original manufacture for an amount
equal to their initial appraised value at May 5, 1999 times the applicable
Depreciation Factor.
(5) All contracted and assumed future payments in respect of the leases are
timely received by Aircraft Finance and twenty days of investment income are
earned at LIBOR on those amounts each month.
(6) Future lease terms are assumed to be five years.
(7) No new purchase options with respect to the aircraft are granted to
lessees by Aircraft Finance, and no existing purchase options are exercised.
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(8) No new lease termination or extension options are granted to lessees by
Aircraft Finance, and no existing termination or extension options are
exercised.
(9) All 36 initial aircraft are delivered to Aircraft Finance on May 5,
1999.
(10) Aircraft Finance acquires no additional aircraft and issues no
additional notes.
(11) Security deposits and aircraft modification payments are zero.
(12) Distributions on the notes are made on the 15th day of each month and
the calculation date is assumed to be the 9th day of each month, regardless of
the day on which these actually occur.
INTEREST, EXPENSE, OPERATING COST AND OTHER REINVESTMENT ASSUMPTIONS
(13) The initial notes are issued in amounts and with coupons as set forth
in the following table and payments are made in accordance with the payment
priorities set forth under "Description of the Notes -- Priority of Payments".
<TABLE>
<CAPTION>
CLASS OF INITIAL NOTES AMOUNT MONTHLY COUPON
- ---------------------- ------------ --------------
($ MILLIONS)
<S> <C> <C>
Class A-1 Notes.......................... 512.5 LIBOR + 0.48%
Class A-2 Notes.......................... 400.0 LIBOR + 0.50%
Class B Notes............................ 126.5 LIBOR + 1.15%
Class C Notes............................ 106.0 8.00%
Class D Notes............................ 64.0 11.00%
</TABLE>
(14) Refinancing notes for the Class A-1 Notes are issued and sold on May
15, 2004 and on each of the subsequent expected final payment dates of any such
refinancing notes on the same terms with respect to priority, coupon and
redemption as the initial Class A-1 Notes and with maturities and amortization
schedules paid with the application of the required payment priorities. Issuance
expenses are 0.05% of the outstanding principal balance.
(15) The servicer's fees are described under "Management of Aircraft
Finance -- The Servicer". The other selling, general and administrative expenses
of Aircraft Finance and its subsidiaries in the amount of $2.1 million per year
are deducted from gross revenue and include fees to the administrative agent,
the financial advisor and the capital markets advisor.
(16) Gross revenues are reduced each year by 3.50% to account for
contingent costs, including insurance expenses, aircraft releasing costs,
leasing transaction expenses and maintenance expenditures net of maintenance
reserve receipts.
(17) Aircraft Finance makes and receives swap payments in accordance with
the swap agreements in place on May 5, 1999, and Aircraft Finance enters into no
additional swaps.
(18) Funds on deposit in the collections account other than lease payments
earn interest each month at a rate per annum equal to one-month LIBOR and are
applied in accordance with the payment of priorities set forth under
"Description of the Notes -- Priority of Payments". See assumption (5).
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ASSUMED STRESS CASE SCENARIO
The assumed case reflects an annual reduction in gross revenues of 8.0%.
This 8.0% reduction is a combination of a 3.5% reduction due to contingent costs
described in assumption (16) and 4.5% reduction resulting from specified factors
impairing, or putting strains upon, the collection of revenues. Those factors,
which are referred to as "stresses" or "stress factors", are: AOG, lessee
defaults, aircraft repossession costs and bad debts. AOG is an acronym for
"Aircraft On the Ground" and is reflected as turnover and remarketing time. The
calculation detail of the assumed reduction in revenues is set forth below.
<TABLE>
<C> <S> <C>
A: Weighted Average Portfolio
Turnover: 20% per annum (Assumption (6))
B: Average Re-marketing Time: 4 weeks (0.08 years)
C: Weighted Average Default Rate: 4% per annum
D: Average Repossession Time: 14 weeks (0.27 years)
E: Weighted Average Bad Debt
Expense: 1% per annum
</TABLE>
<TABLE>
<S> <C>
AOG = (A X B) + (C X (B + D))
Annual Repossession Expense ("ARE") = C/8
AOG = (20% X .08 yrs) + (4% X (.08 yrs + .27 yrs)).......... 3.0%
ARE (4%/8).................................................. 0.5%
Bad Debt Expense............................................ 1.0
Stress Related Gross Revenue Reduction...................... 4.5%
Contingent Costs............................................ 3.5
Gross Revenue Reduction in the assumed case................. 8.0%
</TABLE>
More severe stress factors would result in a greater annual reduction in
gross revenues. The following table shows the effect upon gross revenues if the
severity of each one of the stress factors outlined in the above example is in
turn doubled from those in the prior table but the other stress factors remain
as set forth above.
<TABLE>
<CAPTION>
GROSS
REVENUE
STRESS SEVERITY REDUCTION
- ------ ------------- ---------
<S> <C> <C>
Portfolio Turnover.......................... 40% per annum 9.6%
Re-marketing Time........................... 8 weeks 9.9%
Default Rate................................ 8% per annum 9.9%
Repossession Time........................... 28 weeks 9.1%
Bad Debt Expense............................ 2% per annum 9.0%
</TABLE>
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PRINCIPAL REPAYMENTS UNDER THE ASSUMED CASE
The table below shows, for each payment date presented, the percentage of
the initial outstanding principal balance of the aggregate classes of notes
expected to be outstanding on that payment date based on the assumptions set out
above.
PERCENT OF INITIAL PRINCIPAL BALANCE OF THE
INITIAL NOTES BASED ON THE ASSUMED CASE
<TABLE>
<CAPTION>
CLASS CLASS CLASS CLASS CLASS
PAYMENT DATE OCCURRING IN JUNE A-1 NOTES A-2 NOTES B NOTES C NOTES D NOTES
- ------------------------------ --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1999 (Closing Date)......... 100.00% 100.00% 100.00% 100.00% 100.00%
2000........................ 100.00% 88.61% 98.70% 100.00% 100.00%
2001........................ 100.00% 78.24% 95.22% 100.00% 100.00%
2002........................ 100.00% 67.78% 94.09% 94.81% 99.78%
2003........................ 100.00% 60.83% 91.16% 78.67% 94.58%
2004........................ 100.00% 52.09% 83.28% 70.50% 90.39%
2005........................ 0.00% 39.17% 80.86% 65.71% 86.10%
2006........................ 0.00% 25.21% 76.68% 62.68% 82.17%
2007........................ 0.00% 11.90% 65.49% 61.59% 78.53%
2008........................ 0.00% 0.00% 58.09% 61.59% 58.17%
2009........................ 0.00% 0.00% 50.72% 60.53% 45.02%
2010........................ 0.00% 0.00% 43.59% 52.39% 36.21%
2011........................ 0.00% 0.00% 36.15% 43.00% 32.57%
2012........................ 0.00% 0.00% 27.52% 36.98% 29.68%
2013........................ 0.00% 0.00% 17.81% 29.35% 29.68%
2014........................ 0.00% 0.00% 10.18% 24.54% 28.45%
2015........................ 0.00% 0.00% 7.95% 21.50% 28.45%
2016........................ 0.00% 0.00% 0.00% 7.00% 28.45%
2017........................ 0.00% 0.00% 0.00% 0.00% 0.00%
Weighted Average Life..... 5.0 4.9 10.0 10.4 11.0
</TABLE>
94
<PAGE> 99
DECLINING BALANCES OF THE INITIAL NOTES AND ASSUMED COLLATERAL VALUE*
BASED ON THE ASSUMED CASE
<TABLE>
<CAPTION>
PAYMENT DATE CLASS A1 CLASS A2 CLASS B CLASS C CLASS D
- ------------ -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
May-99 512.50 400.00 126.50 106.00 64.00
Jun-99 512.50 395.25 126.13 106.00 64.00
Jul-99 512.50 392.51 125.81 106.00 64.00
Aug-99 512.50 389.79 125.50 106.00 64.00
Sep-99 512.50 385.43 125.18 106.00 64.00
Oct-99 512.50 382.65 124.86 106.00 64.00
Nov-99 512.50 379.60 124.86 106.00 64.00
Dec-99 512.50 374.93 124.86 106.00 64.00
Jan-00 512.50 371.96 124.86 106.00 64.00
Feb-00 512.50 368.98 124.86 106.00 64.00
Mar-00 512.50 364.85 124.86 106.00 64.00
Apr-00 512.50 361.83 124.86 106.00 64.00
May-00 512.50 358.15 124.86 106.00 64.00
Jun-00 512.50 354.44 124.86 106.00 64.00
Jul-00 512.50 350.77 124.69 106.00 64.00
Aug-00 512.50 347.68 123.98 106.00 64.00
Sep-00 512.50 344.96 122.86 106.00 64.00
Oct-00 512.50 341.48 122.46 106.00 64.00
Nov-00 512.50 338.38 121.76 106.00 64.00
Dec-00 512.50 334.77 121.57 106.00 64.00
Jan-01 512.50 331.41 121.20 106.00 64.00
Feb-01 512.50 327.80 121.07 106.00 64.00
Mar-01 512.50 324.57 120.45 106.00 64.00
Apr-01 512.50 320.79 120.45 106.00 64.00
May-01 512.50 316.90 120.45 106.00 64.00
Jun-01 512.50 312.97 120.45 106.00 64.00
Jul-01 512.50 308.93 120.45 106.00 64.00
Aug-01 512.50 304.90 120.45 106.00 64.00
Sep-01 512.50 301.42 119.88 106.00 64.00
Oct-01 512.50 298.06 119.16 106.00 64.00
Nov-01 512.50 294.04 119.16 106.00 64.00
Dec-01 512.50 290.02 119.16 106.00 64.00
Jan-02 512.50 286.01 119.16 106.00 64.00
Feb-02 512.50 281.95 119.16 106.00 64.00
Mar-02 512.50 277.79 119.16 106.00 64.00
Apr-02 512.50 273.71 119.16 106.00 64.00
May-02 512.50 271.97 119.02 103.69 64.00
Jun-02 512.50 271.11 119.02 100.50 63.86
Jul-02 512.50 269.42 119.02 98.17 63.66
Aug-02 512.50 265.97 119.02 97.39 63.66
Sep-02 512.50 265.38 117.66 95.55 63.26
Oct-02 512.50 261.93 117.29 95.55 62.83
Nov-02 512.50 260.04 117.15 93.89 62.28
Dec-02 512.50 257.75 117.01 92.30 61.96
Jan-03 512.50 254.21 116.87 91.89 61.76
Feb-03 512.50 251.23 116.61 91.01 61.56
Mar-03 512.50 249.47 116.23 88.97 61.25
Apr-03 512.50 247.82 115.97 86.72 61.05
May-03 512.50 245.45 115.70 85.16 60.73
Jun-03 512.50 243.32 115.32 83.39 60.53
Jul-03 512.50 241.12 114.93 81.62 60.33
Aug-03 512.50 240.30 114.44 78.72 60.01
Sep-03 512.50 239.66 113.14 76.30 59.81
Oct-03 512.50 235.38 112.98 76.30 59.61
Nov-03 512.50 233.57 110.45 76.30 59.40
Dec-03 512.50 231.56 109.73 74.73 59.09
Jan-04 512.50 228.11 108.79 74.73 58.88
Feb-04 512.50 224.47 107.86 74.73 58.68
Mar-04 512.50 220.63 106.92 74.73 58.47
Apr-04 512.50 216.94 106.10 74.73 58.16
May-04 512.50 212.69 105.72 74.73 58.06
Jun-04 512.50 208.34 105.35 74.73 57.85
Jul-04 512.50 203.89 104.97 74.73 57.64
Aug-04 512.50 199.61 104.59 74.73 57.33
Sep-04 512.50 195.70 104.21 74.23 57.12
Oct-04 512.50 191.79 103.82 73.74 56.80
Nov-04 512.50 187.73 103.44 73.36 56.59
Dec-04 512.50 183.41 103.06 72.98 56.38
Jan-05 512.50 178.96 102.67 72.82 56.17
Feb-05 512.50 177.49 102.29 69.65 55.96
Mar-05 512.50 172.10 102.29 69.65 55.75
Apr-05 512.50 167.02 102.29 69.65 55.53
May-05 512.50 161.81 102.29 69.65 55.32
Jun-05 512.50 156.69 102.29 69.65 55.11
Jul-05 512.50 151.71 102.29 69.38 54.89
Aug-05 512.50 147.44 102.29 68.48 54.68
Sep-05 512.50 142.65 102.26 68.10 54.46
Oct-05 512.50 137.48 102.26 67.93 54.24
Nov-05 512.50 132.23 102.26 67.93 54.03
Dec-05 512.50 127.18 102.26 67.60 53.81
Jan-06 512.50 122.25 102.26 67.22 53.59
Feb-06 512.50 117.20 102.26 66.95 53.37
Mar-06 512.50 112.43 101.52 66.67 53.25
Apr-06 512.50 108.43 100.14 66.67 53.03
May-06 512.50 104.43 98.62 66.67 52.81
Jun-06 512.50 100.83 97.00 66.44 52.59
Jul-06 512.50 96.84 95.91 65.96 52.37
Aug-06 512.50 93.84 94.08 65.28 52.15
Sep-06 512.50 88.77 93.53 65.28 52.02
Oct-06 512.50 84.99 91.66 65.28 51.80
Nov-06 512.50 80.91 90.15 65.28 51.57
Dec-06 512.50 76.45 88.89 65.28 51.35
Jan-07 512.50 71.91 87.70 65.28 51.22
Feb-07 512.50 67.47 86.47 65.28 50.99
Mar-07 512.50 62.26 85.70 65.28 50.76
Apr-07 512.50 57.08 85.06 65.28 50.63
May-07 512.50 52.29 84.00 65.28 50.40
Jun-07 512.50 47.61 82.85 65.28 50.26
Jul-07 512.50 42.94 81.87 65.28 49.83
Aug-07 512.50 38.57 81.11 65.28 48.94
Sep-07 512.50 34.30 80.35 65.28 47.96
Oct-07 512.50 30.13 79.69 65.28 46.68
Nov-07 512.50 25.78 78.94 65.28 45.72
Dec-07 512.50 22.09 78.01 65.28 44.17
Jan-08 512.50 17.40 77.36 65.28 43.39
Feb-08 512.50 13.26 76.52 65.28 42.21
Mar-08 512.50 8.77 75.87 65.28 40.98
Apr-08 512.50 4.75 75.05 65.28 39.61
May-08 512.50 0.55 74.31 65.28 38.30
Jun-08 508.77 0.00 73.49 65.28 37.23
Jul-08 504.14 0.00 72.76 65.28 36.29
Aug-08 499.97 0.00 71.95 65.28 35.03
Sep-08 495.01 0.00 71.22 65.28 34.44
Oct-08 489.72 0.00 70.50 65.28 34.06
Nov-08 484.98 0.00 69.61 65.28 33.41
Dec-08 480.08 0.00 68.81 65.28 32.72
Jan-09 476.15 0.00 68.01 65.28 31.09
Feb-09 471.53 0.00 67.21 65.28 30.11
Mar-09 466.34 0.00 66.42 65.28 29.45
Apr-09 460.99 0.00 65.64 65.28 29.17
May-09 455.84 0.00 64.94 64.85 28.96
Jun-09 451.04 0.00 64.16 64.16 28.82
Jul-09 446.27 0.00 63.47 63.55 28.37
Aug-09 441.59 0.00 62.78 62.78 28.02
Sep-09 436.44 0.00 62.17 62.17 27.87
Oct-09 431.97 0.00 61.57 60.74 27.80
Nov-09 426.86 0.00 60.97 60.07 27.66
Dec-09 421.53 0.00 60.45 59.39 27.55
Jan-10 416.31 0.00 59.69 58.78 27.55
Feb-10 413.20 0.00 58.37 57.97 26.16
Mar-10 405.98 0.00 57.64 57.25 23.40
Apr-10 401.14 0.00 56.83 56.60 23.40
May-10 396.16 0.00 56.10 56.03 23.40
Jun-10 391.60 0.00 55.14 55.53 23.18
Jul-10 388.14 0.00 54.42 54.96 21.58
Aug-10 381.92 0.00 54.33 54.96 21.58
Sep-10 376.35 0.00 53.56 54.96 21.58
Oct-10 373.10 0.00 52.12 53.21 21.58
Nov-10 368.87 0.00 51.34 51.82 21.58
Dec-10 364.73 0.00 50.49 50.31 21.58
Jan-11 360.08 0.00 49.72 49.25 21.58
Feb-11 355.98 0.00 48.96 47.61 21.58
Mar-11 350.64 0.00 48.19 47.00 21.58
Apr-11 345.49 0.00 47.36 46.42 21.58
May-11 340.58 0.00 46.40 45.96 21.26
Jun-11 335.41 0.00 45.72 45.58 20.84
Jul-11 330.06 0.00 44.77 45.16 20.84
Aug-11 325.45 0.00 43.96 44.75 19.95
Sep-11 320.17 0.00 43.10 44.16 19.95
Oct-11 315.06 0.00 42.30 43.71 19.64
Nov-11 310.20 0.00 41.03 43.34 19.51
Dec-11 301.10 0.00 40.15 42.70 19.51
Jan-12 295.57 0.00 39.39 42.37 19.51
Feb-12 290.76 0.00 37.95 41.96 19.51
Mar-12 280.96 0.00 37.18 41.33 18.99
Apr-12 275.72 0.00 36.25 40.90 18.99
May-12 271.17 0.00 35.46 39.54 18.99
Jun-12 265.47 0.00 34.82 39.20 18.99
Jul-12 260.48 0.00 34.17 38.09 18.99
Aug-12 242.62 0.00 32.13 37.56 18.99
Sep-12 238.12 0.00 30.47 37.21 18.99
Oct-12 232.91 0.00 29.70 36.67 18.99
Nov-12 228.17 0.00 28.87 35.86 18.99
Dec-12 222.93 0.00 28.11 35.43 18.99
Jan-13 218.82 0.00 27.30 33.92 18.99
Feb-13 214.51 0.00 25.89 33.17 18.99
Mar-13 203.41 0.00 24.75 32.38 18.99
Apr-13 198.12 0.00 24.10 31.92 18.99
May-13 193.06 0.00 23.17 31.54 18.99
Jun-13 187.82 0.00 22.53 31.11 18.99
Jul-13 182.98 0.00 21.73 30.39 18.99
Aug-13 178.53 0.00 20.89 29.33 18.99
Sep-13 173.27 0.00 20.05 29.03 18.99
Oct-13 168.23 0.00 19.27 28.39 18.99
Nov-13 162.97 0.00 18.46 28.01 18.99
Dec-13 157.54 0.00 17.70 27.67 18.99
Jan-14 152.07 0.00 16.90 27.42 18.99
Feb-14 146.82 0.00 16.11 27.04 18.86
Mar-14 141.58 0.00 15.17 26.71 18.73
Apr-14 136.19 0.00 14.35 26.45 18.73
May-14 131.45 0.00 13.59 26.01 18.21
Jun-14 125.82 0.00 12.87 26.01 18.21
Jul-14 121.62 0.00 12.00 24.73 18.21
Aug-14 115.29 0.00 12.00 24.73 18.21
Sep-14 109.93 0.00 11.01 24.73 18.21
Oct-14 100.59 0.00 10.34 24.53 18.21
Nov-14 94.66 0.00 10.20 24.29 18.21
Dec-14 88.91 0.00 10.06 23.91 18.21
Jan-15 82.94 0.00 10.06 23.58 18.21
Feb-15 76.92 0.00 10.06 23.28 18.21
Mar-15 71.04 0.00 10.06 22.79 18.21
Apr-15 64.72 0.00 10.06 22.79 18.21
May-15 58.67 0.00 10.06 22.79 18.21
Jun-15 52.60 0.00 10.06 22.79 18.21
Jul-15 46.49 0.00 10.06 22.79 18.21
Aug-15 40.36 0.00 10.06 22.79 18.21
Sep-15 34.25 0.00 10.06 22.79 18.21
Oct-15 28.12 0.00 10.06 22.79 18.21
Nov-15 22.00 0.00 10.06 22.79 18.21
Dec-15 15.87 0.00 10.06 22.79 18.21
Jan-16 9.70 0.00 10.06 22.79 18.21
Feb-16 3.50 0.00 10.06 22.79 18.21
Mar-16 0.00 0.00 7.34 22.79 18.21
Apr-16 0.00 0.00 1.08 22.79 18.21
May-16 0.00 0.00 0.00 13.66 18.21
Jun-16 0.00 0.00 0.00 7.42 18.21
Jul-16 0.00 0.00 0.00 0.00 16.99
Aug-16 0.00 0.00 0.00 0.00 0.00
Sep-16 0.00 0.00 0.00 0.00 0.00
Oct-16 0.00 0.00 0.00 0.00 0.00
Nov-16 0.00 0.00 0.00 0.00 0.00
Dec-16 0.00 0.00 0.00 0.00 0.00
Jan-17 0.00 0.00 0.00 0.00 0.00
Feb-17 0.00 0.00 0.00 0.00 0.00
Mar-17 0.00 0.00 0.00 0.00 0.00
Apr-17 0.00 0.00 0.00 0.00 0.00
May-17 0.00 0.00 0.00 0.00 0.00
Jun-17 0.00 0.00 0.00 0.00 0.00
Jul-17 0.00 0.00 0.00 0.00 0.00
Aug-17 0.00 0.00 0.00 0.00 0.00
Sep-17 0.00 0.00 0.00 0.00 0.00
Oct-17 0.00 0.00 0.00 0.00 0.00
Nov-17 0.00 0.00 0.00 0.00 0.00
Dec-17 0.00 0.00 0.00 0.00 0.00
Jan-18 0.00 0.00 0.00 0.00 0.00
Feb-18 0.00 0.00 0.00 0.00 0.00
Mar-18 0.00 0.00 0.00 0.00 0.00
Apr-18 0.00 0.00 0.00 0.00 0.00
May-18 0.00 0.00 0.00 0.00 0.00
Jun-18 0.00 0.00 0.00 0.00 0.00
Jul-18 0.00 0.00 0.00 0.00 0.00
Aug-18 0.00 0.00 0.00 0.00 0.00
Sep-18 0.00 0.00 0.00 0.00 0.00
Oct-18 0.00 0.00 0.00 0.00 0.00
Nov-18 0.00 0.00 0.00 0.00 0.00
Dec-18 0.00 0.00 0.00 0.00 0.00
Jan-19 0.00 0.00 0.00 0.00 0.00
Feb-19 0.00 0.00 0.00 0.00 0.00
Mar-19 0.00 0.00 0.00 0.00 0.00
Apr-19 0.00 0.00 0.00 0.00 0.00
May-19 0.00 0.00 0.00 0.00 0.00
Jun-19 0.00 0.00 0.00 0.00 0.00
Jul-19 0.00 0.00 0.00 0.00 0.00
Aug-19 0.00 0.00 0.00 0.00 0.00
Sep-19 0.00 0.00 0.00 0.00 0.00
Oct-19 0.00 0.00 0.00 0.00 0.00
Nov-19 0.00 0.00 0.00 0.00 0.00
Dec-19 0.00 0.00 0.00 0.00 0.00
Jan-20 0.00 0.00 0.00 0.00 0.00
Feb-20 0.00 0.00 0.00 0.00 0.00
Mar-20 0.00 0.00 0.00 0.00 0.00
Apr-20 0.00 0.00 0.00 0.00 0.00
May-20 0.00 0.00 0.00 0.00 0.00
Jun-20 0.00 0.00 0.00 0.00 0.00
Jul-20 0.00 0.00 0.00 0.00 0.00
Aug-20 0.00 0.00 0.00 0.00 0.00
Sep-20 0.00 0.00 0.00 0.00 0.00
Oct-20 0.00 0.00 0.00 0.00 0.00
Nov-20 0.00 0.00 0.00 0.00 0.00
Dec-20 0.00 0.00 0.00 0.00 0.00
Jan-21 0.00 0.00 0.00 0.00 0.00
Feb-21 0.00 0.00 0.00 0.00 0.00
Mar-21 0.00 0.00 0.00 0.00 0.00
Apr-21 0.00 0.00 0.00 0.00 0.00
May-21 0.00 0.00 0.00 0.00 0.00
Jun-21 0.00 0.00 0.00 0.00 0.00
Jul-21 0.00 0.00 0.00 0.00 0.00
Aug-21 0.00 0.00 0.00 0.00 0.00
Sep-21 0.00 0.00 0.00 0.00 0.00
Oct-21 0.00 0.00 0.00 0.00 0.00
Nov-21 0.00 0.00 0.00 0.00 0.00
Dec-21 0.00 0.00 0.00 0.00 0.00
Jan-22 0.00 0.00 0.00 0.00 0.00
Feb-22 0.00 0.00 0.00 0.00 0.00
Mar-22 0.00 0.00 0.00 0.00 0.00
Apr-22 0.00 0.00 0.00 0.00 0.00
May-22 0.00 0.00 0.00 0.00 0.00
Jun-22 0.00 0.00 0.00 0.00 0.00
Jul-22 0.00 0.00 0.00 0.00 0.00
Aug-22 0.00 0.00 0.00 0.00 0.00
Sep-22 0.00 0.00 0.00 0.00 0.00
Oct-22 0.00 0.00 0.00 0.00 0.00
Nov-22 0.00 0.00 0.00 0.00 0.00
Dec-22 0.00 0.00 0.00 0.00 0.00
Jan-23 0.00 0.00 0.00 0.00 0.00
Feb-23 0.00 0.00 0.00 0.00 0.00
Mar-23 0.00 0.00 0.00 0.00 0.00
Apr-23 0.00 0.00 0.00 0.00 0.00
May-23 0.00 0.00 0.00 0.00 0.00
Jun-23 0.00 0.00 0.00 0.00 0.00
Jul-23 0.00 0.00 0.00 0.00 0.00
Aug-23 0.00 0.00 0.00 0.00 0.00
Sep-23 0.00 0.00 0.00 0.00 0.00
Oct-23 0.00 0.00 0.00 0.00 0.00
Nov-23 0.00 0.00 0.00 0.00 0.00
Dec-23 0.00 0.00 0.00 0.00 0.00
Jan-24 0.00 0.00 0.00 0.00 0.00
Feb-24 0.00 0.00 0.00 0.00 0.00
Mar-24 0.00 0.00 0.00 0.00 0.00
Apr-24 0.00 0.00 0.00 0.00 0.00
May-24 0.00 0.00 0.00 0.00 0.00
<CAPTION>
PAYMENT DATE APV
- ------------ ---
<S> <C>
May-99 165.64
Jun-99 167.47
Jul-99 167.21
Aug-99 166.93
Sep-99 168.28
Oct-99 168.04
Nov-99 167.74
Dec-99 169.04
Jan-00 168.64
Feb-00 168.25
Mar-00 168.99
Apr-00 168.60
May-00 168.87
Jun-00 169.16
Jul-00 169.56
Aug-00 169.92
Sep-00 170.30
Oct-00 170.71
Nov-00 171.04
Dec-00 171.36
Jan-01 171.59
Feb-01 171.83
Mar-01 172.16
Apr-01 172.41
May-01 172.76
Jun-01 173.13
Jul-01 173.61
Aug-01 174.07
Sep-01 174.53
Oct-01 175.03
Nov-01 175.45
Dec-01 175.86
Jan-02 176.25
Feb-02 176.66
Mar-02 177.18
Apr-02 177.60
May-02 178.12
Jun-02 178.62
Jul-02 179.16
Aug-02 179.68
Sep-02 180.16
Oct-02 180.69
Nov-02 181.20
Dec-02 181.78
Jan-03 182.32
Feb-03 182.87
Mar-03 183.58
Apr-03 184.16
May-03 184.86
Jun-03 185.53
Jul-03 186.26
Aug-03 186.96
Sep-03 187.68
Oct-03 188.46
Nov-03 189.13
Dec-03 189.86
Jan-04 190.57
Feb-04 191.44
Mar-04 192.51
Apr-04 193.41
May-04 194.20
Jun-04 195.18
Jul-04 196.25
Aug-04 197.26
Sep-04 198.28
Oct-04 199.38
Nov-04 200.41
Dec-04 201.68
Jan-05 202.86
Feb-05 204.05
Mar-05 205.60
Apr-05 206.83
May-05 208.17
Jun-05 209.41
Jul-05 210.78
Aug-05 212.06
Sep-05 213.35
Oct-05 214.76
Nov-05 216.08
Dec-05 217.52
Jan-06 218.87
Feb-06 220.24
Mar-06 221.93
Apr-06 223.33
May-06 224.85
Jun-06 226.28
Jul-06 227.83
Aug-06 229.30
Sep-06 230.78
Oct-06 232.38
Nov-06 233.90
Dec-06 235.53
Jan-07 237.08
Feb-07 238.65
Mar-07 240.52
Apr-07 242.12
May-07 243.83
Jun-07 245.41
Jul-07 247.11
Aug-07 248.73
Sep-07 250.32
Oct-07 252.00
Nov-07 253.61
Dec-07 255.33
Jan-08 256.99
Feb-08 258.67
Mar-08 260.54
Apr-08 262.26
May-08 263.99
Jun-08 265.64
Jul-08 267.39
Aug-08 269.08
Sep-08 270.79
Oct-08 272.60
Nov-08 274.29
Dec-08 276.08
Jan-09 277.82
Feb-09 279.58
Mar-09 281.58
Apr-09 283.35
May-09 285.16
Jun-09 286.90
Jul-09 288.72
Aug-09 290.50
Sep-09 292.30
Oct-09 294.13
Nov-09 295.91
Dec-09 297.78
Jan-10 299.60
Feb-10 301.45
Mar-10 302.83
Apr-10 304.45
May-10 306.03
Jun-10 307.57
Jul-10 309.18
Aug-10 310.76
Sep-10 312.35
Oct-10 314.02
Nov-10 315.66
Dec-10 317.37
Jan-11 319.04
Feb-11 320.74
Mar-11 322.61
Apr-11 324.35
May-11 326.16
Jun-11 327.93
Jul-11 329.78
Aug-11 331.59
Sep-11 333.43
Oct-11 335.17
Nov-11 336.89
Dec-11 338.36
Jan-12 340.15
Feb-12 341.96
Mar-12 343.45
Apr-12 345.32
May-12 347.25
Jun-12 349.17
Jul-12 351.14
Aug-12 352.02
Sep-12 354.17
Oct-12 356.31
Nov-12 358.29
Dec-12 360.32
Jan-13 362.33
Feb-13 364.37
Mar-13 366.00
Apr-13 368.16
May-13 370.28
Jun-13 372.31
Jul-13 374.39
Aug-13 376.47
Sep-13 378.56
Oct-13 380.70
Nov-13 382.83
Dec-13 385.01
Jan-14 387.18
Feb-14 389.38
Mar-14 391.64
Apr-14 393.74
May-14 395.79
Jun-14 397.74
Jul-14 399.67
Aug-14 401.57
Sep-14 403.49
Oct-14 405.10
Nov-14 407.07
Dec-14 408.99
Jan-15 410.91
Feb-15 412.86
Mar-15 414.84
Apr-15 416.76
May-15 418.40
Jun-15 420.05
Jul-15 421.71
Aug-15 423.40
Sep-15 425.05
Oct-15 426.71
Nov-15 428.34
Dec-15 429.99
Jan-16 431.65
Feb-16 433.33
Mar-16 435.01
Apr-16 436.73
May-16 438.12
Jun-16 439.92
Jul-16 441.74
Aug-16 405.52
Sep-16 384.54
Oct-16 370.32
Nov-16 361.40
Dec-16 357.83
Jan-17 354.25
Feb-17 339.20
Mar-17 335.94
Apr-17 328.43
May-17 325.28
Jun-17 322.13
Jul-17 318.96
Aug-17 315.79
Sep-17 312.61
Oct-17 309.42
Nov-17 306.22
Dec-17 293.92
Jan-18 290.98
Feb-18 282.81
Mar-18 280.01
Apr-18 277.20
May-18 274.38
Jun-18 271.55
Jul-18 268.71
Aug-18 265.87
Sep-18 263.02
Oct-18 260.17
Nov-18 257.30
Dec-18 254.43
Jan-19 251.55
Feb-19 248.66
Mar-19 245.77
Apr-19 242.87
May-19 239.96
Jun-19 237.04
Jul-19 234.11
Aug-19 231.18
Sep-19 228.24
Oct-19 225.29
Nov-19 222.34
Dec-19 219.37
Jan-20 216.40
Feb-20 213.42
Mar-20 210.44
Apr-20 207.44
May-20 204.44
Jun-20 201.43
Jul-20 198.41
Aug-20 195.39
Sep-20 192.35
Oct-20 189.31
Nov-20 186.26
Dec-20 183.21
Jan-21 180.14
Feb-21 177.07
Mar-21 173.99
Apr-21 170.90
May-21 167.81
Jun-21 164.70
Jul-21 161.59
Aug-21 158.47
Sep-21 150.29
Oct-21 147.30
Nov-21 144.31
Dec-21 125.62
Jan-22 118.12
Feb-22 115.72
Mar-22 113.31
Apr-22 105.73
May-22 98.31
Jun-22 91.04
Jul-22 83.93
Aug-22 76.97
Sep-22 70.13
Oct-22 56.67
Nov-22 55.49
Dec-22 49.14
Jan-23 42.99
Feb-23 42.11
Mar-23 41.23
Apr-23 40.35
May-23 39.46
Jun-23 38.57
Jul-23 32.44
Aug-23 31.71
Sep-23 30.97
Oct-23 30.23
Nov-23 29.49
Dec-23 28.74
Jan-24 28.00
Feb-24 27.25
Mar-24 26.50
Apr-24 13.06
May-24 0.00
</TABLE>
- -------------------------
* "Collateral Value" is the sum of (1) the Depreciation Factor for each aircraft
at that time times the initial appraised value of that aircraft and (2) cash
reserves equal to the amount of cash reserves assumed to exist based on the
Assumed Case.
MINIMUM REVENUE PERCENTAGE REQUIRED TO RETIRE THE INITIAL NOTES
The table below indicates the minimum percentage of gross revenue that will
be necessary to repay all interest and principal on each class of notes by its
respective final maturity date. If the actual revenue received by Aircraft
Finance and its subsidiaries were to fall below the percentages of gross revenue
indicated below and all of the other assumptions proved correct, Aircraft
Finance would be unable to meet its required payment obligations on the final
maturity dates of the note, which would constitute an event of default.
95
<PAGE> 100
PERCENTAGE OF GROSS REVENUE NECESSARY TO REPAY THE INITIAL NOTES
BY THE APPLICABLE FINAL MATURITY DATE ASSUMING ACTUAL EXPERIENCE
CORRESPONDS TO THE ASSUMED CASE UNTIL THE BEGINNING OF THE YEAR STATED
<TABLE>
<CAPTION>
CLOSING DATE YEAR 3 YEAR 6 YEAR 10
------------ ------ ------ -------
<S> <C> <C> <C> <C>
Class A Notes.......................... 60.8% 60.1% 59.4% 56.3%
Class B Notes.......................... 69.1% 68.3% 67.7% 60.7%
Class C Notes.......................... 77.6% 75.8% 73.6% 66.3%
Class D Notes.......................... 84.3% 82.2% 78.3% 69.8%
</TABLE>
EFFECT OF A PERMANENT CHANGE IN GROSS REVENUE
Aircraft Finance prepared the tables below based on the assumptions, except
that it varied the revenues received by the Aircraft Finance group from assumed
gross revenues by the indicated percentages, beginning in years 3, 6 and 9. If
Aircraft Finance receives actual revenues as indicated below and all of the
other assumptions proved correct, then the expected maturities, weighted average
lives and yields of the respective classes of notes would be as set forth below.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 3
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
-------------------------------------------------------------------
+10% 0% -8%* -15% -20%
----------- ----------- ----------- ----------- -----------
EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes......... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes......... 6.7 3.8 7.8 4.3 9.1 4.9 10.2 5.5 10.1 5.8
Class B Notes........... 12.7 9.3 14.5 9.8 17.0 10.0 18.8 11.6 19.2 11.7
Class C Notes........... 12.9 9.2 14.8 9.8 17.2 10.4 19.4 11.7 23.3 13.8
Class D Notes........... 13.0 9.8 14.9 10.3 17.3 11.0 21.4 15.7 ** **
</TABLE>
- -------------------------
* Assumed case
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 3
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
------------------------------------
+10% 0% -8%* -15% -20%
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class A-2 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class B Notes........................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class C Notes........................... 8.0% 8.0% 8.0% 8.0% 8.0%
Class D Notes........................... 11.0% 11.0% 11.0% 11.0% 7.8%
</TABLE>
- -------------------------
* Assumed case
96
<PAGE> 101
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 6
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
-------------------------------------------------------------------
+10% 0% -8%* -15% -20%
----------- ----------- ----------- ----------- -----------
EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes........ 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes........ 7.8 4.5 8.4 4.7 9.1 4.9 10.1 5.0 10.2 5.2
Class B Notes.......... 13.6 9.6 15.2 9.9 17.0 10.0 18.8 11.6 19.2 11.6
Class C Notes.......... 13.9 9.6 15.4 10.0 17.2 10.4 19.4 11.7 22.5 12.8
Class D Notes.......... 13.9 10.1 15.4 10.5 17.3 11.0 19.6 14.6 23.4 17.0
</TABLE>
- -------------------------
* Assumed case
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 6
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
------------------------------------
+10% 0% -8%* -15% -20%
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class A-2 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class B Notes........................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class C Notes........................... 8.0% 8.0% 8.0% 8.0% 8.0%
Class D Notes........................... 11.0% 11.0% 11.0% 11.0% 11.0%
</TABLE>
- -------------------------
* Assumed case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 9
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
-------------------------------------------------------------------
+10% 0% -8%* -15% -20%
----------- ----------- ----------- ----------- -----------
EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes........ 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes........ 8.8 4.9 8.9 4.9 9.1 4.9 9.1 4.9 9.1 4.9
Class B Notes.......... 14.6 9.8 15.7 9.9 17.0 10.0 17.9 10.9 18.8 11.3
Class C Notes.......... 14.9 9.8 15.9 10.1 17.2 10.4 18.4 11.4 19.4 11.7
Class D Notes.......... 14.9 10.3 16.0 10.7 17.3 11.0 18.6 14.2 20.1 14.8
</TABLE>
- -------------------------
* Assumed case
97
<PAGE> 102
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 9
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
------------------------------------
+10% 0% -8%* -15% -20%
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class A-2 Notes......................... 5.7% 5.7% 5.7% 5.7% 5.7%
Class B Notes........................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class C Notes........................... 8.0% 8.0% 8.0% 8.0% 8.0%
Class D Notes........................... 11.0% 11.0% 11.0% 11.0% 11.0%
</TABLE>
- -------------------------
* Assumed case
EFFECT OF PERMANENT DECLINE IN PORTFOLIO VALUE
If the value of Aircraft Finance's portfolio of aircraft as adjusted for
appraisals is significantly less than the value assumed, the Scheduled Principal
Payment Amount payable to holders of the Class A Notes may increase. Payment of
that increased amount may shorten the weighted average lives of the Class A
Notes and lengthen the weighted average lives of the classes of notes that have
a lower payment priority. The following tables show the expected maturity and
weighted average life of each class of notes if the Adjusted Portfolio Value
permanently declined to a given percentage of the assumed portfolio value,
beginning in years 1 and 5, respectively.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE BEGINNING IN YEAR 1
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS 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>
Class A-1 Notes...... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes...... 9.1 4.9 8.7 4.8 8.7 4.8 8.7 4.8
Class B Notes........ 17.0 10.0 17.0 10.5 17.0 11.0 17.0 11.1
Class C Notes........ 17.2 10.4 17.3 10.4 17.3 10.9 17.3 11.0
Class D Notes........ 17.3 11.0 17.4 13.2 17.4 13.5 17.4 13.5
</TABLE>
- -------------------------
* Assumed case
98
<PAGE> 103
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE BEGINNING IN YEAR 5
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS 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>
Class A-1 Notes...... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes...... 9.1 4.9 8.7 4.8 8.7 4.8 8.7 4.8
Class B Notes........ 17.0 10.0 17.0 10.4 17.0 10.9 17.0 11.1
Class C Notes........ 17.2 10.4 17.3 10.4 17.3 10.9 17.3 11.0
Class D Notes........ 17.3 11.0 17.4 13.2 17.4 13.5 17.4 13.5
</TABLE>
- -------------------------
* Assumed case
EFFECT OF CYCLICAL VARIATIONS IN GROSS REVENUE AND PORTFOLIO VALUE -- "RECESSION
SCENARIOS"
Historically, the aviation industry has experienced cyclical swings in the
supply and demand for aircraft. Aircraft Finance would be negatively affected by
a decline in the demand for aircraft. Aircraft Finance has assumed that such a
decline or "recession", as used in this discussion, will result in a decline in
aircraft values and an increase in defaults and downtime, as well as a decline
in operating lease rental rates. In that event gross revenues would decline.
Aircraft Finance prepared the following tables to show the effect on
expected maturities and weighted average lives of the Class B, Class C and Class
D Notes, if recessions of different lengths occurred. In preparing the following
tables Aircraft Finance assumed that a recession would have the following effect
on the Aircraft Finance group:
(1) Aircraft values fall on the first day of the recession to a given
percentage of the assumed portfolio value. This decrease would trigger an
increase in Scheduled Principal Payment Amounts on the Class A Notes.
(2) After a period of two years following the first day of the recession,
gross revenues fall by a given percentage as aircraft are re-leased or lessees
default. This would result in less cash flow being available to make payments of
interest and principal on the notes.
(3) The recession lasts a given period of time. After that the adjusted
portfolio value returns to the assumed portfolio value on the first day after
the recession. Two years after the end of the recession, gross revenues returns
to the assumed case. Aircraft Finance cannot, however, assure you that periods
of weak traffic growth and lower demand for aircraft will be followed by periods
of strong growth and high demand for aircraft or that following a recession
aircraft values and gross revenues will return to assumed case levels.
99
<PAGE> 104
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS B
NOTES ASSUMING A RECESSION LASTING THREE YEARS
<TABLE>
Decline in Gross Revenues........ 0% 8%* 10% 20%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Portfolio
Value.......................... 100% 100%* 90% 80%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF YEAR EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 16.1 10.0 17.0 10.0 17.0 10.2 17.9 11.6
3 16.2 10.0 17.0 10.0 17.0 10.2 17.8 11.5
5 16.3 10.0 17.0 10.0 17.0 10.1 17.6 11.4
10 16.5 10.0 17.0 10.0 17.0 10.1 17.4 10.9
</TABLE>
- -------------------------
* Assumed case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS B
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
<TABLE>
Decline in Gross Revenues........ 0% 8%* 10% 20%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Portfolio
Value.......................... 100% 100%* 90% 80%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF YEAR EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 15.7 9.9 17.0 10.0 17.1 10.4 18.8 11.6
3 15.8 9.9 17.0 10.0 17.0 10.2 18.6 11.6
5 15.9 9.9 17.0 10.0 17.0 10.3 18.3 11.5
10 16.3 10.0 17.0 10.0 17.0 10.2 17.6 11.1
</TABLE>
- -------------------------
* Assumed case
100
<PAGE> 105
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS C
NOTES ASSUMING A RECESSION LASTING THREE YEARS
<TABLE>
Decline in Gross Revenues........ 0% 8%* 10% 20%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Portfolio
Value.......................... 100% 100%* 90% 80%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF YEAR EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 16.4 10.2 17.2 10.4 17.3 10.6 18.3 11.4
3 16.5 10.2 17.2 10.4 17.3 10.5 18.0 11.4
5 16.6 10.2 17.2 10.4 17.3 10.5 17.9 11.4
10 16.8 10.3 17.2 10.4 17.3 10.7 17.7 11.2
</TABLE>
- -------------------------
* Assumed case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS C
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
<TABLE>
Decline in Gross Revenues........ 0% 8%* 10% 20%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Portfolio
Value.......................... 100% 100%* 90% 80%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF YEAR EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 15.9 10.1 17.2 10.4 17.4 10.9 19.4 11.7
3 16.1 10.1 17.2 10.4 17.4 10.8 18.9 11.6
5 16.2 10.1 17.2 10.4 17.3 10.7 18.6 11.5
10 16.5 10.2 17.2 10.4 17.3 10.6 17.9 11.4
</TABLE>
- -------------------------
* Assumed case
101
<PAGE> 106
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS D
NOTES ASSUMING A RECESSION LASTING THREE YEARS
<TABLE>
Decline in Gross Revenues........ 0% 8%* 10% 20%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Portfolio
Value.......................... 100% 100%* 90% 80%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF YEAR EXP. AVG. EXP. AVG. EXP. AVG. EXP. Avg.
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 16.4 10.8 17.3 11.0 17.4 13.1 18.5 14.3
3 16.5 10.8 17.3 11.0 17.4 12.9 18.3 14.0
5 16.6 10.8 17.3 11.0 17.4 12.7 18.1 13.9
10 16.8 10.9 17.3 11.0 17.4 12.2 17.9 13.4
</TABLE>
- -------------------------
* Assumed case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS D
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
<TABLE>
Decline in Gross Revenues........ 0% 8%* 10% 20%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Portfolio
Value.......................... 100% 100%* 90% 80%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF YEAR EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 (Closing Date) 15.9 10.6 17.3 11.0 17.5 13.6 19.8 16.4
3 16.1 10.7 17.3 11.0 17.5 13.6 19.1 14.5
5 16.2 10.7 17.3 11.0 17.5 13.4 18.9 14.3
10 16.6 10.8 17.3 11.0 17.4 13.0 18.1 13.6
</TABLE>
- -------------------------
* Assumed case
102
<PAGE> 107
DESCRIPTION OF THE NOTES
The following description is a summary of the material terms of the notes,
the indenture and other agreements. The description does not restate those
documents. Please read those documents because they, and not this description,
define your rights as holders of the notes. Aircraft Finance has filed those
agreements as exhibits to the registration statement of which this prospectus is
a part. The description relies on several defined terms, and this prospectus
contains a glossary in Appendix 1 that identifies the pages on which terms used
in more than one section of this prospectus are first defined or used.
THE INDENTURE AND THE TRUSTEE
The exchange notes will be issued under the trust indenture, dated as of
May 5, 1999 between Aircraft Finance, ReSource/Phoenix, in its capacity as the
administrative agent, and Bankers Trust under which the outstanding notes were
issued. Bankers Trust is appointed the trustee under the indenture. Bankers
Trust is also the security trustee and the operating bank under the security
trust agreement pursuant to which Aircraft Finance granted collateral to the
holders of the notes and its other creditors.
The notes are obligations solely of Aircraft Finance and are not secured by
the aircraft. The notes are not guaranteed by any lessee, General Electric
Capital Corporation or other sellers of Aircraft, GE Capital Aviation Services,
Limited, the trustees and holders of the beneficial interest of Aircraft Finance
or any other person. Class A, Class B and Class C Notes are issuable in
definitive, fully registered form and in minimum denominations of $100,000 or
any higher whole multiple of $1,000. Class D Notes are issued in definitive,
fully registered form and in minimum denominations of $1,000,000 and higher
whole multiples of $100,000.
The appointment of Bankers Trust as the trustee is currently for each class
and subclass of notes. Because the various subclasses of notes may not always
have the same interests, the trustee may resign or be replaced by the holders of
any class or subclass of notes as to any particular class or subclass of notes
in each case for that or any other reason. Aircraft Finance may also replace the
trustee if the trustee is no longer eligible, becomes subject to any insolvency
proceeding or otherwise is no longer able to act. No resignation or removal for
replacement may be effective until the replacement trustee has accepted its
appointment. The indenture provides that Aircraft Finance will pay the fees and
expenses of the trustee and will indemnify and defend the trustee against any
loss or liability incurred by the trustee other than through its own bad faith
or negligence.
RATINGS
The exchange notes and the initial Class D Notes are rated as follows:
<TABLE>
<CAPTION>
RATING AGENCIES
----------------------------
CLASSES OF INITIAL NOTES MOODY'S STANDARD & POOR'S
- ------------------------ ------- -----------------
<S> <C> <C>
Class A-1................................... Aa2 AA
Class A-2................................... Aa2 AA
Class B..................................... A2 A
Class C..................................... Baa2 BBB
Class D..................................... Ba2 BB
</TABLE>
103
<PAGE> 108
You should not view the ratings of the notes as a recommendation to buy,
sell or hold the notes. The ratings only address the likelihood of the timely
payment of interest at the rate specified below and the ultimate payment of
principal on the notes. The ratings do not address other payments on the notes
or the effect of any withholding tax on the notes or on the cash flows of
Aircraft Finance and its subsidiaries.
PAYMENTS ON THE NOTES
PAYMENT DATES
On each payment date, the trustee will pay -- or will instruct a paying
agent appointed in Luxembourg to pay -- to the holders of the notes all
interest, principal and any Sale Premium on the notes so long as the trustee or
the paying agent confirms that it has received the payment by 1:00 p.m. (New
York time) on that Payment Date. If the trustee or the paying agent confirms
receipt of the payment after that time, it will make the payment to the holders
of the notes on the business day after the business day on which it received the
payment. The trustee or the paying agent will make each payment on each note on
any payment date other than the final payment date for that note to the holder
of record as of the record date immediately preceding that payment date. The
final payment for any note, however, will be made only upon surrender of the
Note by the holder or its agent -- including any holder in street name -- at the
office or agency of the trustee or the paying agent. So long as any notes are
listed on the Luxembourg Stock Exchange, Aircraft Finance must appoint and
maintain a paying agent in Luxembourg.
If any note is issued as a definitive note, payments on that note will be
made by check mailed to its holder of record on the applicable record date at
its address appearing on the register for that note. Alternatively, the holder
of one or more notes in definitive form that have an aggregate principal amount
of at least $1,000,000 may apply in writing to the trustee to have payments to
it made by wire transfer to a designated account at a financial institution in
New York City. The final payment, however, on those notes will be made only upon
surrender of those notes by the holder or its agent -- including any holder in
street name -- at the office or agency of the trustee or the paying agent.
EXPECTED MATURITIES
The following table sets forth the expected weighted average life, the
expected final payment date and the final maturity date of each class of
exchange notes and the initial Class D Notes. The expected final payment date
for any note is the date on which the final payment of principal of and interest
on that note is expected to be made if all the assumptions described under "Note
Payment Assumptions" prove correct. The final maturity date for any note is the
date on which all principal not previously paid is due and payable. The actual
final payment date for each of the notes is likely to occur earlier or later
than that note's expected final payment date as a result of numerous factors, in
particular that those assumptions are unlikely to correspond to actual
experience. Aircraft Finance may also refinance or otherwise redeem notes before
their expected final payment dates.
104
<PAGE> 109
WEIGHTED AVERAGE LIVES, EXPECTED FINAL
PAYMENT DATES AND FINAL MATURITY DATES OF THE INITIAL NOTES
<TABLE>
<CAPTION>
EXPECTED WEIGHTED EXPECTED FINAL
CLASS OF INITIAL NOTES AVERAGE LIFE IN YEARS PAYMENT DATE FINAL MATURITY DATE
- ---------------------- --------------------- --------------- -------------------
<S> <C> <C> <C>
Class A-1 Notes........ 5.0 May 15, 2004 May 15, 2024
Class A-2 Notes........ 4.9 June 15, 2008 May 15, 2024
Class B Notes.......... 10.0 May 15, 2016 May 15, 2024
Class C Notes.......... 10.4 July 15, 2016 May 15, 2024
Class D Notes.......... 11.0 August 15, 2016 May 15, 2024
</TABLE>
SOURCES OF PAYMENT OF PRINCIPAL AND INTEREST
Payments on the notes will be made only after the expenses, with specified
exceptions, of Aircraft Finance and its subsidiaries have been paid and
otherwise in the order of the payment priorities described under "-- Priority of
Payments". The sole sources of payment for the exchange notes, the Class D Notes
and the other obligations of Aircraft Finance and its subsidiaries are funds
derived from the aircraft owned by them -- rent and other payments under
existing leases and any future leases, insurance proceeds, sales proceeds and
any payments by General Electric Capital Corporation as to undelivered
aircraft -- liquidity reserves funded out the proceeds of the Initial Notes or
that may be funded out of the proceeds of future notes or provided through any
future credit facilities, lease reserves provided by General Electric Capital
Corporation and lessees, net payments under swap and other hedging agreements,
investment earnings and net proceeds from the sale of any notes issued to
refinance other notes.
If there are insufficient funds on any payment date to pay interest on any
notes, Aircraft Finance may deposit all or part of the funds needed to pay
interest on any subclass of notes. Those deposits, if provided, may be made only
out of funds provided to Aircraft Finance by the holders of its beneficial
interests. Those deposits as to any subclass of notes are to be made into the
note account for that subclass of notes and are not subject to the payment
priorities described under "-- Priority of Payments".
INTEREST
Each note bears interest on its outstanding principal balance, payable
monthly in arrears on each payment date. Interest accrues for a period from and
including a payment date to but excluding the next payment date or, where
applicable, the final payment date for any note.
The interest rate for the exchange notes and the initial Class D Notes are
as follows:
<TABLE>
<S> <C>
Class A-1................................... LIBOR(1) + 0.48%
Class A-2................................... LIBOR + 0.50%
Class B..................................... LIBOR + 1.15%
Class C..................................... 8.00%
Class D..................................... 11.00%
</TABLE>
- ---------------
(1) The average one-month LIBOR for the month of November 1999 was 5.58%.
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<PAGE> 110
The initial Class C Notes were issued with original issue discount. See
"U.S. Federal Income Tax Consequences -- Taxation of U.S. Holders" for a
description of the related income tax consequences.
Interest accrued at the respective rates referred to above and the
equivalent rates for any future notes and unpaid for any class of notes on any
payment date and interest at that rate on any unpaid interest for that class are
referred to as the "Interest Amount". The Interest Amount for any class of notes
has a higher payment priority than the other interest components on the notes,
namely, Maturity Step-Up Interest, Registration Step-Up Interest and Additional
Interest.
If Aircraft Finance does not pay any Class A-1 Note on or before its
expected final payment date, that note will bear additional interest of 0.50%
per annum. This additional interest is referred to as "Maturity Step-Up
Interest". The initial notes provide and future notes may provide for an
increase in the rate of interest upon a failure by Aircraft Finance to satisfy
any registration requirements undertaken by it in issuing those notes. This
increase in interest is referred to as "Registration Step-Up Interest". Accrued
interest and premium on any class or subclass of notes that is not paid when due
on any payment date will bear interest at the then current interest rate for
that class or subclass of notes. Interest on past due interest at the regular
rate for any note is included in the Interest Amount and has the same payment
priority as regularly accruing interest. Any additional interest on past due
interest and interest on past due premium is referred to as "Additional
Interest". Additional Interest will have a lower payment priority, and the
payment of those amounts is not and will not be rated by the rating agencies
rating the notes.
Interest on the Class A-1, Class A-2 and Class B Notes will be calculated
on the basis of a 360-day year and the actual number of days elapsed in the
accrual period. Interest on the Class C and Class D Notes will be calculated on
the basis of one-twelfth of an annual interest payment on the outstanding
principal balance and in the case of an incomplete accrual period on the basis
of a 360-day year consisting of twelve 30-day months.
The rate of interest payable on the Class A and Class B Notes is based on
LIBOR. Aircraft Finance and the administrative agent have entered into an
agreement with the Bankers Trust to act as the reference agent and in that
capacity to determine LIBOR. The reference agent has agreed to determine LIBOR
for a reference date that is two business days before the start of each interest
accrual period. On each reference date, the reference agent is to determine
LIBOR as the per annum offered rate for deposits in U.S. dollars for a period of
one month that appears on the display designated as page "3750" on the Telerate
Monitor or such other page or service as may replace it for the purpose of
displaying LIBOR of major banks for U.S. dollar deposits at approximately 11:00
a.m., London time.
If that offered rate is replaced by the corresponding rates of more than
one bank, the reference agent is to determine LIBOR based on the average of the
rates that appear. If no offered rates appear or the Telerate page is
unavailable, the reference agent is to request each of the banks whose offered
rates normally appear or substitute reference banks in London to provide the
reference agent with its offered quotation to prime banks for dollar deposits in
London for the next accrual period at 11:00 a.m., London time, on the reference
date. LIBOR will be the average of the rates so quoted.
If the reference agent does not receive at least two quotations on a
reference date, the reference agent is to determine LIBOR for that reference
date based on the average of the
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<PAGE> 111
U.S. dollar lending rates that New York City banks selected by it are then
quoting to leading European banks for the next accrual period. If, again, the
reference agent does not receive at least two quotations, LIBOR as of that
reference date is to be LIBOR for the last preceding reference date. If the
reference agent does not determine LIBOR for any reason, the administrative
agent has agreed to do so on the same basis.
Once the reference agent has determined LIBOR, the administrative agent is
to calculate the interest rate for each of the Class A-1, Class A-2 and Class B
Notes and the amount of interest payable on the relevant payment date on each of
those notes. The reference agent's determination of LIBOR and the administrative
agent's determination of the interest rate and the interest amount of each
subclass of notes will be conclusive and binding upon all parties in the absence
of manifest error.
The administrative agent has agreed to give notice of the applicable LIBOR,
the payment date, the interest rate for each subclass notes for each interest
accrual period and the amount of interest on each subclass of notes to Aircraft
Finance, the listing agent and paying agent in Luxembourg, the trustee, the
rating agencies rating the notes, the servicer, the financial advisor and the
capital markets advisor. Holders of the notes may obtain that information at the
offices of the Luxembourg listing and paying agents or from the reports provided
to them by the trustee for the relevant payment date.
The initial reference agent is Bankers Trust. Aircraft Finance is entitled
to terminate the appointment of the reference agent at any time on 30 days'
notice and to appoint a replacement reference agent in its place. Notice of any
such termination will be given to the holders of the notes that bear interest at
a floating rate. The reference agent may not be removed or resign unless a
successor has been appointed.
PRINCIPAL AMORTIZATION
On each payment date if there are sufficient funds available, Aircraft
Finance will pay the Minimum Principal Payment Amount for each class of notes,
the Supplemental Principal Payment Amount for the Class A and Class B Notes only
and the Scheduled Principal Payment Amount for each class of notes. Payments of
principal in those amounts will be made as to any class of notes only after the
payment of all amounts having a higher payment priority, as set forth under
"-- Priority of Payments". If there are still available funds after payment of
the above principal installments and other amounts having a higher payment
priority, the excess funds will be paid to reduce principal of the notes in
order of classes. A reduction in principal from excess funds is not treated as a
redemption under the indenture and will not be paid with any premium, except in
the limited circumstances described under "-- Premium Sale".
The "Minimum Principal Payment Amount" for any class of notes on any
payment date is the difference, if positive, between the outstanding principal
balance of that class and the Minimum Target Principal Balance for that class.
The "Minimum Target Principal Balance" for any class of notes on any
payment date is determined by multiplying (1) the applicable "Minimum Class
Percentage" for that class of notes set forth in Appendix 5 to this prospectus
times (2) the Assumed Portfolio Value. If the outstanding principal balance of
the Class A Notes on any payment date is greater than the Adjusted Portfolio
Value, the Minimum Target Principal Balance of the Class A Notes will be the
Scheduled Target Principal Balance of the Class A Notes. The Minimum Class
Percentages will change as additional aircraft are acquired.
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<PAGE> 112
The "Assumed Portfolio Value" on any payment date is the total for all
aircraft in Aircraft Finance's portfolio on the fourth business day before the
payment date of the values obtained for each such aircraft by:
(1) dividing the Depreciation Factor for an aircraft on that fourth day by
the Depreciation Factor for that aircraft on May 5, 1999 in the case of any of
the initial 36 aircraft or the date it was acquired in the case of any other
aircraft and
(2) multiplying the result times the initial appraised base value of that
aircraft on May 5, 1999 or its acquisition date, as applicable.
The Assumed Portfolio Value for the initial 36 aircraft is set forth on
Appendix 4 to this prospectus.
The "Depreciation Factor" for an aircraft is:
(1-(k x n)) x (1 + g)(n)
where:
<TABLE>
<S> <C> <C>
n = the age of that aircraft expressed in years
k = 0.9
---------------------------
its expected useful life
g = 0.015
</TABLE>
For purposes of the calculation of the Depreciation Factor, the expected useful
life of each of the initial 36 aircraft is contractually deemed to be 25 years
or, in the case of each DC-10 aircraft, 30 years. The expected useful life
deemed to be contractually applicable for any other aircraft will be determined
by Aircraft Finance.
The Depreciation Factor produces a "depreciation curve" that assumes that
the value of an aircraft will decline on an accelerated basis as the aircraft
ages. Aircraft Finance has used the Depreciation Factors solely to determine
repayments of principal of the notes and to calculate the amount to be paid by
General Electric Capital Corporation for any initial aircraft that is not timely
delivered. They do not correlate to or predict actual declines in aircraft
values over any period. Furthermore, variables used to calculate the
Depreciation Factors will change as the composition of Aircraft Finance's
portfolio of aircraft changes through acquisitions and sales of aircraft.
Finally, Aircraft Finance may also apply different depreciation factors to
express the assumed decline in values of aircraft acquired in the future.
The "Adjusted Portfolio Value" on any payment date is the total for all
aircraft in Aircraft Finance's portfolio on the fourth business day before the
payment date of the values obtained for each such aircraft by
(1) multiplying the Adjusted Base Value of an aircraft by its Depreciation
Factor on the calculation date and
(2) dividing the result by its Depreciation Factor as of the date of its
most recent appraisal.
The "Adjusted Base Value" of an Aircraft on the fourth business day before
any payment date is the average of the most recent base values appraisals
obtained for that aircraft.
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<PAGE> 113
The "Supplemental Principal Payment Amount" for the Class A Notes and Class
B Notes on any payment date is the difference, if positive, between the
outstanding principal balance of that class, as reduced by any Minimum Principal
Payment Amount to be paid on that class, and the Supplemental Target Principal
Balance for that class.
The "Supplemental Target Principal Balance" for the Class A Notes and Class
B Notes is determined by multiplying (1) the applicable "Supplemental Class
Percentage" for that class set forth in Appendix 5 to this prospectus and (2)
the Assumed Portfolio Value. The Supplemental Class Percentages will change as
additional aircraft are acquired.
The "Scheduled Principal Payment Amount" for any class of notes on any
payment date is the difference, if positive, between the outstanding principal
balance of that class (as reduced by any Minimum Principal Payment Amount and,
in the case of the Class A Notes and the Class B Notes, any Supplemental
Principal Payment Amount to be paid on that class) and the Scheduled Target
Principal Balance.
The "Scheduled Target Principal Balance" for:
(1) the Class A Notes on any payment date is determined by multiplying (a)
the applicable "Scheduled Class Percentage" for that class set forth in Appendix
5 to this prospectus times (b) the lesser of the Assumed Portfolio Value and
105% of the Adjusted Portfolio Value; and
(2) the Class B Notes, the Class C Notes and the Class D Notes is
determined by multiplying the (a) the applicable Scheduled Class Percentage set
forth in Appendix 5 to this prospectus times (b) the Assumed Portfolio Value.
The mathematical formulas described above are used to determine principal
payments on any payment date based on the revenues collected during the prior
month. These formulas are designed to produce payments that would result in each
class of notes being repaid in full on its respective expected maturity date if
all the assumptions regarding the expected revenues of Aircraft Finance
described under "Note Payment Assumptions" prove to be correct.
Actual revenues will, however, vary from those assumed and may vary
significantly. In the case of revenue shortfalls future revenues will be
allocated first to principal payments that have a higher payment priority until
that category of principal is reduced to its "expected" or "target" level for
the relevant payment date. The target level for each payment category on each
payment date is in turn determined as a percentage of a predetermined or assumed
value of the aircraft portfolio adjusted for depreciation. These percentages and
assumed value are shown in the indicated appendices to this prospectus.
In order to balance the effect of revenue variations, these formulas also
provide for more than one calculation for each class at different payment
priorities among subclasses of notes. The categories are designated as
"Minimum", "Supplemental" and, in the case of the Class A and B Notes,
"Scheduled".
PREMIUM SALE
If one or more aircraft are sold before the May 2010 payment date other
than by the security trustee in the exercise of remedies under the security
trust agreement, the proceeds of the sale will be included in the funds
available for distribution on the next payment date. If the sale of the relevant
aircraft occurs after the fourth business day prior to a payment date but before
that payment date, the distribution will instead be made on the second next
payment date. As part of that distribution, the administrative agent will
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calculate a Sale Premium to be paid to the holders of the Class C Note and the
Class D Notes in accordance with the payment priorities set forth under
"-- Priority of Payments".
"Sale Premium" is as of the fourth business day prior to a payment date:
(1) in the case of the initial Class C Notes, the excess, if any, of (a)
the Projected Principal Payment Amounts for that class and the scheduled
Interest Amount on that amount to and including the expected final payment date
discounted to present value at a discount rate of 0.50% plus the applicable
treasury yield over (b) the sum of those Projected Principal Payment Amounts;
(2) in the case of the initial Class D Notes and a distribution occurring
prior to May 15, 2004, the excess, if any, of (a) the sum of (x) the Projected
Principal Payment Amounts of that class and the scheduled Interest Amount on
that amount to but not including May 15, 2004 plus (y) the applicable Redemption
Premium times the sum of the Projected Principal Payment Amounts of those notes
falling due on May 15, 2004 and each subsequent payment date discounted as of
May 15, 2004 to present value at a discount rate of 0.75% plus the applicable
treasury yield over (b) the sum of the Projected Principal Payment Amounts for
that class to and including the expected final payment date;
(3) in the case of the Initial Class D Notes and a distribution occurring
on or after May 15, 2004, the excess, if any, of (a) the applicable Redemption
Premium times the sum of the Projected Principal Payment Amounts on that class
to and including the expected final payment date over (b) the sum of those
Projected Principal Payment Amounts.
Sale Premium is designed to calculate a premium on only that portion of the
distributed principal that is in excess of the principal payments needed to
reduce the principal balance of the Class C Notes and the Class D Notes to the
level it should have if all expected installments are made. Sale Premium is not
payable on the initial Class A Notes or initial Class B Notes. Whether or not
any future class of notes will be entitled to any Sale Premium and, if so, the
manner of calculating it will be determined by Aircraft Finance.
REFINANCING
Aircraft Finance may repay all or any part of any class of notes on any
payment date with the proceeds of notes issued under the indenture. The issuance
of refinancing notes must satisfy indenture covenants, must be authorized by the
controlling trustees of Aircraft Finance and will be effective only after
receipt of a confirmation of the rating agencies rating the notes that they will
not lower, qualify or withdraw their ratings as a result. The proceeds of the
refinancing notes may be used to pay the Redemption Price of the notes to be
repaid, to pay accrued and unpaid interest on those notes and to fund cash
reserves. Any refinancing notes will have the same payment priority as the notes
of the class to which they belong and will not have a payment priority higher
than that of the Class A Notes.
The indenture treats the repayment of any notes with the proceeds of
refinancing notes as a redemption. As a result, the notice and other procedures
that apply to a redemption will apply to such a repayment. See "-- Redemption".
Aircraft Finance intends to refinance 100% of the outstanding principal
balance of the Class A-1 notes on their expected final payment date by selling
refinancing notes in the capital markets. Failure to repay any Class A-1 Notes
in full at its expected final payment
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date will not result in an indenture event of default. If the Class A-1 Notes
are not repaid in full on their expected final payment date, that subclass of
notes will convert automatically into a subclass of notes that has a principal
repayment schedule intended to ensure that the remaining outstanding principal
balance of the Class A-1 notes will be repaid in full on or before its final
maturity date in accordance with the Class A-1 notes pool factors set forth in
Appendix 6 to this prospectus.
REDEMPTION
Aircraft Finance may at its option redeem all or any part of any class of
notes on any payment date. An optional redemption may be made with the proceeds
of refinancing notes or funds provided by the holders of the beneficial interest
in Aircraft Finance but not out of amounts required to be deposited in the
collections account. Within each subclass of notes being redeemed in part, the
amount of the principal being prepaid will be applied pro rata among all notes
of that subclass. An optional redemption does not include the payment of
principal faster than the expected schedule of installments out amounts
deposited in the collections account.
REDEMPTIONS WITH A PREMIUM
Except in the case of an optional redemption for tax reasons or after the
acceleration of the notes, Aircraft Finance is required to pay a Redemption
Price that includes a premium to make an optional redemption of any notes,
including in a refinancing with refinancing notes. Aircraft Finance is in
addition required to pay all accrued and unpaid interest and Sale Premium on the
notes being redeemed to the date of redemption.
The "Redemption Price" is determined as follows:
(1) If Aircraft Finance redeems any initial Class A Notes or initial Class
B Notes, the Redemption Price equals the applicable Redemption Premium times the
principal amount being redeemed.
(2) If Aircraft Finance redeems any initial Class C Notes, the Redemption
Price equals the higher of (a) the sum of (x) the Projected Principal Payment
Amounts for those notes and the scheduled Interest Amount on those amounts to
and including the expected final payment date discounted to present value at a
discount rate of 0.50% plus the applicable treasury yield plus (y) the
difference between the principal amount being redeemed and the sum of those
Projected Principal Payment Amounts and (b) the principal amount being redeemed.
(3) If Aircraft Finance redeems any initial Class D Notes before May 15,
2004, the Redemption Price equals the higher of (a) the sum of (x) the Projected
Principal Payment Amounts of those notes and the scheduled Interest Amount on
those amounts to but not including May 15, 2004 plus the applicable Redemption
Premium times the sum of the Projected Principal Payment Amounts of those notes
falling on or after May 15, 2004 discounted as of May 15, 2004 to present value
at a discount rate of 0.75% plus the applicable treasury yield and (y) the
difference between the principal amount being redeemed and the sum of those
Projected Principal Payment Amounts and (b) the principal amount being redeemed.
(4) If Aircraft Finance redeems any initial Class D Notes on or after May
15, 2004, the Redemption Price equals the applicable Redemption Premium times
the principal amount being redeemed.
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The Redemption Price for any future notes will be established as part of
the terms of those notes. If Aircraft Finance makes an optional redemption after
the acceleration of the notes, the Redemption Price equals the outstanding
principal balance of the notes without premium.
The Redemption Price is designed to reflect a premium on only that portion
of the principal being redeemed that is in excess of the principal payment
needed to reduce the principal balance of the relevant class of notes to the
level it should have if all expected installments are made. In the case of the
Class A and Class B Notes, the premium on that excess principal is determined by
a declining percentage. In the case of the Class C Notes, the premium is
determined by discounting the expected principal payments that would remain had
all prior expected payments been timely made and interest on those payments to
present value using a discount rate based on the yield on applicable United
States Treasury securities. In the case of the Class D Notes, it is determined
by a combination of both approaches depending on the time of the redemption.
"Projected Principal Payment Amounts" means as of the relevant calculation
date the Applicable Percentage of the Assumed Principal Payments of the Class C
Notes or Class D Notes.
The "Applicable Percentage" is determined for any Class C Notes or Class D
Notes as of the relevant calculation date for the Sale Premium and the
Redemption Price, as follows:
(1) In the case of the Sale Premium, it is determined by dividing (a) the
excess, if any, of (x) the difference between (A) the principal balance of those
notes that would have remained outstanding had no aircraft sale occurred prior
to that calculation date and (B) the principal balance of those notes that would
have remained outstanding were the proceeds of the aircraft sale applied as
provided in "-- Priority of Payments" without paying any Sale Premium on either
class of notes over (y) the difference, if positive, between (A) the outstanding
principal balance of those notes as reduced by any principal payments that would
have been made had there been no aircraft sale and (B) the Assumed Principal
Balance of those notes by (b) the Assumed Principal Balance of those notes;
(2) In the case of the Redemption Price, it is determined by dividing (a)
the excess, if any, of (x) the principal amount of the notes being redeemed over
(y) the difference, if positive, between the outstanding principal balance of
those notes as reduced by any principal payments that would have been made had
there been no optional redemption and the Assumed Principal Balance of those
notes by (b) the Assumed Principal Balance of those notes.
"Assumed Principal Balance" means as of the relevant calculation date the
sum of the Assumed Principal Payments.
"Assumed Principal Payments" means as of the relevant calculation date each
of the principal payment amounts for the Class C Notes or Class D Notes, as
applicable, set forth opposite a date in Appendix 8 to this prospectus falling
after the related payment date and ending on the expected final payment date for
those notes or any other specified date.
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The "Redemption Premiums" of the Class A, Class B and Class D Notes are set
out below:
<TABLE>
<CAPTION>
REDEMPTION PREMIUM
--------------------------------------------
CLASS A-1 CLASS A-2 CLASS B CLASS D
REDEMPTION DATE NOTES NOTES NOTES NOTES
- --------------- --------- --------- ------- -------
<S> <C> <C> <C> <C>
After the Closing Date but prior to
May 15, 2000........................ 101.00% 101.00% 101.50% --
On or after May 15, 2000 but prior to
May 15, 2001........................ 100.75 100.75 101.25 --
On or after May 15, 2001 but prior to
May 15, 2002........................ 100.50 100.50 101.00 --
On or after May 15, 2002 but prior to
May 15, 2003........................ 100.25 100.25 100.75 --
On or after May 15, 2003 but prior to
May 15, 2004........................ 100.00 100.25 100.50 --
On or after May 15, 2004 but prior to
May 15, 2005........................ 100.00 100.00 100.25 105.50%
On or after May 15, 2005 but prior to
May 15, 2006........................ 100.00 100.00 100.00 104.40
On or after May 15, 2006 but prior to
May 15, 2007........................ 100.00 100.00 100.00 103.30
On or after May 15, 2007 but prior to
May 15, 2008........................ 100.00 100.00 100.00 102.20
On or after May 15, 2008 but prior to
May 15, 2009........................ 100.00 100.00 100.00 101.10
On or after May 15, 2009.............. 100.00 100.00 100.00 100.00
</TABLE>
"Treasury Yield" means the interest rate, expressed as a semiannual decimal
and, in the case of United States Treasury bills, converted to a bond equivalent
yield, determined on the relevant calculation date to be the per annum rate
equal to the semiannual yield to maturity for United States Treasury securities
maturing on the Average Life Date of the relevant subclass of notes and trading
in the public securities markets either (1) as determined by interpolation
between the most recent weekly average yield to maturity for two series of
United States Treasury securities trading in the public securities markets, (a)
one maturing as close as possible to, but earlier than, the Average Life Date of
that subclass and (b) the other maturing as close as possible to, but later than
the Average Life Date of that subclass in each case as published in the most
recent H.15(519) statistical release published by the Board of Governors of the
Federal Reserve System or (2) if a weekly average yield to maturity for United
States Treasury securities maturing on the Average Life Date of that subclass is
reported in the most recent H.15(519), that weekly average yield to maturity.
For the purposes of this definition,
"Average Life Date" is, for any class of notes on any payment date, the
date that follows the applicable payment date by a period equal to (1) the sum
of the products of (a) the Projected Principal Payment Amount allocable to that
class of notes on each subsequent payment date and (b) the number of days
remaining until that subsequent
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payment date divided by (2) the outstanding principal balance of that class on
that payment date.
REDEMPTIONS WITHOUT PREMIUM
REDEMPTION FOR TAXATION PURPOSES. All payments of principal, interest and
premium made by Aircraft Finance on any note will be made without withholding or
deduction for or on account of any present or future taxes or duties of whatever
nature unless required by law. Should withholding or deduction be required by
law, Aircraft Finance is not obliged to pay any additional amounts in respect of
withholding or deduction.
If at any time:
(1) Aircraft Finance is or on the next payment date will be required to
make any withholding or deduction under applicable with respect to any payment
on any notes; or
(2) Aircraft Finance is or will be subject to any circumstance that results
or will result in any tax or other similar imposition that would materially
increase the cost to Aircraft Finance of making payments on any notes or of
complying with its obligations as to the notes; materially increase the
operating or administrative expenses of Aircraft Finance; or otherwise obligate
Aircraft Finance or any of its subsidiaries to make any material payment on, or
calculated by reference to, the amount of any sum received or receivable by or
on behalf of Aircraft Finance;
Aircraft Finance is to inform the trustee at that time of any such requirement
or imposition and to use its best efforts to avoid its effect. Aircraft Finance
may not take any action to avoid such an effect unless it first obtains a
confirmation from the rating agencies rating the notes that they will not lower,
qualify or withdraw their ratings as a result. If, after using its best efforts,
Aircraft Finance has not avoided the effects, Aircraft Finance may at its
election redeem all of the notes of any or all subclasses to which the
withholding or deduction applies on any payment date. In such an optional
redemption, Aircraft Finance must pay the outstanding principal balance each
subclass to be redeemed plus accrued and unpaid interest to the redemption date
but without premium. No optional redemption for tax reasons may occur more than
30 days prior to the time at which the relevant imposition is to become
effective.
REDEMPTION AFTER ACCELERATION. If the notes are accelerated, Aircraft
Finance may, at its election, redeem the notes in full on the next payment date
by written notice to the trustee delivered not less than 30 days and no more
than 45 days prior to the next payment date. In such an optional redemption,
Aircraft Finance must pay the Redemption Price plus accrued and unpaid interest
and any unpaid Sale Premium. The Redemption Price for this purpose is the
outstanding principal balance of the notes without premium.
METHOD OF REDEMPTION
The trustee is to give notice of any optional redemption at least 20 days
before the relevant redemption date to the holders of the notes of each affected
subclass. If a redemption is for less than all of the notes of any subclass,
notes of that subclass to be redeemed are to be repaid pro rata, to the extent
funds are available therefor. Aircraft Finance must deposit the funds necessary
for the redemption with the security trustee.
Each notice of redemption must state:
(1) the applicable redemption date;
(2) the trustee's arrangements for making payments;
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(3) the Redemption Price of the notes to be redeemed;
(4) that, in the case of a redemption any subclass in whole, the notes of
that subclass must be surrendered by the holder or its authorized agent to the
trustee to collect payment; and
(5) that, in the case of a redemption in whole, interest on the notes
called for redemption will cease to accrue on and after the redemption date
unless Aircraft Finance defaults.
Once a notice of a redemption in whole of a subclass of notes is published, that
subclass of notes will become due and payable on the redemption date stated in
that notice in the amounts stated above. All notes that are redeemed must be
surrendered to the trustee for cancellation and accordingly may not be reissued
or resold.
ADDITIONAL NOTES
Aircraft Finance may at any time issue additional notes under the indenture
to provide the funds to acquire additional aircraft and to fund cash reserves.
Additional notes may be issued as part of any outstanding subclass of notes or
as a separate subclass of any of the four classes of notes. Additional notes of
any subclass will have the same payment priority as other notes of the class to
which they belong. The priority of any subclass of notes as to other subclasses
of the same class will depend on the factors described under "-- Allocation of
Principal among Subclasses of Notes".
Additional notes may be sold through one or more public offerings or
private placements of securities or otherwise. Additional notes may provide that
they will bear Maturity Step-up Interest after their expected final payment date
and may establish any Redemption Price and any Sale Premium. Any issuance of
additional notes and the related acquisition of additional aircraft must satisfy
indenture covenants, must be authorized by the controlling trustees and will be
effective only after receipt of a confirmation from the rating agencies rating
the notes that they will not lower, qualify or withdraw their ratings as a
result.
DEFEASANCE
Aircraft Finance may at any time terminate all of its obligations under the
notes and the indenture, except for a limited number of continuing obligations.
The continuing obligations include those respecting the defeasance trust and
obligations to register the transfer or exchange of the notes, to replace
mutilated, destroyed, lost or stolen notes and to maintain a register for the
notes. If Aircraft Finance elects this option, called the legal defeasance
option, the notes may not be accelerated even if an indenture event of default
occurs. Holders will, instead, rely on the trust deposit referred to below for
the payment of interest when due and for the payment or principal upon maturity
or, if Aircraft Finance has also elected to redeem the notes, on the redemption
date specified by it.
Alternatively, Aircraft Finance may elect to terminate only its obligations
under the covenants described under "-- Indenture Covenants" and "-- Operating
Covenants". If Aircraft Finance elects this option, called the covenant
defeasance option, the notes may be accelerated only if the indenture event of
default arises under clauses (1), (2) or (3) set forth under "-- Indenture
Events of Default" or under clause (5) or (6) so set forth if applicable to
Aircraft Finance but not if applicable only to a subsidiary.
In the case of the covenant defeasance option, holders will also rely on
the trust deposit referred to below for the payment of interest when due and for
the payment of
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principal upon maturity or, if Aircraft Finance has also elected to redeem the
notes, on the redemption date specified by it. In addition, if an indenture
event of default permitting acceleration does occur, the trust deposit would be
used to pay amounts then due on each accelerated subclass of notes.
In order to exercise either defeasance option, Aircraft Finance must
irrevocably deposit in trust cash or obligations of the U.S. Government or
obligations of corporate issuers that are rated AAA (or equivalent) or higher by
the rating agencies rating the notes and mature within 3 years of the date of
defeasance. The deposit must be in such amounts as will be sufficient to pay all
principal or Redemption Price, accrued and unpaid interest and Sale Premium on
the notes to redemption or maturity and must comply with specified other
conditions. The other conditions include delivering to the trustee an opinion of
counsel to the effect that the holders of the notes will not recognize income,
gain or loss for United States federal income tax purposes as a result of such
deposit and defeasance and will be subject to United States federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred. In the case of
the legal defeasance option only, that opinion of counsel must be based on a
ruling of the IRS or other change in applicable United States federal income tax
law.
PRIORITY OF PAYMENTS
PRIORITY BEFORE ACCELERATION OF THE NOTES
On each payment date, the administrative agent will distribute or retain
all amounts on deposit in the collections account in the order of priority set
forth below. Payments of principal as to any class of notes will be allocated
among the subclasses of that class as described under "-- Allocation of
Principal among Subclasses". Any amount specified below will be paid only if all
amounts having a higher payment priority have been paid or retained in full.
(1) FIRST, to the expense account, an amount so that the amount on deposit
equals the Required Expense Amount;
(2) SECOND, the following amounts pro rata:
(a) to the holders of Class A Notes, the Interest Amount on the Class A
Notes, pro rata according to the Interest Amount due on the Class A Notes; and
(b) to each swap provider, any payment due under a swap agreement other
than subordinated swap payments, pro rata according to the amounts due;
(3) THIRD, to each provider of a primary eligible credit facility, any
amounts payable to it under the primary eligible credit facility other than
expenses and, to each cash collateral account that is a primary eligible credit
facility, an amount so that the amount on deposit equals the required amount for
that account;
(4) FOURTH, to retain in the collections account, cash reserves up to the
Senior Note Blockage Amount less aggregate amounts available for drawing under
any primary eligible credit facilities and on deposit in any cash collateral
account for the Class A Notes after giving effect to any transfer under clause
(3) above;
(5) FIFTH, to the holders of the Class A Notes, the Minimum Principal
Payment Amount for the Class A Notes;
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(6) SIXTH, to the holders of Class B Notes, the Interest Amount on the
Class B Notes, pro rata according to the Interest Amount due on the Class B
Notes;
(7) SEVENTH, pro rata, to each provider of a secondary eligible credit
facility, any amounts payable to it under the secondary eligible credit facility
other than expenses, and, to each cash collateral account that is a secondary
eligible credit facility, an amount so that the amount on deposit equals the
required amount for that account;
(8) EIGHTH, to retain in the collections account, cash reserves up to the
Mezzanine Note Blockage Amount less the amounts available for drawing under any
primary or secondary eligible credit facilities and on deposit in any cash
collateral accounts for the Class A or Class B Notes after giving effect to any
transfers under clauses (3) and (7) above;
(9) NINTH, to the holders of the Class B Notes, the Minimum Principal
Payment Amount for the Class B Notes;
(10) TENTH, to the holders of Class C Notes, the Interest Amount on the
Class C Notes, pro rata according to the Interest Amount due on the Class C
Notes;
(11) ELEVENTH, pro rata, to each provider of a tertiary eligible credit
facility, any amounts payable to it under the tertiary eligible credit facility
other than expenses and, to each cash collateral account that is a tertiary
eligible credit facility, an amount so that the amount on deposit equals the
required amount for that account;
(12) TWELFTH, to retain in the collections account, cash reserves up to the
Junior Note Blockage Amount less the amounts available for drawing under any
primary, secondary or tertiary eligible credit facilities and on deposit in any
cash collateral accounts for the Class A, Class B or Class C Notes after giving
effect to any transfers under clauses (3), (7) and (11) above;
(13) THIRTEENTH, to the holders of Class A Notes, the Supplemental
Principal Payment Amount for the Class A Notes;
(14) FOURTEENTH, to the holders of Class B Notes, the Supplemental
Principal Payment Amount for the Class B Notes;
(15) FIFTEENTH, to the holders of Class C Notes, the Minimum Principal
Payment Amount for the Class C Notes;
(16) SIXTEENTH, to the holders of the Class D Notes, the Interest Amount on
the Class D Notes pro rata according to the Interest Amount due on the Class D
Notes;
(17) SEVENTEENTH, pro rata, to each provider of a subordinate eligible
credit facility, any amounts payable to it under the subordinate eligible credit
facility other than expenses and, to each cash collateral account that is a
subordinate eligible credit facility, an amount so that the amount on deposit is
equal to the required amount for that collateral account;
(18) EIGHTEENTH, to retain in the collections account, cash reserves up to
the Subordinate Note Blockage Amount less the amounts available for drawing
under any eligible credit facilities on deposit in any cash collateral accounts
for the Class A, Class B, Class C or Class D Notes after giving effect to any
transfers under clauses (3), (7), (11) and (17) above;
(19) NINETEENTH, to the holders of Class D Notes, the Minimum Principal
Payment Amount for the Class D Notes;
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(20) TWENTIETH, to the expense account, an accrual for expenses other than
aircraft modification payments and refinancing expenses that are anticipated to
become due between the next payment date and the fifth next payment date in the
amount the administrative agent reasonably determines should be accrued;
(21) TWENTY-FIRST, to the holders of notes, all accrued and unpaid Maturity
Step-Up Interest, Registration Step-Up Interest and Additional Interest in order
of seniority by alphabetical designation among the classes of notes but pro rata
among the subclasses of each class according to the amount of that interest due;
(22) TWENTY-SECOND, to the holders of Class A Notes, the Scheduled
Principal Payment Amount for the Class A Notes;
(23) TWENTY-THIRD, to the holders of Class B Notes, the Scheduled Principal
Payment Amount for the Class B Notes;
(24) TWENTY-FOURTH, to the holders of Class C Notes, the Scheduled
Principal Payment Amount for the Class C Notes;
(25) TWENTY-FIFTH, to the holders of Class D Notes, the Scheduled Principal
Payment Amount for the Class D Notes;
(26) TWENTY-SIXTH, to the owner trustee account, the amount needed to
reimburse amounts provided to Aircraft Finance by its beneficial interest
holders to make up any interest shortfalls for distribution by the owner trustee
to the holders of the beneficial interests of Aircraft Finance;
(27) TWENTY-SEVENTH, to the holders of the Class C Notes, the Class D
Notes, any refinancing notes and any additional notes, any Sale Premium as of
the calculation date for that Payment Date and any unpaid Sale Premium, in order
of seniority by alphabetical designation among those notes but pro rata among
the subclass of those notes according to the amount of Sale Premium due;
(28) TWENTY-EIGHTH, to the expense account, an accrual for any aircraft
modification payments or refinancing expenses in the amount the administrative
agent determines to accrue;
(29) TWENTY-NINTH, to the holders of Class A Notes, the outstanding
principal balance of the Class A Notes;
(30) THIRTIETH, to the holders of Class B Notes, the outstanding principal
balance of the Class B Notes;
(31) THIRTY-FIRST, to the holders of Class C Notes, the outstanding
principal balance of the Class C Notes;
(32) THIRTY-SECOND, to the holders of Class D Notes, the outstanding
principal balance of the Class D Notes;
(33) THIRTY-THIRD, to swap providers, payments under swap agreements that
are subordinated by the relevant swap agreement;
(34) THIRTY-FOURTH, to the servicer, the Additional Servicing Fees; and
(35) THIRTY-FIFTH, to the owner trustee for distribution to the holders of
the beneficial interests of Aircraft Finance, all remaining amounts.
The payment priorities provide for cash reserves to be retained in the
collections account before payments having a lower payment priority may be made.
No transfer will
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be made following clause (4), (8), (12) or (18), respectively, except to the
extent cash reserves on deposit in the collections account exceed the amounts to
be retained as provided in such clauses. The reserves are intended to provide a
source of liquidity for the payment of interest, expense, swap payments and
other items in accordance with the priorities set forth above that are not
subordinated to the Interest Amount on the notes and for payments on the notes
that rank senior in priority to the payment priority clause under which those
cash reserves were retained. As of the date of this prospectus, the total cash
reserves were $52 million.
If the cash reserves reduce to below the Senior Note Blockage Amount,
Aircraft Finance may continue to pay the Required Expense Amount, swap payments
that are not subordinated to the Interest Amount on the notes and the Interest
Amount on the Class A Notes but may not make any payment that has a lower
payment priority until cash reserves are replenished to that amount. Likewise,
if the cash reserves reduce to below the Mezzanine Note Blockage Amount, the
Junior Note Blockage Amount or the Subordinated Note Blockage Amount, Aircraft
Finance may continue to pay the Interest Amount on the Class B Notes, the Class
C Notes or the Class D Notes, respectively, but may not make any payment that
has a lower respective priority.
The required levels of cash reserves will automatically reduce as the
principal balance of the classes of the notes reduces below the target level set
forth in the indenture. The "Senior Note Blockage Amount" is initially $33
million but will reduce to $24 million on the Payment Date on which the
outstanding principal balance of the Class A Notes has reduced to $24 million or
less. The "Mezzanine Note Blockage Amount" is initially $43 million but will
reduce to the sum, when less than $43 million, of the Senior Note Blockage
Amount and the outstanding principal balance of the Class B Notes. The "Junior
Note Blockage Amount" is initially $48 million but will reduce to the sum, when
less than $48 million, of the Mezzanine Note Blockage Amount and the outstanding
principal balance of the Class C Notes. The "Subordinate Note Blockage Amount"
is initially $52 million but will reduce to the sum, when less than $52 million,
of the Junior Note Blockage Amount and the outstanding principal balance of the
Class D Notes. Once the outstanding principal balance of the notes is $24
million or less, all blockage amounts will be reduced to zero. Aircraft Finance
may also unilaterally reduce any reserve level if it obtains a confirmation from
the rating agencies rating the notes that they will not lower, qualify or
withdraw their ratings as a result.
Aircraft Finance may arrange for one or more credit facilities. These
facilities may consist of letters of credit, guarantees or other credit
facilities that meet criteria specified in the indenture or cash collateral
accounts in the name of the security trustee. Eligible credit facilities may be
designated as primary, secondary, tertiary or subordinate depending on the class
of notes that they support. Amounts available for drawing or on deposit in any
eligible credit facility will be credited against the related reserve levels
indicated above. Providers of eligible credit facilities will be reimbursed
under the terms of those facilities and cash collateral accounts will be
replenished to a required amount established by Aircraft Finance but in each
case only within the respective payment priorities set forth above. There are
currently no cash collateral accounts or other credit facilities.
"Required Expense Amount" means the amount of expenses of the Aircraft
Finance group due and payable on the relevant calculation date or reasonably
anticipated to become due and payable before the payment date next succeeding
the following calculation date to the extent those expenses consist of expenses
other than aircraft modification payments and refinancing expenses or any
aircraft modification payments or refinancing
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expenses in respect of which an accrual was previously made by a deposit in the
expense account whether or not any such accrual has been previously used to pay
any other expense, but excluding any portion of the accrual previously used to
pay any aircraft modification payments or refinancing expenses. The Required
Expense Amount is determined after giving effect to any withdrawal from any
lessee funded account in which lessee segregated funds are kept or any drawing
upon credit support provided by a lessee that is then available for the payment
of any expense.
ALLOCATION OF PRINCIPAL AMONG SUBCLASSES OF NOTES. If the amount available
on any payment date to pay principal to any class of notes at any level of
payment priority described in "-- Priority of Payments" is insufficient to pay
all subclasses of that class of notes, the amount so payable will be allocated
to those subclasses in the following order of priority:
(1) To each subclass in order of issuance, the difference, if positive,
between (a) the outstanding principal balance of that subclass and (b) the
applicable extended pool factor set forth in Appendix 7 to this prospectus times
the initial principal balance of that subclass when it was issued. If two or
more subclasses were issued on the same date, principal amount will be applied
to each of those subclasses pro rata according to the amount so calculated.
(2) To each subclass, the difference, if positive, between (a) the
outstanding principal balance of that subclass as reduced by any payment under
clause (1) above and (b) the applicable pool factor set forth in Appendix 6 to
this prospectus times the initial principal balance of that subclass when it was
issued pro rata according to the amount so calculated.
(3) To each subclass that has an expected final payment date on or before
that payment date in order of issuance, the balance up to its outstanding
principal balance. If two or more subclasses were issued on the same date, the
balance will be applied in order of the earliest expected final payment date.
Likewise, if two or more subclasses have the same expected final payment date,
the balance will be applied pro rata according to the outstanding principal
balance of each of those subclasses as reduced by any payments under clauses (1)
and (2) above.
(4) To each subclass that has an excess amortization date on or before that
payment date, the balance up to its outstanding principal balance, pro rata
according to the outstanding principal balance of each of those subclasses as
reduced by any payments under the above clauses.
(5) To each subclass in order of the earliest expected final payment date,
the balance up to its outstanding principal balance. If two or more subclasses
have the same expected final payment date, the balance will be applied pro rata
according to the outstanding principal balance of each of those subclasses as
reduced by any payments under the above.
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The "excess amortization date" for each subclass of the initial notes is:
<TABLE>
<CAPTION>
EXCESS
CLASS OF INITIAL NOTES AMORTIZATION DATE
- ---------------------- -----------------
<S> <C>
Class A-1...................................... May 15, 2004
Class A-2...................................... June 15, 1999
Class B........................................ June 15, 1999
Class C........................................ July 15, 2016
Class D........................................ May 15, 2009
</TABLE>
PRIORITY OF PAYMENTS AFTER ACCELERATION
If the notes have been accelerated, the priorities described above under
"-- Priority of Payments Before Acceleration" will not apply and all amounts
will instead be applied in the following order:
(1) FIRST, to the expense account, an amount so that the amount on deposit
equals the Required Expense Amount;
(2) SECOND, pro rata, to each provider of any primary eligible credit
facility, any amounts payable to it under the primary eligible credit facility
other than expenses and, to each cash collateral account that is a primary
eligible credit facility, an amount so that the amount on deposit equals the
required amount for that account;
(3) THIRD, pro rata
(a) to the holders of the Class A Notes, the Interest Amount on, and all
outstanding principal of, that class pro rata according to the amount of the
principal of that class and
(b) pro rata to any swap provider, any senior swap payments due under
any swap agreement;
(4) FOURTH, to the holders of the Class A Notes, all Maturity Step-up
Interest, Registration Step-up Interest, Additional Interest and redemption
premium, pro rata according to the amount due;
(5) FIFTH, pro rata, to each provider of a secondary eligible credit
facility, any amounts payable to it under the secondary eligible credit facility
other than expenses and, to any cash collateral account that is a secondary
eligible credit facility, an amount so that the amount on deposit equals the
required amount for that account;
(6) SIXTH, to the holders of the Class B Notes, all accrued and unpaid
interest and interest and redemption premium on, and all outstanding principal
of, that class, pro rata according to the amount due;
(7) SEVENTH, pro rata, to each provider of a tertiary eligible credit
facility, any amounts payable to it under the tertiary eligible credit facility
other than expenses and, to each cash collateral account that is a tertiary
eligible credit facility, an amount so that the amount on deposit equals the
required amount for that account;
(8) EIGHTH, to the holders of the Class C Notes, all accrued and unpaid
interest, Sale Premium and redemption premium on, and all outstanding principal
of, that class, pro rata according to the amount due;
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(9) NINTH, pro rata, to each provider of a subordinate eligible credit
facility, any amounts payable to it under the subordinate eligible credit
facility other than expenses and, to each cash collateral account that is a
subordinate eligible credit facility, an amount so that the amount on deposit
equals the required amount for that account;
(10) TENTH, to the holders of Class D Notes, all accrued and unpaid
interest, Sale Premium and redemption premium on, and all outstanding principal
of, that class pro rata according to the amount due;
(11) ELEVENTH, pro rata, to any swap provider, the amounts of subordinated
swap payments due under any swap agreement; and
(12) TWELFTH, to the owner trustee for distribution to holders of the
beneficial interests of Aircraft Finance, all remaining amounts.
INDENTURE COVENANTS
NO RELEASE OF OBLIGATIONS
Aircraft Finance has agreed that it will not take, or knowingly permit any
subsidiary to take, any action that would amend, terminate or discharge or
prejudice the validity or effectiveness of the indenture, the security trust
agreement, the master aircraft purchase agreement, the administrative agency
agreement, the financial advisory agreement, the servicing agreement, any
servicing agreement with UniCapital (if entered into) or the capital markets
advisory agreement or permit any party to any of those agreements to be released
from its obligations, except, in each case, as permitted or contemplated by the
terms of the agreement.
Aircraft Finance may, however, terminate any of those agreements in
connection with its replacement with an agreement on terms substantially no less
favorable to Aircraft Finance and its subsidiaries than the agreement being
terminated. The foregoing restriction also does not apply if the controlling
trustees of Aircraft Finance determine in the resolution authorizing the action
to be permitted or taken or the release to be given that the action or release
does not materially and adversely affect the interests of the holders of the
notes and Aircraft Finance has provided notice to the rating agencies rating the
notes. Aircraft Finance, however, may not in any case take any action that would
result in any amendment or modification to any conflicts standard or duty of
care in any of those agreements. In addition, there must be at all times an
administrative agent for the services now provided by the administrative agent
to Aircraft Finance, a financial advisor and a servicer for all aircraft in
Aircraft Finance's portfolio.
LIMITATION ON ENCUMBRANCES
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, create, incur, assume or suffer to exist any mortgage, pledge,
lien, encumbrance, charge or security interest over or with respect to any asset
of Aircraft Finance or any subsidiary, including any ownership interests and any
indebtedness of any subsidiary held by Aircraft Finance or another subsidiary.
This restriction does not apply to funds of lessees required to be segregated
from Aircraft Finance's other funds under the terms of any lease. Encumbrances
include any conditional sale, any sale with recourse against the sellers or any
affiliate of the sellers under the master aircraft purchase agreement and any
agreement to give any security interest.
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The foregoing provision does not preclude:
(1) any lien for taxes, assessments and governmental charges or levies not
yet due and payable or that are being contested in good faith by appropriate
proceedings;
(2) any liens of a repairer, carrier or hanger keeper on any aircraft
arising in the ordinary course of business by operation of law, any engine or
parts-pooling arrangements or any other similar lien;
(3) any lien or encumbrance on any aircraft, engines or parts permitted
under a lease of that property, other than liens or encumbrances created by the
lessor;
(4) any liens created by or through or arising from debt or liabilities or
any act or omission of any lessee in each case either in contravention of the
relevant lease (whether or not the lease has been terminated) or without the
consent of the relevant lessor; if the lessor becomes aware of such a lien, the
lessor must use commercially reasonable efforts to have the lien lifted;
(5) any head lease, lease, conditional sale agreement or purchase option
under the lease of an aircraft existing on May 5, 1999 with respect to the
initial 36 aircraft or on the date the aircraft is acquired by Aircraft Finance
or any subsidiaries with respect to any initial or future aircraft or any
aircraft agreement meeting the requirements of clause (3) or (4) of the second
paragraph under "-- Limitation on Aircraft Sales";
(6) any lien for air navigation authority, airport landing, gate or
handling (or similar) charges or levies;
(7) any lien created in favor of Aircraft Finance, any subsidiaries or the
security trustee;
(8) any encumbrance arising under an eligible credit facility;
(9) any lien not referred to in clauses (1) through (8) above that would
not adversely affect the owner's rights and does not exceed the greater of 1% of
the aggregate initial appraised value of Aircraft Finance's portfolio of
aircraft or $250,000 per aircraft;
(10) any security interest created or required to be created under the
security trust agreement;
(11) any encumbrance over rights in or derived from any leases, if Aircraft
Finance obtains a confirmation from the rating agencies that they will not
lower, qualify or withdraw their ratings of the notes as a result and if the
transaction or series of transactions resulting in the encumbrance, taken as a
whole, does not materially and adversely affect the amount of collections that
would have been received by Aircraft Finance and its subsidiaries from the lease
had the encumbrance not been created; or
(12) any other encumbrance the validity or applicability of which is being
contested in good faith in appropriate proceedings by Aircraft Finance or any
subsidiaries.
LIMITATION ON RESTRICTED PAYMENTS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to,
(1) declare or pay any dividend or make any distribution on its ownership
interests held by persons other than Aircraft Finance or any subsidiaries,
except that Aircraft Finance may make payments on its beneficial interests out
of funds distributed to the Owner Trustee as described under "-- Priority of
Payments";
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(2) purchase, redeem, retire or otherwise acquire for value any beneficial
interest in Aircraft Finance or any ownership interest of its subsidiaries held
by and on behalf of persons other than Aircraft Finance, any subsidiary or other
persons permitted under the requirements described in clause (2)(b) under
"-- Limitation on the Issuance, Delivery and Sale of Equity Interests";
(3) make any interest, principal or premium, if any, payment on the notes
or make any voluntary or optional repurchase, defeasance or other acquisition or
retirement for value of indebtedness of Aircraft Finance or any subsidiary that
is not owed to Aircraft Finance or any subsidiary other than in accordance with
the notes and the indenture, except out of funds other than collections, if any
new notes of Aircraft Finance issued in connection with that action rank pair
passu with the notes being repurchased, defeased, acquired or retired, the
controlling trustees determine that the action does not materially and adversely
affect the holders of the notes and the rating agencies rating the notes confirm
that they will not lower, qualify or withdraw their ratings on the notes as a
result;
(4) make any investments, other than investments of funds in the accounts
permitted under the indenture, investments permitted under provision described
under "-- Limitation on Engaging in Business Activities", and investments in any
subsidiary that owns aircraft, if written notice of the organization or
acquisition of the subsidiary is given to each rating agency rating the notes.
For purposes of the above provision, the term "investment" means any loan
or advance to a person or entity, any purchase or other acquisition of any
beneficial interest, capital stock, warrants, rights, options, obligations or
other securities of a person or entity, any capital contribution to a person or
entity or any other investment in a person or entity. The term "investment" does
not include any obligation to make deferred or installment payments pursuant to
any agreement for the purchase of aircraft in clause (3) or (5) of the second
paragraph under "-- Limitation on Aircraft Sales" if Aircraft Finance or a
subsidiary retains a security interest in the relevant aircraft until all of
those obligations are discharged.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, create or otherwise suffer to exist any consensual encumbrance or
restriction of any kind on the ability of any subsidiary to:
(1) declare or pay dividends or make any other distributions permitted by
applicable law or purchase, redeem or otherwise acquire for value any beneficial
interest or other ownership interests of Aircraft Finance or any subsidiary;
(2) pay any indebtedness owed to Aircraft Finance or a subsidiary;
(3) make loans or advances to Aircraft Finance or a subsidiary; or
(4) transfer any of its property or assets to Aircraft Finance or any other
subsidiary.
The foregoing provision does not restrict any consensual encumbrances or
other restrictions:
(1) existing on May 5, 1999 with respect to the initial 36 aircraft or on
the date an aircraft is acquired with respect to any aircraft under the
transactional documents described in this prospectus and any amendments,
extensions, refinancings, renewals or replacements of those documents, if the
consensual encumbrances and restrictions in any
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amendment, extension, refinancing, renewal or replacement are no less favorable
in any material respect to the holders of the notes than those previously in
effect; or
(2) in the case of clause (4) in the prior paragraph, that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset or
that exist by virtue of any transfer of, agreement to transfer, option or right
with respect to, or consensual encumbrance on, any property or assets of
Aircraft Finance or any subsidiary not otherwise prohibited by the indenture.
This provision also does not restrict Aircraft Finance or any subsidiary
from creating, incurring, assuming or suffering to exist any encumbrances not
otherwise prohibited under the indenture.
LIMITATION ON ENGAGING IN BUSINESS ACTIVITIES
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, engage in any business or activity other than:
(1) (a) purchasing or otherwise acquiring, owning, holding, converting,
maintaining, modifying, managing, operating, leasing, re-leasing aircraft within
the limitations described under "-- Limitation on Aircraft Acquisitions";
(b) selling or otherwise disposing of aircraft within the limitations
described under "-- Limitation on Aircraft Sales"; and
(c) entering into all contracts and engaging in all related activities
incidental to those activities, including from time to time in the ordinary
course of business accepting, exchanging or holding promissory notes, contingent
payment obligations or equity interests of lessees or their affiliates issued in
connection with the bankruptcy, reorganization or other similar process of those
lessees or affiliates or in settlement of delinquent obligations or obligations
anticipated to be delinquent of those lessees or affiliates;
(2) providing loans to, and guaranteeing or otherwise supporting the
obligations and liabilities of, Aircraft Finance or any subsidiary, in each case
on such terms and in such manner as the controlling trustees of Aircraft Finance
see fit -- whether or not Aircraft Finance or the subsidiary derives a benefit
from doing so -- if the loan, guarantee or other support is provided in
connection with the purposes set forth in clause (1) above and Aircraft Finance
gives written notice of the loan, guarantee or other support to each rating
agency rating the notes;
(3) financing or refinancing the business activities described in clause
(1) above through the offer, sale and issuance of any securities of Aircraft
Finance, upon such terms and conditions as the controlling trustees see fit, for
cash or in payment or in partial payment for any property purchased or otherwise
acquired by Aircraft Finance or any subsidiary;
(4) engaging in currency and interest rate exchange transactions for the
purposes of avoiding, reducing, minimizing, hedging against or otherwise
managing the risk of any loss, cost, expense or liability arising, or that may
arise, directly or indirectly, from any change or changes in any interest rate
or currency exchange rate or in the price or value of Aircraft Finance's or any
of its subsidiaries' property or assets, within limits and with providers
specified in a resolution of the controlling trustees and submitted to the
rating agencies rating the notes, including but not limited to dealings, whether
involving purchases, sales or otherwise, in foreign currency, spot and forward
interest rate exchange
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contracts, forward interest rate agreements, caps, floors and collars, futures,
options, swaps, and any other currency, interest rate and other similar hedging
arrangements and such other instruments as are similar to, or derivatives of,
any of the foregoing;
(5) (a) establishing, promoting and aiding in promoting, constituting,
forming or organizing companies, trusts, syndicates, partnerships or other
entities of all kinds in any part of the world for the purposes set forth in
clause (1) above if Aircraft Finance gives written notice to each rating agency
rating the notes that the entity is set up in compliance with the indenture;
(b) acquiring, holding and disposing of shares, securities and other
interests in any such trust, company, syndicate, partnership or other entity;
and
(c) disposing of shares, securities and other interests in, or causing
the dissolution of, any existing subsidiary within the requirements described
under "-- Limitation on Aircraft Sales";
(6) taking out, acquiring, surrendering and assigning policies of insurance
and assurances with any insurance company or companies as Aircraft Finance or
any of its subsidiaries may think fit and to pay the related premiums; and
(7) entering into a servicing agreement with any UniCapital affiliate with
respect to aircraft purchased from UniCapital or any of its affiliates if
Aircraft Finance first obtains a confirmation from the rating agencies rating
the notes that they will not lower, qualify or withdraw their ratings as a
result and delivers to the trustee a resolution of the controlling trustees
approving the agreement.
LIMITATION ON INDEBTEDNESS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, incur, create, issue, assume, guarantee or otherwise become
liable for or with respect to, or become responsible for, the payment of,
indebtedness, contingently or otherwise and whether present or future. For ease,
the term "incur" is used for each such action.
The term "indebtedness" means, at any date of determination and without
duplication:
(1) all indebtedness of a person for borrowed money;
(2) all obligations of a person evidenced by bonds, debentures, notes or
other similar instruments;
(3) all reimbursements and other obligations of a person in respect of
letters of credit or other similar instruments;
(4) all obligations of a person to pay the deferred and unpaid purchase
price of property or services due more than six months after the date of
purchasing the property or service or taking delivery and title to the property
or the completion of the services and payment deferrals arranged primarily as a
method of financing the acquisition of the property or service;
(5) all obligations of a person under a lease of, or other agreement
conveying the right to use, any property that is required to be classified and
accounted for as a capital lease obligation under generally accepted accounting
principles in the United States;
(6) all indebtedness of other persons secured by a lien on any asset of a
person, whether or not such indebtedness is assumed by that person; and
(7) all indebtedness of other persons guaranteed by a person.
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The foregoing provision does not restrict:
(1) indebtedness in respect of any initial note issued on May 5, 1999 and
the exchange notes;
(2) indebtedness in respect of any refinancing notes or other indebtedness
issued in connection with the repurchase, defeasance, acquisition or retirement
for value of any initial notes or exchange notes, if
(a) Aircraft Finance receives a confirmation from the rating agencies
rating the notes that they will not lower, qualify or withdraw their ratings as
a result with respect to the refinancing notes or other indebtedness;
(b) taking into account the refinancing or repurchase, Aircraft Finance
receives a confirmation from the rating agencies rating the notes that they will
not lower, qualify or withdraw their ratings as a result; and
(c) the net proceeds of the refinancing notes or other indebtedness are
applied only (x) to repay the Redemption Price of the notes being refinanced or
repurchased and related transaction expenses, (y) to fund any cash collateral
account established for the refinancing notes and (z) for deposit into the
collections account as cash reserves at any existing or increased level;
(3) indebtedness in respect of guarantees by any Aircraft Finance group
member (other than as provided in clause (5) below) unless it would materially
and adversely affect the holders of the notes;
(4) indebtedness in respect of any additional notes, if
(a) the net proceeds of the additional notes are applied (w) to finance
the acquisition of additional aircraft where permitted as described under
"-- Limitation on Aircraft Acquisitions", (x) to pay related transaction
expenses, (y) to fund any cash collateral account established for those
additional notes and (z) for deposit into the collections account as cash
reserves at any existing or increased level;
(b) Aircraft Finance obtains a confirmation from the rating agencies
rating the notes that they will not lower, qualify or withdraw their ratings as
a result; and
(c) the additional notes and all other secured obligations will be
secured by the collateral under the security trust agreement;
(5) obligations to each seller of aircraft under each agreement for the
purchase of aircraft, any related lease assignment and assumption agreements and
other related documents, including any indebtedness owed to any lessee with
respect to maintenance contribution obligations;
(6) indebtedness under intercompany loans or any agreement between Aircraft
Finance or any of its subsidiaries if the indebtedness is evidenced by
promissory notes and Aircraft Finance provides written notice of the
indebtedness to each rating agency rating the notes; and
(7) indebtedness of Aircraft Finance under any eligible credit facility if
Aircraft Finance obtains a confirmation from the rating agencies rating the
notes that they will not lower, qualify or withdraw their ratings as a result.
For the purposes of this provision, the term "guarantee" means any
contingent or other obligation of a person directly or indirectly guaranteeing
any indebtedness or other obligation of any other person. Without limiting the
generality of that definition, the term
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"guarantee" includes any contingent or other obligation of a person directly or
indirectly to purchase or pay, or advance or supply funds for the purchase or
payment of, the indebtedness or other obligation of another person or entered
into for purpose of assuring in any other manner the person owed the
indebtedness or other obligation of its payment or protecting that person
against loss in respect the whole or any part of the indebtedness or other
obligation. The term "guarantee" does not include endorsements for collection or
deposit in the ordinary course of business. The term "guarantee" when used as a
verb has a corresponding meaning.
LIMITATION ON AIRCRAFT SALES
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, sell, transfer or otherwise dispose of any aircraft or any
interest in any aircraft other than as provided in the servicing agreement.
The foregoing provision does not restrict the sale, transfer or other
disposition of:
(1) any engine or part of any aircraft purchased on the date that aircraft
is acquired;
(2) one or more aircraft or interest in one or more aircraft
(a) pursuant to a purchase option or a similar agreement existing on May
5, 1999 with respect to the initial 36 aircraft or on the date the aircraft was
acquired in the case of any aircraft or
(b) to Aircraft Finance or another subsidiary if Aircraft Finance
provides written notice to each rating agency rating the notes;
(3) if the sale does not result in default under the concentration limits
exercised under "-- Concentration Limits" and the net present value of the cash
net sale proceeds is not less than the Note Target Price;
(4) in connection with the receipt of insurance proceeds due to an event of
loss; or
(5) when the net present value of the cash Net Sales Proceeds is less than
the Note Target Price if
(a) in any one calendar year sales under this clause do not exceed 10%
of the Adjusted Portfolio Value as determined by the most recent appraisals for
that year;
(b) the controlling trustees unanimously confirm that the sale would not
materially and adversely affect the holders of the notes; and
(c) unless Aircraft Finance obtains a confirmation from the rating
agencies rating the notes that they will not lower, qualify or withdraw their
ratings as a result, the sale does not result in a default under the
concentration limits described under "-- Concentration Limits".
For the purposes of this provision, the net present value of the cash net
sale proceeds is the present value of all payments received or to be received by
Aircraft Finance or any of its subsidiaries from the date on which the relevant
option is granted or the relevant aircraft purchase agreement is executed
through and including the date on which title to the aircraft is transferred
discounted back to the option granting or execution date, as the case may be, at
the weighted average cost of funds of Aircraft Finance. The weighted average
cost of funds will be based on the cost of funds represented by the notes taking
into account any swap agreements.
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"Note Target Price" means an amount equal to 103% of the aggregate
outstanding principal balance of the notes plus any accrued but unpaid interest
on the principal and any related swap breakage costs, allocable to an aircraft
on the date of the sale agreement is executed or the option granted. On any
date, the outstanding principal balance of the notes allocable to an aircraft is
determined by multiplying the principal balance by the Adjusted Base Value of
that aircraft on the most recent payment date and dividing the result by the
Adjusted Portfolio Value on that payment date.
"Net Sale Proceeds" means the aggregate amount of cash received or to be
received from time to time (whether as initial or deferred consideration) by or
on behalf of the seller in connection with the sale, transfer or other
disposition of an asset after deducting without duplication reasonable and
customary brokerage commissions, fees under the servicing agreement and other
similar fees and commissions and the amount of taxes payable in connection with
or as a result of the transaction, in each case to the extent, but only to the
extent, that the amounts deducted are, at the time of receipt of the cash,
actually paid to a person that is not an affiliate of the seller and are
properly attributable to the transaction or to the asset.
LIMITATION ON AIRCRAFT ACQUISITIONS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, purchase or otherwise acquire any aircraft other than the initial
36 aircraft.
Aircraft Finance and its subsidiaries may, however, purchase or otherwise
acquire, directly or indirectly, additional aircraft from time to time if:
(a) no indenture event of default has occurred and is continuing;
(b) the acquisition does not result in a default under the concentration
limit described under "-- Concentration Limits"; and
(c) after giving effect to the acquisition, no more than 90% of the
appraised base value of the aircraft in Aircraft Finance's portfolio consists of
Stage 3 narrowbody aircraft, no more than 50% of the appraised base value of
that portfolio consists of Stage 3 widebody aircraft, no more than 15% of the
appraised base value of that portfolio consists of regional jets and none of the
aircraft in the portfolio are turboprop aircraft unless Aircraft Finance obtains
a confirmation from the rating agencies rating the notes that they will not
lower, qualify or withdraw their ratings as a result.
If, in connection with any permitted acquisition of additional aircraft, a
confirmation from the rating agencies rating the notes that they will not lower,
qualify or withdraw their ratings as a result has been obtained for UniCapital
or any affiliate of UniCapital to act as an additional servicer, Aircraft
Finance is required to enter into a servicing agreement with that entity upon
the terms approved by the rating agencies rating the notes and set forth in a
resolution of the independent controlling trustees of Aircraft Finance.
LIMITATION ON MODIFICATION PAYMENTS AND CAPITAL EXPENDITURES
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, make any capital expenditures for the purpose of effecting any
optional improvement or modification of any aircraft, including the optional
conversion of any aircraft from a passenger aircraft to a freighter or mixed-use
aircraft or the purchase or other acquisition of any engines or parts outside of
the ordinary course of business. An aircraft modification payment does not
include any capital expenditure made in the ordinary course of business
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in connection with a new lease of an aircraft or any capital expenditure
existing in any lease on May 5, 1999 for the initial 36 aircraft or the date on
which it was acquired in the case of any other aircraft.
Aircraft Finance and its subsidiaries may, however, make an aircraft
modification payment if
(1) that and all other modification payments made after May 5, 1999 with
respect to any single aircraft do not exceed the amount of funds that would be
necessary to perform one incidence of heavy maintenance on the aircraft;
(2) the modification payment is included in the annual operating budget of
Aircraft Finance and approved by the controlling trustees or the amount of funds
necessary to make that modification payment has been accrued in the expense
account or otherwise allowed to be paid under the provision described under
"-- Limitation on Indebtedness"; and
(3) that and all other modification payments do not exceed 5% of the
aggregate initial appraised value of all aircraft.
LIMITATION ON CONSOLIDATION, MERGER AND TRANSFER OF ASSETS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, consolidate with, merge with or into, or sell, convey, transfer,
lease or otherwise dispose of its property and assets as an entirety or
substantially as an entirety, in one transaction or in a series of related
transactions to any other person, or permit any other person to merge with or
into Aircraft Finance or any subsidiary, unless
(1)(a) the resulting entity is a special purpose entity, with a charter
that is substantially similar to that of Aircraft Finance or the subsidiary;
(b) payments from the resulting entity to the holders of the notes do not
give rise to any withholding tax payments less favorable to them than the amount
of any withholding tax payments that would have been required had the event not
occurred; and
(c) the entity is not subject to taxation as a corporation, an association
or publicly traded partnership taxable as a corporation;
(2) in the case of Aircraft Finance, the current beneficial interests
remain outstanding or are exchanged for new interests that have substantially
the same terms and conditions and the resulting entity expressly assumes all of
the obligations of Aircraft Finance in the indenture, the notes and each other
transaction document described in this prospectus;
(3) a confirmation from the rating agencies rating the notes that they will
not lower, qualify or withdraw their ratings as a result is obtained;
(4) immediately after giving effect to the transaction, no indenture event
of default occurs and is continuing;
(5) the transaction does not result in the recognition of gain or loss by
the holders of the beneficial interest of Aircraft Finance for United States
federal income tax purposes; and
(6) Aircraft Finance delivers to the trustee an officer's certificate and
an opinion of counsel, each stating that the consolidation, merger or transfer
and any related supplemental indenture comply with the above criteria and, if
applicable, the requirements
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described under "-- Limitation on Aircraft Sales" and that all applicable
conditions precedent under the indenture relating to such transaction have been
satisfied.
The foregoing provision does not apply to a consolidation, merger, sale,
conveyance, transfer, lease or disposition:
(a) within the Aircraft Finance group if it would not materially and
adversely affect the holders of the notes and Aircraft Finance gives written
notice each rating agency rating the notes;
(b) complying with the terms of the requirements described under
"-- Limitation on Aircraft Sales"; or
(c) effected as part of a single transaction providing for the
redemption or defeasance of the notes in accordance with their terms.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to, directly or indirectly, enter into, renew or extend any
transaction with any affiliate of Aircraft Finance or any subsidiary, except
upon fair and reasonable terms no less favorable to Aircraft Finance or the
subsidiary than could be obtained in a comparable arm's-length transaction with
a person that is not an affiliate. Without limiting the foregoing, this
provision applies to the purchase, sale, lease or exchange of property or
assets, or the rendering of any service.
The foregoing limitation does not limit or apply to
(1) any transaction in connection with the establishment of the Aircraft
Finance group or its acquisition of the initial 36 aircraft or made under the
transactional documents described in this prospectus;
(2) any transaction among Aircraft Finance and its subsidiaries unless it
would materially and adversely affect the holders of the notes;
(3) the payment of reasonable and customary fees to, and the provision of
reasonable and customary liability insurance in respect of, the controlling
trustees;
(4) any payments on or with respect to the notes or to the owner trustee
under the indenture and to the holders of the beneficial interests of Aircraft
Finance under its trust agreement;
(5) the acquisition of additional aircraft or any transaction complying
with the provisions described under "-- Limitation on Aircraft Sales";
(6) any payments of the types referred to in clause (1) or (2) of the
provision described under "Limitation on Restricted Payments" and not prohibited
under those clauses; or
(7) the sale of Aircraft Finance or any subsidiary as part of a single
transaction providing for the redemption or defeasance of notes in accordance
with their terms.
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LIMITATION ON THE ISSUANCE, DELIVERY AND SALE OF EQUITY INTERESTS
Aircraft Finance has agreed that it will not:
(1) issue, deliver or sell any shares, interests, participations or other
equivalents in equity however designated and whether voting or non-voting, other
than beneficial interests existing on May 5, 1999; or
(2) sell, or permit any subsidiary, directly or indirectly, to issue,
deliver or sell, any shares, interests, participations or other equivalents in
equity however designated and whether voting or nonvoting, other than the
beneficial interests and shares existing on May 5, 1999.
The foregoing provision does not apply to:
(1) issuances, sales, delivery, transfer or pledge of beneficial interests
in any Aircraft Finance group member to or for the benefit of any other Aircraft
Finance group member;
(2) issuances or sales of any additional beneficial interest of Aircraft
Finance to finance the acquisition of additional aircraft as permitted by the
indenture if (x) the rating agencies rating the notes confirm that they will not
lower, qualify or withdraw their ratings as a result and (y) the net proceeds
are used only to finance such an aircraft acquisition, to fund any cash
collateral account, for deposit as cash reserves in the collections account or
to pay any related transaction expenses;
(3) issuances or sales of interests of foreign subsidiaries of Aircraft
Finance to nationals in the jurisdiction of incorporation or organization to the
extent required by applicable law or necessary in the determination of the
controlling trustees to avoid adverse tax consequences or to facilitate the
registration or leasing of Aircraft;
(4) the pledge of interests in subsidiaries under the security trust
agreement;
(5) the sale of any interests of a subsidiary to effect the sale of all
aircraft owned by the subsidiary in compliance with the terms of the
requirements described under "-- Limitation on Aircraft Sales"; and
(6) the issuance of additional beneficial interests in Aircraft Finance to
the holders of its current beneficial interest to the extent those holders
provide funds to Aircraft Finance to effect a redemption, to fund payments to be
made to cure interest shortfalls or to discharge the notes upon their
acceleration.
BANKRUPTCY AND INSOLVENCY
Aircraft Finance has agreed that:
(1) it will promptly provide the trustee and the rating agencies rating the
notes with written notice of any proceeding by or against Aircraft Finance or
any of its subsidiaries seeking to adjudicate any of them a bankrupt or
insolvent, seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for either all or any substantial part of its
property;
(2) it will not take any action to waive, repeal, amend, vary, supplement
or otherwise modify its charter documents that would adversely affect the
rights, privileges or preferences of any holders of the notes, as determined by
the controlling trustees; and
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(3) it will not, without an affirmative unanimous written resolution of the
controlling trustees, take any action to waive, repeal, amend, vary, supplement
or otherwise modify the provision of its trust agreement that requires a
unanimous resolution of the controlling trustees or limits the actions of its
beneficial interest holders with respect to voluntary insolvency proceedings or
consents to involuntary insolvency proceedings.
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Aircraft Finance has agreed that it will duly and punctually pay the
principal, premium and interest on the notes in accordance with the terms of the
indenture and the notes.
LIMITATION ON EMPLOYEES
Aircraft Finance has agreed that it will not, and will not permit any of
its subsidiaries to, employ or maintain any employees other than as required by
law. The trustees and directors of Aircraft Finance or any of its subsidiaries
are not deemed to be employees for this purpose.
OPERATING COVENANTS
CONCENTRATION LIMITS
Aircraft Finance has agreed that it will not, and will not permit any
subsidiary to lease or re-lease any aircraft if doing so would violate the
concentration limits listed below unless the rating agencies rating the notes
confirm that they will not lower, qualify or withdraw their ratings on the notes
as a result. Aircraft Finance and its subsidiaries may, however, renew or extend
any lease to an existing lessee even if that would result in a violation of the
concentration limits. The concentration limits may be changed in the future but
only if the rating agencies rating the notes confirm that they will not lower,
qualify or withdraw their ratings on the notes as a result.
<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
LESSEE CONCENTRATION LIMITS APPRAISED VALUE OF PORTFOLIO(1)
- --------------------------- -------------------------------
<S> <C>
Single lessee rated BBB/Baa2 (or the
equivalent) or better..................... 15
Other single lessees........................ 10
Five largest lessees........................ 35
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
COUNTRY CONCENTRATION LIMITS APPRAISED VALUE OF PORTFOLIO(1)
- ---------------------------- -------------------------------
<S> <C>
Countries rated AAA/Aaa (or the
equivalent)(2)............................ 30
Countries rated BBB/Baa2 (or the equivalent)
or better(2)................................ 20
Other....................................... 15
</TABLE>
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<TABLE>
<CAPTION>
PERCENTAGE OF MOST RECENT
REGION CONCENTRATION LIMITS APPRAISED VALUE OF PORTFOLIO(1)
- --------------------------- -------------------------------
<S> <C>
Developed Market region(3).................. 55
Emerging Market region(3)................... 25
Asia and Pacific regions together(3)........ 45
Undesignated(3)............................. 20(4)
</TABLE>
- -------------------------
(1) This percentage is obtained by dividing the most recent appraised value of
all aircraft leased or to be leased to lessees habitually based in the
applicable country by the most recent appraised value of all aircraft then
owned by Aircraft Finance and its subsidiaries.
(2) The applicable rating is the sovereign foreign currency debt rating assigned
by the rating agencies rating the notes to the country in which a lessee is
habitually based at the time the relevant lease is executed.
(3) The designation of regions is set out below.
(4) In addition, no more than 10% of the most recent appraised value of the
aircraft may be leased to lessees habitually based in "Undesignated"
countries rated below BBB/ Baa2 or the equivalent and no more than 5% of the
most recent appraised value of the aircraft may be leased to lessees
habitually based in "Undesignated" countries in Africa.
<TABLE>
<CAPTION>
REGION COUNTRY
- ------ -------
<S> <C>
Developed Markets
Europe................................ EU (except Greece and Luxembourg),
Norway and Switzerland
North America....................... Canada and United States
Pacific............................. Australia, Hong Kong, Japan, New
Zealand and Singapore
Emerging Markets
Asia................................ China, India, Indonesia, Korea,
Malaysia, Pakistan, Philippines, Sri
Lanka, Taiwan and Thailand
Europe and Middle East.............. Czech Republic, Greece, Hungary,
Israel, Jordan, Poland, Russia and
Turkey
Latin America....................... Argentina, Brazil, Chile, Columbia,
Mexico, Peru and Venezuela
Undesignated.......................... All other countries (generally those
with small or Undeveloped capital
markets)
</TABLE>
In addition, the indenture does not permit Aircraft Finance or any of its
subsidiaries to lease or re-lease aircraft to lessees who operate or intend to
operate those aircraft in specified countries listed in the indenture and in
other countries listed in the indenture without procuring airline repossession
insurance. The list of prohibited countries and countries with respect to which
airline repossession insurance must be procured may be modified from time to
time upon the approval of the rating agencies rating the notes.
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The indenture contains no limitations on the countries or regions where
sub-lessees may habitually base aircraft if the sublease is permitted under the
relevant lease and the relevant lessee is a signatory to a lease.
COMPLIANCE WITH LAW; MAINTENANCE OF PERMITS
Aircraft Finance has agreed that it and its subsidiaries will
(1) comply with applicable laws,
(2) with limited exceptions, obtain all material governmental
registrations, certificates, licenses, permits and authorizations required to
use and operate the aircraft they own,
(3) not cause or knowingly permit any lessee to operate any aircraft under
any lease in any material respect contrary to any applicable law and
(4) with limited exceptions, not knowingly permit any lessee not to obtain
all material governmental registrations, certificates, licenses, permits and
authorizations required for the lessee's use and operation of its leased
aircraft.
The foregoing provision will not be deemed to have been breached by virtue
of acts or omissions of a lessee, sub-lessee or any person who has possession of
the aircraft or any engine for the purpose of repairs, maintenance, modification
or storage or by virtue of any requisition, seizure, or confiscation of the
aircraft if neither Aircraft Finance nor any subsidiary consents to those acts
or omissions and Aircraft Finance or its subsidiary that is the lessor or owner
of the aircraft promptly and diligently takes such commercially reasonable
actions as a leading international aircraft operating lessor would take under
similar circumstances.
APPRAISAL OF AIRCRAFT
Aircraft Finance has agreed to deliver, commencing in 2000, to the trustee
appraisals of the base value of each of the aircraft at least once each year by
May 31. The appraisals must come from at least three independent appraisers that
are members of the International Society of Transport Aircraft Trading or any
similar organization and be dated within 30 days prior to their delivery to the
trustee.
MAINTENANCE OF AIRCRAFT
Aircraft Finance has agreed that it and its subsidiaries will maintain each
leased aircraft and engine in a condition consistent with the reasonable
commercial practice of leading international aircraft operating lessors with
respect to similar aircraft leased under similar circumstances. Aircraft Finance
also has agreed to maintain each aircraft that is not subject to a lease in a
condition consistent with the reasonable commercial practice of leading
international aircraft operating lessors with respect to similar aircraft not
under lease.
The foregoing provision will not be deemed to have been breached by virtue
of acts or omissions of a lessee, sub-lessee or any person who has possession of
the aircraft or any engine for the purpose of repairs, maintenance, modification
or storage, or by virtue of any requisition, seizure, or confiscation of the
aircraft if neither Aircraft Finance nor any subsidiary consents to those acts
or omissions and Aircraft Finance or its subsidiary that is the lessor or owner
of the aircraft promptly and diligently takes such commercially
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reasonable actions as a leading international aircraft operating lessor would
take under similar circumstances.
NOTIFICATION OF THE TRUSTEE AND THE ADMINISTRATIVE AGENT
Aircraft Finance has agreed to notify the trustee and the administrative
agent as soon as Aircraft Finance or any subsidiary becomes aware of any loss,
theft, damage or destruction to any aircraft or engine if the potential cost of
repair or replacement exceeds $2,000,000.
LEASES
The indenture requires Aircraft Finance in general to use the pro forma
lease agreements then in use by the servicer or any additional servicer as a
starting point in the negotiation of future leases other than intracompany
leases. These pro forma leases may be revised especially for use by the Aircraft
Finance group. In connection with any renewal or extension of a lease, Aircraft
Finance may use the pre-existing lease as a starting point in the lease
negotiations. Aircraft Finance may also use a pre-existing lease as a starting
point in negotiations in connection with the leasing of any aircraft that is
managed or serviced by the servicer or the additional servicer.
If in their annual review of the pro forma lease the controlling trustees
determine that any revision to the pro forma lease made since their last review
is substantially inconsistent with the core lease provisions listed in the
indenture and materially and adversely affects the holders of the notes, the
indenture requires the controlling trustees to direct the servicer not to
include that revision in the pro forma lease to be used as the starting point in
the negotiation of future leases. If the controlling trustees determine that the
revision to the pro forma lease will not materially and adversely affect the
holders of the notes, the controlling trustees must amend the applicable core
lease provisions and notify the rating agencies rating the notes of any lease
entered into in the future whose terms are materially less favorable from the
point of view of the lessor than that of any lease then in effect.
Neither Aircraft Finance nor any subsidiary may enter into any future lease
if the rental payments are denominated in a currency other than United States
dollars unless the rating agencies rating the notes confirm that they will not
lower, qualify or withdraw their ratings on the notes as a result.
The indenture requires that each lease of an aircraft owned by Aircraft
Finance or a subsidiary, other than an intracompany lease, contain an indemnity
from the lessee in respect of any losses or liabilities arising from the use or
operation of the aircraft during the term of the lease. The indemnity may be
subject to exceptions, limitations and qualifications that are consistent with
the reasonable commercial practices of leading international aircraft operating
lessors.
OPINIONS
The indenture prohibits Aircraft Finance and its subsidiaries from entering
into any future lease, other than an intracompany lease, or changing the
jurisdiction of registration of any aircraft that is subject to a lease, unless
the servicer or an additional servicer obtains legal opinions regarding
compliance with the registration requirements of the relevant jurisdiction,
enforceability of the future lease and certain other matters that would
customarily be obtained by leading international aircraft operating lessors.
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INSURANCE
Aircraft Finance has agreed that it or its subsidiaries will maintain
(1) airline hull insurance for each aircraft in an amount at least equal to
the Note Target Price for that aircraft,
(2) airline liability insurance for each aircraft and occurrence in an
amount at least equal to the relevant amounts stated in the indenture for each
model of aircraft, as those amounts may be changed in the future with the
approval of the rating agencies rating the notes, and
(3) airline repossession insurance for each aircraft subject to a lease and
habitually based in specified jurisdictions, in an amount at least equal to the
Note Target Price for that aircraft.
Aircraft Finance has agreed that, for the period July 3, 1999 to May 5,
2000, it will, if requested by any rating agency rating the notes, obtain
aircraft repossession insurance for aircraft leased to lessees habitually based
in specified countries other than developed markets. That period may be extended
for up to one year if a rating agency so requests. Any insurance for any
aircraft subject to a lease may be subject to commercially reasonable deductible
and self-insurance arrangements. The coverage and terms of any insurance
maintained for any aircraft not subject to a lease must be consistent with the
commercial practices of leading international aircraft operating lessors
regarding similar aircraft.
In determining the amount of insurance required to be maintained, Aircraft
Finance may take into account any indemnification from, or insurance provided
by, any governmental, supranational or inter-governmental authority or agency
the sovereign foreign currency debt of which is rated at least AA, or the
equivalent, by at least one of the rating agencies rating the notes. Any such
indemnification or insurance must provide substantially similar protection as
the insurance required by this covenant. Aircraft Finance is not required to
maintain any insurance to the extent that such insurance is not generally
available in the relevant insurance market at commercially reasonable rates.
COMPLIANCE THROUGH AGENTS
Aircraft Finance is entitled to delegate the performance of any of its
operating obligations under the indenture to one or more service providers if
the document under which the delegation is made is included as collateral under
the security trust agreement. This provision is not intended to relieve Aircraft
Finance from any liability if Aircraft Finance or any service provider fails to
perform any obligation strictly in accordance with the indenture.
INDENTURE EVENTS OF DEFAULT AND REMEDIES
Each of the following events is an "indenture event of default" with
respect to any subclass of notes:
(1) A failure to pay when due the Interest Amount on any subclass of notes
that continues for a period of five or more business days.
(2) A failure to pay when due principal on any subclass of notes either on
or prior to its final maturity date.
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(3) A failure to pay when due any amount, other than interest, on any
subclass of notes if there are amounts available in the collections account or
any cash collateral account on a payment date to pay that amount and the failure
continues for five or more business days after that payment date.
(4) A failure by Aircraft Finance to comply with any of the provisions of
the indenture or any notes other than a payment default under clause (1), (2) or
(3) above, if the failure materially and adversely affects the holders of that
subclass of notes and continues for a period of 30 days or more after written
notice to Aircraft Finance by the controlling party or by holders of at least
25% of the outstanding principal balance of the senior-most class.
If the failure can be cured within 90 days of the date of that notice and
the administrative agent has promptly provided the trustee with a certificate
stating that Aircraft Finance has commenced, or will promptly commence, and
diligently pursue all reasonable efforts to cure the failure, the 30-day period
may be extended so long as Aircraft Finance or any subsidiary is diligently
pursuing the cure but no longer than 90 days.
(5) The entry by a court of a decree or order that remains unstayed and
undismissed for 90 days for:
(a) relief in respect of Aircraft Finance or any subsidiary that owns or
leases aircraft with a base value of at least 10% of the Adjusted Portfolio
Value at that time under any applicable law relating to bankruptcy, insolvency,
reorganization or other similar law;
(b) appointment of a receiver, trustee or similar official of Aircraft
Finance or any such subsidiary; or
(c) the winding up or liquidation of the affairs of Aircraft Finance or
any such subsidiary.
(6) Aircraft Finance or any such subsidiary:
(a) commences a voluntary case under any applicable law relating to
bankruptcy, insolvency, reorganization or other similar law or consents to the
entry of an order for relief in any involuntary case under any such law;
(b) consents to the appointment of or taking possession by a receiver,
liquidator, trustee or similar official for Aircraft Finance or any such
subsidiary or for all or substantially all of the property of Aircraft Finance
or any such subsidiary; or
(c) effects any general assignment for the benefit of creditors.
(7) A judgment or order for the payment of money in excess of 5% of the
aggregate Adjusted Portfolio Value is rendered against Aircraft Finance or any
subsidiary and either:
(a) enforcement proceedings are commenced on the judgment or order; or
(b) no stay of enforcement of the judgment or order is in effect for 10
consecutive days. A judgment or order will not be an indenture event of default
so long as the amount of the judgment or order is covered by a binding policy of
insurance and the insurer, who must be rated at least "A" by A.M. Best Company,
has been notified of, and has not disputed the claim for, the amount of the
judgment or order.
(8) The constitutional documents of Aircraft Finance cease to be in full
force and effect and are not replaced with documents that have the same terms.
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The indenture provides that, within 30 days of an indenture event of
default as to any subclass of notes, the trustee will mail to the holders of
notes of that subclass notice of all existing defaults under the indenture known
to it. Other than a default as to interest, principal or premium, the trustee
may withhold the notice if it determines in good faith that withholding the
notice is in the interest of the affected holders.
If an indenture event of default other than an indenture event of default
under clause (5) or (6) above occurs and is continuing, the controlling party
may give a default notice to Aircraft Finance, the administrative agent, the
security trustee and the trustee declaring the outstanding principal balance of
the notes and all accrued and unpaid interest to be due and payable. The
"controlling party" is either the senior trustee or, in some instances, the
provider of a primary eligible credit facility. If the controlling party is the
senior trustee, the holders of at least 25% of the outstanding principal balance
of the senior-most class of notes may instruct the controlling party in writing
to give a default notice. If the controlling party is the facility provider,
only it may give a default notice.
At any time after the controlling party has sent a default notice and
before the exercise of any other remedies, the controlling party may annul the
declaration and its consequences by written notice to Aircraft Finance, the
senior trustee (if not the controlling party), the administrative agent, the
security trustee and the trustee if:
(1) Aircraft Finance deposits an amount sufficient to pay all overdue
installments of interest, and the principal and premium on the notes that would
have become due other than by acceleration;
(2) the annulment would not conflict with any judgment or decree; and
(3) all other defaults other than nonpayment of amounts that become due
solely because of acceleration have been cured or waived.
If the controlling party is the senior trustee, the holders of at least 25% of
the outstanding principal balance of the senior-most class of notes may direct
the controlling party to give that notice of annulment. If the controlling party
is a credit facility provider, only it may give a notice of annulment.
If an indenture event of default under clause (5) or (6) occurs, all
principal, interest and premium will automatically become due without any
further action by any party.
The "senior trustee" is
(1) so long as any Class A Notes are outstanding, the representative of the
majority holders of the Class A Notes;
(2) after the Class A Notes have been repaid in full, and so long as any
Class B Notes are outstanding, the representative of the majority holders of the
Class B Notes;
(3) after the Class A Notes and Class B Notes have been repaid in full and
so long as any Class C Notes are outstanding, the representative of the majority
holders of the Class C Notes; and
(4) after the Class A Notes, the Class B Notes and the Class C Notes have
been repaid in full and so long as any Class D Notes are outstanding, the
representative of the majority holders of the Class D Notes.
If at any time each subclass of the senior-most class of notes does not have the
same trustee, then the senior trustee will be the trustee of the subclass with
the lowest numerical
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designation. As of the date of this prospectus, the senior trustee for each
class of notes is Bankers Trust.
The indenture entitles the trustee, subject to its duty during a default to
act with the required standard of care, to be indemnified by the holders of any
class of notes before exercising any right or power under the indenture at the
request or direction of those holders. Except in limited circumstances, no
holder has the right to sue for recovery or take any other actions to enforce
the obligations of Aircraft Finance to pay any and all amounts due and payable
under the notes other than through the senior trustee acting in accordance with
the indenture. No holder of the notes has the right to take any steps to cause
the filing for bankruptcy of Aircraft Finance or any subsidiary.
Upon acceleration, the security trustee may exercise such remedies as to
the collateral under the security trust agreement as are provided by the Uniform
Commercial Code and other applicable law. These remedies include the sale of all
or any part of the collateral at public or private sale for cash, credit or
other terms as the security trustee may determine to be commercially reasonable.
SUBORDINATION
Under the terms of the indenture and the security trust agreement, each
holder of a Note agrees that its claims against Aircraft Finance for payment of
any amount are subordinate to any claims that have a higher payment priority as
described above in "-- Priority of Payments" and "-- Allocation of Principal
among Subclasses". This subordination continues until the holder of a prior
claim, or the trustee on its behalf, has received the full cash amount of the
prior claim. Each holder is also obligated to hold for the benefit of the holder
of a prior claim any amounts received by the holder that should have been paid
to or on behalf of the holder of a prior claim. Each holder also agrees to
execute and deliver such instruments and documents, and take all further action,
that the controlling party may reasonably request in order to effectuate the
above. Funds provided by the holders of beneficial interests in Aircraft Finance
to cure interest shortfalls, amounts in any cash collateral account, funds
provided for a defeasance of the notes and for an optional redemption of the
notes and proceeds of refinancing notes are not subject to these subordination
provisions.
Under the security trust agreement, so long as any prior claims remain
unpaid, neither any trustee or representative of any holders of notes whose
claims are not prior nor the holders of these claims themselves may commence or
join in commencing any enforcement, collection, foreclosure or other proceeding
as to the collateral. Upon request by the Controlling Party, however, the
holders of the junior claims and their representatives must, at the expense of
Aircraft Finance, join in enforcement, collection, foreclosure or other
proceedings and otherwise cooperate in the proceedings with the security
trustee. They must also execute all such consents, pleadings, releases and other
instruments as the security trustee may reasonably request. The conduct of the
proceedings are at all times to be under the exclusive control of the security
trustee.
Furthermore, upon request by the Controlling Party, the representatives of
the holders of the junior claims are required to release the security in their
favor in any collateral and execute all such instruments as the controlling
party may reasonably request upon any sale, lease, transfer or other disposition
of any collateral under the security trust agreement. Neither the holders of the
junior claims nor their representatives may contest the validity, perfection or
priority of, or seek to avoid, the rights of the controlling party or the
holders of the prior claims as to any collateral.
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MODIFICATION AND WAIVER
The indenture provides that, with the consent of the holders of a majority
of the outstanding principal balance of the notes voting as a single class,
Aircraft Finance may amend or modify the notes or the indenture. Without the
consent of each provider of an eligible credit facility, no amendment may modify
the provisions of the indenture relating to that credit facility or, to the
extent affecting its credit facility, credit facilities generally.
Except as provided in the indenture in connection with the issuance of
additional notes or except as described under "-- Allocation of Principal among
Subclasses", no amendment may without the consent of each swap provider of an
eligible credit facility and the holder of each note affected by the amendment:
(1) alter the frequency or the currency of payment of, the maturity of, or
the method of calculation of the amount of any interest, principal, premium and
Sale Premium on any subclass of notes,
(2) reduce the percentage of the outstanding principal balance of any
subclass required to approve any amendment or waiver or
(3) alter the manner or priority of payment of any subclass of notes.
The holders of a majority of the outstanding principal balance of the
senior-most class of notes by notice to the senior trustee may waive some
indenture events of default. Any modification approved by the required holders
of any subclass of notes will be binding on the holders of that subclass of
notes and each party to the indenture. Aircraft Finance is not restricted from
amending any lease if the amendment is otherwise permitted by the indenture.
The subordination provisions contained in the indenture may not be amended
or modified without the consent of each swap provider, each provider of an
eligible credit facility, each holder of the subclass of notes affected by the
amendment or modification and each holder of any subclass of notes that has a
payment priority higher than that of those notes. The provisions in the
indenture relating to the priority of expenses, swap payments or any eligible
credit facilities may in no event be amended or modified.
NOTICES TO HOLDERS
Except as provided below, any notice to the holders of notes is valid if
given:
(1) by publication in the Luxemburger Wort or, if that newspaper is no
longer published or timely publication is not practicable, in such English
language newspaper or newspapers with a general circulation in Europe as the
trustee approves;
(2) by either of the information in the notice appearing on the relevant
page of the Reuters screen or such other medium for the electronic display of
data as may be approved by the trustee and notified to holders or publication in
the Financial Times and The Wall Street Journal (National Edition) or, if either
newspaper is no longer published or timely publication is not practicable, in
such English language newspaper or newspapers with a general circulation in
Europe and the United States as the trustee approves; and
(3) until such time as definitive notes are issued and, so long as the
notes are registered in the name of a nominee for DTC, or Cedel Bank, and so
long as the notes are listed on the Luxembourg Stock Exchange and its rules so
permit, delivery of the relevant notice to DTC, Euroclear or Cedel Bank for
communication by them to the holders.
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Any notice to the holders of any subclass of notes bearing interest based
on LIBOR that specifies an interest rate for those notes, any payment date, any
principal payment or any payment of premium is validly given by delivery to DTC,
Euroclear or Cedel for communication by them to the holders, does not need to be
published in the Luxemburger Wort, and must be promptly given to the Luxembourg
Stock Exchange and made available at the office of the Luxembourg paying agent.
Any notice specifying an increase in the interest rate of any subclass of notes
due to Maturity Step-Up Interest or Registration Step-Up Interest or redemption
of principal of any notes must be published in the Luxemburger Wort or another
daily newspaper of general circulation in Luxembourg. Any notice is deemed to
have been given on the first day on which any of those conditions shall have
been met.
Notices to holders of the Class D Notes generally will be made by the
trustee directly to the holders.
The trustee may approve some other method of giving notice to the
Noteholders if, in its opinion, the other method is reasonable in light of the
number and identity of the holders and prevailing market practice, is in the
best interests of the holders and will comply with the rules of the Luxembourg
Stock Exchange or any other stock exchange on which the notes may be listed. The
trustee must give notice of its approval of another method of notice.
ACCOUNTS
The administrative agent, acting on behalf of the security trustee, has
directed the operating bank under the security trust agreement to establish and
maintain on the operating bank's books and records in the name of the security
trustee the following accounts:
(1) the "collections account",
(2) one or more "rental accounts",
(3) one or more "lessee funded accounts" in which cash security deposits
and segregated funds are held in accordance with the requirements of a lease,
(4) the "expense account",
(5) one note account for each subclass of the initial notes,
(6) the two "VARIG reserve accounts", and
(7) an owner trustee's account.
When required under the indenture or by action of the controlling trustees,
the administrative agent is to direct the operating bank to maintain in the name
of the security trustee
(1) the "aircraft purchase account",
(2) the "defeasance/redemption account",
(3) the "refinancing account" and
(4) any cash collateral accounts.
Each of the foregoing accounts has been or will be established and
maintained initially with Bankers Trust. The administrative agent has agreed to
replace Bankers Trust as the operating bank if Bankers Trust fails to maintain
either a long-term unsecured debt rating
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of A or better by each of Standard & Poor's and Moody's or a short-term
unsecured debt rating of A-1 by Standard & Poor's and P-1 by Moody's with a bank
that has such a rating. The security trustee and the trustee have appointed the
administrative agent as their agent to direct withdrawal and transfer from the
accounts. Neither the security trustee nor the trustee are responsible for the
acts or omissions of the administrative agent.
Funds on deposit in the accounts will be invested and reinvested by the
administrative agent on behalf of the security trustee in one or more
investments permitted under the indenture. The controlling trustees of Aircraft
Finance may direct these investments unless the notes are accelerated.
Investment earnings, net of losses and investment expenses, will be deposited in
the collections account for distribution. The investment of funds in any lessee
funded account must be made in a manner and with maturities that conform, and
the use of earnings must also conform, to the requirements of the related
leases.
RENTAL ACCOUNTS
Aircraft Finance is to direct all of the lessees to make all payments under
the leases directly into the applicable rental accounts. The administrative
agent is to transfer all funds deposited into the rental accounts into the
collections account within one business day of receipt. Limited amounts may need
to be left on deposit for local legal or regulatory reasons.
NON-TRUSTEE ACCOUNTS
If the administrative agent determines that, for any tax or other
regulatory or legal reason, any payments under any leases may not be deposited
into an account in the name of the security trustee, Aircraft Finance may
establish one or more non-trustee accounts for such amounts in its own name. Any
non-trustee account must be subject to the direction and control of the
administrative agent on behalf of the security trustee.
COLLECTIONS ACCOUNT
All collections received by the Aircraft Finance group must be deposited in
the collections account and either be transferred to another Account or retained
in the collections account. "Collections" include all amounts received by
Aircraft Finance and its subsidiaries, including:
(1) rental payments transferred from the rental accounts;
(2) payments under any letter of credit, letter of comfort, letter of
guarantee or other assurance in respect of a lessee's obligations under a lease;
(3) cash reserves in the collections account;
(4) amounts received as damages or for any breach of contract for
nonpayment of any of the foregoing;
(5) net proceeds of any aircraft sale or amounts received under any
agreement for the purchase of aircraft;
(6) proceeds of any insurance payments for any aircraft;
(7) amounts transferred from a lessee funded account to the collections
account;
(8) net payments to Aircraft Finance under any swap agreement;
(9) investment income from the accounts;
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(10) any proceeds or other payments received under the purchase agreement
with General Electric Capital Corporation or any amounts transferred from the
aircraft purchase account;
(11) any amounts drawn from a VARIG reserve account; and
(12) any other amounts received by any member of the Aircraft Finance
group.
Collections do not include funds required to be segregated by leases, funds to
be transferred to the VARIG reserve account, funds to be applied in connection
with a redemption or defeasance, funds received in connection with a refinancing
of notes and other amounts required to be paid over to any third party pursuant
to any contract.
LESSEE FUNDED ACCOUNT
Lessee security deposits and payments for maintenance reserves may be
required to be segregated from other Aircraft Finance funds. These amounts will
be held in a lessee funded account. Funds on deposit in any lessee funded
account will be used to pay for maintenance and to repay security deposits or to
make such other payments as may be required or permitted under the terms of the
relevant leases. They also may be applied against maintenance payments otherwise
required to be made by the lessee during the term of the related lease. These
amounts may not be used to make payments on the notes at any time, including
after a default, except to the extent applied to unpaid rents and other amounts
due from the lessee. If a lessee relinquishes its rights to receive these
amounts at the end of a lease, any surplus funds may be moved from the lessee
funded account to the collections account.
EXPENSE ACCOUNT
On each payment date, the administrative agent is to withdraw the funds
from the collections account, in the priority of payments established for the
notes, to replenish the expense account to the required expense amount. On any
payment date or any other day, the administrative agent may withdraw funds from
the expense account to pay expenses then due. Aircraft modification payments and
refinancing costs may be withdrawn only to the extent sufficient accruals were
made for those purposes. If funds in the expense account are insufficient to pay
all expenses due on any day other than a payment date, the administrative agent
may withdraw funds from the collections account to avoid a default by Aircraft
Finance in its obligations to any third party.
REFINANCING ACCOUNT
Upon receipt of a notice of a refinancing, the trustee must direct the
administrative agent to cause the operating bank to establish a refinancing
account for the benefit of the holders of the subclass of notes to be
refinanced. The administrative agent will deposit all net proceeds of any such
refinancing after application of accruals made for that purpose in the expense
account into the refinancing account. Those amounts will be held in the
refinancing account until the principal, interest and premium on the refinanced
notes are paid and the refinanced notes are cancelled.
DEFEASANCE/REDEMPTION ACCOUNT
Upon receipt of a notice that any subclass of notes is to be redeemed or
defeased other than in a refinancing, the trustee must direct the administrative
agent to cause the operating bank to establish and maintain a
defeasance/redemption account. All amounts
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received for the purpose of any such redemption or defeasance are to be
deposited in the defeasance/redemption account.
AIRCRAFT PURCHASE ACCOUNT
The proceeds of any additional notes after making any other required
deposits must be deposited in the aircraft purchase account and held in that
account until applied for the purchase of additional aircraft.
NOTE ACCOUNT
Upon the issuance of notes of any subclass for which a note account was not
previously established, the trustee must direct the administrative agent to
cause the operating bank to establish and maintain a note account for that
subclass of notes. All amounts transferred to a note account for any subclass of
notes in accordance with the "-- Priority of Payments" above are to be applied
to the payment of that subclass of notes.
OWNER TRUSTEE ACCOUNT
All amounts transferred to the owner trustee account as described under
"-- Priority of Payments" are to be paid to the owner trustee account for
further application by the owner trustee in accordance with the trust agreement
of Aircraft Finance.
VARIG RESERVE ACCOUNTS
Amounts in the VARIG reserve accounts may be withdrawn and replenished as
set forth above in "The Initial Aircraft and Initial Leases -- The Master
Aircraft Purchase Agreement".
THE COLLATERAL
Aircraft Finance, its two subsidiaries and the security trustee have
entered into the security trust agreement dated as of May 5, 1999. Under the
security trust agreement, the Aircraft Finance group has granted to the security
trustee, for its benefit and the benefit of the holders of the notes, persons
providing services to Aircraft Finance, such as GE Capital Aviation Services,
Limited, the trustee, the administrative agent and others, swap providers and
providers of eligible credit facilities and in order to secure the payment and
performance of all of their obligations, a security interest in all of their
right, title and interest in the collateral. The "Collateral" includes, but is
not limited to, the following:
(1) all of the outstanding shares of common stock of subsidiaries and
indebtedness of subsidiaries, all additional shares of stock acquired by
Aircraft Finance and each of its subsidiaries and additional indebtedness owed
to Aircraft Finance and each of its subsidiaries and all property received,
receivable or otherwise distributable in respect to or in exchange for any stock
or indebtedness;
(2) all of the beneficial interests in subsidiaries, all additional
beneficial interests acquired by Aircraft Finance and each of its subsidiaries,
any and all certificates or instruments evidencing or creating those interests
and all property received, receivable or otherwise distributable in respect of
or in exchange for those interests;
(3) all of the non-trustee accounts, all funds in those accounts, all notes
and other instruments delivered to or otherwise possessed by the security
trustee for or on behalf of Aircraft Finance and each of its subsidiaries and
all property received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing;
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(4) all rights of Aircraft Finance and each of its subsidiaries to each
other Account at any time established and all cash, investment property,
investment earnings, securities, instruments or other property at any time
credited to any Account;
(5) all other investment property of Aircraft Finance and each of its
subsidiaries, including all investments made or acquired from or with the
proceeds of any Account, and all property received, receivable or otherwise
distributed in respect of or in exchange for any or all of the foregoing;
(6) with respect to Aircraft Finance, all of Aircraft Finance's right,
title and interest in all security assignments, cash deposit agreements and
other security agreements executed in its favor by any subsidiary and all of
Aircraft Finance's right, title and interest in all deposit accounts, all
property held in those deposit accounts and all certificates and instruments
provided to it as security under any such agreement;
(7) with respect to each of Aircraft Finance's subsidiaries, all of the
subsidiary's right, title and interest in all leases to which it is or may from
time to time be party and any leasing arrangements with respect to such leases
including all rights to receive moneys due and to become due under a lease, all
rights to receive proceeds of any insurance, indemnity, warranty or guaranty as
to a lease, claims for damages arising out of a default under a lease, all
rights under a lease with respect to any subleases of the aircraft subject to
that lease and the right to terminate a lease, to perform under a lease and to
compel performance and otherwise exercise all remedies under a lease;
(8) all of Aircraft Finance's and each of its subsidiaries' right, title
and interest in the servicing agreement and all other service agreements between
any such entity and a service provider;
(9) with respect to Aircraft Finance and each of its subsidiaries, all of
the member's right, title and interest in all eligible credit facilities not
consisting of a cash collateral account and swap agreements and all rights to
administer, draw upon and otherwise deal with each such eligible credit facility
and to administer and otherwise deal with each such swap agreement;
(10) with respect to Aircraft Finance and each of its subsidiaries, all of
the member's right, title and interest in the personal property identified in a
supplement to the security trust agreement executed and delivered by such member
to the security trustee; and
(11) all proceeds of any and all of the foregoing.
The collateral does not include approximately 3.27% of the amounts received
for a non-delivery of an aircraft or, if non-delivery payments are received for
more than one Aircraft, the product of approximately 0.0654 and the aggregate of
all non-delivery payments divided by the number of aircraft for which
non-delivery payments are made. Payments due to an event of loss are not counted
for this purpose. The excluded payments are to be paid directly to the owner
trustee for distribution to the holders of the beneficial interests.
If the notes have not been accelerated, Aircraft Finance and each of its
subsidiaries are entitled to exercise all voting and other consensual rights
pertaining to the stock and beneficial interests included in the collateral. In
doing so, the member may not breach any other obligation and may not exercise or
refrain from exercising any such right if in its judgment that would materially
and adversely affect the value of any part of the stock and beneficial interest
collateral.
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GOVERNING LAW AND JURISDICTION
The indenture and the notes are governed by the laws of the State of New
York. Aircraft Finance and its subsidiaries have submitted to the jurisdiction
of the United States Federal and New York State courts located in The City of
New York for all purposes of the indenture and the notes.
REPORTS TO NOTEHOLDERS
On the second business day before each payment date, the administrative
agent must send to the trustee, and the trustee must then send to each holder of
notes, a monthly report prepared by the administrative agent regarding payments
to be made on that payment date. The monthly report will list the following
information:
(1) Regarding each payment date,
(a) the balances on deposit on the calculation date immediately
preceding the prior payment date;
(b) the aggregate amounts of deposits and withdrawals between that
calculation date and the calculation date immediately preceding the payment
date; and
(c) the balances on deposit in the expense account, collections account,
any cash collateral account, any VARIG reserve account and lessee funded account
on the calculation date immediately preceding that payment date.
(2) Analysis of expense account activity balance on the preceding
calculation date:
<TABLE>
<S> <C>
Net transfer to the expense account during the
period between the prior calculation date and the
relevant calculation date........................
Payments during period between the prior
calculation date and the relevant calculation
date...............................................
-- Payments on the prior payment date.........
-- Other payments.............................
Balance on relevant calculation date...............
</TABLE>
(3) Analysis of collections account activity
<TABLE>
<S> <C>
Balance on the preceding calculation date..........
Required Expense Amount (including on the preceding
payment date)......................................
Net transfer to lessee funded accounts and VARIG
reserve accounts during the period...............
Collections during the period......................
Drawings under any liquidity facilities............
Aggregate note payments............................
Swap payments......................................
Repayments of drawings under liquidity
facilities.......................................
Balance on relevant calculation date (separately
stating the amount of cash reserve that must be
retained in the collections account).............
Analysis of current payment date distributions.....
</TABLE>
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(4) Payments on the notes
(a) Floating rate notes (by class and, if applicable, subclass)
<TABLE>
<S> <C>
-- Applicable LIBOR for the current interest
accrual period................................
-- Applicable margin for the current interest
accrual period................................
-- Applicable interest rate for the current
interest accrual period.......................
-- Interest Amount payable.......................
-- Maturity Step-Up Interest.....................
-- Registration Step-Up Interest.................
-- Additional Interest...........................
-- Opening outstanding principal balance.........
-- Minimum Principal Payment Amount..............
-- Scheduled Principal Payment Amount............
-- Supplemental Principal Payment Amount.........
-- Sale Premium..................................
-- Redemption Price..............................
-- Amount allocable to principal.................
-- Amount allocable to premium...................
-- Other principal reductions....................
-- Closing outstanding principal balance.........
</TABLE>
(b) Fixed rate notes (by class and, if applicable, subclass)
<TABLE>
<S> <C>
-- Interest rate.................................
-- Interest Amount payable.......................
-- Opening outstanding principal balance.........
-- Minimum Principal Payment Amount..............
-- Scheduled Principal Payment Amount............
-- Sale Premium..................................
-- Redemption Price..............................
-- Amount allocable to principal.................
-- Amount allocable to premium...................
-- Other principal reductions....................
-- Closing outstanding principal balance.........
</TABLE>
(5) Floating rate notes information for next interest accrual period (by
subclass)
<TABLE>
<S> <C>
LIBOR............................................
Margin...........................................
Interest rate....................................
</TABLE>
(6) Payments per $100,000 initial outstanding principal balance of notes
(by subclass)
<TABLE>
<S> <C>
Opening outstanding principal balance........
Total principal payments.....................
Closing outstanding principal balance........
Total interest...............................
Total premium................................
</TABLE>
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After the end of each calendar year or earlier if required by law, the
administrative agent must send the trustee for delivery to each person who at
any time during that calendar year was a holder of any notes a statement
containing the sum of the amounts calculated under items (4) and (6) above or,
if that person was a holder during only a portion of that calendar year, for the
applicable portion of that calendar year.
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BOOK-ENTRY REGISTRATION, GLOBAL CLEARANCE AND SETTLEMENT
BOOK-ENTRY REGISTRATION
The holders of notes will hold them through The Depositary Trust Company in
the United States, Cedel Bank, or Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System in Europe if they are
participants in these systems or indirectly through organizations that are
participants in these systems. Except as set forth below, the notes are
registered in the name of Cede & Co. as the nominee for DTC. Unless and until
definitive notes are issued, all references in this section to actions by
holders of notes will refer to actions taken by DTC upon instructions from
participants whose securities are held by DTC. All references in this prospectus
to distributions, notices, reports and statements to you will refer to
distributions, notices, reports and statements, respectively to DTC or Cede &
Co., as the registered holder of the notes, or to DTC participants for
distribution to you in accordance with DTC procedures.
Cedel Bank and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in the names of Cedel Bank
and Morgan Guaranty Trust Company of New York, Brussels office, on the books of
their respective depositaries which, in turn, will hold those positions in
customers' securities accounts in the depositaries' names on the books of DTC.
Citibank, N.A. will act as depositary for Cedel Bank and The Chase Manhattan
Bank, New York will act as depositary for Euroclear.
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules. Transfers between participating organizations whose
securities are held by Cedel Bank, and participants in Euroclear, will occur in
the ordinary way in accordance with the applicable rules and operating
procedures of Cedel Bank and Euroclear.
Cross-market transfers between persons holding directly or indirectly
through DTC participants, on the one hand, and directly or indirectly through
Cedel participants or Euroclear participants, on the other, will be effected by
DTC in accordance with DTC rules on behalf of Cedel Bank or Euroclear, by its
respective depositary. These cross-market transactions will, however, require
delivery of instructions to Cedel Bank or Euroclear by the counterparty in the
applicable system in accordance with its rules and procedures and within its
established deadlines. If the transaction meets its settlement requirements,
Cedel Bank or Euroclear will deliver instructions to its respective depositary
to take action to effect final settlement on its behalf by delivering or
receiving securities in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Cedel
participants and Euroclear participants may not deliver instructions directly to
the Cedel and Euroclear depositaries.
Because of time-zone differences, credits of beneficial interests in the
global notes received in Cedel Bank or Euroclear as a result of a transaction
with a DTC participant will be made during the securities settlement processing
day dated the business day following the DTC settlement date. Any credits or
transactions in notes settled during the processing will be reported to the
relevant Cedel participant or Euroclear participant on that business day. Cash
received in Cedel Bank or Euroclear as a result of sales of beneficial interests
in the global notes by or through a Cedel participant or Euroclear participant
to a DTC participant will be received with value on the DTC settlement date but
will be available in the relevant Cedel Bank or Euroclear cash account only as
of the business day following settlement in DTC.
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DTC
DTC is a limited purpose trust company organized under the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities for DTC participants and to facilitate the clearance and
settlement of securities transactions between DTC participants through
electronic book-entry changes in accounts of DTC participants, which eliminates
the need for physical movement of certificates. DTC participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may in the future include other organizations. Indirect access to the DTC
system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
participant either directly or indirectly.
If you are not a DTC participant but want to purchase, sell or otherwise
transfer ownership of, or other interests in, beneficial interests in global
notes, you can do so only through DTC participants. Indirect participants of DTC
are also required to effect transfers through a DTC participant.
Payments of interest, principal and premium, on the notes will be made to
DTC and are the responsibility of Aircraft Finance. You will receive all
distributions of interest, principal and premium on the notes from the trustee
or a paying agent through DTC participants and indirect participants.
Disbursement of these payments to DTC participants will be the responsibility of
DTC and disbursement of payments to you will be the responsibility of DTC
participants and indirect participants. DTC's practice is to credit DTC
participants' accounts on the payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on that payment date. Payments by DTC participants to their
customers who own beneficial interests in the global notes will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of that DTC participant. So long as a note
is registered in the name of Cede & Co., the only "noteholder" will be Cede &
Co., as nominee for DTC, and this nominee will be considered the sole owner or
holder of the notes for all purposes under the indenture and the notes. While so
registered, you will be permitted to exercise your rights only indirectly
through DTC and DTC participants.
Under the rules governing DTC and its operations, DTC is required to make
book-entry transfers of beneficial interests in the global notes among the DTC
participants on whose behalf it acts with respect to the notes and to receive
and transmit distributions of interest, principal and premium on the notes. DTC
participants and indirect participants similarly are required to make book-entry
transfers and receive and transmit these payments on behalf of their respective
beneficial interests in the global notes. The DTC rules also provide a mechanism
by which you will receive payments and be able to transfer your interests.
DTC has advised Aircraft Finance that it will take any action permitted to
be taken by you in respect of each class of notes under the indenture only at
the direction of one or more DTC participants to whose accounts beneficial
interests in the global Note representing that class of notes is credited.
Additionally, DTC has advised Aircraft Finance that it will take these actions
with respect to any percentage of the outstanding principal
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amount of any class of notes only at the direction of and on behalf of the DTC
participants whose customers own that outstanding principal amount. DTC may take
conflicting actions with respect to different classes of notes to the extent
that those actions are taken on behalf of DTC participants whose holdings
include such different classes of notes.
DTC'S YEAR 2000 EFFORTS
DTC management is aware that some computer applications, systems and the
like for processing data that are dependent upon calendar dates, including dates
before, on and after January 1, 2000, may encounter Year 2000 problems. DTC has
informed its participants and other members of the financial community that it
has developed and is implementing a program so that its systems, as they relate
to the timely payment of distributions of principal, interest and other payments
to securityholders, book-entry deliveries, and settlement of trades within DTC
continue to function appropriately. This program includes a technical assessment
and a remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which is expected to be completed within appropriate
time frames.
DTC's ability to perform its services properly is, however, also dependent
upon other parties, such as, for example, issuers and their agents, DTC's direct
and indirect participants, third party vendors from whom DTC licenses software
and hardware and third party vendors on whom DTC relies for information or the
provisions of telecommunication and electrical utility service or other
services. DTC has informed its participants and other members of the financial
community that it is contacting, and will continue to contact, third party
vendors from whom DTC acquires services to impress upon them the importance of
such services being Year 2000 compliant and to determine the extent of their
efforts for Year 2000 remediation and, as appropriate, testing of their
services. In addition, DTC is in the process of developing such contingency
plans as it deems appropriate.
CEDEL
Distributions with respect to notes held beneficially through Cedel Bank
will be credited to cash accounts of Cedel participants in accordance with Cedel
Bank's rules and procedures, to the extent received by its depositary. Cedel
Bank will take any other action permitted to be taken by you under the indenture
governing the notes on behalf of a Cedel participant only in accordance with its
rules and procedures and subject to its depositary's ability to effect those
actions on its behalf through DTC.
EUROCLEAR
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law.
These are collectively referred to as the Euroclear "terms and conditions". The
Euroclear terms and conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear and receipts of
payments with respect to securities in Euroclear. All securities of a particular
class in Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Euroclear terms and conditions only on behalf of
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Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.
Distributions with respect to notes beneficially held through Euroclear
will be credited to the cash accounts of Euroclear participants in accordance
with the Euroclear terms and conditions to the extent received by its
Depositary. The Euroclear Operator will take any other action permitted to be
taken by you under the indenture governing the notes on behalf of a Euroclear
participant only in accordance with the Euroclear terms and conditions and
subject to its depositary's ability to effect those actions on its behalf
through DTC.
Although DTC, Cedel Bank and Euroclear have agreed to these procedures to
facilitate transfers of notes among their respective participants, they are
under no obligation to perform or continue to perform these procedures and may
discontinue the procedures at any time by giving reasonable notice to Aircraft
Finance or the trustee.
DEFINITIVE NOTES
The notes of any class may be issued in fully registered certificated form,
or "definitive notes" to you or your nominees if:
(1) Aircraft Finance advises the trustee in writing that DTC is no longer
willing or able to act as depositary for the notes and the trustee does not
appoint a successor at Aircraft Finance's request within 90 days of DTC's
notice;
(2) Aircraft Finance, at its option, elects to terminate the book-entry
system through DTC. As long as any class of notes is listed on the Luxembourg
Stock Exchange, Aircraft Finance will continue to clear those notes through a
securities depository that is recognized by and operates in accordance with the
rules of the Luxembourg Stock Exchange; and
(3) after the occurrence of an indenture event of default with respect to
any class of notes, the holders of a subclass representing an outstanding
principal balance of not less than 51% of the aggregate outstanding principal
balance of notes of that subclass advise Aircraft Finance, the trustee and DTC
through DTC participants in writing that the continuation of a book-entry system
through DTC or a successor depositary is no longer in the best interests of the
holders.
If any of these events occur, the trustee is to notify the relevant holders
and to arrange for definitive notes to be issued in exchange for the holder's
book-entry interests.
The trustee or a paying agent will make distributions of interest,
principal and any premium on any definitive notes directly to the holders of
those notes in whose names the definitive notes were registered at the close of
business on the record date. The distributions will be made by check and mailed
to the address of the holder as it appears on the register maintained by the
registrar. Payments of principal and interest on any definitive notes listed on
the Luxembourg Stock Exchange may also be made at the office of Kredietbank S.A.
Luxembourgeoise, 43, Boulevard Royal, L-2955, Luxembourg. Kredietbank is acting
as the paying agent in Luxembourg. The final payment on the definitive notes,
however, will be made only upon presentation and surrender of the definitive
notes at the office or agency specified in the notice of final distribution to
you or at Kredietbank's offices.
Definitive notes will be freely transferable and exchangeable for
definitive notes of the same subclass at the office of the trustee or the
offices of the co-registrar in Luxembourg.
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If you transfer only part of your holding of definitive notes, a new definitive
note will be issued to the party you transferred it to in respect of the part
transferred and a new definitive note in respect of the balance of the holding
not transferred will be issued to you and may be obtained at the office of the
co-registrar in Luxembourg. No service charge will be imposed for any
registration of transfer or exchange, but you may be required to pay a sum
sufficient to cover any tax or other governmental charge. No service charge will
be imposed for any registration of transfer or exchange, but you may be required
to pay a sum sufficient to cover any tax or other governmental charge may be
required.
You may exchange or replace a note that is mutilated, destroyed, lost or
stolen at the offices of the trustee or the co-registrar in Luxembourg upon
presentation of the note or satisfactory evidence of destruction, loss or theft.
An indemnity satisfactory to the trustee or co-registrar may be required at your
expense before a replacement note will be issued. You will have to pay any tax
or other governmental charge imposed in connection with this exchange or
replacement, and any other related expenses.
PLAN OF DISTRIBUTION
Based on an interpretation by the staff of the SEC in no-action letters
issued to third parties in similar transactions, Aircraft Finance believes that
exchange notes issued to you in the exchange offer in exchange for your
Restricted Notes may be offered for resale, resold and otherwise transferred by
you, without compliance with the registration and prospectus delivery provisions
of the Securities Act. This applies, however, only if
(1) you are acquiring the exchange notes in the ordinary course of your
business;
(2) you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate, in a distribution
of the exchange notes;
(3) you are not an affiliate of Aircraft Finance; and
(4) you are not an initial purchaser who acquired Restricted Notes directly
from Aircraft Finance in the initial offering.
Aircraft Finance refers you to the "Morgan Stanley & Co. Inc." SEC No-Action
Letter available June 5, 1991, "Exxon Capital Holdings Corporation" SEC
No-Action Letter available May 13, 1988 and "Shearman & Sterling" SEC No-Action
Letter available July 2, 1993 for support of this belief.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of those exchange notes. This
prospectus may be used by a broker-dealer in connection with resales of exchange
notes received in exchange for notes where exchange notes were acquired as a
result of market-making activities or other trading activities. Aircraft Finance
has agreed that, starting on the date of this prospectus and ending on the close
of business on the earlier to occur of
(1) the date on which all exchange notes held by broker-dealers eligible to
use the prospectus to satisfy their prospectus delivery obligations under the
Securities Act have been sold and
(2) the date 180 days after the consummation of the exchange offer.
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Aircraft Finance will make this prospectus available to any broker-dealer that
requests the above documents for use in connection with any such resale. In
addition, until , 1999, all dealers effecting transactions in the
exchange notes may be required to deliver a prospectus. If this prospectus is
amended or supplemented, that version must be used instead.
Aircraft Finance will not receive any proceeds from any sale of exchange
notes by broker-dealers. exchange notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to the prevailing market prices or at negotiated prices. Any resale may
be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any broker-
dealer or the purchasers of any such exchange notes. Any broker-dealer that
resells exchange notes that were received by it for its own account pursuant to
the exchange offer and any broker or dealer that participates in a distribution
of those exchange notes may be deemed to be an "underwriter" within the meaning
of the Securities Act and any profit on any resale of exchange notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Aircraft Finance has agreed to pay all expenses of the exchange offer other
than commissions or concessions of any broker-dealers. Included within those
covered expenses are the expense of one counsel for the holders of the
Restricted Notes. Aircraft Finance has also agreed to indemnify broker-dealers
and other holders of the Restricted Notes against specified liabilities,
including liabilities under the Securities Act.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following, in the opinion of Milbank, Tweed, Hadley & McCloy LLP, are
the material United States federal tax consequences that result from the
purchase, ownership and disposition of exchange notes by U.S. holders and
non-U.S. holders. The following discussion does not purport to consider all the
possible tax consequences of the purchase, ownership or disposition of the
exchange notes, and it is not intended to reflect the individual tax position of
any holder. It deals only with exchange notes held as capital assets. Except as
expressly indicated, it is addressed only to holders that purchased notes in the
original offering at the original issue and does not deal with:
(1) holders with a special tax status or special tax situation, such as
financial institutions or dealers in securities or currencies;
(2) notes held as a hedge against currency risks or as part of a straddle
with other investments or as part of a "synthetic security" or other integrated
investment (including a "conversion transaction") consisting of a Note and one
or more other investments; or
(3) situations in which the functional currency of the holder is not the
U.S. dollar.
Except to the extent discussed below, this discussion is not applicable to
non-U.S. holders. This discussion is based upon the United States federal tax
laws and regulations
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now in effect and as currently interpreted. It does not take into account
possible changes in those tax laws or interpretations, all of which may be
applied retroactively. This discussion does not include any description of the
tax laws of any state or local government within the United States or of any
foreign government that may be applicable to you or the exchange notes. You
should consult your own tax advisors concerning the application of the United
States federal tax laws to your particular situation as well as any consequences
arising under the laws of any other taxing jurisdiction.
You will be considered a U.S. holder if you are
(1) a citizen or resident of the United States;
(2) a partnership, corporation or other entity created or organized in or
under the law of the United States or of any state of the United States;
(3) a trust subject to control of one or more United States persons and the
primary supervision of a United States court; or
(4) an estate the income of which is subject to United States federal
income tax regardless of its source.
If you are not a U.S. holder you will be subject to the rules discussed
under "-- Taxation of Non-U.S. Holders."
This discussion assumes that the notes will be characterized as
indebtedness for U.S. federal income tax purposes, and that the notes were not
issued with original issue discount.
TAX CHARACTERIZATION OF AIRCRAFT FINANCE AS A PARTNERSHIP
Aircraft Finance received a legal opinion from Weil, Gotshal & Manges LLP
on May 5, 1999 that it is a partnership and will not be an association or
publicly traded partnership taxable as a corporation for United States federal
income tax purposes.
If the IRS were to assert successfully that Aircraft Finance was a publicly
traded partnership taxable as a corporation for federal income tax purposes,
Aircraft Finance would be subject to corporate income tax on its taxable income.
Aircraft Finance's taxable income would include all its income, including the
income on the leases on its 36 aircraft, any swap agreements, interest on its
accounts and gain on the sale or disposition of its aircraft. The income may
possibly be reduced by depreciation on the aircraft and interest expense on the
exchange notes and initial Class D Notes, servicing and other fees, and losses
from the sale or disposition of aircraft. Any corporate income tax could
materially reduce cash available to make payments on the notes.
TAXATION OF U.S. HOLDERS
Interest on an exchange note generally will be includible in your ordinary
income at the time the interest is accrued or received in accordance with your
regular method of accounting for United States federal income tax purposes.
The initial Class C Notes were issued with a de minimis amount of original
issue discount. If you hold a Class C Note, you will be required to include that
original issue discount in your ordinary income as interest income on a pro rata
basis, as you receive principal payments on the note. You may, however, choose
to accrue de minimis original
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issue discount using the constant yield method, as long as you choose to accrue
all interest, discount and premium on the note using that method. You should
consult your tax adviser regarding the election to accrue interest, discount and
premium under the constant yield method.
Except as noted below, upon the sale, exchange or retirement of an exchange
note, you generally will recognize gain or loss equal to the difference between
the amount realized from that sale, exchange or retirement and your adjusted tax
basis in the exchange note. The amount so realized does not include accrued but
unpaid interest accrued between interest payment dates on the exchange notes,
which is instead includible in income in accordance with your method of
accounting as described above. Your adjusted tax basis in a note generally will
equal the amount you paid for the note, increased by any original issue discount
you previously included in income and decreased by any principal repayments. Any
gain on the disposition of an exchange note will be capital gain and will
generally be United States source gain. You should consult your tax advisor
regarding the United States federal income tax treatment of capital gains, which
may be taxed at lower rates than ordinary income for some non-corporate
taxpayers, and losses, the deductibility of which is subject to limitations.
An exchange of exchange notes for Restricted Notes will not be treated as a
taxable exchange for United States federal income tax purposes. Accordingly, if
you exchange your Restricted Notes for exchange notes you will not recognize
income, gain or loss for United States federal income tax purposes. Your tax
basis in the exchange notes will be equal to your adjusted basis in the
Restricted Notes and your holding period will include the period during which
you held the Restricted Notes.
TAXATION OF NON-U.S. HOLDERS
If you are a non-U.S. holder, any payments of interest -- including
original issue discount -- principal and premium, on the exchange notes to you
will not be subject to United States federal withholding tax if, in the case of
interest:
(1) you do not own, actually or constructively, 10% or more of the Capital
or profits of Aircraft Finance;
(2) you are not a controlled foreign corporation related, directly or
indirectly, to Aircraft Finance through stock ownership;
(3) you are not a bank receiving interest described in Section 881(c)(3)(A)
of the Internal Revenue Code; and
(4) the statement requirement described in the next sentence has been
fulfilled by you or on behalf of you.
Sections 871(h) and 881(c) of the Internal Revenue Code require that, in order
to obtain the exemption from withholding tax described in the previous sentence,
either you, or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business and that is holding an exchange note on your behalf, files a
statement with the withholding agent to the effect that you are not a United
States person.
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Under temporary United States Treasury regulations that apply to both
stated interest and sale or exchange proceeds if either is paid with respect to
a note on or before December 31, 2000, this requirement will be fulfilled if:
(1) you certify on Internal Revenue Service Form W-8, under penalties of
perjury, that you are not a United States person and provide your name and
address; and
(2) any financial institution holding the note on your behalf files a Form
W-8IMY, under penalties of perjury, stating that it has received such a
statement from you and furnishes the withholding agent with a copy.
Recently issued final Treasury regulations, which apply to interest,
including original issue discount, and sale or exchange proceeds paid with
respect to an exchange note after December 31, 2000, also provide that the
certification requirement of Sections 871(h) and 881(c) generally will be
fulfilled if beneficial owners as well as some foreign partnerships, including
partners of certain foreign partnerships, meet the two conditions set forth in
the preceding sentence. A beneficial owner that is a foreign estate or trust (or
a fiduciary of a foreign estate or trust ), a foreign partnership that has
entered into a withholding agreement with the IRS, or a non-U.S. holder holding
a note through its United States branch will, however, be required to provide
its "taxpayer identification number" in addition to its name and address on Form
W-8BEN or Form W-8IMY, as appropriate. Foreign partnerships and their partners
should consult their tax advisors regarding possible additional reporting
requirements.
If interest or other income received with respect to an exchange note is
effectively connected with a United States trade or business conducted by you,
you may, although exempt from the withholding tax described in the preceding
paragraph, be subject to United States federal income tax on this interest in
the same manner as if you were a United States person. In addition, if you are a
corporation, you may be subject to a branch profits tax equal to 30% (or a lower
treaty rate) of your effectively connected earnings and profits for the taxable
year, subject to some adjustments.
If you are a non-U.S. holder, you will not be subject to United States
federal income tax on gain realized on the sale, exchange or other disposition
of a note, unless you are an individual who is present in the United States for
183 days or more in the taxable year of disposition and either your "tax home"
as defined in Internal Revenue Code Section 911(d)(3) is in the United States
unless the gain is attributable to a fixed place of business that you maintain
in a foreign country and such income has been subject to foreign tax of at least
10% or the gain is attributable to an office or other fixed place of business
maintained by you in the United States or the gain is effectively connected with
your conduct of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The trustee will be required to report annually to the IRS, and to each
holder of record of an exchange note, specified information, including the
holder's name, address and taxpayer identification number consisting of either a
social security number or an employer identification number, the aggregate
amount of principal and interest paid and the amount of any tax withheld. This
obligation, however, does not apply to you if you are a corporation, tax-exempt
organization, qualified pension and profit-sharing trust, individual retirement
account or other organization specifically exempt from these rules.
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If you are a U.S. holder subject to the reporting requirements described
above and you fail to supply your correct taxpayer identification number in the
manner required by applicable law or you under-report your tax liability,
Aircraft Finance, its agents or paying agents may be required to "backup"
withhold a tax equal to 31% of each payment of interest and principal on your
notes. This backup withholding is not an additional tax and may be credited
against your United States federal income tax liability, provided that required
information is furnished to the IRS.
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments made by Aircraft Finance or any agent of
Aircraft Finance if you are a non-U.S. holder and the certifications required by
Section 871(h) and 881(c) of the Internal Revenue Code are received, provided
that Aircraft Finance or its agent does not have actual knowledge that you are a
United States person.
The final regulations modify the backup withholding and information
reporting procedures in some respects for payments made after December 31, 2000.
You are urged to consult your tax advisor regarding the application of the
backup withholding and information reporting rules.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES
Although Aircraft Finance believes the exchange notes should be treated as
debt for United States federal income tax purposes, in light of the
highly-leveraged capital structure of Aircraft Finance, the IRS might argue that
one or more classes of the more junior notes represent, in substance, an equity
interest in Aircraft Finance. If the IRS were successful in such a challenge,
Aircraft Finance might be treated as a publicly traded partnership that would be
taxable as a corporation with the adverse consequences described above.
Treatment of the exchange notes as equity interests in a publicly traded
partnership could have additional adverse tax consequences to a holder of such
an exchange note. Such a holder would be treated as a shareholder of a
corporation with the effect that all or a portion of payments to that holder
could be characterized as dividends instead of interest and principal and
payments to foreign holders might be subject to withholding of United States
federal income tax.
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ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, or ERISA, imposes
requirements on persons who are fiduciaries with respect to employee benefit
plans that are subject to ERISA. A person who exercises discretionary authority
or control with respect to the management of the assets of a plan is a fiduciary
of that plan for purposes of ERISA. Before investing in a note, a fiduciary of a
plan should determine whether that investment is permitted under the plan's
governing instruments and is appropriate for the plan in view of the overall
investment policy of the plan and the composition and diversification of its
portfolio, taking into account the limited liquidity of the notes.
Other provisions of ERISA and the Internal Revenue Code prohibit specified
transactions that directly or indirectly involve the assets of plans subject to
ERISA and other types of plans and individual retirement accounts and persons
who have specified relationships to any such plan or account. Plans subject to
ERISA and these other types of plans and accounts are referred to as "plans". In
particular, a sale or exchange of property or an extension of credit between a
plan and a related person might constitute a prohibited transaction unless an
exemption applies. Each of Aircraft Finance and GE Capital Aviation Services,
Limited may be a related person with respect to a plan that purchases notes. Any
plan that proposes to purchase notes should determine that its purchase and
holding of notes will not give rise to a non-exempt prohibited transaction.
Statutory or administrative exemptions from the prohibited transaction
rules under ERISA and the Internal Revenue Code may be available to a plan that
is purchasing the notes. These exemptions might be available for a purchase of
notes:
(1) by a collective investment fund maintained by a bank;
(2) by an insurance company pooled separate account;
(3) by the general account plan of an insurance company;
(4) that is directed by an independent qualified professional asset
manager; or
(5) that is directed by an in-house asset manager,
if all of the applicable terms and conditions of the exemption are satisfied.
Governmental plans and some church plans as defined under ERISA are not
subject to the prohibited transaction rules of ERISA and the Internal Revenue
Code. These plans may, however, be subject to federal, state or local laws or
regulations that may affect their investment in the notes. Any fiduciary of such
a governmental plan or church plan considering a purchase of the notes should
determine whether the purchase and holding of notes will result in a violation
of any such laws or regulations.
EACH PURCHASER OF AN EXCHANGE NOTE WILL BE DEEMED TO HAVE REPRESENTED AND
WARRANTED THAT EITHER NO ASSETS OF A PLAN HAVE BEEN USED TO PURCHASE THAT NOTE
OR THE USE OF PLAN ASSETS TO PURCHASE AND HOLD THAT NOTE WILL NOT RESULT IN A
NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR THE INTERNAL REVENUE CODE.
ANY FIDUCIARY OF A PLAN, A GOVERNMENTAL PLAN OR A CHURCH PLAN CONSIDERING
THE PURCHASE AND HOLDING OF THE NOTES SHOULD CONSULT WITH ITS LEGAL ADVISORS
REGARDING THE CONSEQUENCES OF PURCHASING AND HOLDING ANY NOTES.
160
<PAGE> 165
LEGAL MATTERS
Milbank, Tweed, Hadley & McCloy LLP, New York counsel to Aircraft Finance,
and Morris, James, Hitchens & Williams, Wilmington, Delaware, special Delaware
counsel to Aircraft Finance, will pass upon the legality of the exchange notes
for Aircraft Finance.
LUXEMBOURG LISTING AND GENERAL INFORMATION
(1) Aircraft Finance confirms that there has been no material adverse
change in its financial condition since the date of its formation on April 13,
1999.
(2) Aircraft Finance will deposit a legal notice relating to the issue of
the exchange notes with the Chief Registrar of the District Court in Luxembourg
(Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg) where such
documents may be examined and copies obtained. This is in connection with the
application to list the exchange notes on the Luxembourg Stock Exchange.
(3) The exchange notes have been accepted for clearance by DTC, Euroclear
and Cedel Bank clearance systems with Common Codes of 009917322, 009917381,
009917411, and 009917454 for the Class A-1 Notes, the Class A-2 Notes, the Class
B Notes, and the Class C Notes, respectively.
(4) The exchange notes have been accepted for clearance by DTC, Euroclear
and Cedel Bank clearance systems with ISINs of US009341AL20, US009341AM03,
US009341AN85, and US009341AP34 for the Class A-1 Notes, the Class A-2 Notes, the
Class B Notes, and the Class C Notes, respectively.
(5) The exchange notes have been accepted for clearance by DTC, Euroclear
and Cedel Bank clearance systems with CUSIP numbers 009341AL2, 009341AM0,
009341AN8, and 009341AP3 for the Class A-1 Notes, the Class A-2 Notes, the Class
B Notes, and the Class C Notes, respectively.
(6) All documents mentioned in this prospectus that have been prepared in
connection with the exchange offer will be available at the office of the
Luxembourg paying agent, so long as any of the exchange notes are outstanding.
(7) Aircraft Finance has obtained or will obtain all necessary consents,
approvals and authorizations in connection with the exchange offer.
(8) Aircraft Finance is not involved in litigation or arbitration
proceedings relating to claims on amounts that are material in the context of
the issuance of exchange notes, or, so far as Aircraft Finance is aware, is any
litigation or arbitration involving Aircraft Finance pending or threatened.
(9) The listing agent will notify the Luxembourg Stock Exchange promptly of
any change in the outstanding principal amounts of the exchange notes.
Information relating to changes in the outstanding principal amount of the
exchange notes will be made available at the offices of the Luxembourg paying
agent in the City of Luxembourg.
(10) As long as any of the exchange notes are outstanding, copies of the
monthly, quarterly and annual reports described in "Reports to Holders", and
copies of the annual appraisals described in "Description of the
Notes -- Operating Covenants -- Appraisal of Aircraft" will be made available at
the offices of the Luxembourg paying agent in Luxembourg, where copies may be
obtained upon request.
161
<PAGE> 166
EXPERTS
The consolidated balance sheet as of May 5, 1999 included in this
prospectus has been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent certified public accountants, given on
the authority of said firm as experts in auditing and accounting.
Valuations of the initial aircraft included or to be included in Aircraft
Finance's portfolio have been made by three expert aircraft appraisers: Aircraft
Information Services, Inc., BK Associates, Inc. and Morten Beyer & Agnew, Inc.
These valuations are discussed in detail elsewhere in this prospectus and are
included in reliance upon the authority of such firms as experts in giving
appraisals.
The section entitled "The Commercial Aircraft Industry" in this prospectus
is based upon information either compiled or produced by Simat, Helliesen &
Eichner and is included on reliance upon the authority of that firm as an
expert, although Simat, Helliesen & Eichner has not independently verified the
material provided to it by the outside sources referenced in that section.
162
<PAGE> 167
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheet.................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statement of Cash Flows........................ F-5
Consolidated Statement of Changes in Beneficial Interest.... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 168
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Trustees
In our opinion, the accompanying consolidated balance sheet presents
fairly, in all material respects, the financial position of Aircraft Finance
Trust and Subsidiaries at May 5, 1999, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Company's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this financial
statement in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Ft. Lauderdale, Florida
June 22, 1999
F-2
<PAGE> 169
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 5, SEPTEMBER 30,
1999 1999
---------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................ $ 57,986 $ 64,588
Restricted cash...................................... 21,140 19,966
Rent receivable...................................... 2,590 7,622
Aircraft under operating leases, net................. 1,196,087 1,179,962
Other assets......................................... 465 243
---------- ----------
Total assets.................................... $1,278,268 $1,272,381
========== ==========
LIABILITIES AND BENEFICIAL INTERESTHOLDERS' EQUITY
Accounts payable and accrued liabilities............. $ -- $ 12,108
Deferred rental income............................... 9,038 6,903
Security and other deposits.......................... 21,143 19,966
Notes payable:
Class A-1.......................................... 512,500 512,500
Class A-2.......................................... 400,000 379,347
Class B............................................ 126,500 125,177
Class C............................................ 106,000 106,000
Class D............................................ 64,000 64,000
---------- ----------
1,209,000 1,187,024
---------- ----------
Total liabilities............................... 1,239,181 1,226,001
---------- ----------
Commitments and contingencies (Note 9)............... -- --
Beneficial interestholders' equity:
Beneficial interest................................ 39,087 46,380
---------- ----------
Total liabilities and beneficial
interestholders' equity....................... $1,278,268 $1,272,381
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 170
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
THREE MONTHS ENDED (APRIL 13, 1999)
SEPTEMBER 30, 1999 TO SEPTEMBER 30, 1999
------------------ ---------------------
<S> <C> <C>
REVENUES:
Rental income from operating leases..... $42,839 $66,148
Interest income....................... 1,009 1,594
------- -------
Total revenues..................... 43,848 67,742
------- -------
EXPENSES:
Interest expense...................... 19,599 31,847
Depreciation expense.................. 10,564 17,823
Operating expense..................... 8,221 8,256
Administration and other.............. 1,552 2,523
------- -------
Total expenses..................... 39,936 60,449
------- -------
NET INCOME.............................. $ 3,912 $ 7,293
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 171
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 13, 1999)
TO SEPTEMBER 30, 1999
---------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 7,293
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense................................. 17,823
Changes in assets and liabilities:
Rent receivable...................................... (7,622)
Increase in restricted cash.......................... (19,966)
Other assets......................................... (243)
Accounts payable and accrued liabilities............. 12,108
Deferred rental income............................... 6,903
Security and other deposits.......................... 19,966
-----------
Net cash provided by operating activities............ 36,262
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of aircraft.................................... (1,197,785)
-----------
Net cash used in investing activities................ (1,197,785)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of beneficial interest......................... 39,087
Proceeds from notes payable............................. 1,209,000
Repayment of notes payable.............................. (21,976)
-----------
Net cash provided by financing activities............ 1,226,111
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................. 64,588
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......... --
-----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 64,588
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 172
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN BENEFICIAL INTEREST
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BENEFICIAL
INTEREST
----------
<S> <C>
Issuance of Beneficial Interest............................. $39,087
Net Income.................................................. 7,293
-------
Balance at September 30, 1999............................... $46,380
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 173
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 5, 1999
NOTE 1 -- ORGANIZATION
Aircraft Finance Trust ("Aircraft Finance") is a special-purpose statutory
business trust that was formed on April 13, 1999 under the laws of Delaware.
Aircraft Finance and its two subsidiaries (collectively "Aircraft Finance
group") were formed to conduct certain limited activities, including acquiring,
financing, re-financing, owning, leasing, re-leasing, selling, maintaining and
modifying commercial aircraft. All of the beneficial interest of the Aircraft
Finance group is owned by UniCapital AFT-I, Inc. and UniCapital AFT-II, Inc.,
both wholly-owned indirect subsidiaries of UniCapital Corporation. The Trust
Agreement provides for four trustees, an Owner Trustee and three Controlling
Trustees. The Owner Trustee will maintain the books and records of Aircraft
Finance. The three Controlling Trustees have the authority to manage the
property and affairs of Aircraft Finance under the Trust Agreement. One of the
Controlling Trustees, the Equity Trustee, was appointed by the beneficial
interestholders, while the other two Controlling Trustees are independent of the
beneficial interestholders. Aircraft Finance does not have any officers or
employees. Aircraft Finance has contracted with certain third parties to provide
aircraft servicing, lease administration and accounting services and financial
and capital market advisory services.
On May 5, 1999, Aircraft Finance group completed a securitization
transaction in which it received proceeds from a private placement offering of
notes and simultaneously paid for 36 commercial jet aircraft to be acquired from
General Electric Capital Corporation and certain of its affiliates (together the
"Seller"). The Aircraft Finance group's obligations, including its debt
obligations, are not obligations of, or guaranteed by, the Seller, UniCapital
AFT-I, Inc., UniCapital AFT-II, Inc., UniCapital Corporation or any of its other
subsidiaries, or any person other than the Aircraft Finance group.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and includes the
accounts of Aircraft Finance and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial data as of September 30, 1999 and for the period from
inception to September 30, 1999 is unaudited; however, in the opinion of the
Aircraft Finance group, the interim data includes all adjustments, consisting of
only normal recurring adjustments, necessary for a fair statement of the
financial position and results of operations and of cash flows for the interim
periods. Such interim financial data is not necessarily indicative of results
for the entire year including such interim periods.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and
F-7
<PAGE> 174
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 5, 1999
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. While management believes
that the estimates and related assumptions used in the preparation of the
financial statements are appropriate, actual results could differ from those
estimates. Estimates are made in the assessment of the collectability of
receivables, depreciable lives and estimated salvage values of leased aircraft
and estimates of expected maintenance and overhaul costs in connection with
certain leases of aircraft.
CASH AND CASH EQUIVALENTS
The Aircraft Finance group classifies highly liquid investments with
original maturities of three months or less from the date of purchase as cash
equivalents.
OPERATING LEASES
Aircraft under operating leases are recorded at cost and depreciated on a
straight-line basis over the estimated life to their estimated salvage value.
Generally, aircraft and aircraft equipment are depreciated over estimated useful
lives of 30 years from the date of manufacture to a 15% estimated salvage value.
The Aircraft Finance group's estimates are reviewed periodically to ensure
continued appropriateness.
Revenue under operating leases is recognized as rental income on a
straight-line basis over the lease term. In addition, certain leases provide for
contingent rental payments based on measures of usage.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS 121"), the recognition of an impairment loss for an asset
held for use is required when the estimate of undiscounted future cash flows
expected to be generated by the asset is less than its carrying amount.
Measurement of an impairment loss is to be recognized based on the fair value of
the asset. Fair value reflects the underlying economic value of the aircraft,
including engines, in normal market conditions (where supply and demand are in
reasonable equilibrium) and assumes adequate time for a sale and a willing buyer
and seller. Short-term fluctuations in the market place are disregarded and it
is assumed that there is no necessity either to dispose of a significant number
of aircraft simultaneously or to dispose of aircraft quickly. The fair value of
the assets is based on independent valuations of the aircraft and/or estimates
of discounted future cash flows. SFAS 121 also requires that long-lived assets
to be disposed of be reported at the lower of the carrying amount or fair value
less estimated disposal costs.
MAINTENANCE RESERVES
Most lease contracts require the lessee to bear the obligation for
maintenance costs on airframes and engines, and require the lessee to make
certain prepayments to the lessor, calculated on measures of usage to cover the
expected costs of scheduled maintenance charges, including major airframe and
engine overhauls. Reserves are maintained at amounts considered adequate to
cover those expected reimbursements to lessees.
F-8
<PAGE> 175
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 5, 1999
INCOME TAXES
The operating results of Aircraft Finance group are included in the tax
return of their beneficial interestholders. As such, Aircraft Finance group is
not subject to U.S. Federal, State, and local income taxes.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments, as defined in Statement of Financial
Accounting Standards No. 119, "Disclosure about Derivative Financial Instruments
and Fair Value of Financial Instruments", used by the Aircraft Finance group
include interest rate swaps. The Aircraft Finance group utilizes interest rate
swaps to synthetically alter the repricing characteristics of variable-rate
interest obligations, effectively allowing the Aircraft Finance group to pay a
fixed interest rate on certain notes, reducing its exposure to unfavorable
variations in the LIBOR rate charged on those variable rate interest
obligations. Risks arise from the use of such instruments from the possible
inability of the counterparties to meet the terms of their contracts and from
market movements in values and interest rates. The Aircraft Finance group does
not enter into interest rate swaps for trading purposes.
In accounting for interest rate swaps, the net differential to be paid or
received on the interest rate swap is recognized as a yield adjustment to the
related liability over the life of the swap agreement. If the related liability
is disposed of, the swap agreement is marked to market. Thereafter, the interest
rate swap is accounted for in the financial statements at its fair value with
any unrealized gains and losses recognized in the period incurred. If the
interest rate swap agreement is terminated, the gain or loss is deferred and
amortized over the remaining life of the related liability.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments", requires disclosure of the fair value of
financial instruments, for both assets and liabilities recognized and not
recognized on the balance sheet, for which it is practicable to estimate fair
value. The carrying value of the Aircraft Finance group's financial instruments
at May 5, 1999 approximates fair value due, in part, to their variable-interest
rate characteristics and due further to the completion of the offering of the
notes under the market conditions of that same day.
NOTE 3 -- CASH BALANCES
Aircraft Finance maintains various cash accounts as required by the Trust
Indenture, including a Rental Account, a Collections Account, an Expense
Account, the Lessee Funded Accounts and restricted reserve accounts related to
one lessee.
All payments under the leases are deposited into the Rental Account and
subsequently swept to the Collection Account within one business day of receipt.
Aircraft Finance maintains a cash reserve balance in the Collection Account in
an amount determined monthly in accordance with the Trust Indenture. At May 5,
1999, the cash reserves included in the Collection Account were $52 million. The
cash reserves are intended to provide a source of liquidity for the payment of
expenses, swap payments and
F-9
<PAGE> 176
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 5, 1999
interest on certain classes of notes. Expenses of Aircraft Finance are generally
paid out of the Expense Account which is funded through transfers from the
Collections Account.
The Lessee Funded Accounts and certain lessee reserve accounts are not
available for general use. Security deposits and maintenance reserve payments
from lessees that are required to be segregated from other funds are deposited
into the Lessee Funded Accounts. Certain lessee reserve accounts consists of a
deposit from the Seller of the aircraft that can be drawn upon by Aircraft
Finance should such lessee be delinquent on any of its rent payments. The
balances in the Lessee Funded Accounts and the one lessee reserve account at May
5, 1999 were $14.39 million and $6.75 million, respectively.
NOTE 4 -- AIRCRAFT UNDER OPERATING LEASES
On May 5, 1999, the Aircraft Finance group purchased 36 commercial jet
aircraft from General Electric Capital Corporation and certain of its
subsidiaries (together the "Seller") having an aggregate cost of $1,196 million
pursuant to a Master Aircraft Purchase Agreement. The Aircraft Finance group
financed these purchases primarily through the net proceeds from the Aircraft
Finance group's private placement of asset-backed notes and proceeds from the
issuance of beneficial interests.
All aircraft are compliant with Stage 3 noise levels set out in the United
States Federal Aviation Regulations. An analysis of the various lessee
expiration periods of the aircraft under operating leases is as follows at May
5, 1999:
<TABLE>
<S> <C>
On lease for a further period of:
More than five years........................................ 14
From one to five years.................................... 18
Less than one year........................................ 4
---
Total aircraft portfolio.................................... 36
===
</TABLE>
If the Seller is unable to deliver any of the 36 aircraft on or before
December 1, 1999, the Seller must deliver a substitute aircraft satisfying
certain conditions or repurchase the undelivered aircraft. Any proceeds received
from the Seller for repurchase of such undelivered aircraft will be applied
towards principal reduction of the notes.
F-10
<PAGE> 177
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 5, 1999
At May 5, 1999 future scheduled minimum lease contract payments to be
received under operating leases for the years ended December 31, are as follows:
(dollars in thousands)
<TABLE>
<S> <C>
1999 (May 5 - December 31)........................... $ 86,148
2000................................................. 116,563
2001................................................. 113,993
2002................................................. 103,269
2003................................................. 80,422
Thereafter........................................... 97,837
--------
Total................................................ $598,232
========
</TABLE>
Additional contingent rentals are earned by the Aircraft Finance Trust
group based on certain lessee's usage.
Aircraft Finance group may acquire additional aircraft and related leases
from the Seller, UniCapital Corporation or their affiliates using proceeds from
the issuance of additional notes and equity. Any such acquisition of additional
aircraft by Aircraft Finance group will be subject to the terms of the Trust
Indenture and will require written confirmation from the rating agencies.
NOTE 5 -- NOTES PAYABLE
On May 5, 1999 (the "Initial Closing Date"), the Aircraft Finance group
completed a private placement offering of $1,209 million of securitized notes
(the "Initial Notes") on a basis exempt from registration under the Securities
Act of 1933, as amended. The Aircraft Finance group utilized the proceeds from
the Initial Notes as payment for the acquisition of 36 commercial jet aircraft.
Underwriting and certain other issuance related costs incurred in connection
with the offering were paid by the Seller.
F-11
<PAGE> 178
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 5, 1999
The repayment terms of each class of Initial Notes are such that certain
principal amounts are expected to be repaid on dates which are based on certain
operating assumptions (the "Expected Final Payment Date") or refinanced through
the issuance of new notes, but in any event are ultimately due for repayment on
specified final maturity dates (the "Final Maturity Date"). The Expected Final
Payment Dates, Final Maturity Dates and interest rates applicable to each class
of the Initial Notes are listed as follows (dollars in thousands):
<TABLE>
<CAPTION>
INITIAL EXPECTED FINAL FINAL
CLASS OF NOTE PRINCIPAL AMOUNT INTEREST RATE PAYMENT DATE MATURITY DATE
- ------------- ---------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Class A-1 $ 512,500 LIBOR + 0.48% May 15, 2004 May 15, 2024
Class A-2 400,000 LIBOR + 0.50% June 15, 2008 May 15, 2024
Class B 126,500 LIBOR + 1.15% May 15, 2016 May 15, 2024
Class C 106,000 8.00% July 15, 2016 May 15, 2024
Class D 64,000 11.00% August 15, 2016 May 15, 2024
----------
$1,209,000
==========
</TABLE>
The one-month LIBOR rate with respect to these notes as of May 5, 1999 was
4.90%.
If the Class A-1 Notes are not repaid on or before their Expected Final
Payment Date, such class of notes will accrue interest thereafter at the stated
interest rate plus 0.50% per annum ("Maturity Step-Up Interest").
Aircraft Finance group is obligated to use its best efforts to consummate
an exchange offer (the "Exchange Offer") pursuant to which the Initial Notes,
other than Class D Notes, would be exchanged for substantially similar debt
securities issued pursuant to an effective registration statement under the
Securities Act of 1933. If the Exchange Offer is not consummated on or before
January 30, 2000, the Initial Notes will accrue interest at the stated interest
rate, plus 0.50% per annum until the date that the Exchange Offer is
consummated.
Aircraft Finance group has the right to make an optional redemption of any
Notes. Should Aircraft Finance choose to exercise an early redemption of any of
the Notes, it may be required to pay a redemption premium as required by the
Trust Indenture.
The dates on which principal repayments on the notes will actually occur
will depend on the cash flows generated by the rental income from the Aircraft
Finance group's portfolio of aircraft, Aircraft Finance group's ability to
refinance any or all of the notes and the amount of operating costs incurred in
the ordinary course of business. Amounts received by the Aircraft Finance group
and available for distribution are paid in accordance with the priorities
specified in the Trust Indenture.
NOTE 6 -- DERIVATIVE FINANCIAL INSTRUMENTS
INTEREST RATE SWAPS
At May 5, 1999, the Aircraft Finance group was a party to five interest
rate swap agreements which it entered into on May 5, 1999. Under the agreements,
the Aircraft
F-12
<PAGE> 179
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 5, 1999
Finance group will pay a fixed rate of interest on the notional amount to the
counterparty and, in turn, the counterparty will pay the Aircraft Finance group
a rate of interest on the notional amount based on LIBOR. On May 5, 1999, the
fair values of these interest rate swaps was zero as the agreements became
effective under the market conditions of that same day.
The following table presents, as of May 5, 1999, a summary of the terms of
the Aircraft Finance group's interest rate swap agreements (dollars in
thousands):
<TABLE>
<CAPTION>
FIXED RATE TO BE RATE TO BE
NOTIONAL PAID BY AIRCRAFT RECEIVED BY AIRCRAFT
AMOUNT FINANCE GROUP FINANCE GROUP MATURITY DATE
- -------- ---------------- -------------------- -------------
<S> <C> <C> <C>
$ 80,000 5.23% LIBOR April 15, 2000
60,000 5.50% LIBOR January 15, 2002
175,000 5.56% LIBOR October 15, 2002
345,000 5.65% LIBOR January 15, 2004
230,000 5.71% LIBOR November 15, 2004
</TABLE>
NOTE 7 -- NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities", which is effective for
fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and it
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in the fair value of such derivatives
will vary based on the intended use of the derivative. The Aircraft Finance
group plans to adopt SFAS 133 beginning in the year 2001. Adoption of SFAS 133
is not expected to have a significant impact on Aircraft Finance group's results
of operations, cash flows or financial position.
NOTE 8 -- RELATED PARTY
On May 5, 1999, UniCapital Corporation (parent company of the beneficial
interestholders) purchased approximately $3.8 million of the Class D Notes.
One of the three Controlling Trustees, the Equity Trustee, is an employee
of UniCapital Air Group, Inc. a wholly-owned subsidiary of UniCapital
Corporation and the parent company of UniCapital AFT-I, Inc. and UniCapital
AFT-II, Inc. The Equity Trustee has the ability to exert certain influence over
the operations of Aircraft Finance group including that the acquisition of
additional aircraft by Aircraft Finance and the terms of any related financing
need only be approved by the Equity Trustee. Further, any sale of any aircraft,
decisions requiring Aircraft Finance's approval under the Servicing Agreement
with GECAS or the agreement with the administrative agent and the reduction of
any required level of reserves must be approved by the Equity Trustee and at
least one of the Independent Controlling Trustees.
F-13
<PAGE> 180
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 5, 1999
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
In accordance with the terms of a servicing agreement (the "Servicing
Agreement"), GE Capital Aviation Services, Limited, ("GECAS") is performing
certain aircraft related services with respect to the Aircraft Finance group's
aircraft portfolio. Such activities include the collection of rents and other
amounts due from lessees, the monitoring of maintenance, insurance and other
obligations under the aircraft leases, the enforcement of rights against the
lessees, the remarketing of aircraft for re-lease or sale and the performance of
other specified aircraft-related services. In accordance with the Servicing
Agreement, fees payable to GECAS by Aircraft Finance include base fees and fees
calculated as a percentage of lease rentals received, in addition to certain
incentive based fees.
The Servicing Agreement expires on the latter of (i) the payment in full of
all amounts due on the notes and other similar obligations and all amounts due
to the holders of beneficial interests in Aircraft Finance and (ii) the date on
which Aircraft Finance and its subsidiaries cease to own any aircraft. Each
party has the right to terminate the Servicing Agreement under specified
circumstances.
Additionally, Aircraft Finance has contracted with third parties to provide
administrative, financial and capital markets advisory and trust services.
NOTE 10 -- CONCENTRATION OF CREDIT RISK
Credit risk with respect to operating lease receivables is generally
diversified due to the number of lessees comprising the Aircraft Finance group's
customer base and the different geographic areas in which they operate. At May
5, 1999, the Aircraft Finance group had leased aircraft to 23 lessees in 13
countries. Also, on May 5, 1999, nine of the aircraft are being leased to
lessees domiciled in certain emerging markets, including those located in
Eastern Europe, the Middle East, Latin America and Asia. The exposure of the
Aircraft Finance group's aircraft to particular countries and customers is
managed partly through concentration limits and through obtaining deposits from
lessees and certain cash reserves.
At May 5, 1999, Aircraft Finance group held cash reserves of $6.75 million
that are available to fund delinquent rentals and other payments due from one
certain lessee. Such amounts are not available for general use. Any unused
reserve amount must be returned to the Sellers at lease expiration.
NOTE 11 -- SUBSEQUENT EVENTS (UNAUDITED)
SALE OF BENEFICIAL INTEREST
UniCapital Corporation sold 51% of Aircraft Finance to three financial
services companies. As a result of these transactions, UniCapital Corporation
through its indirect subsidiaries UniCapital AFT-I, Inc. and UniCapital AFT-II,
Inc., owns 49% of Aircraft Finance.
One of those financial service companies acquired its direct and indirect
interests in Aircraft Finance (16%) from UniCapital Corporation in an
installment sale. To the extent that future installment payments are not timely
made, UniCapital Air Group, Inc. has the
F-14
<PAGE> 181
AIRCRAFT FINANCE TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MAY 5, 1999
right to reacquire all or a portion of the financial service company's ownership
interests in Aircraft Finance. Under arrangements entered into among each of the
owners of Aircraft Finance, it is contemplated that upon completion of the
installment payments, the officer of UniCapital Corporation and UniCapital Air
Group, Inc., that presently serves as the Equity Trustee will resign as the
Equity Trustee. Upon his resignation, a replacement trustee would be appointed
by the holders of the ownership interests in Aircraft Finance.
F-15
<PAGE> 182
APPENDIX 1
INDEX OF SELECTED DEFINED TERMS
<TABLE>
<S> <C>
Additional Interest......................................... 106
Additional Servicing Fees................................... 45
Adjusted Base Value......................................... 108
Adjusted Portfolio Value.................................... 108
Applicable Percentage....................................... 112
Depreciation Factor......................................... 108
Interest Amount............................................. 106
Junior Note Blockage Amount................................. 119
Maturity Step-Up Interest................................... 106
Mezzanine Note Blockage Amount.............................. 119
Minimum Principal Payment Amount............................ 107
Note Target Price........................................... 129
Projected Principal Payment Amounts......................... 112
Redemption Premium.......................................... 113
Redemption Price............................................ 111
Registration Step-Up Interest............................... 106
Sale Premium................................................ 110
Scheduled Principal Payment Amount.......................... 109
Senior Note Blockage Amount................................. 119
Subordinate Note Blockage Amount............................ 119
Supplemental Principal Payment Amount....................... 109
</TABLE>
<PAGE> 183
APPENDIX 2
AIRCRAFT TYPES DATA(1)
<TABLE>
<CAPTION>
STAGE 3
NARROW/ TYPICAL NO. & MFR OF NOISE PRODUCTION CURRENT ON NO. OF
TYPE AND VARIANT WIDEBODY SEATS ENGINES COMPLIANCE YEARS FLEET ORDER OPERATORS
- ---------------- -------- ------- ------------ ---------- ---------- ------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Airbus A310-300......... Wide 220 2 X GE/PW Yes 1986- 163 6 41
Airbus A320-200......... Narrow 150 2 X CFM/IAE Yes 1988- 667 416 77
Boeing 737-300.......... Narrow 130 2 X CFM Yes 1984- 1043 25 105
Boeing 737-400.......... Narrow 150 2 X CFM Yes 1988- 472 9 61
Boeing 767-200ER........ Wide 220 2 X GE/PW Yes 1984- 96 10 25
Boeing 767-300ER........ Wide 250 2 X GE/PW/RR Yes 1988- 376 60 58
McDonnell Douglas
DC-10-30.............. Wide 280 3 X GE Yes 1972-1988 129 0 31
McDonnell Douglas
MD-83(2).............. Narrow 150 2 X PW Yes 1985- 255 26 28
</TABLE>
- -------------------------
SOURCE: AIRCLAIMS CASE DATABASE
(1) Data as of January 14, 1999.
(2) Boeing has announced that production of this type is expected to end in
1999.
<PAGE> 184
APPENDIX 3
MONTHLY GROSS REVENUES BASED ON THE NOTE PAYMENT ASSUMPTIONS
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
June 1999............ 15,425,023
July 1999............ 10,734,539
August 1999.......... 10,734,539
September 1999....... 12,534,539
October 1999......... 10,734,539
November 1999........ 10,685,539
December 1999........ 12,435,539
January 2000......... 10,562,539
February 2000........ 10,562,539
March 2000........... 11,762,539
April 2000........... 10,562,539
May 2000............. 11,234,539
June 2000............ 11,284,539
July 2000............ 11,357,539
August 2000.......... 11,357,539
September 2000....... 11,357,539
October 2000......... 11,357,539
November 2000........ 11,285,539
December 2000........ 11,235,539
January 2001......... 11,162,539
February 2001........ 11,162,539
March 2001........... 11,162,539
April 2001........... 11,162,539
May 2001............. 11,234,539
June 2001............ 11,284,539
July 2001............ 11,357,539
August 2001.......... 11,357,539
September 2001....... 11,357,539
October 2001......... 11,357,539
November 2001........ 11,285,539
December 2001........ 11,235,539
January 2002......... 11,235,539
February 2002........ 11,235,539
March 2002........... 11,235,539
April 2002........... 11,221,990
May 2002............. 11,292,539
June 2002............ 11,285,383
July 2002............ 11,275,706
August 2002.......... 11,275,706
September 2002....... 11,222,997
October 2002......... 11,222,997
November 2002........ 11,150,997
December 2002........ 11,150,997
January 2003......... 11,150,997
February 2003........ 11,150,997
March 2003........... 11,150,997
April 2003........... 11,150,997
May 2003............. 11,219,022
June 2003............ 11,219,022
July 2003............ 11,219,022
August 2003.......... 11,219,022
September 2003....... 11,219,022
October 2003......... 11,219,022
November 2003........ 11,143,254
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
December 2003........ 11,143,254
January 2004......... 11,143,254
February 2004........ 11,143,254
March 2004........... 11,143,254
April 2004........... 11,149,932
May 2004............. 11,185,932
June 2004............ 11,202,932
July 2004............ 11,202,932
August 2004.......... 11,202,932
September 2004....... 11,202,932
October 2004......... 11,184,622
November 2004........ 11,184,622
December 2004........ 11,184,622
January 2005......... 11,184,622
February 2005........ 11,184,622
March 2005........... 11,184,622
April 2005........... 11,184,622
May 2005............. 11,172,784
June 2005............ 11,172,784
July 2005............ 11,172,784
August 2005.......... 11,172,784
September 2005....... 11,172,784
October 2005......... 11,172,784
November 2005........ 11,172,784
December 2005........ 11,172,784
January 2006......... 11,172,784
February 2006........ 11,172,784
March 2006........... 11,172,784
April 2006........... 11,172,784
May 2006............. 11,172,784
June 2006............ 11,172,784
July 2006............ 11,172,784
August 2006.......... 11,172,784
September 2006....... 11,172,784
October 2006......... 11,172,784
November 2006........ 11,172,784
December 2006........ 11,172,784
January 2007......... 11,172,784
February 2007........ 11,172,784
March 2007........... 11,172,784
April 2007........... 11,172,784
May 2007............. 11,172,784
June 2007............ 11,115,284
July 2007............ 11,115,284
August 2007.......... 11,115,284
September 2007....... 11,057,784
October 2007......... 11,038,434
November 2007........ 11,038,434
December 2007........ 11,038,434
January 2008......... 11,038,434
February 2008........ 11,038,434
March 2008........... 11,038,434
April 2008........... 11,038,434
May 2008............. 10,930,294
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
June 2008............ 10,901,654
July 2008............ 10,901,654
August 2008.......... 10,901,654
September 2008....... 10,901,654
October 2008......... 10,901,654
November 2008........ 10,839,871
December 2008........ 10,839,871
January 2009......... 10,839,871
February 2009........ 10,839,871
March 2009........... 10,839,871
April 2009........... 10,796,471
May 2009............. 10,748,871
June 2009............ 10,723,796
July 2009............ 10,723,796
August 2009.......... 10,723,796
September 2009....... 10,723,796
October 2009......... 10,662,683
November 2009........ 10,662,683
December 2009........ 10,662,683
January 2010......... 10,662,683
February 2010........ 10,662,683
March 2010........... 15,610,465
April 2010........... 10,188,587
May 2010............. 10,050,587
June 2010............ 10,050,587
July 2010............ 10,050,587
August 2010.......... 10,050,587
September 2010....... 10,050,587
October 2010......... 10,050,587
November 2010........ 10,050,587
December 2010........ 10,050,587
January 2011......... 10,050,587
February 2011........ 10,050,587
March 2011........... 10,050,587
April 2011........... 10,050,587
May 2011............. 10,050,587
June 2011............ 10,050,587
July 2011............ 10,050,587
August 2011.......... 10,050,587
September 2011....... 10,050,587
October 2011......... 9,871,885
November 2011........ 9,871,885
December 2011........ 14,074,953
January 2012......... 9,752,437
February 2012........ 9,752,437
March 2012........... 15,087,769
April 2012........... 9,605,321
May 2012............. 9,605,321
June 2012............ 9,605,321
July 2012............ 9,605,321
August 2012.......... 24,425,100
September 2012....... 9,239,201
October 2012......... 9,174,701
November 2012........ 9,006,701
</TABLE>
<PAGE> 185
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
December 2012........ 9,005,340
January 2013......... 9,005,340
February 2013........ 9,005,340
March 2013........... 15,995,768
April 2013........... 8,823,815
May 2013............. 8,737,895
June 2013............ 8,651,975
July 2013............ 8,651,975
August 2013.......... 8,651,975
September 2013....... 8,651,975
October 2013......... 8,651,975
November 2013........ 8,651,975
December 2013........ 8,651,975
January 2014......... 8,651,975
February 2014........ 8,651,975
March 2014........... 8,651,975
April 2014........... 8,494,506
May 2014............. 8,410,506
June 2014............ 8,285,613
July 2014............ 8,230,828
August 2014.......... 8,193,203
September 2014....... 8,193,203
October 2014......... 12,307,889
November 2014........ 8,051,625
December 2014........ 7,962,254
January 2015......... 7,962,254
February 2015........ 7,962,254
March 2015........... 7,962,254
April 2015........... 7,893,458
May 2015............. 7,556,054
June 2015............ 7,556,054
July 2015............ 7,556,054
August 2015.......... 7,556,054
September 2015....... 7,501,479
October 2015......... 7,501,479
November 2015........ 7,441,136
December 2015........ 7,441,136
January 2016......... 7,441,136
February 2016........ 7,441,136
March 2016........... 7,441,136
April 2016........... 7,441,136
May 2016............. 11,697,857
June 2016............ 7,309,986
July 2016............ 7,309,986
August 2016.......... 23,458,641
September 2016....... 6,879,586
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
October 2016......... 16,812,438
November 2016........ 11,482,516
December 2016........ 6,124,856
January 2017......... 6,124,856
February 2017........ 17,676,742
March 2017........... 5,868,179
April 2017........... 10,034,720
May 2017............. 5,663,112
June 2017............ 5,663,112
July 2017............ 5,663,112
August 2017.......... 5,663,112
September 2017....... 5,663,112
October 2017......... 5,663,112
November 2017........ 5,415,462
December 2017........ 14,469,414
January 2018......... 5,109,800
February 2018........ 10,297,128
March 2018........... 4,928,375
April 2018........... 4,928,375
May 2018............. 4,928,375
June 2018............ 4,928,375
July 2018............ 4,928,375
August 2018.......... 4,928,375
September 2018....... 4,928,375
October 2018......... 4,928,375
November 2018........ 4,928,375
December 2018........ 4,928,375
January 2019......... 4,928,375
February 2019........ 4,928,375
March 2019........... 4,928,375
April 2019........... 4,579,871
May 2019............. 4,579,871
June 2019............ 4,492,528
July 2019............ 4,323,028
August 2019.......... 4,232,728
September 2019....... 4,232,728
October 2019......... 4,232,728
November 2019........ 4,232,728
December 2019........ 4,034,123
January 2020......... 4,034,123
February 2020........ 4,034,123
March 2020........... 4,034,123
April 2020........... 4,034,123
May 2020............. 3,669,205
June 2020............ 3,669,205
July 2020............ 3,669,205
</TABLE>
<TABLE>
<CAPTION>
GROSS
MONTH REVENUES
----- ----------
($)
<S> <C>
August 2020.......... 3,669,205
September 2020....... 3,580,705
October 2020......... 3,580,705
November 2020........ 3,505,276
December 2020........ 3,505,276
January 2021......... 3,505,276
February 2021........ 3,505,276
March 2021........... 3,505,276
April 2021........... 3,505,276
May 2021............. 3,505,276
June 2021............ 3,505,276
July 2021............ 3,505,276
August 2021.......... 3,505,276
September 2021....... 8,542,726
October 2021......... 3,337,606
November 2021........ 3,337,606
December 2021........ 19,088,646
January 2022......... 7,903,751
February 2022........ 2,798,210
March 2022........... 2,798,210
April 2022........... 7,913,568
May 2022............. 7,755,939
June 2022............ 7,584,515
July 2022............ 7,391,823
August 2022.......... 7,225,948
September 2022....... 7,097,825
October 2022......... 13,697,467
November 2022........ 1,326,717
December 2022........ 6,459,660
January 2023......... 6,309,133
February 2023........ 1,028,182
March 2023........... 1,028,182
April 2023........... 1,028,182
May 2023............. 1,028,182
June 2023............ 1,028,182
July 2023............ 6,257,559
August 2023.......... 860,542
September 2023....... 860,542
October 2023......... 860,542
November 2023........ 860,542
December 2023........ 860,542
January 2024......... 860,542
February 2024........ 860,542
March 2024........... 860,542
April 2024........... 13,326,973
May 2024............. 13,059,274
</TABLE>
<PAGE> 186
APPENDIX 4
ASSUMED PORTFOLIO VALUES FOR THE INITIAL PORTFOLIO
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
May 1999............. 1,322.64
June 1999............ 1,319.34
July 1999............ 1,316.04
August 1999.......... 1,312.72
September 1999....... 1,309.39
October 1999......... 1,306.05
November 1999........ 1,302.70
December 1999........ 1,299.34
January 2000......... 1,295.97
February 2000........ 1,292.58
March 2000........... 1,289.19
April 2000........... 1,285.79
May 2000............. 1,282.38
June 2000............ 1,278.96
July 2000............ 1,275.52
August 2000.......... 1,272.08
September 2000....... 1,268.62
October 2000......... 1,265.16
November 2000........ 1,261.68
December 2000........ 1,258.20
January 2001......... 1,254.70
February 2001........ 1,251.19
March 2001........... 1,247.68
April 2001........... 1,244.15
May 2001............. 1,240.61
June 2001............ 1,237.06
July 2001............ 1,233.50
August 2001.......... 1,229.93
September 2001....... 1,226.34
October 2001......... 1,222.75
November 2001........ 1,219.15
December 2001........ 1,215.53
January 2002......... 1,211.91
February 2002........ 1,208.27
March 2002........... 1,204.62
April 2002........... 1,200.97
May 2002............. 1,197.30
June 2002............ 1,193.62
July 2002............ 1,189.92
August 2002.......... 1,186.22
September 2002....... 1,182.51
October 2002......... 1,178.79
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
November 2002........ 1,175.05
December 2002........ 1,171.30
January 2003......... 1,167.55
February 2003........ 1,163.78
March 2003........... 1,160.00
April 2003........... 1,156.21
May 2003............. 1,152.41
June 2003............ 1,148.59
July 2003............ 1,144.77
August 2003.......... 1,140.93
September 2003....... 1,137.08
October 2003......... 1,133.23
November 2003........ 1,129.36
December 2003........ 1,125.48
January 2004......... 1,121.58
February 2004........ 1,117.68
March 2004........... 1,113.76
April 2004........... 1,109.84
May 2004............. 1,105.90
June 2004............ 1,101.95
July 2004............ 1,097.99
August 2004.......... 1,094.02
September 2004....... 1,090.03
October 2004......... 1,086.04
November 2004........ 1,082.03
December 2004........ 1,078.01
January 2005......... 1,073.98
February 2005........ 1,069.94
March 2005........... 1,065.88
April 2005........... 1,061.82
May 2005............. 1,057.74
June 2005............ 1,053.65
July 2005............ 1,049.55
August 2005.......... 1,045.43
September 2005....... 1,041.31
October 2005......... 1,037.17
November 2005........ 1,033.02
December 2005........ 1,028.86
January 2006......... 1,024.69
February 2006........ 1,020.51
March 2006........... 1,016.31
April 2006........... 1,012.10
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
May 2006............. 1,007.88
June 2006............ 1,003.65
July 2006............ 999.41
August 2006.......... 995.15
September 2006....... 990.88
October 2006......... 986.60
November 2006........ 982.31
December 2006........ 978.00
January 2007......... 973.69
February 2007........ 969.36
March 2007........... 965.01
April 2007........... 960.66
May 2007............. 956.29
June 2007............ 951.92
July 2007............ 947.53
August 2007.......... 943.12
September 2007....... 938.71
October 2007......... 934.28
November 2007........ 929.84
December 2007........ 925.38
January 2008......... 920.92
February 2008........ 916.44
March 2008........... 911.95
April 2008........... 907.45
May 2008............. 902.93
June 2008............ 898.40
July 2008............ 893.86
August 2008.......... 889.31
September 2008....... 884.74
October 2008......... 880.16
November 2008........ 875.57
December 2008........ 870.97
January 2009......... 866.35
February 2009........ 861.72
March 2009........... 857.08
April 2009........... 852.42
May 2009............. 847.75
June 2009............ 843.07
July 2009............ 838.38
August 2009.......... 833.67
September 2009....... 828.95
October 2009......... 824.22
</TABLE>
<PAGE> 187
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
November 2009........ 819.47
December 2009........ 814.71
January 2010......... 809.94
February 2010........ 805.15
March 2010........... 795.10
April 2010........... 790.42
May 2010............. 785.72
June 2010............ 781.01
July 2010............ 776.29
August 2010.......... 771.55
September 2010....... 766.81
October 2010......... 762.04
November 2010........ 757.27
December 2010........ 752.48
January 2011......... 747.68
February 2011........ 742.87
March 2011........... 738.04
April 2011........... 733.20
May 2011............. 728.35
June 2011............ 723.49
July 2011............ 718.61
August 2011.......... 713.71
September 2011....... 708.81
October 2011......... 703.89
November 2011........ 698.96
December 2011........ 689.81
January 2012......... 684.98
February 2012........ 680.13
March 2012........... 669.92
April 2012........... 665.18
May 2012............. 660.42
June 2012............ 655.65
July 2012............ 650.87
August 2012.......... 631.33
September 2012....... 626.96
October 2012......... 622.58
November 2012........ 618.19
December 2012........ 613.79
January 2013......... 609.37
February 2013........ 604.94
March 2013........... 593.54
April 2013........... 589.29
May 2013............. 585.04
June 2013............ 580.77
July 2013............ 576.49
August 2013.......... 572.20
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
September 2013....... 567.90
October 2013......... 563.58
November 2013........ 559.26
December 2013........ 554.92
January 2014......... 550.57
February 2014........ 546.21
March 2014........... 541.84
April 2014........... 537.46
May 2014............. 533.06
June 2014............ 528.65
July 2014............ 524.24
August 2014.......... 519.80
September 2014....... 515.36
October 2014......... 506.77
November 2014........ 502.43
December 2014........ 498.08
January 2015......... 493.71
February 2015........ 489.33
March 2015........... 484.94
April 2015........... 480.54
May 2015............. 476.13
June 2015............ 471.70
July 2015............ 467.27
August 2015.......... 462.82
September 2015....... 458.36
October 2015......... 453.89
November 2015........ 449.40
December 2015........ 444.91
January 2016......... 440.40
February 2016........ 435.88
March 2016........... 431.35
April 2016........... 426.81
May 2016............. 417.99
June 2016............ 413.55
July 2016............ 409.10
August 2016.......... 388.54
September 2016....... 384.54
October 2016......... 370.32
November 2016........ 361.40
December 2016........ 357.83
January 2017......... 354.25
February 2017........ 339.20
March 2017........... 335.94
April 2017........... 328.43
May 2017............. 325.28
June 2017............ 322.13
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
July 2017............ 318.96
August 2017.......... 315.79
September 2017....... 312.61
October 2017......... 309.42
November 2017........ 306.22
December 2017........ 293.92
January 2018......... 290.98
February 2018........ 282.81
March 2018........... 280.01
April 2018........... 277.20
May 2018............. 274.38
June 2018............ 271.55
July 2018............ 268.71
August 2018.......... 265.87
September 2018....... 263.02
October 2018......... 260.17
November 2018........ 257.30
December 2018........ 254.43
January 2019......... 251.55
February 2019........ 248.66
March 2019........... 245.77
April 2019........... 242.87
May 2019............. 239.96
June 2019............ 237.04
July 2019............ 234.11
August 2019.......... 231.18
September 2019....... 228.24
October 2019......... 225.29
November 2019........ 222.34
December 2019........ 219.37
January 2020......... 216.40
February 2020........ 213.42
March 2020........... 210.44
April 2020........... 207.44
May 2020............. 204.44
June 2020............ 201.43
July 2020............ 198.41
August 2020.......... 195.39
September 2020....... 192.35
October 2020......... 189.31
November 2020........ 186.26
December 2020........ 183.21
January 2021......... 180.14
February 2021........ 177.07
March 2021........... 173.99
April 2021........... 170.90
</TABLE>
<PAGE> 188
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
May 2021............. 167.81
June 2021............ 164.70
July 2021............ 161.59
August 2021.......... 158.47
September 2021....... 150.29
October 2021......... 147.30
November 2021........ 144.31
December 2021........ 125.62
January 2022......... 118.12
February 2022........ 115.72
March 2022........... 113.31
April 2022........... 105.73
May 2022............. 98.31
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
June 2022............ 91.04
July 2022............ 83.93
August 2022.......... 76.97
September 2022....... 70.13
October 2022......... 56.67
November 2022........ 55.49
December 2022........ 49.14
January 2023......... 42.99
February 2023........ 42.11
March 2023........... 41.23
April 2023........... 40.35
May 2023............. 39.46
</TABLE>
<TABLE>
<CAPTION>
ASSUMED
MONTH PORTFOLIO VALUE
- ----- ---------------
($ MILLIONS)
<S> <C>
June 2023............ 38.57
July 2023............ 32.44
August 2023.......... 31.71
September 2023....... 30.97
October 2023......... 30.23
November 2023........ 29.49
December 2023........ 28.74
January 2024......... 28.00
February 2024........ 27.25
March 2024........... 26.50
April 2024........... 13.06
May 2024............. 0.00
</TABLE>
<PAGE> 189
APPENDIX 5
The "Class Percentages" contained in the following Appendix 5 represent
percentages to be incorporated into the mathematical formulas found on pages
107-109 under "Description of the Notes -- Payments on the Notes -- Principal
Amortization" in the text. Those formulas are used in calculating principal
payments on the monthly payment dates for the notes.
<PAGE> 190
APPENDIX 5
CLASS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLOSING............... 68.99% 9.56% 8.01%
JUNE 1999............. 68.99% 68.99% 68.80% 9.56% 9.56% 9.56% 8.04% 8.04%
JULY 1999............. 68.99% 68.99% 68.76% 9.56% 9.56% 9.56% 8.06% 8.06%
AUGUST 1999........... 68.99% 68.99% 68.73% 9.56% 9.56% 9.56% 8.08% 8.08%
SEPTEMBER 1999........ 68.99% 68.99% 68.57% 9.56% 9.56% 9.56% 8.10% 8.10%
OCTOBER 1999.......... 68.99% 68.99% 68.53% 9.56% 9.56% 9.56% 8.12% 8.12%
NOVEMBER 1999......... 68.95% 68.95% 68.48% 9.60% 9.60% 9.58% 8.14% 8.14%
DECEMBER 1999......... 68.92% 68.92% 68.29% 9.63% 9.63% 9.61% 8.16% 8.16%
JANUARY 2000.......... 68.89% 68.89% 68.24% 9.66% 9.66% 9.63% 8.18% 8.18%
FEBRUARY 2000......... 68.85% 68.85% 68.19% 9.70% 9.70% 9.66% 8.21% 8.21%
MARCH 2000............ 68.82% 68.82% 68.05% 9.73% 9.73% 9.68% 8.23% 8.23%
APRIL 2000............ 68.78% 68.78% 67.99% 9.77% 9.77% 9.71% 8.25% 8.25%
MAY 2000.............. 68.75% 68.75% 67.89% 9.80% 9.80% 9.74% 8.27% 8.27%
JUNE 2000............. 68.66% 68.66% 67.78% 9.89% 9.89% 9.76% 8.29% 8.29%
JULY 2000............. 68.50% 68.50% 67.68% 9.92% 9.92% 9.77% 8.32% 8.32%
AUGUST 2000........... 68.12% 68.12% 67.62% 9.95% 9.95% 9.74% 8.34% 8.34%
SEPTEMBER 2000........ 67.92% 67.92% 67.59% 9.98% 9.98% 9.68% 8.36% 8.36%
OCTOBER 2000.......... 67.80% 67.80% 67.50% 10.01% 10.01% 9.67% 8.38% 8.38%
NOVEMBER 2000......... 67.67% 67.67% 67.44% 10.03% 10.03% 9.65% 8.41% 8.41%
DECEMBER 2000......... 67.58% 67.58% 67.34% 10.06% 10.06% 9.66% 8.43% 8.43%
JANUARY 2001.......... 67.55% 67.55% 67.26% 10.09% 10.09% 9.65% 8.45% 8.45%
FEBRUARY 2001......... 67.53% 67.53% 67.16% 10.12% 10.12% 9.67% 8.48% 8.48%
MARCH 2001............ 67.72% 67.72% 67.09% 10.14% 10.14% 9.65% 8.50% 8.50%
APRIL 2001............ 67.82% 67.82% 66.97% 10.17% 10.17% 9.68% 8.52% 8.52%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
CLOSING............... 4.84%
JUNE 1999............. 4.87% 4.87%
JULY 1999............. 4.91% 4.91%
AUGUST 1999........... 4.88% 4.88%
SEPTEMBER 1999........ 4.89% 4.89%
OCTOBER 1999.......... 4.91% 4.91%
NOVEMBER 1999......... 4.96% 4.96%
DECEMBER 1999......... 4.93% 4.93%
JANUARY 2000.......... 4.94% 4.94%
FEBRUARY 2000......... 4.96% 4.96%
MARCH 2000............ 4.98% 4.98%
APRIL 2000............ 4.98% 4.98%
MAY 2000.............. 5.00% 5.00%
JUNE 2000............. 5.02% 5.02%
JULY 2000............. 5.02% 5.02%
AUGUST 2000........... 5.04% 5.04%
SEPTEMBER 2000........ 5.05% 5.05%
OCTOBER 2000.......... 5.06% 5.06%
NOVEMBER 2000......... 5.10% 5.10%
DECEMBER 2000......... 5.10% 5.10%
JANUARY 2001.......... 5.12% 5.12%
FEBRUARY 2001......... 5.12% 5.12%
MARCH 2001............ 5.13% 5.13%
APRIL 2001............ 5.20% 5.20%
</TABLE>
<PAGE> 191
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAY 2001.............. 67.67% 67.67% 66.85% 10.20% 10.20% 9.71% 8.55% 8.55%
JUNE 2001............. 67.59% 67.59% 66.72% 10.22% 10.22% 9.74% 8.57% 8.57%
JULY 2001............. 67.50% 67.50% 66.59% 10.25% 10.25% 9.75% 8.60% 8.60%
AUGUST 2001........... 67.42% 67.42% 66.45% 10.28% 10.28% 9.78% 8.62% 8.62%
SEPTEMBER 2001........ 67.32% 67.32% 66.37% 10.31% 10.31% 9.77% 8.65% 8.65%
OCTOBER 2001.......... 67.24% 67.24% 66.29% 10.34% 10.34% 9.74% 8.67% 8.67%
NOVEMBER 2001......... 67.37% 67.37% 66.15% 10.38% 10.38% 9.77% 8.70% 8.70%
DECEMBER 2001......... 67.38% 67.38% 66.02% 10.40% 10.40% 9.80% 8.73% 8.73%
JANUARY 2002.......... 67.40% 67.40% 65.88% 10.43% 10.43% 9.83% 8.75% 8.75%
FEBRUARY 2002......... 67.41% 67.41% 65.75% 10.47% 10.47% 9.86% 8.78% 8.78%
MARCH 2002............ 67.45% 67.45% 65.60% 10.50% 10.50% 9.89% 8.80% 8.80%
APRIL 2002............ 67.46% 67.46% 65.46% 10.53% 10.53% 9.92% 8.83% 8.83%
MAY 2002.............. 67.49% 67.49% 65.52% 10.49% 10.49% 9.94% 8.66% 8.66%
JUNE 2002............. 67.51% 67.51% 65.64% 10.44% 10.44% 9.97% 8.42% 8.42%
JULY 2002............. 67.52% 67.52% 65.71% 10.29% 10.29% 10.00% 8.25% 8.25%
AUGUST 2002........... 67.54% 67.54% 65.62% 10.14% 10.14% 10.03% 8.21% 8.21%
SEPTEMBER 2002........ 67.55% 67.55% 65.78% 9.95% 9.95% 9.95% 8.08% 8.08%
OCTOBER 2002.......... 67.45% 67.45% 65.69% 9.99% 9.95% 9.95% 8.16% 8.11%
NOVEMBER 2002......... 67.66% 67.66% 65.74% 10.02% 9.97% 9.97% 7.99% 7.99%
DECEMBER 2002......... 67.76% 67.76% 65.76% 9.99% 9.99% 9.99% 7.88% 7.88%
JANUARY 2003.......... 67.86% 67.86% 65.66% 10.01% 10.01% 10.01% 7.87% 7.87%
FEBRUARY 2003......... 67.93% 67.93% 65.62% 10.02% 10.02% 10.02% 7.82% 7.82%
MARCH 2003............ 68.04% 68.04% 65.68% 10.03% 10.02% 10.02% 7.67% 7.67%
APRIL 2003............ 68.12% 68.12% 65.75% 10.04% 10.03% 10.03% 7.50% 7.50%
MAY 2003.............. 68.21% 68.21% 65.77% 10.04% 10.04% 10.04% 7.39% 7.39%
JUNE 2003............. 68.30% 68.30% 65.80% 10.05% 10.04% 10.04% 7.26% 7.26%
JULY 2003............. 68.38% 68.38% 65.83% 10.04% 10.04% 10.04% 7.13% 7.13%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
MAY 2001.............. 5.16% 5.16%
JUNE 2001............. 5.22% 5.22%
JULY 2001............. 5.22% 5.22%
AUGUST 2001........... 5.24% 5.24%
SEPTEMBER 2001........ 5.22% 5.22%
OCTOBER 2001.......... 5.24% 5.24%
NOVEMBER 2001......... 5.25% 5.25%
DECEMBER 2001......... 5.27% 5.27%
JANUARY 2002.......... 5.29% 5.29%
FEBRUARY 2002......... 5.30% 5.30%
MARCH 2002............ 5.33% 5.33%
APRIL 2002............ 5.33% 5.33%
MAY 2002.............. 5.35% 5.34%
JUNE 2002............. 5.35% 5.35%
JULY 2002............. 5.35% 5.35%
AUGUST 2002........... 5.37% 5.37%
SEPTEMBER 2002........ 5.35% 5.35%
OCTOBER 2002.......... 5.33% 5.33%
NOVEMBER 2002......... 5.30% 5.30%
DECEMBER 2002......... 5.29% 5.29%
JANUARY 2003.......... 5.29% 5.29%
FEBRUARY 2003......... 5.29% 5.29%
MARCH 2003............ 5.28% 5.28%
APRIL 2003............ 5.28% 5.28%
MAY 2003.............. 5.27% 5.27%
JUNE 2003............. 5.27% 5.27%
JULY 2003............. 5.27% 5.27%
</TABLE>
<PAGE> 192
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUGUST 2003........... 68.47% 68.47% 65.98% 10.04% 10.03% 10.03% 6.90% 6.90%
SEPTEMBER 2003........ 68.55% 68.55% 66.14% 9.96% 9.95% 9.95% 6.71% 6.71%
OCTOBER 2003.......... 68.53% 68.53% 65.99% 9.98% 9.97% 9.97% 6.78% 6.73%
NOVEMBER 2003......... 68.77% 68.77% 66.06% 9.78% 9.78% 9.78% 6.77% 6.76%
DECEMBER 2003......... 68.80% 68.80% 66.11% 9.75% 9.75% 9.75% 6.64% 6.64%
JANUARY 2004.......... 68.85% 68.85% 66.03% 9.70% 9.70% 9.70% 6.67% 6.66%
FEBRUARY 2004......... 68.90% 68.90% 65.93% 9.65% 9.65% 9.65% 6.70% 6.69%
MARCH 2004............ 68.95% 68.95% 65.82% 9.60% 9.60% 9.60% 6.72% 6.71%
APRIL 2004............ 68.99% 68.99% 65.72% 9.56% 9.56% 9.56% 6.75% 6.73%
MAY 2004.............. 68.99% 68.99% 65.57% 9.56% 9.56% 9.56% 6.77% 6.76%
JUNE 2004............. 68.99% 68.99% 65.41% 9.56% 9.56% 9.56% 6.80% 6.78%
JULY 2004............. 68.99% 68.99% 65.24% 9.56% 9.56% 9.56% 6.82% 6.81%
AUGUST 2004........... 68.99% 68.99% 65.09% 9.56% 9.56% 9.56% 6.85% 6.83%
SEPTEMBER 2004........ 68.99% 68.99% 64.97% 9.56% 9.56% 9.56% 6.81% 6.81%
OCTOBER 2004.......... 68.99% 68.99% 64.84% 9.56% 9.56% 9.56% 6.79% 6.79%
NOVEMBER 2004......... 68.99% 68.99% 64.71% 9.56% 9.56% 9.56% 6.78% 6.78%
DECEMBER 2004......... 68.99% 68.99% 64.55% 9.56% 9.56% 9.56% 6.77% 6.77%
JANUARY 2005.......... 68.99% 68.99% 64.38% 9.56% 9.56% 9.56% 6.78% 6.78%
FEBRUARY 2005......... 68.99% 68.99% 64.48% 9.56% 9.56% 9.56% 6.51% 6.51%
MARCH 2005............ 68.74% 68.74% 64.22% 9.81% 9.81% 9.60% 6.57% 6.53%
APRIL 2005............ 68.73% 68.73% 63.99% 9.82% 9.82% 9.63% 6.59% 6.56%
MAY 2005.............. 68.74% 68.74% 63.75% 9.81% 9.81% 9.67% 6.61% 6.59%
JUNE 2005............. 68.74% 68.74% 63.51% 9.81% 9.81% 9.71% 6.63% 6.61%
JULY 2005............. 68.73% 68.73% 63.28% 9.82% 9.82% 9.75% 6.61% 6.61%
AUGUST 2005........... 68.74% 68.74% 63.12% 9.81% 9.81% 9.78% 6.55% 6.55%
SEPTEMBER 2005........ 68.73% 68.73% 62.91% 9.82% 9.82% 9.82% 6.54% 6.54%
OCTOBER 2005.......... 68.68% 68.68% 62.66% 9.87% 9.87% 9.86% 6.55% 6.55%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
AUGUST 2003........... 5.26% 5.26%
SEPTEMBER 2003........ 5.26% 5.26%
OCTOBER 2003.......... 5.26% 5.26%
NOVEMBER 2003......... 5.26% 5.26%
DECEMBER 2003......... 5.25% 5.25%
JANUARY 2004.......... 5.25% 5.25%
FEBRUARY 2004......... 5.25% 5.25%
MARCH 2004............ 5.25% 5.25%
APRIL 2004............ 5.24% 5.24%
MAY 2004.............. 5.25% 5.25%
JUNE 2004............. 5.25% 5.25%
JULY 2004............. 5.25% 5.25%
AUGUST 2004........... 5.24% 5.24%
SEPTEMBER 2004........ 5.24% 5.24%
OCTOBER 2004.......... 5.23% 5.23%
NOVEMBER 2004......... 5.23% 5.23%
DECEMBER 2004......... 5.23% 5.23%
JANUARY 2005.......... 5.23% 5.23%
FEBRUARY 2005......... 5.23% 5.23%
MARCH 2005............ 5.23% 5.23%
APRIL 2005............ 5.23% 5.23%
MAY 2005.............. 5.23% 5.23%
JUNE 2005............. 5.23% 5.23%
JULY 2005............. 5.23% 5.23%
AUGUST 2005........... 5.23% 5.23%
SEPTEMBER 2005........ 5.23% 5.23%
OCTOBER 2005.......... 5.23% 5.23%
</TABLE>
<PAGE> 193
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOVEMBER 2005......... 68.63% 68.63% 62.41% 9.92% 9.92% 9.90% 6.63% 6.58%
DECEMBER 2005......... 68.55% 68.55% 62.17% 10.00% 10.00% 9.94% 6.57% 6.57%
JANUARY 2006.......... 68.49% 68.49% 61.94% 10.06% 10.06% 9.98% 6.56% 6.56%
FEBRUARY 2006......... 68.42% 68.42% 61.70% 10.13% 10.13% 10.02% 6.56% 6.56%
MARCH 2006............ 68.37% 68.37% 61.49% 10.18% 10.18% 9.98% 6.56% 6.56%
APRIL 2006............ 68.29% 68.29% 61.35% 10.26% 10.26% 9.89% 6.59% 6.59%
MAY 2006.............. 68.23% 68.23% 61.21% 10.32% 10.32% 9.78% 6.62% 6.62%
JUNE 2006............. 68.17% 68.17% 61.11% 10.38% 10.38% 9.66% 6.62% 6.64%
JULY 2006............. 68.09% 68.09% 60.97% 10.46% 10.46% 9.54% 6.60% 6.67%
AUGUST 2006........... 68.03% 68.03% 60.93% 10.52% 10.52% 9.45% 6.56% 6.56%
SEPTEMBER 2006........ 67.91% 67.91% 60.68% 10.64% 10.64% 9.43% 6.65% 6.59%
OCTOBER 2006.......... 67.79% 67.79% 60.56% 10.74% 10.73% 9.29% 6.81% 6.62%
NOVEMBER 2006......... 67.65% 67.65% 60.41% 10.71% 10.70% 9.17% 7.01% 6.65%
DECEMBER 2006......... 67.47% 67.47% 60.22% 10.68% 10.67% 9.08% 7.05% 6.68%
JANUARY 2007.......... 67.32% 67.32% 60.02% 10.64% 10.63% 9.00% 7.05% 6.71%
FEBRUARY 2007......... 67.16% 67.16% 59.83% 10.61% 10.60% 8.92% 6.81% 6.73%
MARCH 2007............ 66.59% 66.59% 59.56% 10.58% 10.56% 8.88% 7.13% 6.76%
APRIL 2007............ 66.43% 66.43% 59.29% 10.55% 10.53% 8.85% 7.15% 6.80%
MAY 2007.............. 66.28% 66.28% 59.06% 10.51% 10.50% 8.78% 7.18% 6.83%
JUNE 2007............. 66.13% 66.13% 58.84% 10.47% 10.46% 8.70% 7.21% 6.86%
JULY 2007............. 65.96% 65.96% 58.62% 10.44% 10.43% 8.64% 7.23% 6.89%
AUGUST 2007........... 65.79% 65.79% 58.43% 10.41% 10.40% 8.60% 7.25% 6.93%
SEPTEMBER 2007........ 65.60% 65.60% 58.25% 10.40% 10.39% 8.56% 7.27% 6.96%
OCTOBER 2007.......... 65.40% 65.40% 58.08% 10.34% 10.33% 8.53% 7.30% 7.00%
NOVEMBER 2007......... 65.20% 65.20% 57.89% 10.28% 10.27% 8.49% 7.33% 7.03%
DECEMBER 2007......... 64.96% 64.96% 57.77% 10.21% 10.20% 8.43% 7.96% 7.06%
JANUARY 2008.......... 64.76% 64.76% 57.54% 10.15% 10.14% 8.40% 7.98% 7.09%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
NOVEMBER 2005......... 5.23% 5.23%
DECEMBER 2005......... 5.23% 5.23%
JANUARY 2006.......... 5.23% 5.23%
FEBRUARY 2006......... 5.23% 5.23%
MARCH 2006............ 5.24% 5.24%
APRIL 2006............ 5.24% 5.24%
MAY 2006.............. 5.24% 5.24%
JUNE 2006............. 5.24% 5.24%
JULY 2006............. 5.24% 5.24%
AUGUST 2006........... 5.24% 5.24%
SEPTEMBER 2006........ 5.25% 5.25%
OCTOBER 2006.......... 5.25% 5.25%
NOVEMBER 2006......... 5.25% 5.25%
DECEMBER 2006......... 5.25% 5.25%
JANUARY 2007.......... 5.26% 5.26%
FEBRUARY 2007......... 5.26% 5.26%
MARCH 2007............ 5.26% 5.26%
APRIL 2007............ 5.27% 5.27%
MAY 2007.............. 5.27% 5.27%
JUNE 2007............. 5.28% 5.28%
JULY 2007............. 5.28% 5.25%
AUGUST 2007........... 5.28% 5.18%
SEPTEMBER 2007........ 5.29% 5.10%
OCTOBER 2007.......... 5.29% 4.99%
NOVEMBER 2007......... 5.30% 4.91%
DECEMBER 2007......... 5.30% 4.77%
JANUARY 2008.......... 5.31% 4.71%
</TABLE>
<PAGE> 194
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FEBRUARY 2008......... 64.55% 64.55% 57.37% 10.08% 10.08% 8.35% 8.02% 7.13%
MARCH 2008............ 64.53% 64.34% 57.16% 10.01% 10.01% 8.32% 8.05% 7.16%
APRIL 2008............ 64.41% 64.12% 57.00% 9.94% 9.94% 8.27% 8.08% 7.20%
MAY 2008.............. 64.22% 63.89% 56.82% 9.87% 9.87% 8.23% 8.10% 7.23%
JUNE 2008............. 64.11% 63.66% 56.63% 9.80% 9.80% 8.18% 8.11% 7.27%
JULY 2008............. 63.94% 63.42% 56.40% 9.73% 9.73% 8.14% 8.10% 7.31%
AUGUST 2008........... 63.79% 63.20% 56.22% 9.65% 9.65% 8.09% 8.08% 7.35%
SEPTEMBER 2008........ 63.60% 62.96% 55.95% 9.58% 9.58% 8.05% 8.07% 7.38%
OCTOBER 2008.......... 63.31% 62.60% 55.64% 9.62% 9.62% 8.01% 8.05% 7.42%
NOVEMBER 2008......... 63.01% 62.18% 55.39% 9.67% 9.67% 7.95% 8.02% 7.46%
DECEMBER 2008......... 62.70% 61.74% 55.12% 9.73% 9.73% 7.90% 7.99% 7.50%
JANUARY 2009.......... 62.39% 61.31% 54.96% 9.78% 9.78% 7.85% 7.98% 7.54%
FEBRUARY 2009......... 62.13% 60.86% 54.72% 9.83% 9.83% 7.80% 7.95% 7.58%
MARCH 2009............ 61.91% 60.42% 54.41% 9.88% 9.79% 7.75% 7.92% 7.62%
APRIL 2009............ 61.42% 59.95% 54.08% 9.94% 9.83% 7.70% 7.90% 7.66%
MAY 2009.............. 61.11% 59.49% 53.77% 9.99% 9.87% 7.66% 7.88% 7.65%
JUNE 2009............. 60.72% 59.02% 53.50% 10.05% 9.90% 7.61% 7.85% 7.61%
JULY 2009............. 60.37% 58.53% 53.23% 10.10% 9.94% 7.57% 7.83% 7.58%
AUGUST 2009........... 60.01% 58.05% 52.97% 10.16% 9.98% 7.53% 7.80% 7.53%
SEPTEMBER 2009........ 59.65% 57.54% 52.65% 10.22% 10.02% 7.50% 7.77% 7.50%
OCTOBER 2009.......... 59.29% 57.04% 52.41% 10.27% 10.06% 7.47% 7.75% 7.37%
NOVEMBER 2009......... 58.91% 57.37% 52.09% 10.33% 10.10% 7.44% 7.70% 7.33%
DECEMBER 2009......... 58.64% 57.29% 51.74% 10.26% 10.15% 7.42% 7.68% 7.29%
JANUARY 2010.......... 58.40% 57.11% 51.40% 10.16% 10.15% 7.37% 7.66% 7.25%
FEBRUARY 2010......... 58.30% 56.91% 51.32% 10.06% 10.05% 7.25% 7.64% 7.20%
MARCH 2010............ 58.15% 57.09% 51.06% 10.02% 10.01% 7.25% 7.69% 7.20%
APRIL 2010............ 58.03% 56.87% 50.75% 9.93% 9.91% 7.19% 7.67% 7.16%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
FEBRUARY 2008......... 5.32% 4.60%
MARCH 2008............ 5.32% 4.49%
APRIL 2008............ 5.33% 4.36%
MAY 2008.............. 5.33% 4.24%
JUNE 2008............. 5.34% 4.14%
JULY 2008............. 5.35% 4.05%
AUGUST 2008........... 5.35% 3.93%
SEPTEMBER 2008........ 5.36% 3.89%
OCTOBER 2008.......... 5.37% 3.86%
NOVEMBER 2008......... 5.38% 3.81%
DECEMBER 2008......... 5.39% 3.75%
JANUARY 2009.......... 5.39% 3.58%
FEBRUARY 2009......... 5.40% 3.49%
MARCH 2009............ 5.41% 3.43%
APRIL 2009............ 5.42% 3.42%
MAY 2009.............. 5.43% 3.41%
JUNE 2009............. 5.44% 3.41%
JULY 2009............. 5.45% 3.38%
AUGUST 2009........... 5.46% 3.36%
SEPTEMBER 2009........ 5.47% 3.36%
OCTOBER 2009.......... 5.48% 3.37%
NOVEMBER 2009......... 5.49% 3.37%
DECEMBER 2009......... 5.50% 3.38%
JANUARY 2010.......... 5.52% 3.40%
FEBRUARY 2010......... 5.53% 3.24%
MARCH 2010............ 5.58% 2.94%
APRIL 2010............ 5.59% 2.96%
</TABLE>
<PAGE> 195
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAY 2010.............. 57.80% 56.66% 50.42% 9.83% 9.82% 7.14% 7.66% 7.13%
JUNE 2010............. 57.51% 56.46% 50.14% 9.73% 9.71% 7.06% 7.64% 7.11%
JULY 2010............. 57.26% 56.25% 50.00% 9.62% 9.60% 7.01% 7.63% 7.08%
AUGUST 2010........... 57.26% 56.04% 49.50% 9.51% 9.50% 6.96% 7.63% 7.05%
SEPTEMBER 2010........ 57.11% 55.81% 49.08% 9.43% 9.42% 6.91% 7.61% 7.02%
OCTOBER 2010.......... 57.12% 55.47% 48.96% 9.48% 9.46% 6.84% 7.58% 6.76%
NOVEMBER 2010......... 57.19% 55.82% 48.71% 9.54% 9.51% 6.78% 7.62% 6.62%
DECEMBER 2010......... 57.22% 56.16% 48.47% 9.18% 9.17% 6.71% 7.66% 6.48%
JANUARY 2011.......... 57.37% 56.13% 48.16% 9.13% 9.11% 6.65% 7.69% 6.42%
FEBRUARY 2011......... 57.19% 56.08% 47.92% 9.07% 9.06% 6.59% 7.69% 6.38%
MARCH 2011............ 57.12% 56.05% 47.51% 9.02% 9.00% 6.53% 7.70% 6.35%
APRIL 2011............ 57.15% 56.01% 47.12% 8.95% 8.93% 6.46% 7.70% 6.32%
MAY 2011.............. 57.16% 55.98% 46.76% 8.87% 8.87% 6.37% 7.72% 6.31%
JUNE 2011............. 57.17% 55.95% 46.36% 8.79% 8.79% 6.32% 7.72% 6.30%
JULY 2011............. 57.18% 55.91% 45.93% 8.71% 8.71% 6.23% 7.71% 6.28%
AUGUST 2011........... 57.19% 55.87% 45.60% 8.63% 8.63% 6.16% 7.69% 6.27%
SEPTEMBER 2011........ 57.23% 55.83% 45.17% 8.39% 8.39% 6.08% 7.70% 6.23%
OCTOBER 2011.......... 57.41% 55.67% 44.76% 8.27% 8.27% 6.01% 7.68% 6.21%
NOVEMBER 2011......... 57.69% 56.06% 44.38% 8.33% 8.33% 5.87% 7.75% 6.20%
DECEMBER 2011......... 58.20% 56.56% 43.65% 8.10% 8.10% 5.82% 7.76% 6.19%
JANUARY 2012.......... 58.37% 56.72% 43.15% 7.94% 7.94% 5.75% 7.80% 6.18%
FEBRUARY 2012......... 58.54% 56.87% 42.75% 7.78% 7.78% 5.58% 7.84% 6.16%
MARCH 2012............ 59.17% 57.48% 41.94% 7.68% 7.68% 5.55% 7.93% 6.17%
APRIL 2012............ 59.34% 57.64% 41.45% 7.51% 7.51% 5.45% 7.94% 6.14%
MAY 2012.............. 59.50% 57.81% 41.06% 7.34% 7.34% 5.37% 7.99% 5.98%
JUNE 2012............. 59.67% 57.97% 40.49% 7.15% 7.15% 5.31% 8.01% 5.97%
JULY 2012............. 58.43% 58.13% 40.02% 6.97% 6.97% 5.25% 8.03% 5.85%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
MAY 2010.............. 5.60% 2.98%
JUNE 2010............. 5.61% 2.96%
JULY 2010............. 5.63% 2.78%
AUGUST 2010........... 5.64% 2.80%
SEPTEMBER 2010........ 5.65% 2.81%
OCTOBER 2010.......... 5.67% 2.83%
NOVEMBER 2010......... 5.68% 2.85%
DECEMBER 2010......... 5.70% 2.87%
JANUARY 2011.......... 5.71% 2.89%
FEBRUARY 2011......... 5.73% 2.91%
MARCH 2011............ 5.75% 2.92%
APRIL 2011............ 5.76% 2.94%
MAY 2011.............. 5.78% 2.91%
JUNE 2011............. 5.80% 2.88%
JULY 2011............. 5.82% 2.90%
AUGUST 2011........... 5.83% 2.79%
SEPTEMBER 2011........ 5.85% 2.81%
OCTOBER 2011.......... 5.87% 2.79%
NOVEMBER 2011......... 5.91% 2.79%
DECEMBER 2011......... 5.99% 2.83%
JANUARY 2012.......... 6.03% 2.85%
FEBRUARY 2012......... 6.06% 2.87%
MARCH 2012............ 6.13% 2.83%
APRIL 2012............ 6.16% 2.85%
MAY 2012.............. 6.18% 2.87%
JUNE 2012............. 6.20% 2.90%
JULY 2012............. 6.22% 2.92%
</TABLE>
<PAGE> 196
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUGUST 2012........... 59.98% 58.25% 38.43% 6.94% 6.94% 5.09% 8.03% 5.94%
SEPTEMBER 2012........ 59.97% 58.39% 37.98% 6.61% 6.61% 4.86% 8.06% 5.93%
OCTOBER 2012.......... 60.03% 58.38% 37.41% 6.42% 6.42% 4.77% 8.07% 5.88%
NOVEMBER 2012......... 60.09% 58.79% 36.91% 6.47% 6.45% 4.67% 8.13% 5.78%
DECEMBER 2012......... 60.16% 59.13% 36.32% 6.51% 6.48% 4.58% 8.14% 5.77%
JANUARY 2013.......... 60.22% 59.28% 35.91% 6.52% 6.50% 4.48% 8.16% 5.56%
FEBRUARY 2013......... 60.50% 59.41% 35.46% 6.52% 6.50% 4.28% 8.18% 5.48%
MARCH 2013............ 60.80% 59.42% 34.27% 6.59% 6.56% 4.17% 8.17% 5.45%
APRIL 2013............ 61.24% 59.55% 33.62% 6.59% 6.58% 4.09% 8.18% 5.41%
MAY 2013.............. 61.21% 59.69% 33.00% 6.59% 6.57% 3.96% 8.19% 5.39%
JUNE 2013............. 61.21% 59.83% 32.34% 6.59% 6.57% 3.88% 8.20% 5.35%
JULY 2013............. 61.37% 59.96% 31.74% 6.58% 6.56% 3.77% 8.21% 5.27%
AUGUST 2013........... 61.31% 60.10% 31.20% 6.58% 6.56% 3.65% 8.19% 5.12%
SEPTEMBER 2013........ 61.36% 60.17% 30.51% 6.47% 6.45% 3.53% 8.20% 5.11%
OCTOBER 2013.......... 61.39% 60.11% 29.85% 6.46% 6.44% 3.42% 8.20% 5.03%
NOVEMBER 2013......... 61.41% 60.13% 29.14% 6.45% 6.43% 3.30% 8.19% 5.00%
DECEMBER 2013......... 61.44% 60.13% 28.39% 6.44% 6.43% 3.19% 8.19% 4.98%
JANUARY 2014.......... 61.47% 60.16% 27.62% 6.43% 6.42% 3.07% 8.20% 4.98%
FEBRUARY 2014......... 61.58% 60.17% 26.88% 6.42% 6.41% 2.95% 8.21% 4.95%
MARCH 2014............ 61.64% 60.19% 26.13% 6.41% 6.40% 2.80% 8.19% 4.93%
APRIL 2014............ 61.67% 60.20% 25.34% 6.40% 6.38% 2.67% 8.20% 4.91%
MAY 2014.............. 61.69% 60.21% 24.66% 6.39% 6.37% 2.55% 8.21% 4.88%
JUNE 2014............. 61.72% 60.22% 23.80% 6.38% 6.36% 2.42% 8.22% 4.82%
JULY 2014............. 61.76% 59.86% 23.20% 6.36% 6.34% 2.29% 8.21% 4.71%
AUGUST 2014........... 61.67% 59.49% 21.70% 6.35% 6.33% 2.15% 8.20% 4.75%
SEPTEMBER 2014........ 61.60% 60.13% 21.33% 6.33% 6.32% 2.06% 8.20% 4.79%
OCTOBER 2014.......... 61.42% 60.53% 19.85% 6.37% 6.30% 2.04% 8.27% 4.83%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
AUGUST 2012........... 6.39% 3.01%
SEPTEMBER 2012........ 6.41% 3.03%
OCTOBER 2012.......... 6.44% 3.05%
NOVEMBER 2012......... 6.46% 3.07%
DECEMBER 2012......... 6.48% 3.09%
JANUARY 2013.......... 6.50% 3.12%
FEBRUARY 2013......... 6.53% 3.14%
MARCH 2013............ 6.63% 3.20%
APRIL 2013............ 6.65% 3.22%
MAY 2013.............. 6.68% 3.25%
JUNE 2013............. 6.70% 3.27%
JULY 2013............. 6.73% 3.29%
AUGUST 2013........... 6.75% 3.32%
SEPTEMBER 2013........ 6.78% 3.34%
OCTOBER 2013.......... 6.81% 3.37%
NOVEMBER 2013......... 6.84% 3.40%
DECEMBER 2013......... 6.86% 3.43%
JANUARY 2014.......... 6.89% 3.45%
FEBRUARY 2014......... 6.92% 3.45%
MARCH 2014............ 6.96% 3.45%
APRIL 2014............ 6.99% 3.47%
MAY 2014.............. 7.02% 3.41%
JUNE 2014............. 7.05% 3.56%
JULY 2014............. 7.09% 3.58%
AUGUST 2014........... 7.12% 3.60%
SEPTEMBER 2014........ 7.16% 3.62%
OCTOBER 2014.......... 7.25% 3.65%
</TABLE>
<PAGE> 197
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOVEMBER 2014......... 61.32% 59.70% 18.84% 6.35% 6.30% 2.03% 8.18% 4.83%
DECEMBER 2014......... 61.22% 57.78% 17.85% 6.33% 6.30% 2.02% 8.16% 4.80%
JANUARY 2015.......... 61.12% 57.37% 16.80% 6.30% 6.28% 2.05% 8.16% 4.77%
FEBRUARY 2015......... 61.03% 56.97% 15.72% 6.28% 6.26% 2.06% 8.15% 4.75%
MARCH 2015............ 60.92% 56.54% 14.65% 6.26% 6.23% 2.09% 8.15% 4.69%
APRIL 2015............ 60.82% 56.12% 13.46% 6.23% 6.21% 2.10% 8.15% 4.74%
MAY 2015.............. 60.74% 55.68% 12.32% 6.21% 6.19% 2.11% 8.14% 4.77%
JUNE 2015............. 60.67% 55.26% 11.14% 6.18% 6.16% 2.13% 8.16% 4.83%
JULY 2015............. 60.60% 54.83% 9.95% 6.16% 6.13% 2.15% 8.15% 4.87%
AUGUST 2015........... 60.45% 55.88% 8.72% 6.13% 6.11% 2.17% 8.14% 4.92%
SEPTEMBER 2015........ 60.30% 53.90% 7.47% 6.10% 6.08% 2.19% 8.14% 4.96%
OCTOBER 2015.......... 60.15% 53.43% 6.10% 6.07% 6.05% 2.21% 8.14% 5.04%
NOVEMBER 2015......... 59.99% 52.95% 4.80% 6.04% 6.02% 2.24% 8.14% 5.09%
DECEMBER 2015......... 59.82% 52.43% 3.47% 6.01% 5.99% 2.26% 8.13% 5.14%
JANUARY 2016.......... 59.66% 51.92% 2.10% 5.98% 5.95% 2.28% 8.14% 5.19%
FEBRUARY 2016......... 59.48% 50.08% 0.62% 5.94% 5.92% 2.28% 8.13% 5.25%
MARCH 2016............ 59.29% 49.33% 0.00% 5.91% 5.88% 1.50% 8.13% 4.65%
APRIL 2016............ 59.12% 48.76% 0.00% 5.87% 5.85% 0.05% 8.12% 3.89%
MAY 2016.............. 58.79% 48.55% 0.00% 5.89% 5.87% 0.00% 8.20% 3.03%
JUNE 2016............. 58.58% 47.35% 0.00% 5.85% 5.81% 0.00% 8.09% 1.79%
JULY 2016............. 57.44% 46.71% 0.00% 5.81% 5.78% 0.00% 8.07% 0.00%
AUGUST 2016........... 57.29% 46.68% 0.00% 6.00% 5.95% 0.00% 8.28% 0.00%
SEPTEMBER 2016........ 56.37% 45.20% 0.00% 4.54% 4.49% 0.00% 8.14% 0.00%
OCTOBER 2016.......... 56.63% 43.73% 0.00% 4.59% 4.52% 0.00% 8.08% 0.00%
NOVEMBER 2016......... 57.17% 42.60% 0.00% 4.58% 4.53% 0.00% 8.06% 0.00%
DECEMBER 2016......... 56.85% 41.88% 0.00% 4.50% 4.47% 0.00% 8.06% 0.00%
JANUARY 2017.......... 54.28% 41.18% 0.00% 4.42% 4.39% 0.00% 8.05% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
NOVEMBER 2014......... 7.29% 3.68%
DECEMBER 2014......... 7.33% 3.79%
JANUARY 2015.......... 7.37% 3.82%
FEBRUARY 2015......... 7.41% 3.86%
MARCH 2015............ 7.45% 3.89%
APRIL 2015............ 7.49% 3.92%
MAY 2015.............. 7.53% 3.96%
JUNE 2015............. 7.58% 4.00%
JULY 2015............. 7.62% 4.04%
AUGUST 2015........... 7.67% 4.07%
SEPTEMBER 2015........ 7.71% 4.11%
OCTOBER 2015.......... 7.76% 4.15%
NOVEMBER 2015......... 7.81% 4.20%
DECEMBER 2015......... 7.87% 4.23%
JANUARY 2016.......... 7.92% 4.28%
FEBRUARY 2016......... 7.97% 4.32%
MARCH 2016............ 8.03% 4.37%
APRIL 2016............ 8.09% 4.41%
MAY 2016.............. 8.23% 4.50%
JUNE 2016............. 8.29% 4.55%
JULY 2016............. 8.35% 4.15%
AUGUST 2016........... 8.76% 0.00%
SEPTEMBER 2016........ 8.82% 0.00%
OCTOBER 2016.......... 9.13% 0.00%
NOVEMBER 2016......... 9.32% 0.00%
DECEMBER 2016......... 9.38% 0.00%
JANUARY 2017.......... 9.44% 0.00%
</TABLE>
<PAGE> 198
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FEBRUARY 2017......... 55.82% 39.48% 0.00% 4.48% 4.40% 0.00% 8.00% 0.00%
MARCH 2017............ 54.52% 38.72% 0.00% 4.38% 4.36% 0.00% 8.01% 0.00%
APRIL 2017............ 54.88% 37.53% 0.00% 4.34% 4.30% 0.00% 7.97% 0.00%
MAY 2017.............. 54.50% 36.76% 0.00% 4.24% 4.22% 0.00% 7.98% 0.00%
JUNE 2017............. 54.12% 36.00% 0.00% 4.14% 4.11% 0.00% 7.97% 0.00%
JULY 2017............. 53.72% 35.23% 0.00% 4.03% 4.01% 0.00% 7.98% 0.00%
AUGUST 2017........... 53.32% 34.43% 0.00% 3.92% 3.90% 0.00% 7.98% 0.00%
SEPTEMBER 2017........ 52.92% 33.62% 0.00% 3.81% 3.78% 0.00% 7.99% 0.00%
OCTOBER 2017.......... 52.51% 32.77% 0.00% 3.69% 3.66% 0.00% 7.99% 0.00%
NOVEMBER 2017......... 48.59% 31.90% 0.00% 3.57% 3.54% 0.00% 7.98% 0.00%
DECEMBER 2017......... 49.71% 28.66% 0.00% 3.56% 2.10% 0.00% 7.74% 0.00%
JANUARY 2018.......... 49.28% 27.69% 0.00% 3.44% 1.50% 0.00% 7.73% 0.00%
FEBRUARY 2018......... 49.93% 26.96% 0.00% 3.24% 0.00% 0.00% 7.83% 0.00%
MARCH 2018............ 49.69% 24.90% 0.00% 2.83% 0.00% 0.00% 7.78% 0.00%
APRIL 2018............ 49.42% 23.90% 0.00% 2.53% 0.00% 0.00% 7.73% 0.00%
MAY 2018.............. 49.16% 22.96% 0.00% 1.86% 0.00% 0.00% 7.32% 0.00%
JUNE 2018............. 48.89% 22.09% 0.00% 0.97% 0.00% 0.00% 6.08% 0.00%
JULY 2018............. 48.60% 21.28% 0.00% 0.00% 0.00% 0.00% 4.77% 0.00%
AUGUST 2018........... 48.32% 20.52% 0.00% 0.00% 0.00% 0.00% 3.45% 0.00%
SEPTEMBER 2018........ 48.03% 19.82% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2018.......... 47.73% 19.17% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2018......... 47.40% 18.57% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2018......... 46.89% 18.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2019.......... 46.17% 17.48% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2019......... 45.42% 16.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2019............ 44.65% 16.12% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2019............ 43.87% 16.12% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
FEBRUARY 2017......... 9.83% 0.00%
MARCH 2017............ 9.89% 0.00%
APRIL 2017............ 10.08% 0.00%
MAY 2017.............. 10.14% 0.00%
JUNE 2017............. 10.21% 0.00%
JULY 2017............. 10.27% 0.00%
AUGUST 2017........... 10.34% 0.00%
SEPTEMBER 2017........ 10.41% 0.00%
OCTOBER 2017.......... 10.48% 0.00%
NOVEMBER 2017......... 10.56% 0.00%
DECEMBER 2017......... 10.96% 0.00%
JANUARY 2018.......... 11.03% 0.00%
FEBRUARY 2018......... 11.31% 0.00%
MARCH 2018............ 11.39% 0.00%
APRIL 2018............ 11.47% 0.00%
MAY 2018.............. 11.55% 0.00%
JUNE 2018............. 11.63% 0.00%
JULY 2018............. 11.71% 0.00%
AUGUST 2018........... 11.79% 0.00%
SEPTEMBER 2018........ 10.83% 0.00%
OCTOBER 2018.......... 9.44% 0.00%
NOVEMBER 2018......... 8.00% 0.00%
DECEMBER 2018......... 6.52% 0.00%
JANUARY 2019.......... 4.99% 0.00%
FEBRUARY 2019......... 3.41% 0.00%
MARCH 2019............ 1.78% 0.00%
APRIL 2019............ 0.00% 0.00%
</TABLE>
<PAGE> 199
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAY 2019.............. 43.06% 15.37% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2019............. 42.22% 12.76% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2019............. 41.36% 9.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AUGUST 2019........... 40.56% 8.54% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2019........ 39.73% 7.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2019.......... 38.88% 5.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2019......... 37.98% 4.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2019......... 37.08% 3.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2020.......... 36.14% 1.50% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2020......... 35.13% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2020............ 29.61% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2020............ 28.20% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2020.............. 27.65% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2020............. 27.49% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2020............. 27.23% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AUGUST 2020........... 26.98% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2020........ 26.75% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2020.......... 26.46% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2020......... 26.29% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2020......... 19.98% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2021.......... 18.48% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2021......... 16.91% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2021............ 15.27% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2021............ 13.79% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2021.............. 12.26% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2021............. 10.66% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2021............. 8.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
MAY 2019.............. 0.00% 0.00%
JUNE 2019............. 0.00% 0.00%
JULY 2019............. 0.00% 0.00%
AUGUST 2019........... 0.00% 0.00%
SEPTEMBER 2019........ 0.00% 0.00%
OCTOBER 2019.......... 0.00% 0.00%
NOVEMBER 2019......... 0.00% 0.00%
DECEMBER 2019......... 0.00% 0.00%
JANUARY 2020.......... 0.00% 0.00%
FEBRUARY 2020......... 0.00% 0.00%
MARCH 2020............ 0.00% 0.00%
APRIL 2020............ 0.00% 0.00%
MAY 2020.............. 0.00% 0.00%
JUNE 2020............. 0.00% 0.00%
JULY 2020............. 0.00% 0.00%
AUGUST 2020........... 0.00% 0.00%
SEPTEMBER 2020........ 0.00% 0.00%
OCTOBER 2020.......... 0.00% 0.00%
NOVEMBER 2020......... 0.00% 0.00%
DECEMBER 2020......... 0.00% 0.00%
JANUARY 2021.......... 0.00% 0.00%
FEBRUARY 2021......... 0.00% 0.00%
MARCH 2021............ 0.00% 0.00%
APRIL 2021............ 0.00% 0.00%
MAY 2021.............. 0.00% 0.00%
JUNE 2021............. 0.00% 0.00%
JULY 2021............. 0.00% 0.00%
</TABLE>
<PAGE> 200
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUGUST 2021........... 7.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2021........ 3.94% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2021.......... 2.29% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2021......... 0.56% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2021......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2022.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2022......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2022............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2022............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2022.............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2022............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2022............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AUGUST 2022........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2022........ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2022.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
NOVEMBER 2022......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2022......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2023.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2023......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2023............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2023............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2023.............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JUNE 2023............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JULY 2023............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AUGUST 2023........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 2023........ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
OCTOBER 2023.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
AUGUST 2021........... 0.00% 0.00%
SEPTEMBER 2021........ 0.00% 0.00%
OCTOBER 2021.......... 0.00% 0.00%
NOVEMBER 2021......... 0.00% 0.00%
DECEMBER 2021......... 0.00% 0.00%
JANUARY 2022.......... 0.00% 0.00%
FEBRUARY 2022......... 0.00% 0.00%
MARCH 2022............ 0.00% 0.00%
APRIL 2022............ 0.00% 0.00%
MAY 2022.............. 0.00% 0.00%
JUNE 2022............. 0.00% 0.00%
JULY 2022............. 0.00% 0.00%
AUGUST 2022........... 0.00% 0.00%
SEPTEMBER 2022........ 0.00% 0.00%
OCTOBER 2022.......... 0.00% 0.00%
NOVEMBER 2022......... 0.00% 0.00%
DECEMBER 2022......... 0.00% 0.00%
JANUARY 2023.......... 0.00% 0.00%
FEBRUARY 2023......... 0.00% 0.00%
MARCH 2023............ 0.00% 0.00%
APRIL 2023............ 0.00% 0.00%
MAY 2023.............. 0.00% 0.00%
JUNE 2023............. 0.00% 0.00%
JULY 2023............. 0.00% 0.00%
AUGUST 2023........... 0.00% 0.00%
SEPTEMBER 2023........ 0.00% 0.00%
OCTOBER 2023.......... 0.00% 0.00%
</TABLE>
<PAGE> 201
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS A CLASS B CLASS B CLASS B CLASS C CLASS C
MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SUPPLEMENTAL SCHEDULED MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
- ------------ ---------- ------------ ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOVEMBER 2023......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
DECEMBER 2023......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
JANUARY 2024.......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
FEBRUARY 2024......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 2024............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
APRIL 2024............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MAY 2024.............. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
<CAPTION>
CLASS D CLASS D
MINIMUM SCHEDULED
PAYMENT DATE CLASS CLASS
OCCURRING IN PERCENTAGE PERCENTAGE
- ------------ ---------- ----------
<S> <C> <C>
NOVEMBER 2023......... 0.00% 0.00%
DECEMBER 2023......... 0.00% 0.00%
JANUARY 2024.......... 0.00% 0.00%
FEBRUARY 2024......... 0.00% 0.00%
MARCH 2024............ 0.00% 0.00%
APRIL 2024............ 0.00% 0.00%
MAY 2024.............. 0.00% 0.00%
</TABLE>
<PAGE> 202
APPENDIX 6
The "Pool Factors" contained in the following Appendix 6 represent
percentages to be incorporated in the calculations found on page 119 under
"Description of the Notes -- Priority of Payments -- Allocation of Principal
Among Subclasses of Notes." Those calculations are used to determine, in the
case of insufficient funds to make a principal payment to all subclasses of a
series of notes, the basis on which the available funds are allocated among the
subclasses.
<PAGE> 203
APPENDIX 6
POOL FACTORS
The following are the Pool Factors as of May 5, 1999. These Pool Factors
may be changed by a resolution of the Controlling Trustees in connection with a
refinancing of the notes or the acquisition of additional aircraft.
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Closing........................................ 100.00% 100.00% 100.00% 100.00% 100.00%
June 1999...................................... 100.00% 98.81% 99.71% 100.00% 100.00%
July 1999...................................... 100.00% 98.13% 99.46% 100.00% 100.00%
August 1999.................................... 100.00% 97.45% 99.21% 100.00% 100.00%
September 1999................................. 100.00% 96.36% 98.95% 100.00% 100.00%
October 1999................................... 100.00% 95.66% 98.70% 100.00% 100.00%
November 1999.................................. 100.00% 94.90% 98.70% 100.00% 100.00%
December 1999.................................. 100.00% 93.73% 98.70% 100.00% 100.00%
January 2000................................... 100.00% 92.99% 98.70% 100.00% 100.00%
February 2000.................................. 100.00% 92.24% 98.70% 100.00% 100.00%
March 2000..................................... 100.00% 91.21% 98.70% 100.00% 100.00%
April 2000..................................... 100.00% 90.46% 98.70% 100.00% 100.00%
May 2000....................................... 100.00% 89.54% 98.70% 100.00% 100.00%
June 2000...................................... 100.00% 88.61% 98.70% 100.00% 100.00%
July 2000...................................... 100.00% 87.69% 98.57% 100.00% 100.00%
August 2000.................................... 100.00% 86.92% 98.00% 100.00% 100.00%
September 2000................................. 100.00% 86.24% 97.12% 100.00% 100.00%
October 2000................................... 100.00% 85.37% 96.81% 100.00% 100.00%
November 2000.................................. 100.00% 84.59% 96.26% 100.00% 100.00%
December 2000.................................. 100.00% 83.69% 96.10% 100.00% 100.00%
January 2001................................... 100.00% 82.85% 95.81% 100.00% 100.00%
February 2001.................................. 100.00% 81.95% 95.70% 100.00% 100.00%
March 2001..................................... 100.00% 81.14% 95.22% 100.00% 100.00%
April 2001..................................... 100.00% 80.20% 95.22% 100.00% 100.00%
May 2001....................................... 100.00% 79.22% 95.22% 100.00% 100.00%
June 2001...................................... 100.00% 78.24% 95.22% 100.00% 100.00%
July 2001...................................... 100.00% 77.23% 95.22% 100.00% 100.00%
August 2001.................................... 100.00% 76.23% 95.22% 100.00% 100.00%
September 2001................................. 100.00% 75.36% 94.77% 100.00% 100.00%
October 2001................................... 100.00% 74.52% 94.19% 100.00% 100.00%
November 2001.................................. 100.00% 73.51% 94.19% 100.00% 100.00%
December 2001.................................. 100.00% 72.51% 94.19% 100.00% 100.00%
January 2002................................... 100.00% 71.50% 94.19% 100.00% 100.00%
</TABLE>
<PAGE> 204
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
February 2002.................................. 100.00% 70.49% 94.19% 100.00% 100.00%
March 2002..................................... 100.00% 69.45% 94.19% 100.00% 100.00%
April 2002..................................... 100.00% 68.43% 94.19% 100.00% 100.00%
May 2002....................................... 100.00% 67.99% 94.09% 97.82% 100.00%
June 2002...................................... 100.00% 67.78% 94.09% 94.81% 99.78%
July 2002...................................... 100.00% 67.35% 94.09% 92.61% 99.47%
August 2002.................................... 100.00% 66.49% 94.09% 91.88% 99.47%
September 2002................................. 100.00% 66.34% 93.01% 90.14% 98.85%
October 2002................................... 100.00% 65.48% 92.72% 90.14% 98.17%
November 2002.................................. 100.00% 65.01% 92.61% 88.57% 97.31%
December 2002.................................. 100.00% 64.44% 92.50% 87.07% 96.82%
January 2003................................... 100.00% 63.55% 92.39% 86.68% 96.51%
February 2003.................................. 100.00% 62.81% 92.18% 85.86% 96.19%
March 2003..................................... 100.00% 62.37% 91.88% 83.94% 95.70%
April 2003..................................... 100.00% 61.95% 91.67% 81.81% 95.39%
May 2003....................................... 100.00% 61.36% 91.46% 80.34% 94.89%
June 2003...................................... 100.00% 60.83% 91.16% 78.67% 94.58%
July 2003...................................... 100.00% 60.28% 90.86% 77.00% 94.26%
August 2003.................................... 100.00% 60.07% 90.46% 74.27% 93.77%
September 2003................................. 100.00% 59.91% 89.44% 71.98% 93.45%
October 2003................................... 100.00% 58.85% 89.31% 71.98% 93.14%
November 2003.................................. 100.00% 58.39% 87.31% 71.98% 92.82%
December 2003.................................. 100.00% 57.89% 86.75% 70.50% 92.32%
January 2004................................... 100.00% 57.03% 86.00% 70.50% 92.00%
February 2004.................................. 100.00% 56.12% 85.26% 70.50% 91.68%
March 2004..................................... 100.00% 55.16% 84.52% 70.50% 91.36%
April 2004..................................... 100.00% 54.23% 83.87% 70.50% 90.87%
May 2004....................................... 100.00% 53.17% 83.58% 70.50% 90.72%
June 2004...................................... 100.00% 52.09% 83.28% 70.50% 90.39%
July 2004...................................... 100.00% 50.97% 82.98% 70.50% 90.07%
August 2004.................................... 100.00% 49.90% 82.68% 70.50% 89.57%
September 2004................................. 100.00% 48.92% 82.38% 70.03% 89.25%
October 2004................................... 100.00% 47.95% 82.08% 69.57% 88.75%
November 2004.................................. 100.00% 46.93% 81.77% 69.21% 88.42%
December 2004.................................. 100.00% 45.85% 81.47% 68.85% 88.09%
January 2005................................... 100.00% 44.74% 81.16% 68.69% 87.76%
February 2005.................................. 100.00% 44.37% 80.86% 65.71% 87.43%
March 2005..................................... 100.00% 43.02% 80.86% 65.71% 87.10%
April 2005..................................... 100.00% 41.75% 80.86% 65.71% 86.77%
</TABLE>
<PAGE> 205
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
May 2005....................................... 100.00% 40.45% 80.86% 65.71% 86.44%
June 2005...................................... 100.00% 39.17% 80.86% 65.71% 86.10%
July 2005...................................... 100.00% 37.93% 80.86% 65.45% 85.77%
August 2005.................................... 100.00% 36.86% 80.86% 64.60% 85.43%
September 2005................................. 100.00% 35.66% 80.84% 64.25% 85.09%
October 2005................................... 100.00% 34.37% 80.84% 64.09% 84.76%
November 2005.................................. 100.00% 33.06% 80.84% 64.09% 84.42%
December 2005.................................. 100.00% 31.80% 80.84% 63.77% 84.08%
January 2006................................... 100.00% 30.56% 80.84% 63.41% 83.74%
February 2006.................................. 100.00% 29.30% 80.84% 63.16% 83.39%
March 2006..................................... 100.00% 28.11% 80.25% 62.90% 83.21%
April 2006..................................... 100.00% 27.11% 79.16% 62.90% 82.87%
May 2006....................................... 100.00% 26.11% 77.96% 62.90% 82.52%
June 2006...................................... 100.00% 25.21% 76.68% 62.68% 82.17%
July 2006...................................... 100.00% 24.21% 75.82% 62.23% 81.83%
August 2006.................................... 100.00% 23.46% 74.37% 61.59% 81.48%
September 2006................................. 100.00% 22.19% 73.94% 61.59% 81.28%
October 2006................................... 100.00% 21.25% 72.46% 61.59% 80.93%
November 2006.................................. 100.00% 20.23% 71.26% 61.59% 80.58%
December 2006.................................. 100.00% 19.11% 70.27% 61.59% 80.23%
January 2007................................... 100.00% 17.98% 69.33% 61.59% 80.02%
February 2007.................................. 100.00% 16.87% 68.36% 61.59% 79.67%
March 2007..................................... 100.00% 15.57% 67.74% 61.59% 79.31%
April 2007..................................... 100.00% 14.27% 67.24% 61.59% 79.10%
May 2007....................................... 100.00% 13.07% 66.40% 61.59% 78.74%
June 2007...................................... 100.00% 11.90% 65.49% 61.59% 78.53%
July 2007...................................... 100.00% 10.73% 64.72% 61.59% 77.86%
August 2007.................................... 100.00% 9.64% 64.12% 61.59% 76.47%
September 2007................................. 100.00% 8.57% 63.52% 61.59% 74.93%
October 2007................................... 100.00% 7.53% 63.00% 61.59% 72.93%
November 2007.................................. 100.00% 6.45% 62.41% 61.59% 71.44%
December 2007.................................. 100.00% 5.52% 61.67% 61.59% 69.01%
January 2008................................... 100.00% 4.35% 61.15% 61.59% 67.80%
February 2008.................................. 100.00% 3.32% 60.49% 61.59% 65.95%
March 2008..................................... 100.00% 2.19% 59.98% 61.59% 64.04%
April 2008..................................... 100.00% 1.19% 59.32% 61.59% 61.89%
May 2008....................................... 100.00% 0.14% 58.74% 61.59% 59.84%
June 2008...................................... 99.27% 0.00% 58.09% 61.59% 58.17%
July 2008...................................... 98.37% 0.00% 57.52% 61.59% 56.71%
</TABLE>
<PAGE> 206
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
August 2008.................................... 97.56% 0.00% 56.87% 61.59% 54.74%
September 2008................................. 96.59% 0.00% 56.30% 61.59% 53.81%
October 2008................................... 95.56% 0.00% 55.73% 61.59% 53.22%
November 2008.................................. 94.63% 0.00% 55.03% 61.59% 52.20%
December 2008.................................. 93.67% 0.00% 54.39% 61.59% 51.12%
January 2009................................... 92.91% 0.00% 53.76% 61.59% 48.59%
February 2009.................................. 92.01% 0.00% 53.13% 61.59% 47.05%
March 2009..................................... 90.99% 0.00% 52.51% 61.59% 46.02%
April 2009..................................... 89.95% 0.00% 51.89% 61.59% 45.57%
May 2009....................................... 88.94% 0.00% 51.33% 61.18% 45.26%
June 2009...................................... 88.01% 0.00% 50.72% 60.53% 45.02%
July 2009...................................... 87.08% 0.00% 50.17% 59.95% 44.33%
August 2009.................................... 86.16% 0.00% 49.62% 59.22% 43.79%
September 2009................................. 85.16% 0.00% 49.15% 58.65% 43.54%
October 2009................................... 84.29% 0.00% 48.67% 57.31% 43.44%
November 2009.................................. 83.29% 0.00% 48.20% 56.67% 43.22%
December 2009.................................. 82.25% 0.00% 47.79% 56.03% 43.05%
January 2010................................... 81.23% 0.00% 47.19% 55.45% 43.05%
February 2010.................................. 80.63% 0.00% 46.15% 54.69% 40.87%
March 2010..................................... 79.22% 0.00% 45.57% 54.01% 36.56%
April 2010..................................... 78.27% 0.00% 44.93% 53.39% 36.56%
May 2010....................................... 77.30% 0.00% 44.35% 52.86% 36.56%
June 2010...................................... 76.41% 0.00% 43.59% 52.39% 36.21%
July 2010...................................... 75.74% 0.00% 43.02% 51.85% 33.73%
August 2010.................................... 74.52% 0.00% 42.95% 51.85% 33.73%
September 2010................................. 73.43% 0.00% 42.34% 51.85% 33.73%
October 2010................................... 72.80% 0.00% 41.20% 50.20% 33.73%
November 2010.................................. 71.97% 0.00% 40.59% 48.89% 33.73%
December 2010.................................. 71.17% 0.00% 39.91% 47.46% 33.73%
January 2011................................... 70.26% 0.00% 39.31% 46.46% 33.73%
February 2011.................................. 69.46% 0.00% 38.70% 44.92% 33.73%
March 2011..................................... 68.42% 0.00% 38.10% 44.34% 33.73%
April 2011..................................... 67.41% 0.00% 37.44% 43.79% 33.73%
May 2011....................................... 66.45% 0.00% 36.68% 43.36% 33.22%
June 2011...................................... 65.45% 0.00% 36.15% 43.00% 32.57%
July 2011...................................... 64.40% 0.00% 35.39% 42.61% 32.57%
August 2011.................................... 63.50% 0.00% 34.75% 42.22% 31.18%
September 2011................................. 62.47% 0.00% 34.07% 41.66% 31.18%
October 2011................................... 61.48% 0.00% 33.44% 41.24% 30.69%
</TABLE>
<PAGE> 207
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
November 2011.................................. 60.53% 0.00% 32.43% 40.88% 30.48%
December 2011.................................. 58.75% 0.00% 31.74% 40.29% 30.48%
January 2012................................... 57.67% 0.00% 31.14% 39.97% 30.48%
February 2012.................................. 56.73% 0.00% 30.00% 39.59% 30.48%
March 2012..................................... 54.82% 0.00% 29.39% 38.99% 29.68%
April 2012..................................... 53.80% 0.00% 28.66% 38.58% 29.68%
May 2012....................................... 52.91% 0.00% 28.04% 37.30% 29.68%
June 2012...................................... 51.80% 0.00% 27.52% 36.98% 29.68%
July 2012...................................... 50.83% 0.00% 27.01% 35.93% 29.68%
August 2012.................................... 47.34% 0.00% 25.40% 35.43% 29.68%
September 2012................................. 46.46% 0.00% 24.09% 35.10% 29.68%
October 2012................................... 45.45% 0.00% 23.48% 34.59% 29.68%
November 2012.................................. 44.52% 0.00% 22.82% 33.83% 29.68%
December 2012.................................. 43.50% 0.00% 22.22% 33.43% 29.68%
January 2013................................... 42.70% 0.00% 21.58% 32.00% 29.68%
February 2013.................................. 41.86% 0.00% 20.47% 31.29% 29.68%
March 2013..................................... 39.69% 0.00% 19.57% 30.55% 29.68%
April 2013..................................... 38.66% 0.00% 19.05% 30.11% 29.68%
May 2013....................................... 37.67% 0.00% 18.31% 29.75% 29.68%
June 2013...................................... 36.65% 0.00% 17.81% 29.35% 29.68%
July 2013...................................... 35.70% 0.00% 17.18% 28.67% 29.68%
August 2013.................................... 34.83% 0.00% 16.51% 27.67% 29.68%
September 2013................................. 33.81% 0.00% 15.85% 27.39% 29.68%
October 2013................................... 32.83% 0.00% 15.24% 26.78% 29.68%
November 2013.................................. 31.80% 0.00% 14.59% 26.42% 29.68%
December 2013.................................. 30.74% 0.00% 13.99% 26.11% 29.68%
January 2014................................... 29.67% 0.00% 13.36% 25.87% 29.68%
February 2014.................................. 28.65% 0.00% 12.74% 25.51% 29.47%
March 2014..................................... 27.63% 0.00% 11.99% 25.20% 29.26%
April 2014..................................... 26.57% 0.00% 11.34% 24.95% 29.26%
May 2014....................................... 25.65% 0.00% 10.75% 24.54% 28.45%
June 2014...................................... 24.55% 0.00% 10.18% 24.54% 28.45%
July 2014...................................... 23.73% 0.00% 9.49% 23.33% 28.45%
August 2014.................................... 22.50% 0.00% 9.49% 23.33% 28.45%
September 2014................................. 21.45% 0.00% 8.70% 23.33% 28.45%
October 2014................................... 19.63% 0.00% 8.17% 23.14% 28.45%
November 2014.................................. 18.47% 0.00% 8.06% 22.92% 28.45%
December 2014.................................. 17.35% 0.00% 7.95% 22.56% 28.45%
January 2015................................... 16.18% 0.00% 7.95% 22.25% 28.45%
</TABLE>
<PAGE> 208
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
February 2015.................................. 15.01% 0.00% 7.95% 21.96% 28.45%
March 2015..................................... 13.86% 0.00% 7.95% 21.50% 28.45%
April 2015..................................... 12.63% 0.00% 7.95% 21.50% 28.45%
May 2015....................................... 11.45% 0.00% 7.95% 21.50% 28.45%
June 2015...................................... 10.26% 0.00% 7.95% 21.50% 28.45%
July 2015...................................... 9.07% 0.00% 7.95% 21.50% 28.45%
August 2015.................................... 7.88% 0.00% 7.95% 21.50% 28.45%
September 2015................................. 6.68% 0.00% 7.95% 21.50% 28.45%
October 2015................................... 5.49% 0.00% 7.95% 21.50% 28.45%
November 2015.................................. 4.29% 0.00% 7.95% 21.50% 28.45%
December 2015.................................. 3.10% 0.00% 7.95% 21.50% 28.45%
January 2016................................... 1.89% 0.00% 7.95% 21.50% 28.45%
February 2016.................................. 0.68% 0.00% 7.95% 21.50% 28.45%
March 2016..................................... 0.00% 0.00% 5.80% 21.50% 28.45%
April 2016..................................... 0.00% 0.00% 0.86% 21.50% 28.45%
May 2016....................................... 0.00% 0.00% 0.00% 12.88% 28.45%
June 2016...................................... 0.00% 0.00% 0.00% 7.00% 28.45%
July 2016...................................... 0.00% 0.00% 0.00% 0.00% 26.54%
August 2016.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2016................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2016................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2016.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2016.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2017................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2017.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2017..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2017..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2017....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2017...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2017...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2017.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2017................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2017................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2017.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2017.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2018................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2018.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2018..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2018..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<PAGE> 209
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
May 2018....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2018...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2018...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2018.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2018................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2018................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2018.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2018.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2019................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2019.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2019..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2019..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2019....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2019...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2019...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2019.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2019................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2019................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2019.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2019.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2020................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2020.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2020..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2020..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2020....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2020...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2020...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2020.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2020................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2020................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2020.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2020.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2021................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2021.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2021..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2021..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2021....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2021...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2021...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<PAGE> 210
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
August 2021.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2021................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2021................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2021.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2021.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2022................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2022.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2022..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2022..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2022....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2022...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2022...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2022.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2022................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2022................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2022.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2022.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2023................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2023.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2023..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2023..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2023....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2023...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2023...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2023.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2023................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2023................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2023.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2023.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2024................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2024.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2024..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2024..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2024....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2024...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2024...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2024.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2024................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2024................................... 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<PAGE> 211
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
November 2024.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2024.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2025................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2025.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2025..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2025..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
May 2025....................................... 0.00% 0.00% 0.00% 0.00% 0.00%
June 2025...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
July 2025...................................... 0.00% 0.00% 0.00% 0.00% 0.00%
August 2025.................................... 0.00% 0.00% 0.00% 0.00% 0.00%
September 2025................................. 0.00% 0.00% 0.00% 0.00% 0.00%
October 2025................................... 0.00% 0.00% 0.00% 0.00% 0.00%
November 2025.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
December 2025.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
January 2026................................... 0.00% 0.00% 0.00% 0.00% 0.00%
February 2026.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
March 2026..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
April 2026..................................... 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
<PAGE> 212
APPENDIX 7
The "Extended Pool Factors" contained in the following Appendix 7 represent
percentages to be incorporated in the calculations found on page 120 under
"Description of the Notes -- Priority of Payments -- Allocation of Principal
Among Subclasses of Notes." Those calculations are used to determine, in the
case of insufficient funds to make a principal payment to all subclasses of a
series of notes, the basis on which the available funds are allocated among the
subclasses.
<PAGE> 213
APPENDIX 7
EXTENDED POOL FACTORS
The following are the Extended Pool Factors as of May 5, 1999. These
Extended Pool Factors may be changed by a resolution of the Controlling Trustees
in connection with a refinancing of the notes or the acquisition of additional
aircraft.
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Closing........................................ 100.00% 100.00% 100.00% 100.00% 100.00%
June 1999...................................... 100.00% 99.27% 99.71% 100.00% 100.00%
July 1999...................................... 100.00% 98.86% 99.46% 100.00% 100.00%
August 1999.................................... 100.00% 98.29% 99.21% 100.00% 100.00%
September 1999................................. 100.00% 97.71% 98.95% 100.00% 100.00%
October 1999................................... 100.00% 97.14% 98.70% 100.00% 100.00%
November 1999.................................. 100.00% 96.43% 98.70% 100.00% 100.00%
December 1999.................................. 100.00% 95.75% 98.70% 100.00% 100.00%
January 2000................................... 100.00% 95.07% 98.70% 100.00% 100.00%
February 2000.................................. 100.00% 94.36% 98.70% 100.00% 100.00%
March 2000..................................... 100.00% 93.68% 98.70% 100.00% 100.00%
April 2000..................................... 100.00% 92.97% 98.70% 100.00% 100.00%
May 2000....................................... 100.00% 92.28% 98.70% 100.00% 100.00%
June 2000...................................... 100.00% 91.41% 98.70% 100.00% 100.00%
July 2000...................................... 100.00% 90.31% 98.70% 100.00% 100.00%
August 2000.................................... 100.00% 88.51% 98.70% 100.00% 100.00%
September 2000................................. 100.00% 87.29% 98.70% 100.00% 100.00%
October 2000................................... 100.00% 86.32% 98.70% 100.00% 100.00%
November 2000.................................. 100.00% 85.32% 98.70% 100.00% 100.00%
December 2000.................................. 100.00% 84.45% 98.70% 100.00% 100.00%
January 2001................................... 100.00% 83.76% 98.70% 100.00% 100.00%
February 2001.................................. 100.00% 83.11% 98.70% 100.00% 100.00%
March 2001..................................... 100.00% 83.11% 98.70% 100.00% 100.00%
April 2001..................................... 100.00% 82.82% 98.70% 100.00% 100.00%
May 2001....................................... 100.00% 81.75% 98.70% 100.00% 100.00%
June 2001...................................... 100.00% 80.91% 98.70% 100.00% 100.00%
July 2001...................................... 100.00% 80.03% 98.70% 100.00% 100.00%
August 2001.................................... 100.00% 79.18% 98.70% 100.00% 100.00%
September 2001................................. 100.00% 78.27% 98.70% 100.00% 100.00%
October 2001................................... 100.00% 77.42% 98.70% 100.00% 100.00%
November 2001.................................. 100.00% 77.21% 98.70% 100.00% 100.00%
December 2001.................................. 100.00% 76.63% 98.70% 100.00% 100.00%
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
January 2002................................... 100.00% 76.08% 98.70% 100.00% 100.00%
February 2002.................................. 100.00% 75.50% 98.70% 100.00% 100.00%
March 2002..................................... 100.00% 75.00% 98.70% 100.00% 100.00%
April 2002..................................... 100.00% 74.42% 98.70% 100.00% 100.00%
May 2002....................................... 100.00% 73.89% 98.70% 100.00% 100.00%
June 2002...................................... 100.00% 73.33% 98.51% 99.92% 100.00%
July 2002...................................... 100.00% 72.73% 96.79% 99.92% 100.00%
August 2002.................................... 100.00% 72.17% 95.09% 99.92% 100.00%
September 2002................................. 100.00% 71.57% 93.01% 99.92% 100.00%
October 2002................................... 100.00% 70.65% 93.01% 99.92% 100.00%
November 2002.................................. 100.00% 70.63% 93.01% 99.92% 100.00%
December 2002.................................. 100.00% 70.29% 92.50% 99.91% 100.00%
January 2003................................... 100.00% 69.95% 92.39% 98.21% 100.00%
February 2003.................................. 100.00% 69.51% 92.18% 96.95% 100.00%
March 2003..................................... 100.00% 69.19% 91.88% 95.21% 100.00%
April 2003..................................... 100.00% 68.78% 91.67% 93.83% 100.00%
May 2003....................................... 100.00% 68.39% 91.46% 92.24% 100.00%
June 2003...................................... 100.00% 68.00% 91.16% 90.80% 100.00%
July 2003...................................... 100.00% 67.57% 90.86% 89.42% 100.00%
August 2003.................................... 100.00% 67.17% 90.46% 88.09% 100.00%
September 2003................................. 100.00% 66.74% 89.44% 87.61% 100.00%
October 2003................................... 100.00% 66.03% 89.31% 87.07% 100.00%
November 2003.................................. 100.00% 66.03% 87.31% 86.15% 100.00%
December 2003.................................. 100.00% 65.46% 86.75% 85.60% 100.00%
January 2004................................... 100.00% 64.93% 86.00% 85.14% 100.00%
February 2004.................................. 100.00% 64.40% 85.26% 84.52% 100.00%
March 2004..................................... 100.00% 63.86% 84.52% 83.71% 100.00%
April 2004..................................... 100.00% 63.29% 83.87% 83.07% 100.00%
May 2004....................................... 100.00% 62.62% 83.58% 82.53% 100.00%
June 2004...................................... 100.00% 61.94% 83.28% 81.83% 100.00%
July 2004...................................... 100.00% 61.25% 82.98% 81.03% 100.00%
August 2004.................................... 100.00% 60.57% 82.68% 80.31% 100.00%
September 2004................................. 100.00% 59.88% 82.38% 79.57% 100.00%
October 2004................................... 100.00% 59.19% 82.08% 78.76% 100.00%
November 2004.................................. 100.00% 58.50% 81.77% 78.02% 100.00%
December 2004.................................. 100.00% 57.81% 81.47% 77.04% 100.00%
January 2005................................... 100.00% 57.11% 81.16% 76.16% 100.00%
February 2005.................................. 100.00% 56.41% 80.86% 75.28% 100.00%
March 2005..................................... 100.00% 55.05% 80.86% 75.28% 100.00%
</TABLE>
<PAGE> 215
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
April 2005..................................... 100.00% 54.32% 80.86% 75.01% 100.00%
May 2005....................................... 100.00% 53.65% 80.86% 73.50% 100.00%
June 2005...................................... 100.00% 52.94% 80.86% 72.20% 100.00%
July 2005...................................... 100.00% 52.21% 80.86% 70.87% 100.00%
August 2005.................................... 100.00% 51.53% 80.86% 69.45% 100.00%
September 2005................................. 100.00% 50.80% 80.84% 68.23% 100.00%
October 2005................................... 100.00% 49.96% 80.84% 67.25% 100.00%
November 2005.................................. 100.00% 49.12% 80.84% 66.36% 100.00%
December 2005.................................. 100.00% 48.20% 80.84% 65.64% 100.00%
January 2006................................... 100.00% 47.33% 80.84% 64.82% 100.00%
February 2006.................................. 100.00% 46.43% 80.84% 64.07% 100.00%
March 2006..................................... 100.00% 45.59% 80.84% 62.90% 100.00%
April 2006..................................... 100.00% 44.67% 80.84% 62.90% 100.00%
May 2006....................................... 100.00% 43.79% 80.84% 62.90% 100.00%
June 2006...................................... 100.00% 42.92% 80.84% 62.68% 100.00%
July 2006...................................... 100.00% 42.00% 80.84% 62.23% 100.00%
August 2006.................................... 100.00% 41.13% 80.84% 61.59% 100.00%
September 2006................................. 100.00% 40.10% 80.84% 61.59% 100.00%
October 2006................................... 100.00% 39.08% 80.84% 61.59% 100.00%
November 2006.................................. 100.00% 38.01% 80.84% 61.59% 100.00%
December 2006.................................. 100.00% 36.84% 80.84% 61.59% 100.00%
January 2007................................... 100.00% 35.75% 80.84% 61.59% 100.00%
February 2007.................................. 100.00% 34.63% 80.84% 61.59% 100.00%
March 2007..................................... 100.00% 32.53% 80.71% 61.59% 100.00%
April 2007..................................... 100.00% 31.42% 80.12% 61.59% 100.00%
May 2007....................................... 100.00% 30.33% 79.45% 61.59% 100.00%
June 2007...................................... 100.00% 29.25% 78.79% 61.59% 100.00%
July 2007...................................... 100.00% 28.12% 78.23% 61.59% 100.00%
August 2007.................................... 100.00% 26.99% 77.73% 61.59% 100.00%
September 2007................................. 100.00% 25.82% 77.39% 61.59% 100.00%
October 2007................................... 100.00% 24.63% 77.03% 61.59% 100.00%
November 2007.................................. 100.00% 23.44% 76.72% 61.59% 100.00%
December 2007.................................. 100.00% 22.16% 76.60% 61.59% 100.00%
January 2008................................... 100.00% 20.97% 76.24% 61.59% 100.00%
February 2008.................................. 100.00% 19.77% 75.92% 61.59% 100.00%
March 2008..................................... 100.00% 19.00% 74.03% 61.59% 100.00%
April 2008..................................... 100.00% 18.00% 73.04% 61.59% 100.00%
May 2008....................................... 100.00% 16.85% 72.48% 61.59% 100.00%
June 2008...................................... 100.00% 15.87% 71.45% 61.59% 100.00%
</TABLE>
<PAGE> 216
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
July 2008...................................... 100.00% 14.76% 70.73% 61.59% 100.00%
August 2008.................................... 100.00% 13.70% 69.92% 61.59% 100.00%
September 2008................................. 100.00% 12.55% 69.36% 61.59% 100.00%
October 2008................................... 100.00% 11.18% 69.36% 61.59% 100.00%
November 2008.................................. 100.00% 9.80% 69.36% 61.59% 100.00%
December 2008.................................. 100.00% 8.40% 69.36% 61.59% 100.00%
January 2009................................... 100.00% 7.00% 69.36% 61.59% 100.00%
February 2009.................................. 100.00% 5.71% 69.36% 61.59% 100.00%
March 2009..................................... 100.00% 4.53% 69.02% 61.59% 100.00%
April 2009..................................... 100.00% 2.77% 69.02% 61.59% 100.00%
May 2009....................................... 100.00% 1.39% 69.02% 61.59% 100.00%
June 2009...................................... 99.89% 0.00% 69.02% 61.59% 100.00%
July 2009...................................... 98.76% 0.00% 69.02% 61.59% 100.00%
August 2009.................................... 97.62% 0.00% 69.02% 61.59% 100.00%
September 2009................................. 96.48% 0.00% 69.02% 61.59% 100.00%
October 2009................................... 95.35% 0.00% 69.02% 61.59% 100.00%
November 2009.................................. 94.19% 0.00% 69.02% 61.59% 100.00%
December 2009.................................. 93.22% 0.00% 69.02% 61.59% 100.00%
January 2010................................... 92.29% 0.00% 69.02% 61.59% 100.00%
February 2010.................................. 91.59% 0.00% 69.02% 61.59% 100.00%
March 2010..................................... 90.21% 0.00% 67.61% 61.59% 100.00%
April 2010..................................... 89.50% 0.00% 66.37% 61.59% 100.00%
May 2010....................................... 88.61% 0.00% 65.81% 61.59% 100.00%
June 2010...................................... 87.64% 0.00% 65.66% 61.59% 100.00%
July 2010...................................... 86.73% 0.00% 65.16% 61.59% 100.00%
August 2010.................................... 86.20% 0.00% 63.17% 61.59% 100.00%
September 2010................................. 85.45% 0.00% 62.07% 61.59% 100.00%
October 2010................................... 84.93% 0.00% 59.92% 61.59% 100.00%
November 2010.................................. 84.50% 0.00% 57.46% 61.59% 100.00%
December 2010.................................. 84.01% 0.00% 55.17% 61.59% 100.00%
January 2011................................... 83.70% 0.00% 53.96% 61.59% 100.00%
February 2011.................................. 82.90% 0.00% 53.26% 61.59% 100.00%
March 2011..................................... 82.26% 0.00% 52.63% 61.59% 100.00%
April 2011..................................... 81.76% 0.00% 51.87% 61.59% 100.00%
May 2011....................................... 81.23% 0.00% 51.07% 61.59% 100.00%
June 2011...................................... 80.71% 0.00% 50.27% 61.59% 100.00%
July 2011...................................... 80.18% 0.00% 49.48% 61.59% 100.00%
August 2011.................................... 79.64% 0.00% 48.69% 61.59% 100.00%
September 2011................................. 79.15% 0.00% 47.01% 61.59% 100.00%
</TABLE>
<PAGE> 217
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
October 2011................................... 78.85% 0.00% 46.02% 61.59% 100.00%
November 2011.................................. 78.68% 0.00% 46.02% 61.59% 100.00%
December 2011.................................. 78.34% 0.00% 44.17% 61.59% 100.00%
January 2012................................... 78.01% 0.00% 42.99% 61.59% 100.00%
February 2012.................................. 77.69% 0.00% 41.83% 61.59% 100.00%
March 2012..................................... 76.73% 0.00% 40.67% 61.59% 100.00%
April 2012..................................... 76.07% 0.00% 39.49% 61.59% 100.00%
May 2012....................................... 75.39% 0.00% 38.32% 61.59% 100.00%
June 2012...................................... 74.75% 0.00% 37.06% 61.59% 100.00%
July 2012...................................... 74.07% 0.00% 35.86% 61.59% 100.00%
August 2012.................................... 71.76% 0.00% 34.64% 58.31% 100.00%
September 2012................................. 71.43% 0.00% 32.76% 57.62% 100.00%
October 2012................................... 70.92% 0.00% 31.60% 56.96% 100.00%
November 2012.................................. 70.91% 0.00% 31.52% 52.71% 100.00%
December 2012.................................. 70.82% 0.00% 31.44% 48.82% 100.00%
January 2013................................... 70.48% 0.00% 31.31% 46.91% 100.00%
February 2013.................................. 70.13% 0.00% 31.08% 46.68% 100.00%
March 2013..................................... 68.82% 0.00% 30.78% 45.75% 100.00%
April 2013..................................... 68.47% 0.00% 30.65% 45.48% 100.00%
May 2013....................................... 68.14% 0.00% 30.38% 45.20% 100.00%
June 2013...................................... 67.80% 0.00% 30.16% 44.93% 100.00%
July 2013...................................... 67.45% 0.00% 29.90% 44.65% 100.00%
August 2013.................................... 67.10% 0.00% 29.67% 44.21% 100.00%
September 2013................................. 66.67% 0.00% 28.96% 43.93% 100.00%
October 2013................................... 66.10% 0.00% 28.69% 43.60% 100.00%
November 2013.................................. 65.62% 0.00% 28.43% 43.21% 100.00%
December 2013.................................. 65.11% 0.00% 28.21% 42.88% 100.00%
January 2014................................... 64.63% 0.00% 27.94% 42.59% 100.00%
February 2014.................................. 64.13% 0.00% 27.68% 42.31% 100.00%
March 2014..................................... 63.64% 0.00% 27.41% 41.86% 100.00%
April 2014..................................... 63.13% 0.00% 27.11% 41.58% 100.00%
May 2014....................................... 62.63% 0.00% 26.84% 41.29% 100.00%
June 2014...................................... 62.12% 0.00% 26.58% 41.00% 100.00%
July 2014...................................... 61.31% 0.00% 26.36% 41.00% 100.00%
August 2014.................................... 60.52% 0.00% 26.09% 41.00% 100.00%
September 2014................................. 60.47% 0.00% 25.75% 39.87% 100.00%
October 2014................................... 59.85% 0.00% 25.24% 39.54% 100.00%
November 2014.................................. 59.02% 0.00% 25.22% 39.54% 100.00%
December 2014.................................. 58.25% 0.00% 24.92% 39.54% 100.00%
</TABLE>
<PAGE> 218
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
January 2015................................... 57.50% 0.00% 24.59% 39.54% 100.00%
February 2015.................................. 56.73% 0.00% 24.29% 39.54% 100.00%
March 2015..................................... 55.93% 0.00% 24.00% 39.54% 100.00%
April 2015..................................... 55.18% 0.00% 23.67% 39.54% 100.00%
May 2015....................................... 54.45% 0.00% 23.37% 39.54% 100.00%
June 2015...................................... 53.74% 0.00% 23.04% 39.54% 100.00%
July 2015...................................... 53.01% 0.00% 22.75% 39.54% 100.00%
August 2015.................................... 52.29% 0.00% 22.43% 39.54% 100.00%
September 2015................................. 51.57% 0.00% 22.10% 39.54% 100.00%
October 2015................................... 50.84% 0.00% 21.78% 39.54% 100.00%
November 2015.................................. 50.13% 0.00% 21.46% 39.54% 100.00%
December 2015.................................. 49.40% 0.00% 21.14% 39.54% 100.00%
January 2016................................... 48.67% 0.00% 20.82% 39.54% 100.00%
February 2016.................................. 47.96% 0.00% 20.47% 39.54% 100.00%
March 2016..................................... 47.21% 0.00% 20.15% 39.54% 100.00%
April 2016..................................... 46.48% 0.00% 19.81% 39.54% 100.00%
May 2016....................................... 45.07% 0.00% 19.46% 39.54% 100.00%
June 2016...................................... 44.35% 0.00% 19.12% 39.54% 100.00%
July 2016...................................... 43.62% 0.00% 18.79% 39.54% 100.00%
August 2016.................................... 40.37% 0.00% 18.43% 39.54% 100.00%
September 2016................................. 40.37% 0.00% 13.80% 39.54% 100.00%
October 2016................................... 38.51% 0.00% 13.44% 39.54% 100.00%
November 2016.................................. 37.10% 0.00% 13.08% 39.54% 100.00%
December 2016.................................. 36.51% 0.00% 12.73% 39.54% 100.00%
January 2017................................... 35.93% 0.00% 12.38% 39.54% 100.00%
February 2017.................................. 33.53% 0.00% 12.01% 39.54% 100.00%
March 2017..................................... 32.96% 0.00% 11.63% 39.54% 100.00%
April 2017..................................... 31.75% 0.00% 11.27% 39.54% 100.00%
May 2017....................................... 31.21% 0.00% 10.90% 39.54% 100.00%
June 2017...................................... 30.67% 0.00% 10.54% 39.54% 100.00%
July 2017...................................... 30.13% 0.00% 10.16% 39.54% 100.00%
August 2017.................................... 29.59% 0.00% 9.79% 39.54% 100.00%
September 2017................................. 29.04% 0.00% 9.42% 39.54% 100.00%
October 2017................................... 28.50% 0.00% 9.03% 39.54% 100.00%
November 2017.................................. 27.98% 0.00% 8.64% 39.54% 100.00%
December 2017.................................. 26.05% 0.00% 8.27% 39.54% 100.00%
January 2018................................... 25.56% 0.00% 7.91% 39.54% 100.00%
February 2018.................................. 24.34% 0.00% 7.24% 39.54% 100.00%
March 2018..................................... 24.02% 0.00% 6.26% 39.54% 100.00%
</TABLE>
<PAGE> 219
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
April 2018..................................... 23.64% 0.00% 5.54% 39.54% 100.00%
May 2018....................................... 23.46% 0.00% 4.03% 39.54% 100.00%
June 2018...................................... 23.38% 0.00% 2.08% 39.54% 100.00%
July 2018...................................... 23.32% 0.00% 0.00% 39.54% 100.00%
August 2018.................................... 22.76% 0.00% 0.00% 39.54% 100.00%
September 2018................................. 22.19% 0.00% 0.00% 39.54% 100.00%
October 2018................................... 21.61% 0.00% 0.00% 39.54% 100.00%
November 2018.................................. 21.04% 0.00% 0.00% 39.54% 100.00%
December 2018.................................. 20.46% 0.00% 0.00% 39.54% 100.00%
January 2019................................... 19.88% 0.00% 0.00% 39.54% 100.00%
February 2019.................................. 19.30% 0.00% 0.00% 39.54% 100.00%
March 2019..................................... 18.71% 0.00% 0.00% 39.54% 100.00%
April 2019..................................... 18.17% 0.00% 0.00% 39.54% 100.00%
May 2019....................................... 17.63% 0.00% 0.00% 39.54% 100.00%
June 2019...................................... 17.10% 0.00% 0.00% 39.54% 100.00%
July 2019...................................... 16.60% 0.00% 0.00% 39.54% 100.00%
August 2019.................................... 16.11% 0.00% 0.00% 39.54% 100.00%
September 2019................................. 15.61% 0.00% 0.00% 39.54% 100.00%
October 2019................................... 15.12% 0.00% 0.00% 39.54% 100.00%
November 2019.................................. 14.62% 0.00% 0.00% 39.54% 100.00%
December 2019.................................. 14.15% 0.00% 0.00% 39.54% 100.00%
January 2020................................... 13.67% 0.00% 0.00% 39.54% 100.00%
February 2020.................................. 13.20% 0.00% 0.00% 39.54% 100.00%
March 2020..................................... 12.16% 0.00% 0.00% 39.54% 100.00%
April 2020..................................... 11.41% 0.00% 0.00% 39.54% 100.00%
May 2020....................................... 11.03% 0.00% 0.00% 39.54% 100.00%
June 2020...................................... 10.81% 0.00% 0.00% 39.54% 100.00%
July 2020...................................... 10.54% 0.00% 0.00% 39.54% 100.00%
August 2020.................................... 10.28% 0.00% 0.00% 39.54% 100.00%
September 2020................................. 10.04% 0.00% 0.00% 39.54% 100.00%
October 2020................................... 9.68% 0.00% 0.00% 39.54% 100.00%
November 2020.................................. 9.27% 0.00% 0.00% 39.54% 100.00%
December 2020.................................. 7.14% 0.00% 0.00% 39.54% 100.00%
January 2021................................... 6.50% 0.00% 0.00% 39.54% 100.00%
February 2021.................................. 5.84% 0.00% 0.00% 39.54% 100.00%
March 2021..................................... 5.18% 0.00% 0.00% 39.54% 100.00%
April 2021..................................... 4.60% 0.00% 0.00% 39.54% 100.00%
May 2021....................................... 4.01% 0.00% 0.00% 39.54% 100.00%
June 2021...................................... 3.43% 0.00% 0.00% 39.54% 100.00%
</TABLE>
<PAGE> 220
<TABLE>
<CAPTION>
PAYMENT DATE CLASS CLASS CLASS CLASS CLASS
OCCURRING IN A-1 A-2 B C D
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
July 2021...................................... 2.83% 0.00% 0.00% 39.54% 100.00%
August 2021.................................... 2.32% 0.00% 0.00% 39.54% 100.00%
September 2021................................. 1.16% 0.00% 0.00% 39.54% 100.00%
October 2021................................... 0.66% 0.00% 0.00% 39.54% 100.00%
November 2021.................................. 0.16% 0.00% 0.00% 39.54% 100.00%
December 2021.................................. 0.00% 0.00% 0.00% 39.54% 100.00%
January 2022................................... 0.00% 0.00% 0.00% 36.50% 100.00%
February 2022.................................. 0.00% 0.00% 0.00% 34.79% 100.00%
March 2022..................................... 0.00% 0.00% 0.00% 33.09% 100.00%
April 2022..................................... 0.00% 0.00% 0.00% 27.48% 100.00%
May 2022....................................... 0.00% 0.00% 0.00% 21.95% 100.00%
June 2022...................................... 0.00% 0.00% 0.00% 15.83% 100.00%
July 2022...................................... 0.00% 0.00% 0.00% 4.37% 100.00%
August 2022.................................... 0.00% 0.00% 0.00% 0.00% 100.00%
September 2022................................. 0.00% 0.00% 0.00% 0.00% 100.00%
October 2022................................... 0.00% 0.00% 0.00% 0.00% 100.00%
November 2022.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
December 2022.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
January 2023................................... 0.00% 0.00% 0.00% 0.00% 100.00%
February 2023.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
March 2023..................................... 0.00% 0.00% 0.00% 0.00% 100.00%
April 2023..................................... 0.00% 0.00% 0.00% 0.00% 100.00%
May 2023....................................... 0.00% 0.00% 0.00% 0.00% 100.00%
June 2023...................................... 0.00% 0.00% 0.00% 0.00% 100.00%
July 2023...................................... 0.00% 0.00% 0.00% 0.00% 100.00%
August 2023.................................... 0.00% 0.00% 0.00% 0.00% 100.00%
September 2023................................. 0.00% 0.00% 0.00% 0.00% 100.00%
October 2023................................... 0.00% 0.00% 0.00% 0.00% 100.00%
November 2023.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
December 2023.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
January 2024................................... 0.00% 0.00% 0.00% 0.00% 100.00%
February 2024.................................. 0.00% 0.00% 0.00% 0.00% 100.00%
March 2024..................................... 0.00% 0.00% 0.00% 0.00% 100.00%
April 2024..................................... 0.00% 0.00% 0.00% 0.00% 100.00%
May 2024....................................... 0.00% 0.00% 0.00% 0.00% 100.00%
</TABLE>
<PAGE> 221
APPENDIX 8
ASSUMED PRINCIPAL PAYMENTS ON CLASS C AND CLASS D
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
Closing
June 1999.................................................. 0 0
July 1999.................................................. 0 0
August 1999................................................ 0 0
September 1999............................................. 0 0
October 1999............................................... 0 0
November 1999.............................................. 0 0
December 1999.............................................. 0 0
January 2000............................................... 0 0
February 2000.............................................. 0 0
March 2000................................................. 0 0
April 2000................................................. 0 0
May 2000................................................... 0 0
June 2000.................................................. 0 0
July 2000.................................................. 0 0
August 2000................................................ 0 0
September 2000............................................. 0 0
October 2000............................................... 0 0
November 2000.............................................. 0 0
December 2000.............................................. 0 0
January 2001............................................... 0 0
February 2001.............................................. 0 0
March 2001................................................. 0 0
April 2001................................................. 0 0
May 2001................................................... 0 0
June 2001.................................................. 0 0
July 2001.................................................. 0 0
August 2001................................................ 0 0
September 2001............................................. 0 0
October 2001............................................... 0 0
November 2001.............................................. 0 0
December 2001.............................................. 0 0
January 2002............................................... 0 0
February 2002.............................................. 0 0
March 2002................................................. 0 0
</TABLE>
<PAGE> 222
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
April 2002................................................. 0 0
May 2002................................................... 2,314,158 0
June 2002.................................................. 3,183,373 141,542
July 2002.................................................. 2,333,659 197,471
August 2002................................................ 779,909 0
September 2002............................................. 1,842,107 396,710
October 2002............................................... 0 434,998
November 2002.............................................. 1,660,260 551,602
December 2002.............................................. 1,587,764 315,684
January 2003............................................... 412,838 198,767
February 2003.............................................. 878,473 199,356
March 2003................................................. 2,035,570 315,946
April 2003................................................. 2,256,313 200,158
May 2003................................................... 1,552,802 315,990
June 2003.................................................. 1,774,973 200,961
July 2003.................................................. 1,765,860 201,554
August 2003................................................ 2,897,637 316,241
September 2003............................................. 2,425,911 202,358
October 2003............................................... 0 202,952
November 2003.............................................. 0 203,549
December 2003.............................................. 1,566,814 316,693
January 2004............................................... 0 204,355
February 2004.............................................. 0 204,954
March 2004................................................. 0 205,553
April 2004................................................. 0 317,138
May 2004................................................... 0 95,772
June 2004.................................................. 0 207,359
July 2004.................................................. 0 207,964
August 2004................................................ 0 317,971
September 2004............................................. 500,466 208,777
October 2004............................................... 489,326 317,988
November 2004.............................................. 380,311 209,591
December 2004.............................................. 380,296 210,199
January 2005............................................... 165,484 210,808
February 2005.............................................. 3,162,902 211,419
March 2005................................................. 0 212,030
April 2005................................................. 0 212,643
May 2005................................................... 0 213,257
</TABLE>
<PAGE> 223
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
June 2005.................................................. 0 213,872
July 2005.................................................. 277,709 214,488
August 2005................................................ 899,125 215,106
September 2005............................................. 374,302 215,724
October 2005............................................... 166,817 216,344
November 2005.............................................. 0 216,966
December 2005.............................................. 338,457 217,588
January 2006............................................... 376,589 218,211
February 2006.............................................. 274,487 218,836
March 2006................................................. 275,272 117,831
April 2006................................................. 0 220,510
May 2006................................................... 0 221,140
June 2006.................................................. 228,351 221,771
July 2006.................................................. 480,856 222,403
August 2006................................................ 678,983 223,036
September 2006............................................. 0 124,582
October 2006............................................... 0 224,734
November 2006.............................................. 0 225,372
December 2006.............................................. 0 226,012
January 2007............................................... 0 129,284
February 2007.............................................. 0 227,727
March 2007................................................. 0 228,372
April 2007................................................. 0 132,951
May 2007................................................... 0 230,101
June 2007.................................................. 0 135,559
July 2007.................................................. 0 430,763
August 2007................................................ 0 892,775
September 2007............................................. 0 979,300
October 2007............................................... 0 1,281,379
November 2007.............................................. 0 957,922
December 2007.............................................. 0 1,552,944
January 2008............................................... 0 773,243
February 2008.............................................. 0 1,187,293
March 2008................................................. 0 1,220,619
April 2008................................................. 0 1,372,156
May 2008................................................... 0 1,313,966
June 2008.................................................. 0 1,072,357
July 2008.................................................. 0 933,603
</TABLE>
<PAGE> 224
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
August 2008................................................ 0 1,257,896
September 2008............................................. 0 598,142
October 2008............................................... 0 377,948
November 2008.............................................. 0 648,968
December 2008.............................................. 0 692,539
January 2009............................................... 0 1,622,844
February 2009.............................................. 0 982,210
March 2009................................................. 0 661,052
April 2009................................................. 0 286,000
May 2009................................................... 428,746 200,962
June 2009.................................................. 695,366 148,541
July 2009.................................................. 608,762 444,993
August 2009................................................ 773,658 347,247
September 2009............................................. 604,131 156,452
October 2009............................................... 1,426,486 65,150
November 2009.............................................. 677,601 141,372
December 2009.............................................. 674,755 106,860
January 2010............................................... 612,852 0
February 2010.............................................. 808,581 1,396,026
March 2010................................................. 723,621 2,757,033
April 2010................................................. 650,893 0
May 2010................................................... 568,885 0
June 2010.................................................. 497,584 223,873
July 2010.................................................. 568,643 1,591,769
August 2010................................................ 0 0
September 2010............................................. 0 0
October 2010............................................... 1,747,027 0
November 2010.............................................. 1,395,966 0
December 2010.............................................. 1,508,463 0
January 2011............................................... 1,059,179 0
February 2011.............................................. 1,640,323 0
March 2011................................................. 605,405 0
April 2011................................................. 586,023 0
May 2011................................................... 459,949 321,523
June 2011.................................................. 379,387 419,975
July 2011.................................................. 418,217 0
August 2011................................................ 411,499 888,801
September 2011............................................. 589,484 0
</TABLE>
<PAGE> 225
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
October 2011............................................... 448,843 315,115
November 2011.............................................. 376,184 134,272
December 2011.............................................. 633,162 0
January 2012............................................... 329,711 0
February 2012.............................................. 410,471 0
March 2012................................................. 627,841 510,827
April 2012................................................. 438,993 0
May 2012................................................... 1,354,206 0
June 2012.................................................. 337,858 0
July 2012.................................................. 1,113,842 0
August 2012................................................ 532,103 0
September 2012............................................. 350,932 0
October 2012............................................... 537,462 0
November 2012.............................................. 807,685 0
December 2012.............................................. 427,088 0
January 2013............................................... 1,517,346 0
February 2013.............................................. 744,195 0
March 2013................................................. 789,559 0
April 2013................................................. 462,728 0
May 2013................................................... 383,698 0
June 2013.................................................. 428,171 0
July 2013.................................................. 715,698 0
August 2013................................................ 1,065,164 0
September 2013............................................. 298,291 0
October 2013............................................... 642,766 0
November 2013.............................................. 379,363 0
December 2013.............................................. 332,834 0
January 2014............................................... 249,639 0
February 2014.............................................. 387,036 131,749
March 2014................................................. 324,777 134,239
April 2014................................................. 264,491 0
May 2014................................................... 434,840 517,907
June 2014.................................................. 0 0
July 2014.................................................. 1,283,149 0
August 2014................................................ 0 0
September 2014............................................. 0 0
October 2014............................................... 202,627 0
November 2014.............................................. 237,395 0
</TABLE>
<PAGE> 226
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
December 2014.............................................. 381,409 0
January 2015............................................... 328,898 0
February 2015.............................................. 301,937 0
March 2015................................................. 491,766 0
April 2015................................................. 0 0
May 2015................................................... 0 0
June 2015.................................................. 0 0
July 2015.................................................. 0 0
August 2015................................................ 0 0
September 2015............................................. 0 0
October 2015............................................... 0 0
November 2015.............................................. 0 0
December 2015.............................................. 0 0
January 2016............................................... 0 0
February 2016.............................................. 0 0
March 2016................................................. 0 0
April 2016................................................. 0 0
May 2016................................................... 9,128,805 0
June 2016.................................................. 6,238,472 0
July 2016.................................................. 7,418,920 1,224,534
August 2016................................................ 0 16,986,033
September 2016............................................. 0 0
October 2016............................................... 0 0
November 2016.............................................. 0 0
December 2016.............................................. 0 0
January 2017............................................... 0 0
February 2017.............................................. 0 0
March 2017................................................. 0 0
April 2017................................................. 0 0
May 2017................................................... 0 0
June 2017.................................................. 0 0
July 2017.................................................. 0 0
August 2017................................................ 0 0
September 2017............................................. 0 0
October 2017............................................... 0 0
November 2017.............................................. 0 0
December 2017.............................................. 0 0
January 2018............................................... 0 0
</TABLE>
<PAGE> 227
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
February 2018.............................................. 0 0
March 2018................................................. 0 0
April 2018................................................. 0 0
May 2018................................................... 0 0
June 2018.................................................. 0 0
July 2018.................................................. 0 0
August 2018................................................ 0 0
September 2018............................................. 0 0
October 2018............................................... 0 0
November 2018.............................................. 0 0
December 2018.............................................. 0 0
January 2019............................................... 0 0
February 2019.............................................. 0 0
March 2019................................................. 0 0
April 2019................................................. 0 0
May 2019................................................... 0 0
June 2019.................................................. 0 0
July 2019.................................................. 0 0
August 2019................................................ 0 0
September 2019............................................. 0 0
October 2019............................................... 0 0
November 2019.............................................. 0 0
December 2019.............................................. 0 0
January 2020............................................... 0 0
February 2020.............................................. 0 0
March 2020................................................. 0 0
April 2020................................................. 0 0
May 2020................................................... 0 0
June 2020.................................................. 0 0
July 2020.................................................. 0 0
August 2020................................................ 0 0
September 2020............................................. 0 0
October 2020............................................... 0 0
November 2020.............................................. 0 0
December 2020.............................................. 0 0
January 2021............................................... 0 0
February 2021.............................................. 0 0
March 2021................................................. 0 0
</TABLE>
<PAGE> 228
<TABLE>
<CAPTION>
ASSUMED ASSUMED
PAYMENT DATE CLASS C CLASS D
OCCURRING IN PRINCIPAL PAYMENT PRINCIPAL PAYMENT
- ------------ ----------------- -----------------
<S> <C> <C>
April 2021................................................. 0 0
May 2021................................................... 0 0
June 2021.................................................. 0 0
July 2021.................................................. 0 0
August 2021................................................ 0 0
September 2021............................................. 0 0
October 2021............................................... 0 0
November 2021.............................................. 0 0
December 2021.............................................. 0 0
January 2022............................................... 0 0
February 2022.............................................. 0 0
March 2022................................................. 0 0
April 2022................................................. 0 0
May 2022................................................... 0 0
June 2022.................................................. 0 0
July 2022.................................................. 0 0
August 2022................................................ 0 0
September 2022............................................. 0 0
October 2022............................................... 0 0
November 2022.............................................. 0 0
December 2022.............................................. 0 0
January 2023............................................... 0 0
February 2023.............................................. 0 0
March 2023................................................. 0 0
April 2023................................................. 0 0
May 2023................................................... 0 0
June 2023.................................................. 0 0
July 2023.................................................. 0 0
August 2023................................................ 0 0
September 2023............................................. 0 0
October 2023............................................... 0 0
November 2023.............................................. 0 0
December 2023.............................................. 0 0
January 2024............................................... 0 0
February 2024.............................................. 0 0
March 2024................................................. 0 0
April 2024................................................. 0 0
May 2024................................................... 0 0
</TABLE>
<PAGE> 229
APPENDIX 9
[LOGO] AIRCRAFT
INFORMATION
SERVICES, INC.
31 December 1998
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Subject: Half Life and Adjusted Base Value Appraisal for Fleet of 36 Aircraft
The Aircraft Finance Trust ("AFT") Portfolio
AISI File number: A9S006BVO
Ref: Data packages -- 08/09 October 1998, 26 October 1998
Ladies and Gentlemen:
In response to your request, Aircraft Information Services, Inc. (AISI) is
pleased to provide our opinion of the half life and adjusted base values of the
Aircraft Finance Trust ("AFT") Portfolio (36 Aircraft) as identified in Table I
and as described in the above referenced data package.
1. METHODOLOGY AND DEFINITIONS
The standard terms of reference for commercial aircraft value are
'half-life base market value' and 'half-life current market value' of an
'average' aircraft. Base value is a theoretical value that assumes a balanced
market while current market value is the value in the real market; both assume a
hypothetical average aircraft condition. AISI value definitions are consistent
with the current definitions of the International Society of Transport Aircraft
Trading (ISTAT), those of 01 January 1994. AISI is a member of that organization
and employs an ISTAT Certified and Senior Certified Aircraft Appraiser.
AISI defines a 'base value' as that of a transaction between equally
willing and informed buyer and seller, neither under compulsion to buy or sell,
for a single unit cash transaction with no hidden value or liability, and with
supply and demand of the sale item roughly in balance. Base values are typically
given for aircraft in 'new' condition, 'average half-life' condition, or in a
specifically described condition unique to a single aircraft at a specific time.
An 'average' aircraft is an operable airworthy aircraft in average physical
condition and with average accumulated flight hours and cycles, with clear title
and standard unrestricted certificate of airworthiness, and registered in an
authority which does not represent a penalty to aircraft value or liquidity,
with no damage history and with inventory configuration and level of
modification which is normal for its intended use and age. AISI assumes average
condition unless otherwise specified in this report. 'Half-life' condition
assumes that every component or maintenance service which has a prescribed
interval that determines its service life, overhaul interval or interval between
maintenance services, is at a condition which is one-half of the total interval.
It should be noted that AISI and ISTAT value definitions apply to a transaction
involving a single aircraft, and that transactions involving more than one
aircraft are often executed at considerable and highly variable discounts to a
single aircraft price, for a variety of reasons relating to an individual buyer
or seller.
AISI defines a 'current market value', which is synonymous with the older
term 'fair market value' as that value which reflects the real market
conditions, whether at, above or below the base value conditions. Assumption of
a single unit sale and definitions of aircraft condition, buyer/seller
qualifications and type of
Headquarters, 26072 Merit Circle, Suite 123, Laguna Hills, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 E-MAIL: [email protected]
<PAGE> 230
31 December 1998
AISI File No. A9S006BVO
Page - 2 -
transaction remain unchanged from that of base value. Current market value takes
into consideration the status of the economy in which the aircraft is used, the
status of supply and demand for the particular aircraft type, the value of
recent transactions and the opinions of informed buyers and sellers. Current
market value assumes that there is no short term time constraint to buy or sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future value
considerations, or to consider how actual market values vary from theoretical
base values. Base values are less volatile than current market values and tend
to diminish regularly with time. Base values are normally inappropriate to
determine near term values. AISI encourages the use of current market values to
consider the probable near term value of an aircraft.
AISI determines an 'adjusted market value' by determining the value of
known deviations from half-life condition, which may be better or worse than
half-life condition, and to account for better or worse than average physical
condition, and the inclusion of additional equipment, or absence of standard
equipment.
2. VALUATION
No physical inspection of the Aircraft or their essential records was made
by AISI for the purposes of this report, nor has any attempt been made to verify
information provided to us, which is assumed to be correct and applicable to the
Aircraft.
Our opinion of the adjusted base value of the Aircraft is derived from
information and specifications supplied by GE Capital Aviation Services
("GECAS") (for 34 Aircraft) and UniCapital, Inc. ("UniCapital") (for 2
Aircraft). Adjustments are calculated in accordance with standard AISI methods.
Adjustments are calculated only where there is sufficient information to do so,
or where reasonable assumptions can be made. With regard to airframe
maintenance, if no time between check/overhaul (TBO) or time since
check/overhaul (TSO) information was provided, and if the total hours/cycles of
the airframe do not exceed the TBO limits then the total hours/cycles of the
airframe were assumed to be the TSO. This is typical of newer aircraft. If no
information was provided and if the TSO could not be calculated, then half life
was assumed.
With regard to the engines, on aircraft where all engines total cycles
equal the total cycles of the airframe, the engine's life limit TSOs and
overhaul TSOs are assumed to be the same as the total cycles of the airframe.
This is typical of newer aircraft. Where this assumption can not be made, the
engines are considered to be in half life condition.
All hours and cycle information provided for airframe, C Check, D Check,
gear and engines have been projected from the Aircraft specification sheet dates
to a common date based on a daily utilization factor calculated for each
aircraft.
The half life and adjusted base values of the AFT portfolio are presented
in Table I subject to the assumptions, definitions, and disclaimers herein.
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft.
AISI has no past, present, or anticipated future interest in the subject
aircraft. The conclusions and opinions expressed in this report are based on
published information, information provided by others, reasonable
interpretations and calculations thereof and are given in good faith. Such
conclusions and opinions are judgements that reflect conditions and values which
are current at the time of this report. The values and conditions reported upon
are subject to any subsequent change. AISI shall not be liable to
<PAGE> 231
31 December 1998
AISI File No. A9S006BVO
Page - 3 -
any party for damages arising out of reliance or alleged reliance on this
report, or for any parties action or failure to act as a result of reliance or
alleged reliance on this report.
Sincerely,
AIRCRAFT INFORMATION
SERVICES, INC.
/s/ JOHN D. MCNICOL
---------------------------------------------
John D. McNicol
Vice President
Appraisals &
<PAGE> 232
TABLE I -- AISI FILE A9S006BVO-A
DECEMBER 31, 1998
FLEET VALUATION -- THE AFT PORTFOLIO
<TABLE>
<CAPTION>
HALF LIFE ADJUSTED
BASE VALUE BASE VALUE
TYPE MSN DOM YOB ENGINE MTOW 1998 USDOLLARS 1998 USDOLLARS
- ---- ----- ------ ---- ----------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
A310-300...................... 448 Feb-88 1988 CF6-80C2A2 305,500 31,430,000 31,510,000
A320-200...................... 210 Jul-91 1991 CFM56-5A1 166,500 29,080,000 29,160,000
A320-200...................... 221 Sep-91 1991 CFM56-5A3 169,700 29,610,000 29,790,000
A320-200...................... 222 Oct-91 1991 CFM56-5A3 169,700 29,610,000 29,780,000
A320-200...................... 231 Sep-91 1991 CFM56-5A1 166,500 29,080,000 29,230,000
A320-200...................... 373 Jan-93 1993 V2500-A1 166,500 30,980,000 30,970,000
A320-200...................... 737 Sep-97 1997 CFM56-5B4 169,700 41,610,000 43,190,000
A320-200...................... 749 Sep-97 1997 CFM56-5B4 169,700 41,810,000 43,350,000
B737-300...................... 28333 Aug-96 1996 CFM56-3C1 135,000 33,090,000 33,970,000
B737-300...................... 28548 Dec-97 1997 CFM56-3C1 130,000 35,520,000 37,240,000
B737-300...................... 28554 Dec-96 1996 CFM56-3C1 139,500 33,270,000 34,290,000
B737-300...................... 28557 Mar-97 1997 CFM56-3C1 139,500 35,900,000 37,050,000
B737-300...................... 28558 Apr-97 1997 CFM56-3C1 139,500 35,900,000 36,990,000
B737-300...................... 28559 May-97 1997 CFM56-3C1 138,500 35,860,000 37,210,000
B737-300...................... 28561 Jun-97 1997 CFM56-3C1 135,000 35,720,000 36,430,000
B737-300...................... 28562 Jul-97 1997 CFM56-3C1 135,000 35,720,000 36,460,000
B737-300...................... 28563 Aug-97 1997 CFM56-3C1 135,000 35,720,000 37,300,000
B737-300...................... 28564 Nov-97 1997 CFM56-3C1 135,000 35,720,000 37,300,000
B737-300...................... 28740 Jun-98 1998 CFM56-3C1 139,500 37,300,000 39,300,000
B737-400...................... 25663 Nov-92 1992 CFM56-3C1 138,500 27,400,000 27,230,000
B737-400...................... 25664 Nov-92 1992 CFM56-3C1 138,500 27,400,000 26,910,000
B737-400...................... 28489 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,740,000
B737-400...................... 28490 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,630,000
B737-400...................... 28491 Nov-96 1996 CFM56-3C1 150,000 35,930,000 36,680,000
B767-200ER.................... 23805 Jul-87 1987 CF6-80C2B2 335,000 43,100,000 43,100,000
B767-200ER.................... 23806 Aug-87 1987 CF6-80C2B2 335,000 43,100,000 43,100,000
B767-300ER.................... 25221 Aug-91 1991 CF680C2B6F 407,000 66,750,000 67,310,000
B767-300ER.................... 25403 Jan-92 1992 PW4060 407,000 70,620,000 70,440,000
B767-300ER.................... 29617 Mar-99 1999 CF6-80C2B7F 412,000 92,200,000 95,950,000
B767-300ER.................... 30008 May-99 1999 CF6-80C2B7F 412,000 92,200,000 95,950,000
DC-10-30...................... 46584 Feb-80 1980 CF6-50C2 572,000 17,760,000 17,670,000
DC-10-30...................... 48292 Feb-82 1982 CF6-50C2 580,000 20,090,000 20,120,000
MD83.......................... 49398 Nov-86 1986 JT8D-219 160,000 20,190,000 20,640,000
MD83.......................... 49791 Sep-89 1989 JT8D-219 160,000 22,700,000 22,250,000
MD83.......................... 53198 Apr-91 1991 JT8D-219 160,000 24,240,000 23,830,000
MD83.......................... 53199 Mar-92 1992 JT8D-219 160,000 25,100,000 24,830,000
-------------- --------------
Total......................... $1,353,570,000 $1,379,900,000
============== ==============
</TABLE>
<PAGE> 233
BK ASSOCIATES, INC.
1295 NORTHERN BOULEVARD
MANHASSET, NEW YORK 11030
(516) 365-6272 - FAX (516) 365-6287
December 31, 1998
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, DE 19890
Gentlemen:
In response to your request, BK Associates, Inc. is pleased to provide this
opinion of the current Base Value on each of 36 aircraft, the Aircraft Finance
Trust (AFT) Portfolio (Aircraft). The Aircraft are further identified in the
attached Figure 1 by type, serial number, year of manufacture and engine model.
Set forth below is a summary of the methodology, considerations and
assumptions utilized in this appraisal.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's
(ISTAT) definition of FMV, to which BK Associates subscribes, the quoted FMV is
the Appraiser's opinion of the most likely trading price that may be generated
for an aircraft under the market circumstances that are perceived to exist at
the time in question. The FMV assumes that the aircraft is valued for its
highest and best use, that the parties to the hypothetical sale transaction are
willing, able, prudent and knowledgeable, and under no unusual pressure for a
prompt sale, and that the transaction would be negotiated in an open and
unrestricted market on an arm's length basis, for cash or equivalent
consideration, and given an adequate amount of time for effective exposure to
prospective buyers, which BK Associates considers to be 12 to 18 months.
BASE VALUE
Base value is the Appraiser's opinion of the underlying economic value of
an aircraft in an open, unrestricted, stable market environment with a
reasonable balance of supply and demand, and assumes full consideration of its
"highest and best use". An aircraft's base value is founded in the historical
trend of values and in the projection of future value trends and presumes an
arm's length, cash transaction between willing, able and knowledgeable parties,
acting prudently, with an absence of duress and with a reasonable period of time
available for marketing.
VALUE METHODOLOGY
As the definition suggests, Base Value is determined from historic and
future value trends and is not influenced by current market conditions. It is
often determined as a function of the original cost of the aircraft, technical
characteristics of competing aircraft, and development of new models. BK
Associates has determined from analysis of historic data, a relationship between
aircraft age and its value as a percentage of original value for the average
aircraft. These data form the basis for base value and forecast value
determinations but must be adjusted to reflect the value of engine and gross
weight options and other features of the aircraft. Our maintenance adjusted base
values include appropriate financial adjustments based on our interpretation of
the maintenance status data which General Electric Capital Aviation
<PAGE> 234
Aircraft Finance Trust
December 31, 1998
Page 2
Services (GECAS) provided, except for Aircraft Serial Numbers 25221 and 373 for
which UniCapital, Inc. (UniCapital) provided maintenance status data.
LIMITING CONDITIONS AND ASSUMPTIONS
BK has neither inspected the Aircraft nor their maintenance records but
relied upon information supplied by GECAS and UniCapital and from BK's own
database. In determining the base value of an aircraft, the following
assumptions apply to the aircraft:
1. When adequate maintenance status data was not available, we considered
the aircraft has half-time remaining to its next major overhauls or
scheduled shop visit on its airframe, engines, landing gear and
auxiliary power unit.
2. The aircraft is in compliance under a Federal Aviation Administration
approved airline maintenance program, with all airworthiness directives,
mandatory modifications and applicable service bulletins currently up to
industry standard.
3. The interior of the aircraft is in a standard configuration for its
specific type, with the buyer furnished equipment and options of the
types and models generally accepted and utilized in the industry.
4. The aircraft is in current flight operations.
5. The aircraft is sold for cash without seller financing.
6. The Aircraft is in average or better condition.
7. There is no accident damage.
CONCLUSIONS
Based on the above methodology, considerations and assumptions, it is our
opinion that the current base value and the current maintenance adjusted base
value of each aircraft as of today is as shown in Figure 1 attached hereto.
<PAGE> 235
Aircraft Finance Trust
December 31, 1998
Page 3
BK Associates, Inc. has no present or contemplated future interest in the
Aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation and the time and budget constraints imposed by the client. It is
not given as a recommendation, or as an inducement, for any financial
transaction and further, BK Associates, Inc. assumes no responsibility or legal
liability for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this appraisal, the
addressee agrees that BK Associates, Inc. shall bear no such responsibility or
legal liability. This appraisal is prepared for the use of the addressee and
shall not be provided to other parties without the express consent of the
addressee.
Sincerely yours,
BK ASSOCIATES, INC.
/s/ R.L. BRITTON
-----------------------------------------
R.L. Britton
Vice President
ISTAT Certified Appraiser
RLB/kf
Attachment
<PAGE> 236
FIGURE 1
AFT PORTFOLIO CURRENT BASE VALUES
<TABLE>
<CAPTION>
BASE VALUE
1/2 TIME MTC ADJ'D
AIRCRAFT SERIAL --------------------
ITEM TYPE NUMBER YEAR ENGINE ($ MIL) ($ MIL)
- ---- ---------- ------ ------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
1............................. A310-300 448 Feb-88 CF6-80C2A2 37.45 37.63
2............................. A320-200 210 Jul-91 CFM56-5A1 27.40 27.45
3............................. A320-200 221 Sep-91 CFM56-5A3 29.40 29.40
4............................. A320-200 222 Oct-91 CFM56-5A3 29.40 29.40
5............................. A320-200 231 Sep-91 CFM56-5A1 27.40 27.40
6............................. A320-200 737 Sep-97 CFM56-5B4 37.20 37.99
7............................. A320-200 749 Sep-97 CFM56-5B4 37.20 37.64
8............................. A320-200 373 Jan-93 V2500-A1 30.20 30.17
9............................. B737-300 28559 May-97 CFM56-3C1 34.00 34.23
10............................ B737-300 28554 Dec-96 CFM56-3C1 32.75 33.24
11............................ B737-300 28557 Mar-97 CFM56-3C1 34.00 34.64
12............................ B737-300 28558 Apr-97 CFM56-3C1 34.00 34.63
13............................ B737-300 28561 Jun-97 CFM56-3C1 34.00 34.48
14............................ B737-300 28562 Jul-97 CFM56-3C1 34.00 34.54
15............................ B737-300 28563 Aug-97 CFM56-3C1 34.00 34.57
16............................ B737-300 28564 Nov-97 CFM56-3C1 34.00 34.84
17............................ B737-300 28740 Jun-98 CFM56-3C1 35.25 36.35
18............................ B737-300 28548 Dec-97 CFM56-3C1 34.00 34.78
19............................ B737-300 28333 Aug-96 CFM56-3C1 32.75 33.08
20............................ B737-400 28489 Nov-96 CFM56-3C1 33.60 34.10
21............................ B737-400 28490 Nov-96 CFM56-3C1 33.60 34.01
22............................ B737-400 28491 Nov-96 CFM56-3C1 33.60 34.03
23............................ B737-400 25663 Nov-92 CFM56-3C1 27.70 27.34
24............................ B737-400 25664 Nov-92 CFM56-3C1 27.70 27.36
25............................ B767-200ER 23805 Jul-87 CF6-80C2-B2 32.85 31.65
26............................ B767-200ER 23806 Aug-87 CF6-80C2-B2 32.85 31.65
27............................ B767-300ER 29617 Mar-99 CF6-80C2B7F 83.30 85.84
28............................ B767-300ER 25403 Jan-92 PW4060 63.70 63.49
29............................ B767-300ER 30008 May-99 CF6-80C2B7F 83.30 85.84
30............................ B767-300ER 25221 Aug-91 CF6-80C2B6F 60.55 60.37
31............................ MD83 53199 Mar-92 JT8D-219 26.00 26.00
32............................ MD83 49398 Nov-86 JT8D-219 17.75 18.41
33............................ MD83 49791 Sep-89 JT8D-219 21.65 21.65
34............................ MD83 53198 Apr-91 JT8D-219 24.70 24.70
35............................ DC10-30 48292 Feb-82 CF6-50C2 24.30 24.30
36............................ DC10-30 46584 Feb-80 CF6-50C2 21.40 21.40
TOTAL....... 1276.95 1288.60
</TABLE>
<PAGE> 237
MORTEN BEYER & AGNEW
-------------------------
AVIATION CONSULTING FIRM
APPRAISAL OF 36 AIRCRAFT
VALUES AS OF DECEMBER 31, 1998
PREPARED FOR:
Aircraft Finance Trust (AFT)
MARCH 25, 1999
<TABLE>
<S> <C>
Washington, D.C. London
8180 Greensboro Drive Lahinch 62, Lashmere
Suite 1000 Copthorne
McLean, Virginia 22102 West Sussex
Phone +703 847 6598 Phone +44 1342 716248
Fax +703 847 1911 Fax +44 1342 718967
</TABLE>
<PAGE> 238
I. INTRODUCTION AND EXECUTIVE SUMMARY
Morten Beyer and Agnew, Inc. (MBA), has been retained by Aircraft Finance
Trust (AFT) to determine the Current Base Values (CBV) and future lease rates of
a portfolio consisting of the following passenger aircraft:
- (1) Airbus A310,
- (7) Airbus A320-200 aircraft,
- (11) Boeing B737-300s,
- (5) Boeing B737-400s,
- (2) Boeing B767-200ERs,
- (4) Boeing B767-300ERs,
- (2) DC10-30's and
- (4) MD83's
- TOTAL 36 AIRCRAFT
We have been asked to provide the future lease rates per year for 20
(incremental) years based on a five year operating lease for each increment. The
aircraft values of this portfolio are identified at the end of this section.
Base values are calculated as of December 31, 1998.
In performing this valuation we did not inspect the aircraft or their
historical maintenance documentation, but relied solely on information provided
to us by GE Capital Aviation Services (GECAS), with the exception of one
A320-200 (s/n 373) and one B767-300ER (s/n 25221) as that information was
provided by UniCapital, Inc. Their respective individual values, along with the
lease rates for each aircraft, are noted in Section IV.
MBA uses the definition of certain terms, such as CMV and Base Value (BV),
as promulgated by the International Society of Transport Aircraft Trading
(ISTAT), a non-profit association of management personnel from banks, leasing
companies, airlines, manufacturers, appraisers, brokers, and others who have a
vested interest in the commercial aviation industry.
ISTAT defines CMV as the appraiser's opinion of the most likely trading
price that may be generated for an aircraft under market conditions that are
perceived to exist at the time in question. Market Value (MV) assumes that the
aircraft is valued for its highest, best use; that the parties to the
hypothetical sale transaction are willing, able, prudent and knowledgeable and
under no unusual pressure for a prompt sale; and that the transaction would be
negotiated in an open and unrestricted market on an arm's-length basis, for cash
or equivalent consideration, and given an adequate amount of time for effective
exposure to prospective buyers.
The ISTAT definition of Base Value (BV) has, essentially, the same elements
of MV except that the market circumstances are assumed to be in a reasonable
state of equilibrium. Thus, BV pertains to an idealized aircraft and market
combination, but will not necessarily reflect the actual CMV of the aircraft in
<PAGE> 239
question. BV is founded in the historical trend of values and is generally used
to analyze historical values or to project future values.
<TABLE>
<CAPTION>
AIRCRAFT SERIAL DATE OF REGISTRATION
TYPE NUMBER MFG. NUMBER CBV
----------- ------ ------- ------------ -----
<S> <C> <C> <C> <C> <C>
1................................... A310-300 448 Feb-88 C-GYRA 35.18
2.................................. A320-200 210 Jul-91 C-GQCA 29.27
3.................................. A320-200 221 Sep-91 OY CNB 30.91
4.................................. A320-200 222 Oct-91 OY-CNC 30.98
5.................................. A320-200 231 Sep-91 C-FPWD 29.72
6.................................. A320-300 373 Oct-92 N304ML 33.03
5.................................. A320-200 737 Nov-97 F-GRSG 41.50
7.................................. A320-200 749 Sep-97 F-GRSH 41.19
9.................................. B-767-200ER 23805 Jul-87 PP-VNR 32.73
10.................................. B-767-200ER 23806 Jul-87 PP-VNS 32.72
11.................................. B-767-300ER 25221 Jul-91 G-BXOP 63.01
12.................................. B-767-300ER 25403 Jan-92 CC-CEU 66.50
13.................................. B-767-300ER 29617 Mar-99 G-OOAL 87.39
14.................................. B-767-300ER 30008 May-99 TBD 87.75
15.................................. B-737-400 25663 Nov-92 VT-JAP 27.34
16.................................. B-737-400 25664 Nov-92 VT-JAQ 27.12
17.................................. B-737-300 28333 Aug-96 OO-VEB 33.97
18.................................. B-737-400 28489 Nov-96 B-18671 34.43
19.................................. B-737-400 28490 Nov-96 B-18672 34.36
20.................................. B-737-400 28491 Nov-96 B-18673 34.37
21.................................. B-737-300 28548 Dec-97 G-OAMS 33.81
22.................................. B-737-300 28554 Dec-96 G-ECAS 32.38
23.................................. B-737-300 28557 Mar-97 G-SMDB 32.99
24.................................. B-737-300 28558 Apr-97 G-OJTW 33.11
25.................................. B-737-300 28559 May-97 PH-OZC 33.42
26.................................. B-737-300 28561 Jun-97 B-2978 33.77
27.................................. B-737-300 28562 Jul-97 B-2979 34.03
28.................................. B-737-300 28563 Aug-97 N306FL 33.84
29.................................. B-737-300 28564 Nov-97 PT-TEP 34.31
30.................................. B-737-300 28740 Jun-98 N1790B 33.74
31.................................. DC10-30 48292 Feb-82 N87070 21.20
32.................................. DC10-30 46584 Feb-80 N15069 19.03
33.................................. MD83 49398 Nov-86 EC-245 20.16
34.................................. MD83 49791 Oct-89 EC-GGV 22.36
35.................................. MD83 53198 Mar-91 SE-DLS 24.02
36.................................. MD83 53199 Mar-92 SE-DLU 23.79
</TABLE>
2
<PAGE> 240
II. AIRCRAFT
The specifications of the aircraft in this portfolio are as follows:
Organized by type of aircraft -- sample seating arrangements are provided
(although may not reflect the characteristics of each respective aircraft)
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ A310-300
Serial Number................................ 448
Registration................................. C-GYRA
Build Year................................... Feb-88
Engine Type.................................. CF6-80C2
Hours Since New.............................. 29494
Cycles Since New............................. 9560
Max Taxi Weight (lbs.)....................... 308,992
MGTOW (lbs.)................................. 306,999
MLW (lbs.)................................... 272,445
MZFW (lbs.).................................. 174,850
OEW (lbs.)................................... NG
Fuel Capacity (US gals.)..................... 107,516
Seating:
Coach........................................ 265
Galleys...................................... 3
Lavatories................................... 5
Aircraft Type................................ A320-200 A320-200 A320-200
Serial Number................................ 210 221 222
Registration................................. C-GQCA OY CNB OY-CNC
Build Year................................... Jul-91 Sep-91 Oct-91
Engine Type.................................. CFM56-5A1 CFM56-5A1 CFM56-5A3
Hours Since New.............................. 25219 19898 19557
Cycles Since New............................. 9278 10764 10456
Max Taxi Weight (lbs.)....................... 167,328 170,635 170,635
MGTOW (lbs.)................................. 166,446 169,753 169,753
MLW (lbs.)................................... 142,198 142,196 142,196
MZFW (lbs.).................................. 133,377 133,377 133,377
OEW (lbs.)................................... 97,162 95,972 91,629
Fuel Capacity (US gals.)..................... 41,473 41,473 41,473
Seating:
Coach........................................ 108 177 177
Business..................................... 24
Galleys...................................... 3 3 3
Lavatories................................... 3 3 3
</TABLE>
3
<PAGE> 241
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ A320-200 A320-200 A320-200
Serial Number................................ 231 373 737
Registration................................. C-FPWD N304ML F-GRSG
Build Year................................... Sep-91 Jan-93 Nov-97
Engine Type.................................. CFM56-5A1 V2500-A1 CFM56-5B4
Hours Since New.............................. 24744 11349 1860
Cycles Since New............................. 9048 6768 922
Max Taxi Weight (lbs.)....................... 167,328 167,329 170,767
MGTOW (lbs.)................................. 166,446 166,447 169,753
MLW (lbs.)................................... 142,198 142,197 141,093
MZFW (lbs.).................................. 133,377 133,378 134,480
OEW (lbs.)................................... 97,073 90,865 92,152
Fuel Capacity (US gals.)..................... 42,223 42,223 42,946
Seating:
Coach........................................ 108 138 156
Business..................................... 24 10 8
Galleys...................................... 3 2 2
Lavatories................................... 3 3 3
Aircraft Type................................ A320-200
Serial Number................................ 749
Registration................................. F-GRSG
Build Year................................... Nov-97
Engine Type.................................. CFM56-5B4
Hours Since New.............................. 14
Cycles Since New............................. 9
Max Taxi Weight (lbs.)....................... 171,573
MGTOW (lbs.)................................. 170,555
MLW (lbs.)................................... 141,760
MZFW (lbs.).................................. NG
OEW (lbs.)................................... NG
Fuel Capacity (US gals.)..................... 42,946
Seating:
Coach........................................ 156
Business..................................... 8
Galleys...................................... 2
Lavatories................................... 3
</TABLE>
4
<PAGE> 242
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ B737-300 B737-300 B737-300
Serial Number................................ 28333 28548 28554
Registration................................. OO-VEB G-OAMS G-ECAS
Build Year................................... Aug-96 Dec-97 Dec-96
Engine Type.................................. CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New.............................. 5236 2116 4108
Cycles Since New............................. 3824 1810 4388
Max Taxi Weight (lbs.)....................... 135,500 130,500 140,000
MGTOW (lbs.)................................. 135,000 130,000 139,500
MLW (lbs.)................................... 116,600 114,000 114,000
MZFW (lbs.).................................. 106,500 68,983 105,000
OEW (lbs.)................................... 70,760 NG 70,932
Fuel Capacity (US gals.)..................... 35,584 5,311(kg) 35,584
Seating:
Coach........................................ 149 148 148
Galleys...................................... 3 2 2
Lavatories................................... 2 3 3
Aircraft Type................................ B737-300 B737-300 B737-300
Serial Number................................ 28557 28558 28559
Registration................................. G-SMDB G-OJTW PH-OZC
Build Year................................... Mar-97 Apr-97 May-97
Engine Type.................................. CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New.............................. 2925 2997 4931
Cycles Since New............................. 3245 3386 1901
Max Taxi Weight (lbs.)....................... 140,000 140,000 139,000
MGTOW (lbs.)................................. 139,500 139,500 138,500
MLW (lbs.)................................... 114,000 114,000 114,000
MZFW (lbs.).................................. 105,000 105,000 105,000
OEW (lbs.)................................... 70,667 71,070 71,760
Fuel Capacity (US gals.)..................... 35,584 35,584 35,584
Seating:
Coach........................................ 148 148 148
Galleys...................................... 2 2 3
Lavatories................................... 3 3 3
</TABLE>
5
<PAGE> 243
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ B737-300 B737-300
Serial Number................................ 28561 28562
Registration................................. B-2978 B-2979
Build Year................................... Jun-97 Jul-97
Engine Type.................................. CFM56-3C1 CFM56-3C1
Hours Since New.............................. 455 175
Cycles Since New............................. 636 102
Max Taxi Weight (lbs.)....................... 135,500 135,500
MGTOW (lbs.)................................. 135,000 135,000
MLW (lbs.)................................... 114,000 114,000
MZFW (lbs.).................................. 105,000 105,000
OEW(lbs.).................................... 71,018 71,132
Fuel Capacity (US gals.)..................... 35,584 35,584
Seating:
Coach........................................ 148 148
Galleys...................................... 2 2
Lavatories................................... 3 3
Aircraft Type................................ B737-300 B737-300 B737-300
Serial Number................................ 28563 28564 28740
Registration................................. N306FL PT-TEP N1790B
Build Year................................... Aug-97 Nov-97 Jun-98
Engine Type.................................. CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New.............................. 3266 1882 880
Cycles Since New............................. 1377 1581 177
Max Taxi Weight (lbs.)....................... 135,500 135,500 140,000
MGTOW (lbs.)................................. 135,000 135,000 139,500
MLW (lbs.)................................... 114,000 116,000 116,600
MZFW (lbs.).................................. 105,000 106,500 109,600
OEW (lbs.)................................... 70,662 68,833 71,921
Fuel Capacity (US gals.)..................... 35,584 35,584 35,584
Seating:
Coach........................................ 136 148 88
Business..................................... 20
Galleys...................................... 4 2 3
Lavatories................................... 3 3 3
</TABLE>
6
<PAGE> 244
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ B737-400 B737-400
Serial Number................................ 25663 25664
Registration................................. VT-JAP VT-JAQ
Build Year................................... 11-92 11-92
Engine Type.................................. CFM56-3C1 CFM56-3C1
Hours Since New.............................. 13312 12989
Cycles Since New............................. 19413 19241
Max Taxi Weight (lbs.)....................... 138,991 138,997
MGTOW (lbs.)................................. 138,496 138,496
MLW (lbs.)................................... 120,996 120,996
MZFW (lbs.).................................. 112,996 112,996
OEW (lbs.)...................................
Fuel Capacity (US gals.)..................... 35,584 35,584
Seating:
Coach........................................ 112 112
Business..................................... 24 24
Galleys...................................... 3 3
Lavatories................................... 3 3
Aircraft Type................................ B737-400 B737-400 B737-400
Serial Number................................ 28489 28490 28491
Registration................................. B-18671 B-18672 B-18673
Build Year................................... 11-96 Nov-96 Nov-96
Engine Type.................................. CFM56-3C1 CFM56-3C1 CFM56-3C1
Hours Since New.............................. 4347 5405 5291
Cycles Since New............................. 4050 4795 4078
Max Taxi Weight (lbs.)....................... 150,500 150,500 150,500
MGTOW (lbs.)................................. 150,000 150,000 150,000
MLW (lbs.)................................... 124,000 124,000 124,000
MZFW (lbs.).................................. 117,000 117,000 117,000
OEW (lbs.)................................... 76,384 76,294 76,294
Fuel Capacity (US gals.)..................... 35,584 35,584 35,584
Seating:
Coach........................................ 138 138 138
Business..................................... 8 8 8
Galleys...................................... 3 3 3
Lavatories................................... 3 3 3
</TABLE>
7
<PAGE> 245
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ B767-200ER B767-200ER B767-300ER
Serial Number................................ 23805 23806 25221
Registration................................. PP-VNR PP-VNS B-BXOP
Build Year................................... Jul-87 Jul-87 Aug-91
Engine Type.................................. CF6-80C2-B2 CF6-80C2-B2 CF6-80C2-B6
Hours Since New.............................. 41019 40925 24056
Cycles Since New............................. 17664 17474 7348
Max Taxi Weight (lbs.)....................... 336,993 336,993 409,000
MGTOW (lbs.)................................. 334,993 334,993 407,000
MLW (lbs.)................................... 277,994 277,994 320,000
MZFW (lbs.).................................. 252,994 252,994 288,000
OEW (lbs.)................................... 182,319 182,319 189,100
Fuel Capacity (US gals.)..................... 137,015 137,015 172,000
Seating:
Coach........................................ 190 172 287
Business..................................... 18 18
Galleys...................................... 6 6 6
Lavatories................................... 6 6 6
Aircraft Type................................ B767-300ER B767-300ER B767-300ER
Serial Number................................ 25403 29617 30008
Registration................................. CC-CEU G-OOAL TBD
Build Year................................... Jan-92 Mar-99 May-99
Engine Type.................................. CF6-80C2-B2 CF6-80C2-B2 CF6-80C2-B2
Hours Since New.............................. 25067 N/A N/A
Cycles Since New............................. 6322 N/A N/A
Max Taxi Weight (lbs.)....................... 409,000 413,000 413,000
MGTOW (lbs.)................................. 407,000 412,000 412,000
MLW (lbs.)................................... 320,000 300,000 300,000
MZFW (lbs.).................................. 189,390 278,000 278,000
OEW (lbs.)................................... NG NG NG
Fuel Capacity (US gals.)..................... 171,394 24,184 24,184
Seating:
Coach........................................ 147 325 NG
Business..................................... 30
First........................................ 13
Galleys...................................... 7 5 5
Lavatories................................... 8 6 6
</TABLE>
8
<PAGE> 246
<TABLE>
<S> <C> <C> <C>
Aircraft Type................................ MD83 MD83 MD83
Serial Number................................ 49398 49791 53198
Registration................................. EC-245 EC-GGV SE-DLS
Build Year................................... Nov-86 Oct-89 Mar-91
Engine Type.................................. JT8D-219 JT8D-219 JT8D-219
Hours Since New.............................. 32396 24676 23598
Cycles Since New............................. 15638 11903 10483
Max Taxi Weight (lbs)........................ 161,000 161,000 161,000
MGTOW (lbs.)................................. 160,000 160,000 160,000
MLW (lbs.)................................... 139,500 139,500 139,500
MZFW (lbs.).................................. 122,000 122,000 122,000
OEW (lbs.)................................... NG NG NG
Fuel Capacity (US gals.)..................... 46,773 47,081 46,773
Seating:
Coach........................................ 170 170 170
Galleys...................................... 4 4 4
Lavatories................................... 3 3 3
Aircraft Type................................ MD83 DC10-30 DC10-30
Serial Number................................ 53199 48292 46584
Registration................................. SE-DLU N87070 N15069
Build Year................................... Mar-92 Feb-82 Feb-80
Engine Type.................................. JT8D-219 CF6-50C2 CF6-50C2
Hours Since New.............................. 19823 69453 74448
Cycles Since New............................. 7905 15034 16838
Max Taxi Weight (lbs.)....................... 161,000 583,000 575,000
MGTOW (lbs.)................................. 160,000 580,000 572,000
MLW (lbs.)................................... 139,500 411,000 411,000
MZFW (lbs.).................................. 122,000 NG NG
OEW (lbs.)................................... NG NG NG
Fuel Capacity (US gals.)..................... 46,773 251,400 251,400
Seating:
Coach........................................ 165 185 185
Business..................................... 44 44
Galleys...................................... 3 5 5
Lavatories................................... 3 8 8
</TABLE>
III. CURRENT MARKET CONDITIONS
GENERAL
The market for narrowbody used jet aircraft continues to be strong, with
offerings of all but the earlier models being generally snapped-up in short
order. The most recent count shows 122 older narrowbodies (DC-9, B-737-200,
B-727 aircraft) and 26 new models (A319/320/321, B-737-300/-400/-500/-600/-
700/-800, B-757 and MD-80) on the market. This represents about 2.4 percent of
the older types and 0.08 percent of the new types of aircraft currently
available For Sale or Lease. Orders for new models continue to be strong, with
258 new A-319/320/321's, and 189 B-737 NGs being ordered in the first six months
of 1998. Concerns over the Asian financial crisis do not extend to the
narrowbodied aircraft, and order curtailments apply to the widebodies only.
9
<PAGE> 247
The widebody sector is currently holding-up, despite the Asian traffic
downturn. All of the late model widebodies which have been made available by the
Asian-Pacific carriers have been placed. Some of the new aircraft on-order have
been deferred, and those aircraft displaced by the Far East slump, primarily
747-200s, are the ones showing-up on the For Sale/For Lease listings.
[PHOTO] Airbus A310
These are the truncated, longer range models of the A300 series. The
aircraft is now ending its production life, with no new orders coming and only
six outstanding. A total of 261 of all variants have been produced, and
following the chaotic market activity when Pan Am went under, the used market
has been small as few have been offered. FedEx purchased 34 used aircraft and
modified them to cargo, but this has been the only major conversion program. The
A310 has been particularly popular with European and Middle East/Asian carriers
where it has outsold its rival B-767-200.
[PHOTO] Airbus A320-200
Six hundred and forty-two A-320s have been built to date, and new
production is now averaging seven per month, along with ten more sister ships,
the A-319 and A-321. The backlog for the three types totals 841 aircraft. There
are currently 76 operators of one or more of the type. AIRFAX, a current listing
of aircraft for sale or lease shows only two A320's available. Both are brand
new deliveries being offered by ORIX. The market for the A320 is extremely
strong and any available aircraft will sell at or above Base Value.
[PHOTO] Boeing B-737-300
The B-737-300 was launched in 1981 as the Stage 3 successor in the B-737
line. With 18 more seats (three rows), higher gross weight and more range than
the -200, the -300 has become one of the most popular aircraft in the world. The
aircraft is only offered with the CFM56-3 series engines. Production of the -300
is slowing as more and more customers opt for the new -600/-700/-800/-900 series
of upgraded B-737's, which offer a combination of greater range and capacity,
along with more powerful engines.
[PHOTO] Boeing 767-200/ER
10
<PAGE> 248
The Boeing 767 family has been in production since 1982, and has gone
through several iterations and two stretches. Once ETOPS operations were
approved for this semi-widebody twin, it has continuously gained market share in
intercontinental markets. The ERs, or Extended Range models, have taken over
markets once the province of B-747 Combis, DC-10-30s and L-1011s. The standard
configuration is twin-aisle, seven-abreast seating, but European charter
operators squeeze in an eight-abreast configuration, greatly improving the ASM
economics of the aircraft. At seven abreast the aircraft is significantly less
efficient than the old tri-jets, or the B-757. The first of the B-767-200
passenger aircraft are beginning to move into cargo service, with All Nippon
selling its 25 to Airborne, who will operate them without adding a large cargo
door.
With a total of 667 B-767s of all models in passenger service, and UPS
operating 22 new B-767-300ERs in all-cargo configuration, the B-767 has won a
significant share of the market, and is considered to be the banker's favorite
for lease investments. Trying to hold all sectors of its market share, Boeing
agreed to build the -400 stretched version of the B-767 for Delta, but has yet
to win any other orders. The B-777 is the major competitor to the B-767.
[PHOTO] McDonnell Douglas MD-82/-83
The obvious concern with the MD-82/-83 series aircraft is the effect of
Boeing's decision to shut down the line. The only surviving Douglas product is
the renamed MD-95 (B-717). The MD-80 series had been replaced by the V-2500
powered MD-90, and at the end of 1997 there were only ten MD-80's still on
order, so the line was effectively closed anyway. MBA does not believe the
Boeing decision will have a material effect on the value of the MD-80's, which
is principally a function of the fleet size and efficiency of the aircraft. A
total of 1,167 MD-80's of all series will ultimately be built, with the high
gross MD-83 the last model of the series. The MD-82 and 83 have the same
configuration, except that the MGTOW of the -83 is 12,000 pounds greater, giving
it some 1,000 miles additional non-stop range -- a capability not often
utilized. The MD-80 series aircraft got a four-year head start on the B-737-300
entering service in 1980 as opposed to 1984, and gaining a lead of some 300
orders over the B-737. With a maximum of 172 seats, demand for used models has
always been strong, with offerings bought up quickly.
[PHOTO] McDonnell Douglas DC10-30
The DC-10-10 is rapidly being retired by its two major US operators,
American and United, but is being picked up by FedEx for conversion to cargo.
MBA has reduced its estimation of Base Value by 20 percent, and continues
an additional 25 percent reduction in Current Market Price to reflect market
softness. While the majors withdraw, Hawaiian
11
<PAGE> 249
Airlines is having good results with the ones it acquired from American for its
West Coast market. New charter operator OMNI joins Sun Jet in acquiring several.
In the last two to three years Continental and Northwest leased or bought
some 40 DC-10-30s on the open market to supplement their wide body capacity as
they retired B-747's and waited for new deliveries when they could afford them.
Gemini Air Cargo and AOM French Airlines have also been on the acquisition side,
but it now appears the strong demand is decreasing, and continued price erosion
is expected.
The DC-10-40 continues to be an orphan aircraft with only two operators,
JAL and NWA. JAL is planning to retire theirs in the near future. Future values
will depend on whether these aircraft are continued in service, or perhaps
converted for cargo or charter.
IV. VALUATION
In developing the valuations of these aircraft, MBA did not inspect the
aircraft or their respective historical maintenance documentation. Therefore, we
used certain assumptions that are generally accepted industry practice to
calculate the value of an aircraft when more detailed information is not
available. The principal assumptions are as follows (for each aircraft):
1. The aircraft is in good overall condition.
2. The overhaul status of the airframe, engines, landing gear and other
major components are the equivalent of mid-time/mid-life unless
otherwise specified.
3. The historical maintenance documentation has been maintained to
acceptable international standards.
4. The specifications of the aircraft are those most common for an aircraft
of its type and vintage.
5. The aircraft is in a standard airline configuration.
6. The aircraft is current as to all Airworthiness Directives and Service
Bulletins.
7. Its modification status is comparable to that most common for an
aircraft of its type and vintage.
8. Its utilization is comparable to industry averages.
9. There is no history of accident or incident damage.
10. No accounting was made for lease obligations or terms of ownership.
The aircraft subject to this appraisal were adjusted from our Base Value by
applying a 'newness factor' which accounts for month of delivery. Additional
adjustments were made to account for the current maintenance status of each
aircraft using the information provided by Lehman Brothers. The lease rates for
the next 20 years assume a five-year term in dollars per month.
12
<PAGE> 250
<TABLE>
<CAPTION>
AIR HOLLAND AIR MADAGASCAR AIR TOURS/PREIMAIR AIR TOURS/PREIMAIR AIR2000 ALITALIA
B737-300 B-767-300ER A320-200 A320-200 B-767-300ER B-767-300ER
28559 25403 221 222 29617 30008
5/1/97 1/15/92 9/1/91 10/1/91 3/15/99 5/1/99
PH-OZC CC-CEU OY CNB OY-CNC G-OOAL TBD
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base Value ($000,000)..... 31.47 62.67 29.92 29.92 86.85 86.85
Newness................... 0.62 0.00 0.95 1.07 0.54 0.90
Gross Wt ADJ.............. 0.83 3.66 0.46 0.46 0.00 0.00
Airframe Adjustment....... 0.22 0.08 0.53 0.48 0.00 0.00
Engine Adjustment......... 0.41 0.09 (0.83) (0.83) 0.00 0.00
Landing Gear.............. 0.00 0.00 0.00 0.00 0.00 0.00
TCAS...................... 0.00 0.00 0.00 0.00 0.00 0.00
Windshear................. (0.13) 0.00 (0.13) (0.13) 0.00 0.00
Total Adjustments......... 0.51 0.17 (0.42) (0.47) 0.00 0.00
Adjusted Base Value....... 33.42 66.50 30.91 30.98 87.39 87.75
- ------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of.... 07/31/98 09/30/98 07/31/98 07/31/98 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998................. 330,000 665,000 315,000 315,000 865,000 865,000
1999...................... 325,000 660,000 310,000 310,000 860,000 860,000
2000...................... 320,000 655,000 305,000 305,000 855,000 855,000
2001...................... 315,000 650,000 300,000 300,000 850,000 850,000
2002...................... 315,000 645,000 300,000 300,000 845,000 845,000
2003...................... 310,000 640,000 295,000 295,000 840,000 840,000
2004...................... 305,000 635,000 290,000 290,000 835,000 835,000
2005...................... 305,000 630,000 290,000 290,000 830,000 830,000
2006...................... 300,000 625,000 285,000 285,000 825,000 825,000
2007...................... 295,000 620,000 280,000 280,000 820,000 820,000
2008...................... 290,000 615,000 275,000 275,000 815,000 815,000
2009...................... 290,000 610,000 275,000 275,000 810,000 810,000
2010...................... 285,000 605,000 270,000 270,000 805,000 805,000
2011...................... 280,000 600,000 265,000 265,000 800,000 800,000
2012...................... 275,000 595,000 260,000 260,000 795,000 795,000
2013...................... 270,000 590,000 255,000 255,000 790,000 790,000
2014...................... 270,000 585,000 250,000 250,000 785,000 785,000
2015...................... 265,000 575,000 250,000 250,000 775,000 775,000
2016...................... 260,000 570,000 245,000 245,000 770,000 770,000
2017...................... 255,000 560,000 240,000 240,000 760,000 760,000
2018...................... 250,000 550,000 235,000 235,000 750,000 750,000
2019...................... 245,000 545,000 230,000 230,000 745,000 745,000
2020...................... 245,000 540,000 230,000 230,000 740,000 740,000
2021...................... 240,000 535,000 225,000 225,000 735,000 735,000
2022...................... 235,000 530,000 220,000 220,000 730,000 730,000
2023...................... 230,000 525,000 215,000 215,000 725,000 725,000
<CAPTION>
AMERICA WEST
B737-300
28740
6/24/98
N1790B
- -------------------------- ------------
<S> <C>
Base Value ($000,000)..... 33.32
Newness................... 0.41
Gross Wt ADJ.............. 0.00
Airframe Adjustment....... 0.00
Engine Adjustment......... 0.00
Landing Gear.............. 0.00
TCAS...................... 0.00
Windshear................. 0.00
Total Adjustments......... 0.00
Adjusted Base Value....... 33.74
- ----------------------------------------------------------
Maintenance Data as of.... 12/01/98
- -----------------------------------------------------------------------
Forecasted Lease Values
Year 1998................. 335,000
1999...................... 330,000
2000...................... 330,000
2001...................... 325,000
2002...................... 320,000
2003...................... 320,000
2004...................... 315,000
2005...................... 310,000
2006...................... 305,000
2007...................... 305,000
2008...................... 300,000
2009...................... 295,000
2010...................... 295,000
2011...................... 290,000
2012...................... 285,000
2013...................... 280,000
2014...................... 275,000
2015...................... 275,000
2016...................... 270,000
2017...................... 265,000
2018...................... 260,000
2019...................... 255,000
2020...................... 250,000
2021...................... 250,000
2022...................... 245,000
2023...................... 240,000
</TABLE>
13
<PAGE> 251
<TABLE>
<CAPTION>
BRITANNIA BRITISH AIRWAYS BRITISH MIDLAND BRITISH MIDLAND BRITISH MIDLAND CANADIAN
B-767-300ER B737-300 B737-300 B737-300 B737-300 A320-200
25221 28548 28554 28557 28558 210
7/1/91 12/10/97 12/1/96 3/1/97 4/1/97 7/1/91
G-BXOP G-OAMS G-ECAS G-SMDB G-OJTW C-GQCA
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base Value ($000,000).......... 59.59 31.47 29.73 31.47 31.47 29.92
Newness........................ 1.54 1.85 1.60 0.31 0.46 0.72
Gross Wt ADJ................... 1.18 0.30 0.89 0.89 0.89 0.26
Airframe Adjustment............ 0.65 0.32 0.28 0.30 0.30 (0.56)
Engine Adjustment.............. 0.00 0.00 0.01 0.15 0.12 (0.83)
Landing Gear................... 0.04 0.00 0.00 0.00 0.00 0.00
TCAS........................... 0.00 0.00 0.00 0.00 0.00 (0.13)
Windshear...................... 0.00 (0.13) (0.13) (0.13) (0.13) (0.13)
Total Adjustments.............. 0.70 0.20 0.17 0.32 0.29 (1.63)
Adjusted Base Value............ 63.01 33.81 32.38 32.99 33.11 29.27
- --------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of......... 01/15/99 01/08/99 07/31/98 07/31/98 07/31/98 07/31/98
- --------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998...................... 620,000 335,000 320,000 325,000 325,000 310,000
1999........................... 615,000 330,000 315,000 320,000 320,000 305,000
2000........................... 610,000 330,000 315,000 320,000 320,000 300,000
2001........................... 605,000 325,000 310,000 315,000 315,000 300,000
2002........................... 600,000 320,000 305,000 310,000 310,000 295,000
2003........................... 595,000 320,000 305,000 310,000 310,000 290,000
2004........................... 590,000 315,000 300,000 305,000 305,000 290,000
2005........................... 585,000 310,000 295,000 300,000 300,000 285,000
2006........................... 580,000 305,000 290,000 295,000 295,000 275,000
2007........................... 575,000 305,000 290,000 295,000 295,000 275,000
2008........................... 570,000 300,000 285,000 290,000 290,000 270,000
2009........................... 565,000 295,000 280,000 285,000 285,000 265,000
2010........................... 560,000 295,000 280,000 280,000 280,000 260,000
2011........................... 555,000 290,000 275,000 280,000 280,000 255,000
2012........................... 550,000 285,000 270,000 275,000 275,000 255,000
2013........................... 545,000 280,000 265,000 270,000 270,000 250,000
2014........................... 540,000 275,000 260,000 265,000 265,000 245,000
2015........................... 535,000 275,000 260,000 260,000 260,000 240,000
2016........................... 530,000 270,000 255,000 260,000 260,000 235,000
2017........................... 525,000 265,000 250,000 255,000 255,000 230,000
2018........................... 520,000 260,000 245,000 250,000 250,000 225,000
2019........................... 515,000 255,000 240,000 245,000 245,000 225,000
2020........................... 510,000 250,000 235,000 240,000 240,000 220,000
2021........................... 505,000 250,000 235,000 240,000 240,000 215,000
2022........................... 500,000 245,000 230,000 235,000 235,000 210,000
2023........................... 495,000 240,000 225,000 230,000 230,000 205,000
<CAPTION>
CANADIAN
A320-200
231
9/1/91
C-FPWD
- ------------------------------- ---------
<S> <C>
Base Value ($000,000).......... 29.92
Newness........................ 0.95
Gross Wt ADJ................... 0.26
Airframe Adjustment............ (0.39)
Engine Adjustment.............. (0.77)
Landing Gear................... 0.00
TCAS........................... (0.13)
Windshear...................... (0.13)
Total Adjustments.............. (1.41)
Adjusted Base Value............ 29.72
- ------------------------------------------------------------------------------------
Maintenance Data as of......... 07/31/98
- ----------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998...................... 315,000
1999........................... 310,000
2000........................... 305,000
2001........................... 300,000
2002........................... 300,000
2003........................... 295,000
2004........................... 290,000
2005........................... 290,000
2006........................... 285,000
2007........................... 280,000
2008........................... 275,000
2009........................... 275,000
2010........................... 270,000
2011........................... 265,000
2012........................... 260,000
2013........................... 255,000
2014........................... 250,000
2015........................... 250,000
2016........................... 245,000
2017........................... 240,000
2018........................... 235,000
2019........................... 230,000
2020........................... 225,000
2021........................... 225,000
2022........................... 220,000
2023........................... 215,000
</TABLE>
14
<PAGE> 252
<TABLE>
<CAPTION>
CHINA AIRLINES CHINA AIRLINES CHINA GENERAL CHINA GENERAL CONTINENTAL CONTINENTAL
B-737-400 B-737-400 B737-300 B737-300 DC10-30 DC10-30
28490 28491 28561 28562 46584 48292
11/1/96 11/1/96 6/1/97 7/1/97 2/15/80 2/15/82
B-18672 B-18673 B-2978 B-2979 N15069 N87070
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base Value ($000,000)............... 32.51 32.51 31.47 31.47 19.62 20.70
Newness............................. 1.21 1.21 0.77 0.93 0.18 0.15
Gross Wt ADJ........................ 0.68 0.68 0.62 0.62 0.00 0.47
Airframe Adjustment................. 0.23 0.24 0.38 0.39 (0.03) 0.17
Engine Adjustment................... (0.02) (0.02) 0.65 0.75 (0.74) (0.29)
Landing Gear........................ 0.00 0.00 0.00 0.00 0.00 0.00
TCAS................................ (0.13) (0.13) 0.00 0.00 0.00 0.00
Windshear........................... (0.13) (0.13) (0.13) (0.13) 0.00 0.00
Total Adjustments................... (0.04) (0.03) 0.91 1.02 (0.77) (0.12)
Adjusted Base Value................. 34.36 34.37 33.77 34.03 19.03 21.20
- ---------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of.............. 01/15/99 01/15/99 08/21/97 08/21/97 12/13/96 12/13/96
- ---------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998........................... 345,000 345,000 330,000 330,000 200,000 220,000
1999................................ 340,000 340,000 325,000 325,000 195,000 215,000
2000................................ 335,000 335,000 325,000 325,000 190,000 210,000
2001................................ 330,000 330,000 320,000 320,000 185,000 205,000
2002................................ 330,000 330,000 315,000 315,000 180,000 200,000
2003................................ 325,000 325,000 315,000 315,000 175,000 195,000
2004................................ 320,000 320,000 310,000 310,000 170,000 190,000
2005................................ 315,000 315,000 305,000 305,000 165,000 185,000
2006................................ 315,000 315,000 300,000 300,000 160,000 180,000
2007................................ 310,000 310,000 295,000 295,000 155,000 175,000
2008................................ 305,000 305,000 290,000 290,000 150,000 170,000
2009................................ 300,000 300,000 285,000 285,000 145,000 165,000
2010................................ 295,000 295,000 280,000 280,000 140,000 160,000
2011................................ 295,000 295,000 280,000 280,000 135,000 155,000
2012................................ 290,000 290,000 275,000 275,000 130,000 150,000
2013................................ 285,000 285,000 270,000 270,000 125,000 145,000
2014................................ 280,000 280,000 265,000 265,000 120,000 140,000
2015................................ 275,000 275,000 260,000 260,000 115,000 135,000
2016................................ 270,000 270,000 260,000 260,000 110,000 130,000
2017................................ 265,000 265,000 255,000 255,000 105,000 125,000
2018................................ 260,000 260,000 250,000 250,000 100,000 120,000
2019................................ 260,000 260,000 245,000 245,000 100,000 115,000
2020................................ 255,000 255,000 240,000 240,000 95,000 110,000
2021................................ 250,000 250,000 240,000 240,000 95,000 105,000
2022................................ 245,000 245,000 235,000 235,000 90,000 100,000
2023................................ 240,000 240,000 230,000 230,000 85,000 100,000
<CAPTION>
EUROFLY
MD83
53199
3/1/92
SE-DLU
- ------------------------------------ --------
<S> <C>
Base Value ($000,000)............... 24.62
Newness............................. 0.21
Gross Wt ADJ........................ 0.00
Airframe Adjustment................. (0.14)
Engine Adjustment................... (0.77)
Landing Gear........................ 0.00
TCAS................................ (0.13)
Windshear........................... 0.00
Total Adjustments................... (1.04)
Adjusted Base Value................. 23.79
- ---------------------------------------------------------
Maintenance Data as of.............. 07/31/98
- ------------------------------------------------------------------
Forecasted Lease Values
Year 1998........................... 250,000
1999................................ 245,000
2000................................ 245,000
2001................................ 240,000
2002................................ 235,000
2003................................ 230,000
2004................................ 230,000
2005................................ 225,000
2006................................ 220,000
2007................................ 220,000
2008................................ 215,000
2009................................ 215,000
2010................................ 210,000
2011................................ 205,000
2012................................ 205,000
2013................................ 200,000
2014................................ 195,000
2015................................ 195,000
2016................................ 190,000
2017................................ 185,000
2018................................ 180,000
2019................................ 180,000
2020................................ 175,000
2021................................ 175,000
2022................................ 170,000
2023................................ 170,000
</TABLE>
15
<PAGE> 253
<TABLE>
<CAPTION>
FRONTIER JET AIRWAYS JET AIRWAYS MIDWAY ROYAL AVIATION SPANAIR SPANAIR SPANAIR
B737-300 B-737-400 B-737-400 A320-200 A310-300 MD83 MD83 MD83
28563 25663 25664 373 448 49398 49791 53198
8/1/97 11/1/92 11/1/92 1/1/93 2/15/88 11/1/86 10/1/89 3/1/91
N306FL VT-JAP VT-JAQ N304ML C-GYRA EC-245 EC-GGV SE-DLS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Base Value ($000,000)......... 31.47 27.29 27.29 32.85 35.55 19.89 22.83 25.02
Newness....................... 1.08 1.02 1.02 0.00 0.40 0.78 0.80 0.20
Gross Wt ADJ.................. 0.62 (0.00) (0.00) 0.25 (1.36) 0.00 0.00 0.00
Airframe Adjustment........... 0.28 (0.09) (0.31) 0.00 0.15 0.31 (0.20) (0.24)
Engine Adjustment............. 0.51 (0.88) (0.88) 0.00 0.56 (0.83) (0.83) (0.83)
Landing Gear.................. 0.00 0.00 0.00 (0.07) 0.00 0.00 0.00 0.00
TCAS.......................... 0.00 0.00 0.00 0.00 0.00 0.00 (0.13) (0.13)
Windshear..................... (0.13) 0.00 0.00 0.00 (0.13) 0.00 (0.13) 0.00
Total Adjustments............. 0.67 (0.97) (1.19) (0.07) 0.59 (0.51) (1.28) (1.19)
Adjusted Base Value........... 33.84 27.34 27.12 33.03 35.18 20.16 22.36 24.02
- ---------------------------------------------------------------------------------------------------------------------------------
Maintenance Data as of........ 07/31/98 07/31/98 07/3l/98 11/10/97 05/13/98 07/31/98 07/31/98 07/31/98
- ---------------------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998..................... 330,000 285,000 285,000 415,000 345,000 190,000 220,000 235,000
1999.......................... 325,000 280,000 280,000 410,000 340,000 190,000 220,000 235,000
2000.......................... 325,000 275,000 275,000 405,000 335,000 185,000 215,000 230,000
2001.......................... 320,000 275,000 275,000 400,000 330,000 185,000 215,000 230,000
2002.......................... 315,000 270,000 270,000 395,000 325,000 180,000 210,000 225,000
2003.......................... 315,000 265,000 265,000 395,000 320,000 180,000 210,000 225,000
2004.......................... 310,000 265,000 265,000 390,000 315,000 180,000 205,000 220,000
2005.......................... 305,000 260,000 260,000 385,000 310,000 175,000 205,000 215,000
2006.......................... 300,000 255,000 255,000 380,000 305,000 175,000 200,000 215,000
2007.......................... 295,000 255,000 255,000 375,000 300,000 170,000 195,000 210,000
2008.......................... 290,000 250,000 250,000 370,000 295,000 170,000 195,000 210,000
2009.......................... 285,000 245,000 245,000 365,000 290,000 165,000 190,000 205,000
2010.......................... 280,000 245,000 245,000 360,000 285,000 165,000 190,000 205,000
2011.......................... 280,000 240,000 240,000 355,000 280,000 160,000 185,000 200,000
2012.......................... 275,000 235,000 235,000 350,000 275,000 155,000 185,000 l95,000
2013.......................... 270,000 235,000 235,000 345,000 270,000 155,000 180,000 195,000
2014.......................... 265,000 230,000 230,000 340,000 265,000 150,000 175,000 190,000
2015.......................... 260,000 225,000 225,000 335,000 260,000 150,000 175,000 185,000
2016.......................... 260,000 220,000 220,000 330,000 255,000 145,000 170,000 185,000
2017.......................... 255,000 215,000 215,000 325,000 250,000 140,000 165,000 180,000
2018.......................... 250,000 210,000 210,000 320,000 245,000 140,000 165,000 175,000
2019.......................... 245,000 205,000 205,000 315,000 240,000 135,000 160,000 175,000
2020.......................... 240,000 200,000 200,000 315,000 235,000 135,000 160,000 170,000
2021.......................... 240,000 200,000 200,000 310,000 230,000 130,000 155,000 170,000
2022.......................... 235,000 195,000 195,000 305,000 225,000 130,000 155,000 165,000
2023.......................... 230,000 190,000 190,000 300,000 220,000 130,000 150,000 165,000
</TABLE>
16
<PAGE> 254
<TABLE>
<CAPTION>
STAR AIRLINES STAR AIRLINES TRANSBRASIL VARIG VARIG VIRGIN EXPRESS
A320-200 A320-200 B737-300 B-767-200ER B-767-200ER B737-400
737 749 28564 23805 23806 28333
11/1/97 9/1/97 11/1/97 7/1/87 7/1/87 8/1/96
F-GRSG F-GRSH PT-TEP PP-VNR PP-VNS OO-VEB
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Base Value ($000,000)....... 39.59 39.59 31.47 31.52 31.52 32.51
Newness..................... 1.57 1.26 1.54 0.92 0.92 0.85
Gross Wt ADJ................ 0.46 0.46 0.62 (0.59) (0.59) 0.62
Airframe Adjustment......... 0.00 0.00 0.33 (0.33) (0.24) 0.21
Engine Adjustment........... 0.00 0.00 0.47 1.21 1.11 0.03
Landing Gear................ 0.00 0.00 0.00 0.00 0.00 0.00
TCAS........................ 0.00 0.00 0.00 0.00 0.00 (0.13)
Windshear................... (0.13) (0.13) (0.13) 0.00 0.00 (0.13)
Total Adjustments........... (0.13) (0.13) 0.68 0.88 0.87 (0.00)
Adjusted Base Value......... 41.50 41.19 34.31 32.73 32.72 33.97
- ----------------------------------------------------------------------------------------------------------------------
Maintenance Data as of...... 11/10/97 12/10/97 07/31/98 07/31/98 07/31/98 07/31/98
- ----------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998................... 415,000 415,000 335,000 320,000 320,000 315,000
1999........................ 410,000 410,000 330,000 315,000 315,000 310,000
2000........................ 405,000 405,000 330,000 310,000 310,000 305,000
2001........................ 400,000 400,000 325,000 305,000 305,000 300,000
2002........................ 395,000 395,000 320,000 300,000 300,000 300,000
2003........................ 395,000 395,000 320,000 295,000 295,000 295,000
2004........................ 390,000 390,000 315,000 290,000 290,000 290,000
2005........................ 385,000 385,000 310,000 285,000 285,000 285,000
2006........................ 380,000 380,000 305,000 280,000 280,000 280,000
2007........................ 375,000 375,000 305,000 275,000 275,000 280,000
2008........................ 370,000 370,000 300,000 270,000 270,000 275,000
2009........................ 365,000 365,000 295,000 265,000 265,000 270,000
2010........................ 360,000 360,000 295,000 255,000 255,000 265,000
2011........................ 355,000 355,000 290,000 250,000 250,000 265,000
2012........................ 350,000 350,000 285,000 245,000 245,000 260,000
2013........................ 345,000 345,000 280,000 235,000 235,000 255,000
2014........................ 340,000 340,000 275,000 230,000 230,000 250,000
2015........................ 335,000 335,000 275,000 220,000 220,000 245,000
2016........................ 330,000 330,000 270,000 215,000 215,000 245,000
2017........................ 325,000 325,000 265,000 205,000 205,000 240,000
2018........................ 320,000 320,000 260,000 195,000 195,000 235,000
2019........................ 315,000 315,000 255,000 190,000 190,000 230,000
2020........................ 315,000 315,000 250,000 180,000 180,000 230,000
2021........................ 310,000 310,000 250,000 175,000 175,000 225,000
2022........................ 305,000 305,000 245,000 170,000 170,000 220,000
2023........................ 300,000 300,000 240,000 165,000 165,000 215,000
<CAPTION>
VIRGIN EXPRESS/CHINA
B-737-400
28489
11/1/96
B-18671
- ---------------------------- --------------------
<S> <C>
Base Value ($000,000)....... 32.51
Newness..................... 1.21
Gross Wt ADJ................ 0.68
Airframe Adjustment......... 0.28
Engine Adjustment........... (0.00)
Landing Gear................ 0.00
TCAS........................ (0.13)
Windshear................... (0.13)
Total Adjustments........... 0.03
Adjusted Base Value......... 34.43
- ----------------------------------------------------------------------------------------------------------------------
Maintenance Data as of...... 07/31/98
- ----------------------------------------------------------------------------------------------------------------------
Forecasted Lease Values
Year 1998................... 345,000
1999........................ 340,000
2000........................ 335,000
2001........................ 330,000
2002........................ 330,000
2003........................ 325,000
2004........................ 320,000
2005........................ 315,000
2006........................ 315,000
2007........................ 310,000
2008........................ 305,000
2009........................ 300,000
2010........................ 295,000
2011........................ 295,000
2012........................ 290,000
2013........................ 285,000
2014........................ 280,000
2015........................ 275,000
2016........................ 270,000
2017........................ 265,000
2018........................ 260,000
2019........................ 255,000
2020........................ 255,000
2021........................ 250,000
2022........................ 245,000
2023........................ 240,000
</TABLE>
17
<PAGE> 255
A310-300 (S/N 448)
Aircraft C-GYRA was delivered in February, 1988 and is awarded a 'newness'
adjustment of $400,000. The Airframe is adjusted at a rate of $18.75 per
hour -- for a positive adjustment of $150,000 for a recently completed
maintenance check. The Engines are adjusted at a rate of $200 per hour for a
cumulative 2814 hours variance from half-time of 6,000 hours. This is a positive
adjustment of $560,000. A negative adjustment was made of $130,000 for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
A320-200 (S/N 210)
Aircraft C-GQCA was delivered in July, 1991 and is awarded a 'newness'
adjustment of $720,000. The Airframe is adjusted at a rate of $479 per day for a
1,161 day variance from half-time of 1,461 days. This is a negative adjustment
of $560,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hours variance from half-time of 4,000 hours. This is a
negative adjustment of $830,000. A negative adjustment was made of $260,000 for
no TCAS and Windshear. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
A320-200 (S/N 221)
Aircraft OY CNB was delivered in September, 1991 and is awarded a 'newness'
adjustment of $950,000. The Airframe is adjusted at a rate of $479 per day for a
1,101 day variance from half-time of 1,461 days. This is a positive adjustment
of $530,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
A320-200 (S/N 222)
Aircraft OY-CNC was delivered in October, 1991 and is awarded a 'newness'
adjustment of $1,070,000. The Airframe is adjusted at a rate of $639 per day for
a 756 day variance from half-time of 1,096 days. This is a positive adjustment
of $480,000. The Engines are adjusted at a rate of $103 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
A320-200 (S/N 231)
Aircraft C-FPWD was delivered in September, 1991 and is awarded a 'newness'
adjustment of $950,000. The Airframe is adjusted at a rate of $426 per day for a
913 day variance from half-time of 1,644 days. This is a negative adjustment of
$390,000. The Engines are adjusted at a rate of $103 per hour for a cumulative
7,513 hour variance from half-time of 4,000 hours. This is a negative adjustment
of $770,000. A negative adjustment was made of $260,000 for no TCAS and
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
A320-200 (S/N 373)
Aircraft N3O4ML was delivered in January, 1993. A positive adjustment was
made of $250,000 for increased MTOW. Engines were assumed to be at half-time. A
negative adjustment of $300,000 was made for C-Check Status -- less than
half-time. A negative adjustment of $77,000 was made for landing gear status.
APU was assumed to be at half-time.
A320-200 (S/N 737)
Aircraft F-GRSG was delivered in November, 1997 and is awarded a 'newness'
adjustment of $1,570,000. A positive adjustment was made of $460,000 for
increased MTOW. A negative adjustment of
18
<PAGE> 256
$130,000 was made for no Windshear. No current data was provided for the
airframe, engines, landing gear and the APU, therefore it was assumed to be at
half time.
A320-200 (S/N 749)
Aircraft F-GRSH was delivered in September, 1997 and is awarded a 'newness'
adjustment of $1,260,000. A positive adjustment was made of $460,000 for
increased MTOW. A negative adjustment of $130,000 was made for no Windshear. No
current data was provided for the airframe, engines, landing gear and the APU,
therefore it was assumed to be at half time.
B737-300 (S/N 28740)
Aircraft N335AW was delivered in June, 1998 and is awarded a 'newness'
adjustment of $410,000. Due to its relatively new vintage no adjustments were
made on this aircraft.
B737-300 (S/N 28333)
Aircraft OO-VEB was delivered in August, 1996 and is awarded a 'newness'
adjustment of $850,000. The Airframe is adjusted at a rate of $36 per day for a
5,964 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $210,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 344 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $30,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
B737-300 (S/N 28548)
Aircraft G-OAMS was delivered in December, 1997 and is awarded a 'newness'
adjustment of $1,850,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28554)
Aircraft G-ECAS was delivered in December, 1996 and is awarded a 'newness'
adjustment of $1,600,000. The Airframe is adjusted at a rate of $33 per day for
a 8,356 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $280,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 132 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $10,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28557)
Aircraft G-SMDB was delivered in March, 1997 and is awarded a 'newness'
adjustment of $310,000. The Airframe is adjusted at a rate of $33 per day for a
9,075 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $300,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 1,510 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $150,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28558)
Aircraft G-OJTW was delivered in April, 1997 and is awarded a 'newness'
adjustment of $460,000. The Airframe is adjusted at a rate of $33 per day for a
9,003 hour variance from half-time of 12,000 hours. This is a positive
adjustment of $300,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 1,228 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $120,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
19
<PAGE> 257
B737-300 (S/N 28559)
Aircraft PH-OZC was delivered in May, 1997 and is awarded a 'newness'
adjustment of $620,000. The Airframe is adjusted at a rate of $36 per day for a
6,269 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $220,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 4,198 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $410,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28561)
Aircraft B-2978 was delivered in June, 1997 and is awarded a 'newness'
adjustment of $770,000. The Airframe is adjusted at a rate of $36 per day for a
10,745 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $380,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 6,728 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $650,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28562)
Aircraft B-2979 was delivered in July, 1997 and is awarded a 'newness'
adjustment of $930,000. The Airframe is adjusted at a rate of $36 per day for a
11,025 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $390,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 7,723 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $750,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28563)
Aircraft N3O6FL was delivered in August, 1997 and is awarded a 'newness'
adjustment of $1,080,000. The Airframe is adjusted at a rate of $36 per day for
a 7,934 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $280,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 5,246 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $510,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-300 (S/N 28564)
Aircraft PT-TEP was delivered in November, 1997 and is awarded a 'newness'
adjustment of $1,540,000. The Airframe is adjusted at a rate of $36 per day for
a 9,318 hour variance from half-time of 11,200 hours. This is a positive
adjustment of $330,000. The Engines are adjusted at a rate of $97 per hour for a
cumulative 4,838 hour variance from half-time of 4,000 hours. This is a positive
adjustment of $470,000. A negative adjustment of $130,000 was made for no
Windshear. No data was provided for the landing gear and the APU, therefore it
was assumed to be at half time.
B737-400 (S/N 28490)
Aircraft serial number 28490 was delivered November, 1996 and is awarded a
'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of $50
per hour for a 5,375 hour variance from half-time of 20,000 hours. This is a
positive adjustment of $270,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 152 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $10,000. A negative adjustment was made of $260,000 for
no TCAS and Windshear. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
20
<PAGE> 258
B737-400 (S/N 28491)
Aircraft serial number 28491 was delivered November, 1996 and is awarded a
'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of $50
per hour for a 5,375 hour variance from half-time of 20,000 hours. This is a
positive adjustment of $270,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 152 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $10,000. A negative adjustment was made of $260,000 for
no TCAS and Windshear. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
B737-400 (S/N 25663)
Aircraft VT-JAP was delivered new in November, 1992 and is awarded a
'newness' adjustment of $1,020,000. The Airframe is adjusted at a rate of $45
per hour for a 2,112 hour variance from half-time of 11,200 hours. This is a
negative adjustment of $90,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 8,000 hour variance from half-time of 4,000 hours. This is
a negative adjustment of $88,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
B737-400 (S/N 28664)
Aircraft VT-JAQ was delivered new in November, 1992 and is awarded a
'newness' adjustment of $1,020,000. The Airframe is adjusted at a rate of $63
per hour for a 4,989 hour variance from half-time of 8,000 hours. This is a
negative adjustment of $310,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 8,000 hour variance from half-time of 4,000 hours. This is
a negative adjustment of $780,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
B737-400 (S/N 28489)
Aircraft serial number 28489 was delivered in November, 1996 and is awarded
a 'newness' adjustment of $1,210,000. The Airframe is adjusted at a rate of $50
per hour for a 5,653 hour variance from half-time of 10,000 hours. This is a
positive adjustment of $280,000. The Engines are adjusted at a rate of $97 per
hour for a cumulative 18 hour variance from half-time of 4,000 hours. There is
no adjustment to the engines. No data was provided for the landing gear and the
APU, therefore it was assumed to be at half time.
B767-200ER (S/N 23805)
Aircraft PP-VNR was delivered in July, 1987 and is awarded a 'newness'
adjustment of $920,000. The Airframe is adjusted at a rate of $208 per cycle for
a 1,584 cycle variance from half-time of 1,500 cycles. This is a negative
adjustment of $330,000. The Engines are adjusted at a rate of $170 per hour for
a cumulative 7,125 hour variance from half-time of 5,000 hours. This is a
positive adjustment of $1,210,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
B767-200ER (S/N 23806)
Aircraft PP-VNS was delivered in July, 1987 and is awarded a 'newness'
adjustment of $920,000. The Airframe is adjusted at a rate of $208 per cycle for
a 1,150 cycle variance from half-time of 1,500 cycles. This is a negative
adjustment of $240,000. The Engines are adjusted at a rate of $170 per hour for
a cumulative 6,553 hour variance from half-time of 5,000 hours. This is a
positive adjustment of $1,150,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
B767-300ER (S/N 25221)
Aircraft G-BXOP was delivered in August, 1991. The Airframe is adjusted at
a rate of $133.33 per cycle for a 509 cycle variance from half-time of 1,500
hours. This is a positive adjustment of $68,000. Plus an additional $584,000 for
D Check. The engines are assumed to be at half-time. A positive adjustment for
21
<PAGE> 259
$1,000,000 was made for increased MTOW. A positive adjustment was made of
$44,000 for landing gear status. APU was assumed to be at half-time.
B767-300ER (S/N 25403)
Aircraft CC-CEU was delivered in January, 1992. The Airframe is adjusted at
a rate of $58.33 per hour for a 10,647 hour variance from half-time of 12,000
hours. This is a positive adjustment of $80,000. The Engines are adjusted at a
rate of $170 per cycle for a cumulative 541 cycle variance from half-time of
5,000 cycles. There is an adjustment of $90,000. No data was provided for the
landing gear and the APU, therefore it was assumed to be at half time.
B767-300ER (S/N 29617)
This aircraft will be delivered new in March of 1999. A newness adjustment
was made of $540,000 to reflect delivery.
B767-300ER (S/N 30008)
This aircraft will be delivered new in May of 1999. A newness adjustment
was made of $900,000 to reflect delivery.
MD83 (S/N 49398)
Aircraft EC-245 was delivered in November, 1986 and is awarded a 'newness'
adjustment of $780,000. The Airframe is adjusted at a rate of $15 per hour for a
17,396 hour variance from half-time of 15,000 hours. This is a positive
adjustment of $310,000. The Engines are adjusted at a rate of $103 per hour for
a cumulative 8,000 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $830,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
MD83 (S/N 49791)
Aircraft EC-CGV was delivered in October, 1989 and is awarded a 'newness'
adjustment of $800,000. The Airframe is adjusted at a rate of $13 per hour for a
9,676 hour variance from half-time of 15,000 hours. This is a negative
adjustment of $200,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. A negative adjustment was made of $260,000 for no TCAS
and Windshear. No data was provided for the landing gear and the APU, therefore
it was assumed to be at half time.
MD83 (S/N 53198)
Aircraft SE-DLS was delivered in March, 1991 and is awarded a 'newness'
adjustment of $200,000. The Airframe is adjusted at a rate of $12 per hour for a
8,598 hour variance from half-time of 15,000 hours. This is a negative
adjustment of $240,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 8,000 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $830,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
MD83 (S/N 53199)
Aircraft SE-DLU was delivered in March, 1992 and is awarded a 'newness'
adjustment of $210,000. The Airframe is adjusted at a rate of $28 per hour for a
4,823 hour variance from half-time of 15,000 hour days. This is a negative
adjustment of $140,000. The Engines are adjusted at a rate of $69 per hour for a
cumulative 7,511 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $770,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
DC1O-30 (S/N 46584)
Aircraft N15069 was delivered in February, 1980 and is awarded a 'newness'
adjustment of $180,000. The Airframe is adjusted at a rate of $94.70 per hour
for a 307 hour variance from half-time of 2640 hour days. This is a negative
adjustment of $29,000. The Engines are adjusted at a rate of $150 per hour for a
22
<PAGE> 260
cumulative 4932 hour variance from half-time of 4,000 hours. This is a negative
adjustment of $740,000. No data was provided for the landing gear and the APU,
therefore it was assumed to be at half time.
DC10-30 (S/N 48292)
Aircraft N87070 was delivered in February, 1982 and is awarded a 'newness'
adjustment of $150,000. The Airframe is adjusted at a rate of $94.70 per hour
for a 1824 hour variance from half-time of 2640 hour days. This is a positive
adjustment of $170,000. The Engines are adjusted at a rate of $150 per hour for
a cumulative 1956 hour variance from half-time of 4,000 hours. This is a
negative adjustment of $290,000. No data was provided for the landing gear and
the APU, therefore it was assumed to be at half time.
V. COVENANTS
This report has been prepared for the exclusive use of Aircraft Finance
Trust and shall not be provided to other parties by MBA without the express
consent of Aircraft Finance Trust. MBA certifies that this report has been
independently prepared and that it fully and accurately reflects MBA's opinion
as to the Current Fair Market Values and Lease Rates. MBA further certifies that
it does not have, and does not expect to have, any financial or other interest
in the subject or similar aircraft.
This report represents the opinion of MBA as to the Current Fair Market
Values and Lease Rates of the subject aircraft and is intended to be advisory
only in nature. Therefore, MBA assumes no responsibility or legal liability for
any actions taken or not taken by Aircraft Finance Trust or any other party with
regard to the subject aircraft. By accepting this report, all parties agree that
MBA shall bear no such responsibility or legal liability.
This report has been prepared by:
/s/ BRYSON P. MONTELEONE
---------------------------------------------
Bryson P. Monteleone
Manager of Operations
Reviewed by:
/s/ MORTEN S. BEYER
---------------------------------------------
Morten S. Beyer
Chairman and CEO
ISTAT Certified Senior Appraiser/Fellow
March 25, 1999
23
<PAGE> 261
APPENDIX 10
PERCENT OF INITIAL PRINCIPAL BALANCE OF THE
INITIAL NOTES BASED ON THE MODIFIED ASSUMED CASE(1)
<TABLE>
<CAPTION>
CLASS CLASS CLASS CLASS
PAYMENT DATE OCCURRING IN JUNE A-1 NOTES A-2 NOTES B NOTES C NOTES
- ------------------------------ --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
1999....................................... 100.00% 98.24% 99.71% 100.00%
2000....................................... 100.00% 87.54% 98.65% 100.00%
2001....................................... 100.00% 77.28% 95.18% 100.00%
2002....................................... 100.00% 66.88% 94.07% 94.81%
2003....................................... 100.00% 60.20% 91.16% 78.67%
2004....................................... 100.00% 52.03% 83.28% 70.46%
2005....................................... 0.00% 40.20% 80.86% 65.71%
2006....................................... 0.00% 26.15% 80.84% 62.68%
2007....................................... 0.00% 11.90% 76.47% 61.59%
2008....................................... 0.00% 0.00% 64.49% 61.59%
2009....................................... 0.00% 0.00% 55.43% 61.59%
2010....................................... 0.00% 0.00% 47.37% 56.29%
2011....................................... 0.00% 0.00% 39.06% 52.69%
2012....................................... 0.00% 0.00% 31.95% 49.55%
2013....................................... 0.00% 0.00% 25.26% 44.93%
2014....................................... 0.00% 0.00% 21.47% 41.00%
2015....................................... 0.00% 0.00% 20.63% 36.31%
2016....................................... 0.00% 0.00% 14.48% 31.56%
2017....................................... 0.00% 0.00% 0.00% 0.00%
Weighted Average Life.................... 5.0 4.9 10.8 11.3
</TABLE>
(1) Assumed Case as modified, as indicated on page 90.
<PAGE> 262
DECLINING BALANCES OF THE INITIAL NOTES AND ASSUMED COLLATERAL VALUE*
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
CLASS A1 CLASS A2 CLASS B CLASS C CLASS D
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing 512.50 400.00 126.50 106.00 64.00
Jun-99 512.50 392.96 126.13 106.00 64.00
Jul-99 512.50 388.05 125.81 106.00 64.00
Aug-99 512.50 384.01 125.50 106.00 64.00
Sep-99 512.50 379.35 125.18 106.00 64.00
Oct-99 512.50 376.62 124.86 106.00 64.00
Nov-99 512.50 375.18 124.80 106.00 64.00
Dec-99 512.50 370.52 124.80 106.00 64.00
Jan-00 512.50 367.56 124.80 106.00 64.00
Feb-00 512.50 364.59 124.80 106.00 64.00
Mar-00 512.50 360.47 124.79 106.00 64.00
Apr-00 512.50 357.46 124.79 106.00 64.00
May-00 512.50 353.83 124.79 106.00 64.00
Jun-00 512.50 350.16 124.79 106.00 64.00
Jul-00 512.50 346.56 124.62 106.00 64.00
Aug-00 512.50 343.51 123.90 106.00 64.00
Sep-00 512.50 340.82 122.80 106.00 64.00
Oct-00 512.50 337.44 122.34 106.00 64.00
Nov-00 512.50 334.26 121.75 106.00 64.00
Dec-00 512.50 330.70 121.54 106.00 64.00
Jan-01 512.50 327.48 121.08 106.00 64.00
Feb-01 512.50 323.85 120.99 106.00 64.00
Mar-01 512.50 320.62 120.40 106.00 64.00
Apr-01 512.50 316.87 120.40 106.00 64.00
May-01 512.50 313.01 120.40 106.00 64.00
Jun-01 512.50 309.10 120.40 106.00 64.00
Jul-01 512.50 305.22 120.27 106.00 64.00
Aug-01 512.50 301.22 120.27 106.00 64.00
Sep-01 512.50 297.64 119.81 106.00 64.00
Oct-01 512.50 294.28 119.10 106.00 64.00
Nov-01 512.50 290.27 119.10 106.00 64.00
Dec-01 512.50 286.26 119.10 106.00 64.00
Jan-02 512.50 282.26 119.10 106.00 64.00
Feb-02 512.50 278.25 119.10 106.00 64.00
Mar-02 512.50 274.12 119.10 106.00 64.00
Apr-02 512.50 270.08 119.10 106.00 64.00
May-02 512.50 268.38 119.01 103.69 63.94
Jun-02 512.50 267.50 119.00 100.50 63.86
Jul-02 512.50 265.85 118.99 98.17 63.66
Aug-02 512.50 262.46 118.98 97.39 63.66
Sep-02 512.50 261.85 117.66 95.55 63.26
Oct-02 512.50 258.43 117.29 95.55 62.83
Nov-02 512.50 256.66 117.15 93.89 62.28
Dec-02 512.50 254.50 117.01 92.30 61.96
Jan-03 512.50 251.08 116.87 91.89 61.76
Feb-03 512.50 248.22 116.61 91.01 61.56
Mar-03 512.50 246.57 116.23 88.97 61.25
Apr-03 512.50 245.04 115.97 86.72 61.05
May-03 512.50 242.79 115.70 85.16 60.73
Jun-03 512.50 240.79 115.32 83.39 60.53
Jul-03 512.50 238.70 114.93 81.62 60.33
Aug-03 512.50 238.00 114.44 78.72 60.01
Sep-03 512.50 237.48 113.14 76.30 59.81
Oct-03 512.50 233.34 112.98 76.27 59.61
Nov-03 512.50 231.65 110.45 76.27 59.40
Dec-03 512.50 229.72 109.73 74.73 59.09
Jan-04 512.50 226.41 108.79 74.70 58.88
Feb-04 512.50 223.08 107.86 74.70 58.68
Mar-04 512.50 219.52 106.92 74.70 58.47
Apr-04 512.50 216.14 106.10 74.69 58.16
May-04 512.50 212.18 105.72 74.69 58.06
Jun-04 512.50 208.14 105.35 74.69 57.85
Jul-04 512.50 203.97 104.97 74.69 57.64
Aug-04 512.50 199.99 104.59 74.69 57.33
Sep-04 512.50 196.34 104.21 74.23 57.12
Oct-04 512.50 192.72 103.82 73.74 56.80
Nov-04 512.50 188.95 103.44 73.36 56.59
Dec-04 512.50 185.04 103.06 72.98 56.38
Jan-05 512.50 181.02 102.67 72.82 56.17
Feb-05 512.50 179.97 102.29 69.65 55.96
Mar-05 512.50 174.95 102.29 69.65 55.75
Apr-05 512.50 170.30 102.29 69.65 55.53
May-05 512.50 165.50 102.29 69.65 55.32
Jun-05 512.50 160.80 102.29 69.65 55.11
Jul-05 512.50 156.23 102.29 69.38 54.89
Aug-05 512.50 152.38 102.29 68.48 54.68
Sep-05 512.50 148.00 102.26 68.10 54.46
Oct-05 512.50 143.24 102.26 67.93 54.24
Nov-05 512.50 138.41 102.26 67.93 54.03
Dec-05 512.50 133.76 102.26 67.60 53.81
Jan-06 512.50 129.25 102.26 67.22 53.59
Feb-06 512.50 124.61 102.26 66.95 53.37
Mar-06 512.50 119.49 102.26 66.67 53.25
Apr-06 512.50 114.52 102.26 66.67 53.03
May-06 512.50 109.40 102.26 66.67 52.81
Jun-06 512.50 104.60 102.26 66.44 52.59
Jul-06 512.50 99.91 102.26 65.96 52.37
Aug-06 512.50 95.51 102.26 65.28 52.15
Sep-06 512.50 90.29 102.26 65.28 52.02
Oct-06 512.50 85.04 102.26 65.28 51.80
Nov-06 512.50 80.91 101.21 65.28 51.57
Dec-06 512.50 76.45 100.36 65.28 51.35
Jan-07 512.50 71.91 99.58 65.28 51.22
Feb-07 512.50 67.47 98.77 65.28 50.99
Mar-07 512.50 62.26 98.36 65.28 50.76
Apr-07 512.50 57.08 98.13 65.28 50.63
May-07 512.50 52.29 97.47 65.28 50.40
Jun-07 512.50 47.61 96.73 65.28 50.26
Jul-07 512.50 42.94 95.94 65.28 50.03
Aug-07 512.50 38.57 94.93 65.28 49.80
Sep-07 512.50 34.30 93.74 65.28 49.66
Oct-07 512.50 30.13 92.44 65.28 49.42
Nov-07 512.50 25.78 91.28 65.28 49.28
Dec-07 512.50 22.09 89.44 65.28 49.05
Jan-08 512.50 17.40 88.58 65.28 48.90
Feb-08 512.50 13.26 87.12 65.28 48.75
Mar-08 512.50 8.77 85.90 65.28 48.52
Apr-08 512.50 4.75 84.27 65.28 48.37
May-08 512.50 0.55 82.89 65.28 48.13
Jun-08 508.77 0.00 81.58 65.28 47.97
Jul-08 504.14 0.00 80.50 65.28 47.82
Aug-08 499.97 0.00 79.11 65.28 47.58
Sep-08 495.01 0.00 78.39 65.28 47.42
Oct-08 489.72 0.00 77.88 65.28 47.26
Nov-08 484.98 0.00 76.94 65.28 47.11
Dec-08 480.08 0.00 76.04 65.28 46.95
Jan-09 476.15 0.00 74.32 65.28 46.70
Feb-09 471.53 0.00 73.16 65.28 46.53
Mar-09 466.34 0.00 72.29 65.28 46.37
Apr-09 460.99 0.00 71.84 65.28 46.20
May-09 455.84 0.00 71.12 65.28 46.03
Jun-09 451.04 0.00 70.12 65.28 45.86
Jul-09 446.27 0.00 68.99 65.28 45.69
Aug-09 441.59 0.00 68.07 65.03 45.52
Sep-09 436.44 0.00 67.95 64.41 45.34
Oct-09 431.97 0.00 67.01 63.88 45.17
Nov-09 426.86 0.00 67.00 63.10 44.99
Dec-09 421.53 0.00 66.86 62.57 44.81
Jan-10 416.31 0.00 66.57 62.04 44.71
Feb-10 413.20 0.00 64.21 61.51 44.52
Mar-10 405.98 0.00 60.96 61.14 44.37
Apr-10 401.14 0.00 60.66 60.63 44.18
May-10 396.16 0.00 60.44 60.19 44.00
Jun-10 391.60 0.00 59.92 59.67 43.81
Jul-10 388.14 0.00 58.04 59.23 43.71
Aug-10 382.85 0.00 58.04 58.87 43.52
Sep-10 377.68 0.00 58.04 58.35 43.32
Oct-10 373.10 0.00 57.35 57.76 43.21
Nov-10 368.87 0.00 55.89 57.70 43.01
Dec-10 364.73 0.00 54.18 57.64 42.89
Jan-11 360.08 0.00 53.15 57.50 42.69
Feb-11 355.98 0.00 51.71 57.13 42.57
Mar-11 350.64 0.00 51.21 56.83 42.44
Apr-11 345.49 0.00 50.84 56.46 42.23
May-11 340.58 0.00 49.91 56.23 42.10
Jun-11 335.41 0.00 49.41 55.85 41.96
Jul-11 330.06 0.00 49.09 55.40 41.82
Aug-11 325.45 0.00 48.18 54.88 41.61
Sep-11 320.17 0.00 47.63 54.58 41.47
Oct-11 315.06 0.00 47.20 54.06 41.32
Nov-11 310.20 0.00 45.89 54.06 41.31
Dec-11 301.10 0.00 45.36 53.53 41.31
Jan-12 295.57 0.00 44.84 53.43 41.30
Feb-12 290.76 0.00 43.65 53.32 41.22
Mar-12 280.96 0.00 42.53 53.12 41.07
Apr-12 275.72 0.00 42.02 52.82 40.98
May-12 271.17 0.00 40.54 52.77 40.81
Jun-12 265.47 0.00 40.42 52.52 40.65
Jul-12 260.48 0.00 39.53 52.27 40.48
Aug-12 242.62 0.00 39.12 50.70 40.34
Sep-12 238.12 0.00 37.87 50.53 40.19
Oct-12 232.91 0.00 37.38 50.24 40.09
Nov-12 228.17 0.00 36.35 50.24 39.94
Dec-12 222.93 0.00 36.05 49.96 39.77
Jan-13 218.82 0.00 34.56 49.72 39.61
Feb-13 214.51 0.00 33.20 49.48 39.50
Mar-13 203.41 0.00 32.83 48.49 39.35
Apr-13 198.12 0.00 32.61 48.20 39.19
May-13 193.06 0.00 32.12 47.91 39.08
Jun-13 187.82 0.00 31.95 47.62 38.91
Jul-13 182.98 0.00 31.27 47.33 38.80
Aug-13 178.53 0.00 30.43 46.86 38.62
Sep-13 173.27 0.00 30.14 46.57 38.50
Oct-13 168.23 0.00 29.63 46.21 38.38
Nov-13 162.97 0.00 29.40 45.80 38.25
Dec-13 157.54 0.00 29.28 45.45 38.07
Jan-14 152.07 0.00 29.09 45.15 37.93
Feb-14 146.82 0.00 28.65 44.84 37.80
Mar-14 141.58 0.00 28.21 44.38 37.71
Apr-14 136.19 0.00 28.00 44.07 37.57
May-14 131.45 0.00 27.16 43.76 37.42
Jun-14 125.98 0.00 27.16 43.46 37.27
Jul-14 121.62 0.00 26.10 43.04 37.17
Aug-14 116.28 0.00 26.10 42.62 37.01
Sep-14 110.81 0.00 26.10 42.26 36.90
Oct-14 101.53 0.00 26.10 41.91 36.74
Nov-14 96.56 0.00 26.10 41.10 36.63
Dec-14 91.26 0.00 26.10 40.64 36.51
Jan-15 85.86 0.00 26.10 40.29 36.39
Feb-15 80.48 0.00 26.10 39.88 36.26
Mar-15 74.99 0.00 26.10 39.52 36.13
Apr-15 69.56 0.00 26.10 39.16 35.99
May-15 64.46 0.00 26.10 38.76 35.85
Jun-15 59.14 0.00 26.10 38.49 35.76
Jul-15 53.99 0.00 26.10 38.08 35.61
Aug-15 48.77 0.00 26.10 37.67 35.50
Sep-15 43.57 0.00 26.10 37.31 35.34
Oct-15 38.30 0.00 26.10 36.95 35.22
Nov-15 33.06 0.00 26.10 36.58 35.10
Dec-15 27.80 0.00 26.10 36.17 35.01
Jan-16 22.47 0.00 26.10 35.85 34.88
Feb-16 17.50 0.00 25.80 35.44 34.74
Mar-16 12.56 0.00 25.36 35.07 34.64
Apr-16 7.59 0.00 24.97 34.66 34.53
May-16 0.00 0.00 23.23 34.28 34.40
Jun-16 0.00 0.00 18.31 33.46 34.28
Jul-16 0.00 0.00 13.00 33.01 34.16
Aug-16 0.00 0.00 0.00 25.31 34.04
Sep-16 0.00 0.00 0.00 19.77 33.92
Oct-16 0.00 0.00 0.00 5.01 33.81
Nov-16 0.00 0.00 0.00 0.00 28.76
Dec-16 0.00 0.00 0.00 0.00 23.57
Jan-17 0.00 0.00 0.00 0.00 0.00
Feb-17 0.00 0.00 0.00 0.00 0.00
Mar-17 0.00 0.00 0.00 0.00 0.00
Apr-17 0.00 0.00 0.00 0.00 0.00
May-17 0.00 0.00 0.00 0.00 0.00
Jun-17 0.00 0.00 0.00 0.00 0.00
Jul-17 0.00 0.00 0.00 0.00 0.00
Aug-17 0.00 0.00 0.00 0.00 0.00
Sep-17 0.00 0.00 0.00 0.00 0.00
Oct-17 0.00 0.00 0.00 0.00 0.00
Nov-17 0.00 0.00 0.00 0.00 0.00
Dec-17 0.00 0.00 0.00 0.00 0.00
Jan-18 0.00 0.00 0.00 0.00 0.00
Feb-18 0.00 0.00 0.00 0.00 0.00
Mar-18 0.00 0.00 0.00 0.00 0.00
Apr-18 0.00 0.00 0.00 0.00 0.00
May-18 0.00 0.00 0.00 0.00 0.00
Jun-18 0.00 0.00 0.00 0.00 0.00
Jul-18 0.00 0.00 0.00 0.00 0.00
Aug-18 0.00 0.00 0.00 0.00 0.00
Sep-18 0.00 0.00 0.00 0.00 0.00
Oct-18 0.00 0.00 0.00 0.00 0.00
Nov-18 0.00 0.00 0.00 0.00 0.00
Dec-18 0.00 0.00 0.00 0.00 0.00
Jan-19 0.00 0.00 0.00 0.00 0.00
Feb-19 0.00 0.00 0.00 0.00 0.00
Mar-19 0.00 0.00 0.00 0.00 0.00
Apr-19 0.00 0.00 0.00 0.00 0.00
May-19 0.00 0.00 0.00 0.00 0.00
Jun-19 0.00 0.00 0.00 0.00 0.00
Jul-19 0.00 0.00 0.00 0.00 0.00
Aug-19 0.00 0.00 0.00 0.00 0.00
Sep-19 0.00 0.00 0.00 0.00 0.00
Oct-19 0.00 0.00 0.00 0.00 0.00
Nov-19 0.00 0.00 0.00 0.00 0.00
Dec-19 0.00 0.00 0.00 0.00 0.00
Jan-20 0.00 0.00 0.00 0.00 0.00
Feb-20 0.00 0.00 0.00 0.00 0.00
Mar-20 0.00 0.00 0.00 0.00 0.00
Apr-20 0.00 0.00 0.00 0.00 0.00
May-20 0.00 0.00 0.00 0.00 0.00
Jun-20 0.00 0.00 0.00 0.00 0.00
Jul-20 0.00 0.00 0.00 0.00 0.00
Aug-20 0.00 0.00 0.00 0.00 0.00
Sep-20 0.00 0.00 0.00 0.00 0.00
Oct-20 0.00 0.00 0.00 0.00 0.00
Nov-20 0.00 0.00 0.00 0.00 0.00
Dec-20 0.00 0.00 0.00 0.00 0.00
Jan-21 0.00 0.00 0.00 0.00 0.00
Feb-21 0.00 0.00 0.00 0.00 0.00
Mar-21 0.00 0.00 0.00 0.00 0.00
Apr-21 0.00 0.00 0.00 0.00 0.00
May-21 0.00 0.00 0.00 0.00 0.00
Jun-21 0.00 0.00 0.00 0.00 0.00
Jul-21 0.00 0.00 0.00 0.00 0.00
Aug-21 0.00 0.00 0.00 0.00 0.00
Sep-21 0.00 0.00 0.00 0.00 0.00
Oct-21 0.00 0.00 0.00 0.00 0.00
Nov-21 0.00 0.00 0.00 0.00 0.00
Dec-21 0.00 0.00 0.00 0.00 0.00
Jan-22 0.00 0.00 0.00 0.00 0.00
Feb-22 0.00 0.00 0.00 0.00 0.00
Mar-22 0.00 0.00 0.00 0.00 0.00
Apr-22 0.00 0.00 0.00 0.00 0.00
May-22 0.00 0.00 0.00 0.00 0.00
Jun-22 0.00 0.00 0.00 0.00 0.00
Jul-22 0.00 0.00 0.00 0.00 0.00
Aug-22 0.00 0.00 0.00 0.00 0.00
Sep-22 0.00 0.00 0.00 0.00 0.00
Oct-22 0.00 0.00 0.00 0.00 0.00
Nov-22 0.00 0.00 0.00 0.00 0.00
Dec-22 0.00 0.00 0.00 0.00 0.00
Jan-23 0.00 0.00 0.00 0.00 0.00
Feb-23 0.00 0.00 0.00 0.00 0.00
Mar-23 0.00 0.00 0.00 0.00 0.00
Apr-23 0.00 0.00 0.00 0.00 0.00
May-23 0.00 0.00 0.00 0.00 0.00
Jun-23 0.00 0.00 0.00 0.00 0.00
Jul-23 0.00 0.00 0.00 0.00 0.00
Aug-23 0.00 0.00 0.00 0.00 0.00
Sep-23 0.00 0.00 0.00 0.00 0.00
Oct-23 0.00 0.00 0.00 0.00 0.00
Nov-23 0.00 0.00 0.00 0.00 0.00
Dec-23 0.00 0.00 0.00 0.00 0.00
Jan-24 0.00 0.00 0.00 0.00 0.00
Feb-24 0.00 0.00 0.00 0.00 0.00
Mar-24 0.00 0.00 0.00 0.00 0.00
Apr-24 0.00 0.00 0.00 0.00 0.00
May-24 0.00 0.00 0.00 0.00 0.00
<CAPTION>
ASSUMED
COLLATERAL VALUE
----------------
<S> <C>
Closing 165.64
Jun-99 169.76
Jul-99 171.68
Aug-99 172.71
Sep-99 174.36
Oct-99 174.07
Nov-99 172.22
Dec-99 173.52
Jan-00 173.10
Feb-00 172.70
Mar-00 173.43
Apr-00 173.04
May-00 173.26
Jun-00 173.50
Jul-00 173.85
Aug-00 174.17
Sep-00 174.50
Oct-00 174.88
Nov-00 175.17
Dec-00 175.45
Jan-01 175.65
Feb-01 175.85
Mar-01 176.15
Apr-01 176.38
May-01 176.70
Jun-01 177.05
Jul-01 177.51
Aug-01 177.95
Sep-01 178.39
Oct-01 178.88
Nov-01 179.28
Dec-01 179.67
Jan-02 180.05
Feb-02 180.43
Mar-02 180.91
Apr-02 181.29
May-02 181.78
Jun-02 182.25
Jul-02 182.75
Aug-02 183.24
Sep-02 183.69
Oct-02 184.19
Nov-02 184.58
Dec-02 185.03
Jan-03 185.45
Feb-03 185.88
Mar-03 186.47
Apr-03 186.93
May-03 187.52
Jun-03 188.07
Jul-03 188.68
Aug-03 189.26
Sep-03 189.86
Oct-03 190.53
Nov-03 191.08
Dec-03 191.71
Jan-04 192.30
Feb-04 192.87
Mar-04 193.65
Apr-04 194.25
May-04 194.75
Jun-04 195.42
Jul-04 196.21
Aug-04 196.92
Sep-04 197.64
Oct-04 198.45
Nov-04 199.18
Dec-04 200.05
Jan-05 200.81
Feb-05 201.57
Mar-05 202.74
Apr-05 203.55
May-05 204.48
Jun-05 205.30
Jul-05 206.27
Aug-05 207.12
Sep-05 207.99
Oct-05 209.00
Nov-05 209.90
Dec-05 210.94
Jan-06 211.87
Feb-06 212.82
Mar-06 214.14
Apr-06 215.13
May-06 216.24
Jun-06 217.26
Jul-06 218.41
Aug-06 219.46
Sep-06 220.53
Oct-06 221.73
Nov-06 222.83
Dec-06 224.06
Jan-07 225.20
Feb-07 226.35
Mar-07 227.85
Apr-07 229.04
May-07 230.36
Jun-07 231.53
Jul-07 232.83
Aug-07 234.05
Sep-07 235.23
Oct-07 236.51
Nov-07 237.71
Dec-07 239.02
Jan-08 240.26
Feb-08 241.52
Mar-08 242.99
Apr-08 244.28
May-08 245.59
Jun-08 246.80
Jul-08 248.12
Aug-08 249.37
Sep-08 250.64
Oct-08 252.02
Nov-08 253.26
Dec-08 254.62
Jan-09 255.91
Feb-09 257.22
Mar-09 258.80
Apr-09 260.11
May-09 261.48
Jun-09 262.76
Jul-09 264.14
Aug-09 265.46
Sep-09 266.80
Oct-09 268.19
Nov-09 269.52
Dec-09 270.94
Jan-10 272.31
Feb-10 273.70
Mar-10 274.65
Apr-10 275.81
May-10 276.94
Jun-10 278.01
Jul-10 279.17
Aug-10 280.28
Sep-10 281.41
Oct-10 282.63
Nov-10 283.79
Dec-10 285.05
Jan-11 286.26
Feb-11 287.49
Mar-11 288.92
Apr-11 290.19
May-11 291.54
Jun-11 292.85
Jul-11 294.24
Aug-11 295.59
Sep-11 296.96
Oct-11 298.25
Nov-11 299.50
Dec-11 300.51
Jan-12 301.84
Feb-12 303.19
Mar-12 304.24
Apr-12 305.65
May-12 307.13
Jun-12 308.59
Jul-12 310.11
Aug-12 310.55
Sep-12 312.25
Oct-12 313.95
Nov-12 315.49
Dec-12 317.08
Jan-13 318.65
Feb-13 320.25
Mar-13 321.45
Apr-13 323.17
May-13 324.86
Jun-13 326.46
Jul-13 328.11
Aug-13 329.75
Sep-13 331.42
Oct-13 333.13
Nov-13 334.83
Dec-13 336.58
Jan-14 338.33
Feb-14 340.10
Mar-14 341.96
Apr-14 343.63
May-14 345.26
Jun-14 346.79
Jul-14 348.30
Aug-14 349.78
Sep-14 351.29
Oct-14 352.49
Nov-14 354.05
Dec-14 355.56
Jan-15 357.07
Feb-15 358.61
Mar-15 360.20
Apr-15 361.72
May-15 362.96
Jun-15 364.21
Jul-15 365.49
Aug-15 366.78
Sep-15 368.03
Oct-15 369.32
Nov-15 370.56
Dec-15 371.82
Jan-16 373.10
Feb-16 374.40
Mar-16 375.72
Apr-16 377.06
May-16 378.09
Jun-16 379.50
Jul-16 380.93
Aug-16 381.19
Sep-16 382.85
Oct-16 383.50
Nov-16 384.64
Dec-16 386.26
Jan-17 377.83
Feb-17 339.20
Mar-17 335.94
Apr-17 328.43
May-17 325.28
Jun-17 322.13
Jul-17 318.96
Aug-17 315.79
Sep-17 312.61
Oct-17 309.42
Nov-17 306.22
Dec-17 293.92
Jan-18 290.98
Feb-18 282.81
Mar-18 280.01
Apr-18 277.20
May-18 274.38
Jun-18 271.55
Jul-18 268.71
Aug-18 265.87
Sep-18 263.02
Oct-18 260.17
Nov-18 257.30
Dec-18 254.43
Jan-19 251.55
Feb-19 248.66
Mar-19 245.77
Apr-19 242.87
May-19 239.96
Jun-19 237.04
Jul-19 234.11
Aug-19 231.18
Sep-19 228.24
Oct-19 225.29
Nov-19 222.34
Dec-19 219.37
Jan-20 216.40
Feb-20 213.42
Mar-20 210.44
Apr-20 207.44
May-20 204.44
Jun-20 201.43
Jul-20 198.41
Aug-20 195.39
Sep-20 192.35
Oct-20 189.31
Nov-20 186.26
Dec-20 183.21
Jan-21 180.14
Feb-21 177.07
Mar-21 173.99
Apr-21 170.90
May-21 167.81
Jun-21 164.70
Jul-21 161.59
Aug-21 158.47
Sep-21 150.29
Oct-21 147.30
Nov-21 144.31
Dec-21 125.62
Jan-22 118.12
Feb-22 115.72
Mar-22 113.31
Apr-22 105.73
May-22 98.31
Jun-22 91.04
Jul-22 83.93
Aug-22 76.97
Sep-22 70.13
Oct-22 56.67
Nov-22 55.49
Dec-22 49.14
Jan-23 42.99
Feb-23 42.11
Mar-23 41.23
Apr-23 40.35
May-23 39.46
Jun-23 38.57
Jul-23 32.44
Aug-23 31.71
Sep-23 30.97
Oct-23 30.23
Nov-23 29.49
Dec-23 28.74
Jan-24 28.00
Feb-24 27.25
Mar-24 26.50
Apr-24 13.06
May-24 0.00
</TABLE>
* "COLLATERAL VALUE" IS THE SUM OF (1) THE DEPRECIATION FACTOR FOR EACH AIRCRAFT
AT THAT TIME MULTIPLIED BY THE INITIAL APPRAISED VALUE OF THAT AIRCRAFT AND
(2) CASH RESERVES EQUAL TO THE AMOUNT OF CASH RESERVES ASSUMED TO EXIST BASED
ON THE ASSUMED CASE.
<PAGE> 263
PERCENTAGE OF GROSS REVENUE NECESSARY TO REPAY THE INITIAL NOTES
BY THE APPLICABLE FINAL MATURITY DATE ASSUMING ACTUAL EXPERIENCE
CORRESPONDS TO THE MODIFIED ASSUMED CASE UNTIL THE BEGINNING OF THE YEAR STATED.
<TABLE>
<CAPTION>
YEAR 0 YEAR 3 YEAR 6 YEAR 10
------ ------ ------ -------
<S> <C> <C> <C> <C>
Class A Notes............................................. 62.8% 62.7% 62.0% 57.9%
Class B Notes............................................. 71.0% 71.0% 70.5% 63.4%
Class C Notes............................................. 79.1% 78.0% 76.0% 69.8%
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 3
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
-------------------------------------------------------------------
10% 0% 8% -15% -20%
----------- ----------- ----------- ----------- -----------
EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes...................... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes...................... 6.7 3.8 7.9 4.3 9.1 4.9 10.1 5.6 10.1 5.7
Class B Notes........................ 12.9 9.4 14.9 9.8 17.3 10.8 19.2 11.6 19.2 12.0
Class C Notes........................ 13.2 9.3 15.1 9.9 17.5 11.3 22.4 13.1 23.4 14.1
</TABLE>
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 3
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
------------------------------------
REVENUE REDUCTION 10% 0% -8% -15% -20%
----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes....................................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class A-2 Notes....................................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class B Notes......................................... 7.1% 7.1% 7.1% 7.1% 7.1%
Class C Notes......................................... 8.0% 8.0% 8.0% 8.0% 8.0%
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 6
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
-------------------------------------------------------------------
10% 0% 8% -15% -20%
----------- ----------- ----------- ----------- -----------
EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes...................... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes...................... 7.9 4.5 8.6 4.7 9.1 4.9 10.2 5.1 10.2 5.3
Class B Notes........................ 13.9 9.7 15.5 9.9 17.3 10.8 18.8 11.6 19.2 11.6
Class C Notes........................ 14.1 9.6 15.8 10.1 17.5 11.3 19.4 11.7 23.4 13.8
</TABLE>
<PAGE> 264
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 6
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
------------------------------------
10% 0% -8% -15% -20%
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes....................................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class A-2 Notes....................................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class B Notes......................................... 7.1% 7.1% 7.1% 7.1% 7.1%
Class C Notes......................................... 8.0% 8.0% 8.0% 8.0% 8.0%
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 9
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
-------------------------------------------------------------------
10% 0% 8% -15% -20%
----------- ----------- ----------- ----------- -----------
EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG. EXP. AVG.
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes...................... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes...................... 9.0 4.9 9.1 4.9 9.1 4.9 10.1 4.9 10.1 4.9
Class B Notes........................ 14.9 10.0 16.2 10.1 17.3 10.8 18.8 11.6 19.2 11.6
Class C Notes........................ 15.2 9.9 16.4 10.2 17.5 11.3 19.4 11.7 21.4 12.1
</TABLE>
YIELDS ON THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN GROSS REVENUE BEGINNING IN YEAR 9
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
PERMANENT CHANGE IN GROSS REVENUE
---------------------------------
10% 0% -8% -15% -20%
--- --- --- ---- ----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes.......................................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class A-2 Notes.......................................... 6.4% 6.4% 6.4% 6.4% 6.4%
Class B Notes............................................ 7.1% 7.1% 7.1% 7.1% 7.1%
Class C Notes............................................ 8.0% 8.0% 8.0% 8.0% 8.0%
</TABLE>
<PAGE> 265
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE BEGINNING IN YEAR 1
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS 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>
Class A-1 Notes................................. 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes................................. 9.1 4.9 8.9 4.8 8.9 4.8 8.9 4.8
Class B Notes................................... 17.3 10.8 17.3 11.5 17.3 11.5 17.3 11.5
Class C Notes................................... 17.5 11.3 17.5 11.3 17.5 11.3 17.5 11.3
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE BEGINNING IN YEAR 5
BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
<CAPTION>
ADJUSTED PORTFOLIO VALUE AS 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>
Class A-1 Notes................................. 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Class A-2 Notes................................. 9.1 4.9 8.9 4.9 8.9 4.9 8.9 4.9
Class B Notes................................... 17.3 10.8 17.3 11.4 17.3 11.4 17.3 11.4
Class C Notes................................... 17.5 11.3 17.5 11.3 17.5 11.3 17.5 11.3
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS B
NOTES ASSUMING A RECESSION LASTING THREE YEARS BASED ON THE MODIFIED ASSUMED
CASE
<TABLE>
Decline in Gross Revenue............ 0.0% 8.0% 10.0% 20.0%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Value....... 100.0% 100.0% 90.0% 80.0%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF YEAR: EXP AVG EXP AVG EXP AVG EXP AVG
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 16.7 10.0 17.3 10.8 17.4 11.4 18.8 11.6
3 16.8 10.0 17.3 10.8 17.4 11.4 18.6 11.6
5 16.9 10.0 17.3 10.8 17.4 11.3 18.4 11.5
10 17.0 10.3 17.3 10.8 17.4 11.3 17.9 11.4
</TABLE>
<PAGE> 266
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS B
NOTES ASSUMING A RECESSION LASTING FIVE YEARS BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
Decline in Gross Revenue............ 0.0% 8.0% 10.0% 20.0%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Value....... 100.0% 100.0% 90.0% 80.0%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF YEAR: EXP AVG EXP AVG EXP AVG EXP AVG
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 16.1 10.0 17.3 10.8 17.5 11.5 19.2 11.7
3 16.3 10.0 17.3 10.8 17.5 11.4 18.8 11.6
5 16.4 10.0 17.3 10.8 17.4 11.4 18.8 11.6
10 17.0 10.3 17.3 10.8 17.4 11.4 18.4 11.5
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS C
NOTES ASSUMING A RECESSION LASTING THREE YEARS BASED ON THE MODIFIED ASSUMED
CASE
<TABLE>
Decline in Gross Revenue.........
0.0% 8.0% 10.0% 20.0%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Value.... 100.0% 100.0% 90.0% 80.0%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF
YEAR: EXP AVG EXP AVG EXP AVG EXP AVG
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 16.9 10.3 17.5 11.3 17.8 11.3 19.3 11.7
3 17.0 10.3 17.5 11.3 17.8 11.3 18.9 11.6
5 17.1 10.3 17.5 11.3 17.8 11.3 18.7 11.6
10 17.3 10.5 17.5 11.3 17.7 11.3 18.4 11.4
</TABLE>
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF THE INITIAL CLASS C
NOTES ASSUMING A RECESSION LASTING FIVE YEARS BASED ON THE MODIFIED ASSUMED CASE
<TABLE>
Decline in Gross Revenue.........
0.0% 8.0% 10.0% 20.0%
----------- ----------- ----------- -----------
Adjusted Portfolio Value as a
Percentage of Assumed Value.... 100.0% 100.0% 90.0% 80.0%
----------- ----------- ----------- -----------
RECESSION BEGINS
AT START OF
YEAR: EXP AVG EXP AVG EXP AVG EXP AVG
-- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 16.4 10.2 17.5 11.3 17.9 11.3 20.6 12.0
3 16.6 10.2 17.5 11.3 17.8 11.3 19.4 11.8
5 16.8 10.3 17.5 11.3 17.8 11.3 19.4 11.8
10 17.2 10.4 17.5 11.3 17.8 11.3 18.8 11.6
</TABLE>
<PAGE> 267
- ------------------------------------------------------
- ------------------------------------------------------
AIRCRAFT FINANCE HAS NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER MADE BY THIS PROSPECTUS AND YOU
MUST NOT RELY ON ANY SUCH INFORMATION OR REPRESENTATIONS AS HAVING BEEN
AUTHORIZED BY AIRCRAFT FINANCE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER WILL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AIRCRAFT FINANCE SINCE THE DATE AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH THE
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING THE OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN SOLICITATION.
-------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999, ALL BROKER DEALERS THAT EFFECT TRANSACTIONS IN
THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE BROKER-DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO ANY UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$1,145,000,000
AIRCRAFT FINANCE TRUST
-------------------------
PROSPECTUS
-------------------------
OFFER TO EXCHANGE
CLASS A-1 FLOATING RATE ASSET BACKED
NOTES, SERIES 1999-1,
CLASS A-2 FLOATING RATE ASSET BACKED
NOTES, SERIES 1999-1,
CLASS B FLOATING RATE ASSET BACKED
NOTES, SERIES 1999-1
AND
CLASS C FIXED RATE ASSET BACKED
NOTES, SERIES 1999-1
, 1999
------------------------------------------------------
------------------------------------------------------
<PAGE> 268
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Amended and Restated Trust Agreement (the "Trust Agreement") of
Aircraft Finance Trust dated as of May 4, 1999 provides that Aircraft Finance
Trust will indemnify, to the fullest extent permitted by Delaware law, each
trustee (and the officers, directors, employees, heirs, executors or
administrators of each trustee) who was or is a party or is threatened to be
made a party to, or is involved in any threatened, pending or completed action
or suit by or in the right of Aircraft Finance Trust to procure a judgment in
its favor by reason of the fact that such person is or was a trustee of Aircraft
Finance Trust or is or was serving at the request of Aircraft Finance Trust as a
trustee, director or officer of another trust, corporation, partnership, joint
venture or other enterprise. Aircraft Finance Trust also agreed to indemnify, to
the fullest extent permitted by Delaware law, each trustee of Aircraft Finance
Trust from any and all losses, liabilities or expenses that may be imposed on,
incurred by or asserted against any of them arising out of, in connection with
or related to their performance under the Trust Agreement.
ITEM 21. EXHIBITS
(a) Exhibits
The following is a list of exhibits to this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
3.1 Certificate of Trust of Aircraft Finance Trust.*
3.2 Amended and Restated Trust Agreement of Aircraft Finance
Trust dated as of May 4, 1999.*
4.1 Indenture dated as of May 5, 1999 between Aircraft Finance
Trust, Resource/Phoenix, Inc. and Bankers Trust Company.*
4.2 Form of Global Note (included in Exhibit 4.1).*
4.4 Registration Rights Agreement dated as of May 5, 1999
between Aircraft Finance Trust and Lehman Brothers Inc.*
5.1 Opinion of Milbank, Tweed, Hadley & McCloy LLP as to the
legality of the securities being registered hereby.*
5.2 Opinion of Morris, James, Hitchens & Williams as to the
legality of the securities being registered hereby.*
8. Opinion of Milbank, Tweed, Hadley & McCloy LLP as to certain
U.S. Federal income tax matters (included in Exhibit 5.1).*
10.1 Master Aircraft Purchase Agreement, dated as of May 5, 1999
among General Electric Capital Corporation, Aircraft Finance
Trust, the Sellers listed on Annex A thereto and AFT
Trust-Sub I.*
10.2 Security Trust Agreement dated as of May 5, 1999 between
Aircraft Finance Trust, Bankers Trust Company, AFT Trust-Sub
I and Aircraft Finance Trust Ireland, Limited.*
10.3 Servicing Agreement dated as of May 5, 1999 among GE Capital
Aviation Services, Limited and Aircraft Finance Trust.*
</TABLE>
II-1
<PAGE> 269
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
10.4 Administrative Agency Agreement dated as of May 5, 1999
between Bankers Trust Company, Aircraft Finance Trust,
ReSource/Phoenix, Inc., AFT Trust-Sub I and Aircraft Finance
Trust Ireland, Limited.*
10.5 Reference Agency Agreement dated as of May 5, 1999 between
Bankers Trust Company, Aircraft Finance Trust and
ReSource/Phoenix, Inc.*
10.6 Master Swap Agreement and Schedule dated as of May 5, 1999
between Aircraft Finance Trust and Lehman Brothers Financial
Products Inc.*
12. Statement re Computation of Ratio of Earnings to Fixed
Charges.*
21. Subsidiaries of Aircraft Finance Trust.*
23.1 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in
Exhibit 5.1).*
23.2 Consent of Morris, James, Hitchens & Williams (included in
Exhibit 5.2).*
23.3 Consent of Aircraft Information Services, Inc.**
23.4 Consent of BK Associates, Inc.**
23.5 Consent of Morton, Beyer & Agnew.**
23.6 Consent of PricewaterhouseCoopers LLP.**
23.7 Consent of Weil, Gotshal & Manges LLP.**
23.8 Consent of Simat, Helliesen & Eichner.**
25.1 Statement of Eligibility and Qualification of Trustee on
Form T-1 of Bankers Trust Company of New York under the
Trust Indenture Act of 1939.*
27.1 Financial Data Schedule.**
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients; Form of Instructions to
Registered Holder and/or Book-Entry Transfer Facility
Participant from Aircraft Finance Trust.*
99.4 Appraisal of Aircraft Information Services, Inc.*
99.5 Appraisal of BK Associates, Inc.*
99.6 Appraisal of Morton, Beyer & Agnew.*
</TABLE>
- ---------------
* Previously filed
** Filed herewith
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether
II-2
<PAGE> 270
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually, or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-3
<PAGE> 271
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Aircraft
Finance Trust has duly caused this Amendment No. 4 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
AIRCRAFT FINANCE TRUST
by Wilmington Trust Company,
not in its individual capacity but
solely as the Owner Trustee
By: /s/ CHARISSE L. RODGERS
------------------------------------
Name: Charisse L. Rodgers
Title: Senior Financial Services
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of Aircraft Finance Trust and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ DAVID H. TREITEL Controlling Trustee December 14, 1999
- ---------------------------------------------------
David H. Treitel
/s/ RICHARD E. CAVANAGH Controlling Trustee December 14, 1999
- ---------------------------------------------------
Richard E. Cavanagh
/s/ WAYNE D. LIPPMAN Controlling Trustee December 14, 1999
- ---------------------------------------------------
Wayne D. Lippman
/s/ CHARISSE L. RODGERS Owner Trustee December 14, 1999
- ---------------------------------------------------
Wilmington Trust Company, not in its individual
capacity but as the Owner Trustee
</TABLE>
II-4
<PAGE> 272
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
3.1 Certificate of Trust of Aircraft Finance Trust.*
3.2 Amended and Restated Trust Agreement of Aircraft Finance
Trust dated as of May 4, 1999.*
4.1 Indenture dated as of May 5, 1999 between Aircraft Finance
Trust, Resource/Phoenix, Inc. and Bankers Trust Company.*
4.2 Form of Global Note (included in Exhibit 4.1).*
4.4 Registration Rights Agreement dated as of May 5, 1999
between Aircraft Finance Trust and Lehman Brothers Inc.*
5.1 Revised Opinion of Milbank, Tweed, Hadley & McCloy LLP as to
the legality of the securities being registered hereby.*
5.2 Opinion of Morris, James, Hitchens & Williams as to the
legality of the securities being registered hereby.*
8. Opinion of Milbank, Tweed, Hadley & McCloy LLP as to certain
U.S. Federal income tax matters (included in Exhibit 5.1).*
10.1 Master Aircraft Purchase Agreement dated as of May 5, 1999
among General Electric Capital Corporation, Aircraft Finance
Trust, the Sellers listed on Annex A thereto and AFT
Trust-Sub I.*
10.2 Security Trust Agreement dated as of May 5, 1999 between
Aircraft Finance Trust, Bankers Trust Company, AFT Trust-Sub
I and Aircraft Finance Trust Ireland, Limited.*
10.3 Servicing Agreement dated as of May 5, 1999 among GE Capital
Aviation Services, Limited and Aircraft Finance Trust.*
10.4 Administrative Agency Agreement dated as of May 5, 1999
between Bankers Trust Company, Aircraft Finance Trust,
ReSource/Phoenix, Inc., AFT Trust-Sub I and Aircraft Finance
Trust Ireland, Limited.*
10.5 Reference Agency Agreement dated as of May 5, 1999 between
Bankers Trust Company, Aircraft Finance Trust and
ReSource/Phoenix, Inc.*
10.6 Master Swap Agreement and Schedule dated as of May 5, 1999
between Aircraft Finance Trust and Lehman Brothers Financial
Products Inc.*
12. Statement re Computation of Ratio of Earnings to Fixed
Charges.*
21. Subsidiaries of Aircraft Finance Trust.*
23.1 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in
Exhibit 5.1).*
23.2 Consent of Morris, James, Hitchens & Williams (included in
Exhibit 5.2).*
23.3 Consent of Aircraft Information Services, Inc.**
23.4 Consent of BK Associates, Inc.**
23.5 Consent of Morton, Beyer & Agnew.**
23.6 Consent of PricewaterhouseCoopers LLP.**
23.7 Consent of Weil, Gotshal & Manges LLP.**
23.8 Consent of Simat, Helliesen & Eichner.**
</TABLE>
<PAGE> 273
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
25.1 Statement of Eligibility and Qualification of Trustee on
Form T-1 of Bankers Trust Company of New York under the
Trust Indenture Act of 1939.*
27.1 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients; Form of Instructions to
Registered Holder and/or Book-Entry Transfer Facility
Participant from Aircraft Finance Trust.*
99.4 Appraisal of Aircraft Information Services, Inc.*
99.5 Appraisal of BK Associates, Inc.*
99.6 Appraisal of Morton, Beyer & Agnew.*
</TABLE>
- ---------------
* Previously filed
** Filed herewith
<PAGE> 1
Exhibit 23.3
[LETTERHEAD OF AIRCRAFT INFORMATION SERVICES, INC.]
December 14, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies and Gentlemen:
Reference is made to Amendment No. 4 to the Registration Statement
on Form S-4 (the "Registration Statement") (file no. 333-82153) of Aircraft
Finance Trust (the "Company"), to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to the
Company's Exchange Offer with respect to its Class A-1, Class A-2, Class B and
Class C notes.
We hereby consent to (i) the use of the information contained in our
appraisal(s) for the dates set forth in the prospectus contained in the
Registration Statement, (ii) the references to our firm in such prospectus,
including the reference under the caption "Experts," (iii) the attaching of our
appraisals or summaries thereof in form and substance satisfactory to us to the
prospectus and (iv) the filing of this letter as an exhibit to the Registration
Statement.
Aircraft Information Services, Inc.
By: /s/ John D. McNicol
-----------------------
Name: John D. McNicol
Title: Vice President
-- Appraisals & Forecasts
<PAGE> 1
Exhibit 23.4
[LETTERHEAD OF BK ASSOCIATES, INC.]
December 14, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, DE 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies & Gentlemen:
Reference is made to Amendment No. 4 to the Registration Statement on Form S-4
(the "Registration Statement") (file no. 333-82153) of Aircraft Finance Trust
(the "Company"), to be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, relating to the Company's Exchange Offer
with respect to its Class A-1, Class A-2, Class B and Class C Notes.
We hereby consent to (i) the use of the information contained in our
appraisal(s) for the dates set forth in the prospectus contained in the
Registration Statement; (ii) the references to our firm in such prospectus,
including the reference under the caption "Experts"; (iii) the attaching of our
appraisals or summaries thereof in form and substance satisfactory to us to the
prospectus; and (iv) the filing of this letter as an exhibit to the Registration
Statement.
Sincerely yours,
BK ASSOCIATES, INC.
/s/ R. L. Britton
R. L. Britton
Vice President
ISTAT Certified Appraiser
RLB/kf
<PAGE> 1
Exhibit 23.5
[LETTERHEAD OF MORTEN BEYER & AGNEW]
December 14, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies and Gentlemen:
Reference is made to Amendment No. 4 to the Registration Statement on Form
S-4 (the "Registration Statement") (file no. 333-82153) of Aircraft Finance
Trust (the "Company"), to be filed with the Securities and Exchange Commission
under the Securities Act of 1993, as amended, relating to the Company's Exchange
Offer with respect to its Class A-1, Class A-2, Class B and Class C Notes.
We hereby consent to (i) the use of the information contained in our
appraisal(s) for the dates set forth in the prospectus contained in the
Registration Statement, (ii) the references to our firm in such prospectus,
including the reference under caption "Experts," (iii) the attaching of our
appraisals or summaries thereof in form and substance satisfactory to us to the
prospectus and (iv) the filing of this letter as an exhibit to the Registration
Statement.
MORTEN BEYER & AGNEW, INC.
/s/ Bryson P. Monteleone
Bryson P. Monteleone
Director of Operations
<PAGE> 1
Exhibit 23.6
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Amendment No. 4 to the Registration
Statement on Form S-4 of Aircraft Finance Trust and subsidiaries of our report
dated June 22, 1999 relating to the balance sheet of Aircraft Finance Trust and
subsidiaries, which appears in such Registration Statement. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
______________________________
PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
December 14, 1999
<PAGE> 1
Exhibit 23.7
[Weil Gotshal & Manges Letterhead]
December 14, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies and Gentlemen:
Reference is made to Amendment No. 4 to the Registration Statement
on Form S-4 (the "Registration Statement") (file no. 333-82153) of Aircraft
Finance Trust, a Delaware business trust (the "Company"), relating to the
Company's Exchange Offer with respect to its Class A-1, Class A-2, Class B and
Class C Notes.
We hereby consent to (i) the reference to our firm in the "The
Initial Aircraft and Initial Leases - Bankruptcy considerations relating to
"true sale" and "consolidation issues" and "Taxation - U.S. Federal Income Tax
Consequences - Tax Characterization of Aircraft Finance as a Partnership"
sections of the prospectus which forms a part of the Registration Statement, and
(ii) the filing of this letter as an exhibit to the Registration Statement.
Sincerely,
/s/ Weil, Gotshal & Manges LLP
<PAGE> 1
Exhibit 23.8
[LETTERHEAD OF SIMAT, HELLIESEN & EICHNER, INC.]
December 14, 1999
Aircraft Finance Trust
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Re: Aircraft Finance Trust, Series 1999-1
Ladies and Gentlemen:
Reference is made to Amendment No. 4 to the Registration Statement
on Form S-4 (the "Registration Statement") (file no. 333-82153) of Aircraft
Finance Trust (the "Company"), to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to the
Company's Exchange Offer with respect to its Class A-1, Class A-2, Class B and
Class C Notes.
We hereby consent to (i) the inclusion of "The Commercial Aircraft
Industry" section in the prospectus contained in the Registration Statement,
(ii) the references to our firm in such prospectus, including the reference
under the caption "Experts" and (iii) the filing of this letter as an exhibit to
the Registration Statement.
SIMAT, HELLIESEN & EICHNER, INC.
By: /s/ Clive G. Medland
------------------------
Clive G. Medland
Vice President
