K&L Gates Assists on First-of-its-Kind Japanese Operating Lease Asset-Backed Security Transaction

12 June 2019
Tokyo – A team of lawyers from the Tokyo, New York, London, Hong Kong, Singapore, Seattle, and Sydney offices of global law firm K&L Gates has advised JP Lease Products & Services Co., Ltd. (JP Lease) and Stratos Aircraft Management (Stratos) on a first-of-its-kind “JOL AIR 2019-1” aircraft lease asset-backed security (ABS) transaction in which JP Lease acquired 15 aircraft with an aggregate value of US$683.2 million from GE Capital Aviation Services and Pembroke Capital Aircraft, among others, involving 11 lessees in 10 countries across three continents.

This is the first aircraft lease ABS utilizing Japanese operating lease (JOL) equity, as well as JP Lease’s and Stratos’ inaugural ABS as issuer and servicer, respectively. Some of the deal’s unique features include a low weighted average aircraft age of approximately four years, a high weighted average remaining aircraft lease term of approximately 8.3 years, key man servicer replacement provisions, and 100% cash sweep at the bottom of the waterfall for the benefit of the Class A and B noteholders prior to any payment being made to the JOL equity holders.

The K&L Gates’ team that advised on the transaction was comprised of lawyers from the firm’s Tokyo, New York, London, Hong Kong, Singapore, Seattle, and Sydney offices and was led by partner and global head of aviation finance Robert E. Melson, Jr., together with partners Kamil Gerard Ahmed, Sebastian Smith, Neil Campbell and Takahiro Kawaguchi, counsels Misha Kovacevic, Robert Snodgrass and Eiko Grieger, as well as a host of associates and paralegals.

Tokyo partner Melson stated: “We are delighted to have been able to support JP Lease and Stratos on this groundbreaking and sophisticated deal, which not only substantially expands JP Lease’s aircraft portfolio with a broad variety of credits, but also reinforces its capabilities with existing clients and other airlines around the world. The deal also solidifies Stratos’ position as one of the fastest growing independent aircraft servicers. It is exciting to see growth in the JOL market and we are very proud to continue to be actively involved in complex and innovative deals in this space. We expect that this will be a model deal for similar transactions going forward.”

Singapore partner Ahmed said: “We hope this precedent-setting transaction with JP Lease and Stratos will open new possibilities for various players in the aircraft finance space contemplating the use of JOL equity for aircraft lease ABS transactions.”

Tokyo partner Smith added: “This was an incredibly complex transaction that required us to tap into our existing bench strength and global platform to ensure that JP Lease’s interests were best represented and that the transaction successfully closed in a timely manner.”
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