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					China Aeroleasing Summit 2007
Creating an Effective Asset Management
Vehicle through Securitization




Alison Mason, UBS Securities


September 2007
Agenda

 Overview of Market for Aviation Asset Securitizations


 Features of Securitization Structures


 Recent Innovations: Asset Management Models


 Comparison: “Genesis Model” and “Airspeed Model”




                                                          1
Securitization: Optimal Financing for Aviation Assets
Asset characteristics are well-suited to financing through securitization …


  Long economic lives, predictable cash flows
   – Economic lives exceed expected debt repayment period



  Bond tenor/structure recognizes industry cyclicality
   – Expected rather than scheduled amortization



  Structures incorporate lessons learned post-9/11
   – Less aggressive asset valuation/greater credit enhancements



  Issuance growing steadily since 2003 but represents less than ½ of 1% of
   ABS issued each year




                            … Enhanced structures post-9/11 provide protection for investors
                                                                                         2
Lessons Learned Post-9/11
 Diversity in a vacuum is not a virtue
  – More important is liquidity of assets: number and breadth of operators, age/efficiency of assets

                                                                           B737-700
                                                                            12.8%     A319-100
                          MD-80
                                                                                        8.7%
                    MD-11 4.6%
                    6.1%                  767-300ER
              747-400                                       A320-200
                                            26.8%
               7.8%                                           17.3%                              A330-200
                                                                                                   6.2%
           A320-200
            13.6%
                                                                                             A321-200
                                                                                               6.0%

    LIFT
    LIFT                                                AIRSPEED
                                              737-300
  June 2001
  June 2001     737-800
                                    737-400
                                               17.4%     June 2007
                 12.8% 737-700
                              737-500 2.6%                             B737-800
                        6.7% 1.6%
                                                                        49.0%




 Credit enhancement offers protection for severe downturns
  – Committed credit facility: larger size than cash reserves at minimal expense
  – Monoline wrap
  – Reserves for maintenance expenses

 From the investor perspective, reliance on ratings without suitable due diligence of
  portfolio and structure is dangerous
                                                                                                            3
Monoline Wraps
A common feature post- 9/11


 Monolines provide certainty of execution


 Wrap premium + AAA bond pricing costs less than an unwrapped A rating –
  especially in current market with widening spreads


 Monoline is the transaction’s “first investor” - sophisticated underwriting operation
  with detailed cash flow modeling, diligence visits, and document review


 Offers a single party to negotiate with if modifications are needed


 Ambac, Assured Guaranty, FGIC and MBIA are all active in aviation




                                                                                          4
New Investor Base in Aviation Securitizations
Hedge Funds and Private Equity Play Large Role



 Post 9/11, aviation securitization transactions had to attract new investor base in
  order to revive the primary issuance market

 Like many other non-flow products, new communities of investors, such as
  hedge funds, are becoming more important

 As the underlying industry continues to improve, traditional money, such as
  insurance companies and money managers, are returning to the sector

 Wrapped senior tranches are in high demand from investors such as banks and
  money managers

 Unwrapped junior tranches attract hedge funds and others seeking higher yields




                                                                                        5
 Aviation Assets in the Securitization Matrix
Aviation Assets are “Hybrid” Asset Backed Securities



Servicing                       Active Management                     Credit Driven


     Real Estate ABS
                                           Regional
                                                                     Unsecured Debt
                                       Aircraft / Engine
                                        Securitization

                Future Flow
               Securitization
                                        Pooled Aircraft    EETCs/Secured
                                        Securitization         Debt




  Receivable                           Rail/Intermodal
  Financing                            Securitization




                                                                                      6
Why Create an Asset Management Vehicle?

 Aviation leasing is capital intensive and develops concentrations of risk
 Historical method of reducing risk concentrations is selective asset sales – often to
  smaller competitors
 Developing an asset management vehicle offers risk management with additional
  benefits:


    – Retention of customer relationships
    – Ongoing revenue stream from management fees
    – Enhanced return on assets – fee stream on reduced asset base
    – Capital released can be profitably redeployed
    – Monetize asset gains




                                                                                      7
Why Invest in an Asset Management Vehicle?

 Asset diversification by investing in a share of a portfolio


 Active management by experienced leasing company with worldwide coverage


 Running return through dividends


 Potential for residual upside when aircraft are sold




                                                                             8
Capital Structures of Asset Management Vehicles
     – Recent Asset Management Vehicles fall into two categories
        – Low leverage model with equity IPO: Genesis
        – High leverage model with privately sold equity: Airspeed


                           Genesis                         Airspeed


                           G-1 Notes                   G-1 Notes     G-2 Notes
                             (AAA)                       (AAA)         (AAA)
Capitalization:
                                           58%
                                                         C Notes (BBB-)          76.4%
                             Equity                                              79.5%
                                                             Equity
                                           100%                                  100%

  Servicer:                 GECAS                         RBS Aviation

   Home
                            Ireland                          Ireland
Jurisdiction:

                                                                                         9
“Genesis Model” – Public Equity Vehicle

 Single tranche securitization notes with low LTV
 5-years with limited amortization – repayment after year 5 through re-financing
  or “turbo” (sweep all cash for debt repayment)
 With limited amortization, excess cash is available for shareholders


                Pros                                       Cons

   – Liquid investment
                                                – Time and expense to close
   – Easily valued
                                                – Public company disclosure and
   – Potential for follow-on debt and             ongoing reporting
     equity financings
                                                – Requires sponsor to retain
   – Passive investors                            percentage of equity
                                                – Public markets can be fickle
                                                  and event driven



                                                                                    10
Case Study: Genesis Funding Ltd
              Capitalization                                Initial Portfolio Summary


                                              Summary Portfolio Statistics
                                              Initial Appraised Value               $1,398 mm
              G-1 Notes
                                              Number of Aircraft                            41
                                              Number of Lessees                             30
                                  58%
                                              Number of Countries                           17
                Equity
                                              Weighted Average Age of the Portfolio   5.5 years
                                  100%        Weighted Average Remaining Lease Term   5.9 years
              Aircraft Types

                          Other
              A319-100
                          9.7%
              5.5%
      A330-200
       6.8%
                                   B737-800
                                    42.4%
      B747-
      400SF
      8.9%



               A320-200
                26.7%


                                                                                             11
“Airspeed Model” Structured Equity Placement

 Multiple tranche, high LTV securitization notes

 Traditional minimum and expected principal amortization

 Minimum equity dividend relatively high in waterfall

 Diversion of cash to equity dividend lengthens bonds – 8+ year WAL

               Pros                                          Cons

   – 3 – 4 months to close                       – Illiquid investment
   – Limited disclosure and ongoing              – No market for valuation
     reporting to select investor
                                                 – Tax-driven structure involves
     group
                                                   several jurisdictions
   – Knowledgeable, sophisticated
                                                 – Requires “cloning” vehicle for
     but passive investors
                                                   follow-on
   – May sell 100% of equity



                                                                                    12
Case Study: Airspeed Limited 2007-1
             Capitalization                                                    Initial Portfolio Summary


                                                               Summary Portfolio Statistics

     G-1 Notes               G-2 Notes                         Initial Appraised Value                     $1,365.6 mm

                                                               Number of Aircraft                                   36
                                           76.4%               Number of Lessees                                    23
                 C Notes
                                           79.5%               Number of Countries                                  16
                 Equity
                                           100%
                                                               Weighted Average Age of the Portfolio          3.7 years
                                                               Weighted Average Remaining Lease Term          5.3 years
                 Aircraft Types

                           B737-700
                            12.8%        A319-100
                                           8.7%

      A320-200
        17.3%                                       A330-200
                                                      6.2%


                                                A321-200
                                                  6.0%




                    B737-800
                     49.0%


                                                                                                                     13
Contact Information


  Mostafiz Shahmohammed                                                  Cecilia Park                                                                                                                  Mark Sheridan
  Managing Director                                                      Executive Director                                                                                                            Director
  Tel: 212-713-2672                                                      Tel: 212-713-9970                                                                                                             Tel: 212-713-2949
  email: mostafiz.shahmohammed@ubs.com                                   email: cecilia.park@ubs.com                                                                                                   email: mark.sheridan@ubs.com




  Alison Mason                                                           Jennie Jiang                                                                                                                 Gabriel Feghali
  Director                                                               Associate                                                                                                                    Associate
  Tel: 212-713-2573                                                      Tel: 212-713-2464                                                                                                            Tel: 212-713-2692
  email: alison.mason@ubs.com                                            email: jennie.jiang@ubs.com                                                                                                  email: gabriel.feghali@ubs.com




www.ubs.com
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