1
EXHIBIT 3
STRESS TABLES
STRESSES
In the following tables, we have applied various stresses to our Base Case.
There are two types of stress that we use:
- A REDUCTION IN LEASE RENTALS: in our Base Case, net stress-related costs
result in a 4.5% reduction in lease rentals. In the tables, as a stress
to our Base Case, we have applied a further change in lease rentals, by
the percentages shown. We have used this change in addition to the 4.5%
Base Case reduction, and kept the other assumptions constant, as a proxy
for the change in the amount of net cash available to repay principal
that would result in any circumstances where there was any combination
of (1) an increase or reduction in lease rentals, (2) an increase or
reduction in net stress-related costs, (3) an increase or reduction in
aircraft operating expenses, (4) an increase or reduction in SG&A and
(5) an increase or reduction in interest costs, including swap costs.
- A DECLINE IN PORTFOLIO VALUE: in our Base Case, we assume that aircraft
values decline over time in accordance with the depreciation curve that
is used to determine the Assumed Portfolio Value under our indenture. In
the tables, as a stress to our Base Case, we have set the Adjusted
Portfolio Value, at a specified percentage of the Assumed Portfolio
Value under our Base Case. You should refer to MSAF's prospectus dated
November 4, 1998 under "Description of the Notes -- Payment of Principal
and Interest -- Principal Amortization" for a description of the
depreciation curve and how the Assumed Portfolio Value and the Adjusted
Portfolio Value are determined. We have used this reduction in portfolio
value to illustrate the effects of a decline in the value of our
aircraft that is greater than what the Base Case assumes.
EFFECT OF A PERMANENT CHANGE IN LEASE RENTALS
In preparing the tables below, we have started with our Base Case and have
varied lease rentals, by the indicated percentages, beginning in years 3 and 6.
If our lease rentals were to vary as shown below and all of the other
assumptions were to prove correct, then the expected maturities and weighted
average lives of the respective subclasses of 1998 Notes would be as shown
below. Statements of yields for a particular subclass of notes in these tables
are based on the assumption that the purchase price for such notes is 100% of
the face value.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF 1998 NOTES
ASSUMING A PERMANENT CHANGE IN LEASE RENTALS, BEGINNING IN YEAR 3
PERMANENT CHANGE IN LEASE RENTALS
AS A PERCENTAGE OF LEASE RENTALS
-----------------------------------------------------------------------
BASE CASE BASE CASE BASE CASE BASE CASE
+ 10% + 5% BASE CASE - 5% - 10%
------------ ------------ ----------- ------------ ------------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Subclass A-2....................................... 5.5 3.0 5.5 3.0 5.5 3.1 6.1 3.3 6.8 3.5
Subclass B-1....................................... 13.0 6.7 13.0 6.7 13.0 6.7 14.0 6.7 14.0 6.8
Subclass C-1....................................... 12.3 8.6 13.0 8.6 13.0 8.6 15.1 10.2 16.6 12.5
Subclass D-1....................................... 12.2 9.7 14.0 10.1 14.0 10.1 17.0 12.3 (1)
- ---------------
(1) Not all principal repaid prior to Final Maturity Date (Yield = 5.13%).
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EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF 1998 NOTES
ASSUMING A PERMANENT CHANGE IN LEASE RENTALS, BEGINNING IN YEAR 6
PERMANENT CHANGE IN LEASE RENTALS
AS A PERCENTAGE OF LEASE RENTALS
-----------------------------------------------------------------------
BASE CASE BASE CASE BASE CASE BASE CASE
+ 10% + 5% BASE CASE - 5% - 10%
------------ ------------ ----------- ------------ ------------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Subclass A-2....................................... 5.5 3.1 5.5 3.1 5.5 3.1 6.8 3.1 6.8 3.1
Subclass B-1....................................... 13.0 6.7 13.0 6.7 13.0 6.7 14.0 6.7 14.0 6.7
Subclass C-1....................................... 13.0 8.6 13.0 8.6 13.0 8.6 15.0 9.6 15.6 10.2
Subclass D-1....................................... 13.6 10.1 14.0 10.1 14.0 10.1 16.0 11.6 21.0 16.2
- ---------------
(1) Not all principal repaid prior to Final Maturity Date (Yield = 8.05%).
EFFECT OF PERMANENT DECLINE IN PORTFOLIO VALUE
If the Adjusted Portfolio Value becomes significantly less than the Assumed
Portfolio Value under the Base Case, the Scheduled Principal Payment Amount
payable to holders of the class A notes may be increased. Payment of this
increased amount may shorten the weighted average lives of the class A notes and
lengthen the weighted average lives of the subclasses of notes that rank behind
the class A notes in priority of payment. The following tables show the expected
maturity and weighted average life of each subclass of 1998 Notes if the
Adjusted Portfolio Value permanently declined to a given percentage of the
Assumed Portfolio Value, beginning in years 1 and 5.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF 1998 NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE, BEGINNING IN YEAR 1
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE BEGINNING IN YEAR 1
---------------------------------------------------------
100%* 90% 80% 70%
------------ ------------ ------------ ------------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
Subclass A-2................................................ 5.5 3.1 6.7 3.0 5.5 3.0 5.5 3.0
Subclass B-1................................................ 13.0 6.7 13.0 6.7 13.0 6.8 13.0 6.8
Subclass C-1................................................ 13.0 8.6 13.0 8.8 13.0 9.9 13.7 10.3
Subclass D-1................................................ 14.0 10.1 14.0 10.2 14.0 11.4 14.2 11.7
- ---------------
* Base Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF 1998 NOTES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE, BEGINNING IN YEAR 5
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE BEGINNING IN YEAR 5
------------------------------------------------------------
100%* 90% 80% 70%
------------ ------------ ------------ ------------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
Subclass A-2........................................... 5.5 3.1 5.5 3.1 5.5 3.1 5.5 3.1
Subclass B-1........................................... 13.0 6.7 13.0 6.7 13.0 6.7 13.0 6.8
Subclass C-1........................................... 13.0 8.6 13.0 8.7 13.0 9.8 13.8 10.2
Subclass D-1........................................... 14.0 10.1 14.0 10.1 14.0 11.4 14.3 11.7
- ---------------
*Base Case
EFFECT OF CYCLICAL VARIATIONS IN LEASE RENTALS AND PORTFOLIO VALUE --
"RECESSION SCENARIOS"
Historically, the aviation industry has experienced cyclical swings in the
supply and demand for aircraft. We would be negatively affected by a decline in
the demand for aircraft. We have assumed that such a decline
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in demand or "RECESSION" will result in a decline in aircraft values, as well as
an increase in defaults and downtime and a decline in operating lease rental
rates.
We have prepared the following tables to show the effect on expected
maturities and weighted average lives of the subclass B-1, C-1 and D-1 notes if
recessions of different lengths were to occur in the future. In preparing the
following tables we have assumed that a recession would have the following
effect on MSAF group:
- Aircraft values would fall on the first day of the recession to a given
percentage of the Assumed Portfolio Value under the Base Case. This
decrease would trigger an increase in Scheduled Principal Payment
Amounts on the class A notes being paid if amounts were available.
- After a period of two years following the first day of the recession, we
have reduced lease rentals by a given percentage as a proxy for a
combination of the reduction in lease rentals and the increase in net
stress-related costs that we assume would occur as aircraft were
re-leased or lessees defaulted. This would result in less cash flow
being available to make payments of interest and principal on the 1998
Notes.
- The recession would last a given period of time. Afterwards, the
Adjusted Portfolio Value would return to the Assumed Portfolio Value
under the Base Case on the first day after the recession. Two years
after the end of the recession, lease rentals would return to the Base
Case.
Actual experience will likely differ from the assumptions we have used in
preparing the following tables. Specifically, we can give no assurance that
periods of weak traffic growth and lower demand for aircraft will be followed by
periods of strong growth and high demand for aircraft nor can we give any
assurance that following a recession aircraft values and lease rentals will
return to Base Case levels. Because actual experience will likely differ from
those assumptions, the actual maturities and weighted average lives of the 1998
Notes will likely differ from what is shown in the tables below.
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EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS B-1
NOTES ASSUMING A RECESSION LASTING THREE YEARS
DECLINE IN LEASE RENTALS AS A PERCENTAGE OF LEASE
RENTALS.......................................... Base Case Base Case -5% Base Case -10%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF ASSUMED
PORTFOLIO VALUE.................................. 100%* 90% 80%
EXP AVG EXP AVG EXP AVG
--------- --------- --------- --------- --------- ---------
Recession begins at start of Year
1 (closing date)................................. 13.0 6.7 13.0 6.7 14.1 6.8
3................................................ 13.0 6.7 13.0 6.7 13.2 6.8
5................................................ 13.0 6.7 13.0 6.7 13.2 6.8
10............................................... 13.0 6.7 13.0 6.7 13.2 6.7
- ---------------
* Base Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS B-1
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
DECLINE IN LEASE RENTALS AS A PERCENTAGE OF LEASE
RENTALS.......................................... Base Case Base Case -5% Base Case -10%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF ASSUMED
PORTFOLIO VALUE.................................. 100%* 90% 80%
EXP AVG EXP AVG EXP AVG
--------- --------- --------- --------- --------- ---------
Recession begins at start of Year
1 (closing date)................................. 13.0 6.7 13.2 6.7 14.0 6.8
3................................................ 13.0 6.7 13.0 6.8 14.0 6.8
5................................................ 13.0 6.7 13.0 6.7 14.0 6.8
10............................................... 13.0 6.7 13.0 6.7 14.0 6.7
- ---------------
* Base Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS C-1
NOTES ASSUMING A RECESSION LASTING THREE YEARS
DECLINE IN LEASE RENTALS AS A PERCENTAGE OF LEASE
RENTALS.......................................... Base Case Base Case -5% Base Case -10%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF ASSUMED
PORTFOLIO VALUE.................................. 100%* 90% 80%
EXP AVG EXP AVG EXP AVG
--------- --------- --------- --------- --------- ---------
Recession begins at start of Year
1 (closing date)................................. 13.0 8.6 13.1 8.7 15.0 10.5
3................................................ 13.0 8.6 13.1 8.8 15.1 10.2
5................................................ 13.0 8.6 13.1 8.7 13.9 9.6
10............................................... 13.0 8.6 13.0 8.6 13.2 9.1
- ---------------
* Base Case
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EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS C-1
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
DECLINE IN LEASE RENTALS AS A PERCENTAGE OF LEASE
RENTALS.......................................... Base Case Base Case -5% Base Case -10%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF ASSUMED
PORTFOLIO VALUE.................................. 100%* 90% 80%
EXP AVG EXP AVG EXP AVG
--------- --------- --------- --------- --------- ---------
Recession begins at start of Year
1 (closing date)................................. 13.0 8.6 14.1 9.7 15.1 10.6
3................................................ 13.0 8.6 13.2 9.2 15.0 10.5
5................................................ 13.0 8.6 13.1 8.8 15.0 10.4
10............................................... 13.0 8.6 13.1 8.6 14.4 9.6
- ---------------
* Base Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS D-1
NOTES ASSUMING A RECESSION LASTING THREE YEARS
DECLINE IN LEASE RENTALS AS A PERCENTAGE OF LEASE
RENTALS.......................................... Base Case Base Case -5% Base Case -10%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF ASSUMED
PORTFOLIO VALUE.................................. 100%* 90% 80%
EXP AVG EXP AVG EXP AVG
--------- --------- --------- --------- --------- ---------
Recession begins at start of Year
1 (closing date)................................. 14.0 10.1 14.4 11.1 16.0 12.0
3................................................ 14.0 10.1 14.0 10.6 16.0 11.9
5................................................ 14.0 10.1 14.0 10.3 15.6 11.7
10............................................... 14.0 10.1 14.0 10.3 14.9 10.9
- ---------------
* Base Case
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF SUBCLASS D-1
NOTES ASSUMING A RECESSION LASTING FIVE YEARS
DECLINE IN LEASE RENTALS AS A PERCENTAGE OF LEASE
RENTALS.......................................... Base Case Base Case -5% Base Case -10%
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF ASSUMED
PORTFOLIO VALUE.................................. 100%* 90% 80%
EXP AVG EXP AVG EXP AVG
--------- --------- --------- --------- --------- ---------
Recession begins at start of Year
1 (closing date)................................. 14.0 10.1 15.6 11.9 16.3 12.3
3................................................ 14.0 10.1 15.1 11.6 16.0 12.1
5................................................ 14.0 10.1 14.3 11.2 16.0 12.0
10............................................... 14.0 10.1 14.0 10.5 16.0 11.4
- ---------------
* Base Case
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EFFECT OF CHANGES IN LEASE RENTALS ON YIELDS OF FIXED RATE NOTES
In preparing the tables below, we have started with our Base Case and
varied lease rentals by the indicated percentages, beginning in certain years,
for a period of three years in one case and permanently in the other. If our
lease rentals were to vary as shown below and all of the other assumptions were
to prove correct, then the yield to maturity for the subclass C-1 and D-1 notes
would be as shown below. If lease rentals significantly declined, there might
not be sufficient revenues available to meet interest and principal payments on
the 1998 Notes. In such cases, interest on the 1998 Notes would be deferred.
YIELD, DATE OF FIRST DEFERRAL AND NUMBER OF MONTHS IN WHICH INTEREST IS DEFERRED
ON THE
SUBCLASS C-1 NOTES GIVEN THE ASSUMPTIONS BUT WITH A THREE YEAR CHANGE IN LEASE
RENTALS
OF THE MAGNITUDE SHOWN
CHANGE IN LEASE RENTALS, AS A PERCENTAGE OF LEASE RENTALS,
BEGINNING IN YEAR:
---------------------------------------------------------------------------------------------
3 6 9
----------------------------- ----------------------------- -----------------------------
DATE OF DATE OF DATE OF
FIRST MONTHS OF FIRST MONTHS OF FIRST MONTHS OF
CHANGE IN LEASE RENTALS YIELD DEFERRAL DEFERRALS YIELD DEFERRAL DEFERRALS YIELD DEFERRAL DEFERRALS
- ----------------------- ------ -------- --------- ------ -------- --------- ------ -------- ---------
Base Case + 5%................ 7.00% None 0 7.00% None 0 7.00% None 0
Base Case..................... 7.00% None 0 7.00% None 0 7.00% None 0
Base Case - 5%................ 7.00% None 0 7.00% None 0 7.00% None 0
Base Case - 10%............... 7.00% None 0 7.00% None 0 7.00% None 0
YIELD, DATE OF FIRST DEFERRAL AND NUMBER OF MONTHS IN WHICH INTEREST IS DEFERRED
ON THE
SUBCLASS C-1 NOTES GIVEN THE ASSUMPTIONS BUT WITH A PERMANENT CHANGE IN LEASE
RENTALS
OF THE MAGNITUDE SHOWN
CHANGE IN LEASE RENTALS, AS A PERCENTAGE OF LEASE RENTALS,
BEGINNING IN YEAR:
---------------------------------------------------------------------------------------------
3 6 9
----------------------------- ----------------------------- -----------------------------
DATE OF DATE OF DATE OF
FIRST MONTHS OF FIRST MONTHS OF FIRST MONTHS OF
CHANGE IN LEASE RENTALS YIELD DEFERRAL DEFERRALS YIELD DEFERRAL DEFERRALS YIELD DEFERRAL DEFERRALS
- ----------------------- ------ -------- --------- ------ -------- --------- ------ -------- ---------
Base Case + 5%.............. 7.00% None 0 7.00% None 0 7.00% None 0
Base Case................... 7.00% None 0 7.00% None 0 7.00% None 0
Base Case - 5%.............. 7.00% None 0 7.00% None 0 7.00% None 0
Base Case - 10%............. 7.00% Sep-2007 91 7.00% Jun-2011 23 7.00% None 0
YIELD, DATE OF FIRST DEFERRAL AND NUMBER OF MONTHS IN WHICH INTEREST IS DEFERRED
ON THE
SUBCLASS D-1 NOTES GIVEN THE ASSUMPTIONS BUT WITH A THREE YEAR CHANGE IN LEASE
RENTALS
OF THE MAGNITUDE SHOWN
CHANGE IN LEASE RENTALS, AS A PERCENTAGE OF LEASE RENTALS,
BEGINNING IN YEAR:
---------------------------------------------------------------------------------------------
3 6 9
----------------------------- ----------------------------- -----------------------------
DATE OF DATE OF DATE OF
FIRST MONTHS OF FIRST MONTHS OF FIRST MONTHS OF
CHANGE IN LEASE RENTALS YIELD DEFERRAL DEFERRALS YIELD DEFERRAL DEFERRALS YIELD DEFERRAL DEFERRALS
- ----------------------- ------ -------- --------- ------ -------- --------- ------ -------- ---------
Base Case + 5%................ 8.86% None 0 8.86% None 0 8.86% None 0
Base Case..................... 8.86% None 0 8.86% None 0 8.86% None 0
Base Case - 5%................ 8.86% None 0 8.86% None 0 8.86% None 0
Base Case - 10%............... 8.86% None 0 8.86% None 0 8.86% None 0
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YIELD, DATE OF FIRST DEFERRAL AND NUMBER OF MONTHS IN WHICH INTEREST IS DEFERRED
ON THE
SUBCLASS D-1 NOTES GIVEN THE ASSUMPTIONS BUT WITH A PERMANENT CHANGE IN LEASE
RENTALS
OF THE MAGNITUDE SHOWN
CHANGE IN LEASE RENTALS, AS A PERCENTAGE OF LEASE RENTALS,
BEGINNING IN YEAR:
---------------------------------------------------------------------------------------------
3 6 9
----------------------------- ----------------------------- -----------------------------
DATE OF DATE OF DATE OF
FIRST MONTHS OF FIRST MONTHS OF FIRST MONTHS OF
CHANGE IN LEASE RENTALS YIELD DEFERRAL DEFERRALS YIELD DEFERRAL DEFERRALS YIELD DEFERRAL DEFERRALS
- ----------------------- ------ -------- --------- ------ -------- --------- ------ -------- ---------
Base Case + 5%............ 8.86% None 0 8.86% None 0 8.86% None 0
Base Case................. 8.86% None 0 8.86% None 0 8.86% None 0
Base Case - 5%............ 8.86% Feb-2013 38 8.86% None 0 8.86% None 0
Base Case - 10%........... 5.13% Sep-2007 211 8.86% Mar-2011 103 8.86% Feb-2015 16
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EFFECT OF AIRCRAFT SALES
We have prepared the tables below based on the assumptions, except that we
have assumed that each year we sell aircraft representing the indicated
percentages of the adjusted portfolio value, beginning in years 1, 5 and 9. If
MSAF group made annual aircraft sales as shown below and all of the other
assumptions were to prove correct, then the expected maturities and weighted
average lives of the respective subclasses of 1998 Notes would be as shown
below.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF 1998 NOTES
ASSUMING ANNUAL AIRCRAFT SALES OF THE MAGNITUDE SHOWN, BEGINNING IN YEAR 1
PERCENTAGE OF ASSUMED PORTFOLIO VALUE SOLD BEGINNING IN
YEAR 1
--------------------------------------------------------
0%* 1.0% 2.0% 3.0%
----------- ----------- ------------- ------------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ----- ---- ----
Subclass A-2............................................... 5.4 2.8 4.8 2.5 4.2 2.2 4.0 2.0
Subclass B-1............................................... 13.0 7.0 13.0 6.6 13.0 6.2 13.3 5.7
Subclass C-1............................................... 13.2 8.4 15.0 8.6 15.0 9.1 15.9 9.4
Subclass D-1............................................... 14.0 10.1 20.0 13.1 (1) (2)
- ---------------
* Base Case
(1) Not all principal repaid prior to Final Maturity Date (Yield = 7.63%).
(2) Not all principal repaid prior to Final Maturity Date (Yield = 5.30%).
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF 1998 NOTES
ASSUMING ANNUAL AIRCRAFT SALES OF THE MAGNITUDE SHOWN, BEGINNING IN YEAR 5
PERCENTAGE OF ASSUMED PORTFOLIO VALUE SOLD BEGINNING IN
YEAR 5
-------------------------------------------------------
0%* 1.0% 2.0% 3.0%
----------- ----------- ------------ ------------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ----- --- -----
Subclass A-2................................................ 5.4 2.8 5.3 2.8 5.1 2.8 5.1 2.8
Subclass B-1................................................ 13.0 7.0 13.0 6.9 13.0 6.9 13.0 6.8
Subclass C-1................................................ 13.2 8.4 14.3 8.5 15.1 8.6 15.2 8.8
Subclass D-1................................................ 14.0 10.1 20.0 12.6 20.0 12.8 (1)
- ---------------
* Base Case
(1) Not all principal repaid prior to Final Maturity Date (Yield = 8.35%).
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF 1998 NOTES
ASSUMING ANNUAL AIRCRAFT SALES OF THE MAGNITUDE SHOWN, BEGINNING IN YEAR 9
PERCENTAGE OF ASSUMED PORTFOLIO VALUE SOLD BEGINNING
IN YEAR 9
-----------------------------------------------------
0%* 1.0% 2.0% 3.0%
----------- ----------- ----------- -----------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
Subclass A-2................................................ 5.4 2.8 5.4 2.8 5.4 2.8 5.4 2.8
Subclass B-1................................................ 13.0 7.0 13.0 7.0 13.0 7.0 13.0 7.0
Subclass C-1................................................ 13.2 8.4 13.8 8.5 14.0 8.5 14.3 8.5
Subclass D-1................................................ 14.0 10.1 20.0 12.4 20.0 12.4 20.0 12.5
- ---------------
* Base Case
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