1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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AIRPLANES PASS THROUGH TRUST
(In whose assets the certificates represent interests)
AIRPLANES LIMITED AIRPLANES U.S. TRUST
Exact Name of Registrants as specified in memorandum of association or trust agreement
(Originators of Airplanes Pass Through Trust and issuers of the Notes and the Guarantees)
JERSEY, CHANNEL ISLANDS DELAWARE
(State or other jurisdiction of incorporation or organization)
6189 13-3521640
SIC Code I.R.S. Employer Identification No.
22 Grenville Street 1100 North Market Street,
St. Helier Rodney Square North
Jersey, JE4 8PX Wilmington, Delaware
Channel Islands 19890-1000
+ 44 1534 609 000 +1 302 651 1000
(Addresses and telephone numbers of Registrants' principal executive offices)
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CORPORATION SERVICE COMPANY
375 HUDSON STREET
NEW YORK, NY 10014-3666
+1 212 299 9100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
JULIET A. M. CAIN, ESQ.
DAVIS POLK & WARDWELL
99 GRESHAM STREET
LONDON EC2V 7NG, UK
+44 207 418 1300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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Subclass A-9 certificates due March 15,
2019...................................... $750,000,000 100% $750,000,000 $187,500
Subclass A-9 notes of Airplanes Limited..... $682,444,117.47 100% $682,444,117.47 (2)
Subclass A-9 guarantees of Airplanes
Limited................................... -- (2) (2) (2)
Subclass A-9 notes of Airplanes U.S.
Trust..................................... $67,555,882.53 100% $67,555,882.53 (2)
Subclass A-9 guarantees of Airplanes U.S.
Trust..................................... -- (2) (2) (2)
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(f) under the Securities Act of 1933.
(2) The registration fee relates to the registration of the certificates, the
notes and the guarantees. No separate consideration will be received for the
notes or the guarantees.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
$750,000,000
INITIAL PRINCIPAL AMOUNT
OFFER TO EXCHANGE SUBCLASS A-9 CERTIFICATES DUE MARCH 15, 2019
FOR ANY AND ALL OUTSTANDING SUBCLASS A-9 CERTIFICATES DUE MARCH 15, 2019
OF
AIRPLANES PASS THROUGH TRUST
(2001 REFINANCING TRUST)
EACH REPRESENTING A FRACTIONAL UNDIVIDED BENEFICIAL INTEREST IN
SUBCLASS A-9 NOTES
ISSUED AND CROSS-GUARANTEED BY
AIRPLANES LIMITED
AND
AIRPLANES U.S. TRUST
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [THE 20TH
BUSINESS DAY FOLLOWING COMMENCEMENT OF THE OFFER], 2001, UNLESS EXTENDED.
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We are offering to exchange $750,000,000 aggregate initial principal amount of
our new subclass A-9 certificates for our issued and outstanding subclass A-9
certificates that we previously offered and sold to investors on a basis exempt
from registration under the Securities Act of 1933, as amended, by virtue of
Section 4(2), Rule 144A and Regulation S thereunder. The terms of the new
certificates are identical to the old certificates except that the new
certificates will be registered under the Securities Act of 1933, as amended.
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THE OLD CERTIFICATES WERE LISTED ON THE LUXEMBOURG STOCK EXCHANGE ON MARCH 15,
2001. THE NEW CERTIFICATES WILL BE LISTED ON THE LUXEMBOURG STOCK EXCHANGE WHEN
THEY ARE ISSUED.
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INVESTING IN THE NEW CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 18.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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, 2001
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TABLE OF CONTENTS
PAGE
-----
Summary..................................................... 3
Summary Combined Financial Data............................. 15
Risk Factors................................................ 18
The Exchange Offer.......................................... 31
The Parties................................................. 36
Use of Proceeds............................................. 39
The Aircraft, Related Leases and Collateral................. 40
Airplanes Group Performance Assumptions..................... 55
Airplanes Group Cash Flow Analysis.......................... 63
The Commercial Aircraft Industry............................ 72
Management of Airplanes Group............................... 75
Selected Combined Financial Data............................ 86
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 89
Description of Securities................................... 107
Reports to Certificate Holders.............................. 147
Book-Entry Registration, Global Clearance and Settlement.... 150
Tax Considerations.......................................... 154
ERISA Considerations........................................ 160
Plan of Distribution........................................ 162
Legal Matters............................................... 163
Enforcement of Civil Liabilities............................ 164
Listing and General Information............................. 164
Experts..................................................... 166
Index to Financial Statements............................... F-1
Appendix 1 -- Airplanes Group Portfolio Analysis............ A-1-1
Appendix 2 -- Monthly Lease Rentals Based on the Airplanes
Group Performance Assumptions............................. A-2-1
Appendix 3 -- Expected Portfolio Values Based on the
Depreciation Factors and the Aircraft in the
Portfolio as of January 31, 2001.............. A-3-1
Appendix 4 -- Target Loan to Value Ratios of the Class A and
B Certificates............................................ A-4-1
Appendix 5 -- Supplemental Loan to Value Ratios of the Class
A and B Certificates...................................... A-5-1
Appendix 6 -- Target Pool Factors for the Class C and D
Certificates.............................................. A-6-1
Appendix 7 -- Percentage of Initial Outstanding Principal
Balance of the Class A Certificates Based on
the Airplanes Group Performance Assumptions... A-7-1
Index of Defined Terms...................... I-1
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SUMMARY
In this prospectus, we have not specifically defined terms whose meanings
are clear from the context, such as the "subclass A-9 certificates," or that are
widely understood to the investing public, such as "LIBOR." An index of terms
that are defined can be found in "Index of Defined Terms" at the back of this
prospectus. In addition, the following terms have the following meanings in this
prospectus:
- "AIRPLANES TRUST" refers to Airplanes U.S. Trust;
- "AIRPLANES GROUP" refers to Airplanes Limited and Airplanes Trust;
- "WE," "US" and "OUR" refer to Airplanes Group and its subsidiaries and
Airplanes Pass Through Trust, including the 2001 refinancing trust,
except where it is clear that these terms mean only the 2001 refinancing
trust;
- "AIRPLANES PASS THROUGH TRUST" and the "TRUST" refer to all the pass
through trusts created under the Airplanes Pass Through Trust Agreement
dated March 28, 1996 (the "TRUST AGREEMENT") among Airplanes Limited,
Airplanes Trust and Bankers Trust Company, as trustee (the "TRUSTEE"),
except where it is clear that this term means only a particular pass
through trust; and
- the "2001 REFINANCING TRUST" refers only to the pass through trust
created under the trust agreement on March 15, 2001 to issue the
subclass A-9 certificates.
You should read the following summary together with the more detailed
information regarding Airplanes Group and the subclass A-9 certificates
appearing elsewhere in this prospectus, including the financial statements and
related notes of Airplanes Group and Appendices 1-7. All references in this
prospectus to our portfolio as of January 31, 2001 exclude a B737-200QC aircraft
and an engine relating to an A300 aircraft which were subject to purchase
agreements to sell to third parties as of January 31, 2001.
In reviewing the following summary, you should note that the subclass A-9
certificates and notes are solely the obligations of the 2001 refinancing trust
and Airplanes Group, respectively. They are not the obligations of, or
guaranteed by, or offered for sale by, debis AirFinance B.V., debis AirFinance
Ireland plc, General Electric Capital Corporation ("GE CAPITAL"), GE Capital
Aviation Services, Limited ("GECAS"), Bankers Trust Company or any of their
affiliates.
THE EXCHANGE OFFER
On March 15, 2001, we issued $750 million in aggregate principal amount of
subclass A-9 certificates (the "OLD CERTIFICATES"), each representing a
fractional undivided interest in the subclass A-9 notes issued on the same date
and cross-guaranteed by Airplanes Limited and Airplanes Trust. Because we
originally issued the old certificates under an exemption from registration
under the Securities Act of 1933, as amended (the "Securities Act"), the old
certificates contain transfer restrictions. We are now offering to exchange new
subclass A-9 certificates (the "SUBCLASS A-9 CERTIFICATES" or the "NEW
CERTIFICATES") for the old certificates. The new certificates will not contain
these transfer restrictions and may be transferred as we describe under "--
Consequences of Exchanging Old Certificates in the Exchange Offer." Otherwise,
the terms of the new certificates and old certificates are identical, except for
registration rights and special interest provisions relating to the old
certificates.
The exchange offer of the new certificates for the old certificates will
expire at 5:00 p.m., New York City time, on [the 20th business day following
commencement of the offer], 2001, unless we extend it. At any time before the
expiration date, you may withdraw any old certificates that you have tendered to
us in the exchange offer. If we or the exchange agent do not accept any old
certificates that you have tendered, we or the exchange agent will return the
old certificates to you without charge as soon as is practicable after the
exchange offer has expired or has been terminated.
Neither you nor we will recognize any income, gain or loss for U.S. federal
income tax purposes because you exchange your old certificates.
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You should refer to "The Exchange Offer" below for more details about the
procedures for tendering the old certificates and the other terms of the
exchange offer.
CONSEQUENCES OF EXCHANGING OLD CERTIFICATES IN THE EXCHANGE OFFER
Based upon interpretations contained in letters issued to third parties by
the staff of the Securities and Exchange Commission, we believe that any holder
of old certificates, other than a broker-dealer or any holder who is an
affiliate of Airplanes Pass Through Trust or Airplanes Group within the meaning
of Rule 405 under the Securities Act, who exchanges its old certificates for new
certificates in the exchange offer may offer such new certificates for resale,
resell such new certificates or transfer such new certificates without
compliance with the registration and prospectus delivery provisions of the
Securities Act if:
- the holder acquires the new certificates in the ordinary course of the
holder's business; and
- the holder has no arrangement or understanding with any person to
participate in the distribution of the new certificates.
If you wish to accept the exchange offer, you must represent to us in the
letter of transmittal that the two conditions described above have been met.
If you wish to accept the exchange offer, you must also make the following
representations to us:
- If you are not a broker-dealer, you must represent that you are not
participating in the distribution of the new certificates and that you
do not intend to participate in such a distribution.
- If you are a broker-dealer who will not receive new certificates for
your own account, you must represent that neither you nor any person for
whom you receive the new certificates is participating in the
distribution of the new certificates and that neither you nor any such
person intends to participate in such a distribution.
- If you are a broker-dealer who will receive new certificates for your
own account, you must represent that you acquired the old certificates
tendered by you in your market-making or other trading activities. You
must also acknowledge that you will deliver a prospectus if you resell
the new certificates. By making this acknowledgement and delivering a
prospectus, you will not be deemed to admit that you are an underwriter
within the meaning of the Securities Act.
To comply with the securities laws of certain states or other
jurisdictions, it may be necessary to qualify for sale or register the new
certificates prior to offering or selling such new certificates. We have agreed
to register or qualify the new certificates held by broker-dealers for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the old certificates reasonably requests in writing. Unless a holder requests
registration or qualification, we do not intend to take any action to register
or qualify the new certificates for resale in any such jurisdictions.
If you do not exchange your old certificates for new certificates in this
exchange offer, your old certificates will continue to be subject to the
restrictions on transfer contained in the legend on the old certificates. Please
refer to "The Exchange Offer -- Consequences of Failure to Exchange" for a
description of these restrictions.
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THE CERTIFICATES
The following table summarizes some of the principal terms of the subclass
A-9 certificates we are offering to exchange in this exchange offer. Information
in this table is based on what we refer to as our "BASE CASE," which is the
scenario under which our current assumptions regarding our performance that we
discuss under "Airplanes Group Performance Assumptions" prove to be correct. You
should refer to "Airplanes Group Cash Flow Analysis" for more detailed
information regarding our historical cash flow performance since March 1998. You
should note that appraised values of our aircraft may fluctuate and that our
actual revenues may be significantly lower than assumed revenues, which will
have corresponding effects on the information set forth below. See "Airplanes
Group Performance Assumptions" for a more detailed discussion of our assumptions
regarding our performance. For purposes of calculating ratios in this table, we
have used amounts under the Base Case for the 12 months ending March 15, 2002.
The ratios in this table are calculated as of March 15, 2001 and in each case
assuming that the $40 million which will be paid out of the miscellaneous
reserve amount on April 17, 2001, as further described in "-- Overview --
Reduction of Reserves," has been applied to reduce the class A principal
adjustment amount as of March 15, 2001.
SUBCLASS A-9 CERTIFICATES
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Aggregate Principal Amount:................................. $750,000,000
Ratings:
Fitch..................................................... AA
Moody's................................................... Aa2
Standard & Poor's......................................... AA
Interest Rate............................................... LIBOR+0.55%
Initial Loan to Value(1).................................... 57.7%
Initial Loan to Assumed First Year's Net Revenue(1)(2)...... 4.78x
Assumed Interest Coverage Ratio(2)(3)....................... 3.79x
Assumed Debt Service Coverage Ratio(2)(4)................... 3.79x
Assumed Adjusted Debt Service Coverage Ratio(2)(5).......... 1.61x
Expected Final Payment Date(6).............................. November 15, 2008
Expected Weighted Average Life(7)........................... 5.1 Years
Expected Principal Amortization Period...................... January 15, 2004
to November 15, 2008
Final Maturity Date......................................... March 15, 2019
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(1) "INITIAL LOAN TO VALUE" represents (a) the initial aggregate principal
amount of the subclass A-9 certificates plus the estimated outstanding
aggregate principal amount as of March 15, 2001 of each other subclass of
class A certificates then outstanding ("INITIAL LOAN") divided by (b) the
aggregate appraised value of the aircraft as of January 31, 2001 plus the
expected amount of the maintenance reserves and miscellaneous reserves.
(2) "ASSUMED FIRST YEAR'S NET REVENUE" means our gross lease rentals plus
interest income less our leasing costs, servicer fees, administrative agent
fees, cash manager fees and other general and administrative costs.
(3) "ASSUMED INTEREST COVERAGE RATIO" means Assumed First Year's Net Revenue
divided by Assumed First Year's Interest. "ASSUMED FIRST YEAR'S INTEREST"
means the interest payable on the subclass A-9 certificates and each other
subclass of class A certificates then outstanding.
(4) "ASSUMED DEBT SERVICE COVERAGE RATIO" means Assumed First Year's Net Revenue
divided by Assumed First Year's Interest and Minimum Principal. "ASSUMED
FIRST YEAR'S INTEREST AND MINIMUM PRINCIPAL" means (a) the interest and
minimum principal payments on the subclass A-9 certificates plus (b) the
interest and minimum principal payments assumed to be payable on each other
subclass of class A certificates currently outstanding.
(5) "ASSUMED ADJUSTED DEBT SERVICE COVERAGE RATIO" means Assumed First Year's
Net Revenue divided by Assumed First Year's Interest, Minimum Principal and
Class A Principal Adjustment Amount. "ASSUMED FIRST YEAR'S INTEREST, MINIMUM
PRINCIPAL AND CLASS A PRINCIPAL ADJUSTMENT AMOUNT" means (a) the interest,
minimum principal payments and principal adjustment amounts on the subclass
A-9 certificates plus (b) the interest, minimum principal payments and
principal adjustment amounts assumed to be payable on each other subclass of
class A certificates currently outstanding.
(6) "EXPECTED FINAL PAYMENT DATE" with respect to the subclass A-9 certificates
means the date by which we expect to pay all the principal on the subclass
A-9 certificates based on the Base Case.
(7) "EXPECTED WEIGHTED AVERAGE LIFE" represents the length of time we expect the
subclass A-9 certificates to remain outstanding based on the Base Case, as
further discussed in "Airplanes Group Performance Assumptions -- Principal
Payments under the Base Case."
Ratings of the Certificates. The ratings of the subclass A-9 certificates
only address the likelihood of the timely payment of interest and the ultimate
payment of principal and any premium on the subclass A-9
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certificates on their final maturity date. The rating agencies have not rated
our ability to pay the principal in full on the subclass A-9 certificates on
their expected final payment date or on any other date prior to their final
maturity date. In addition, the ratings assigned to the subclass A-9
certificates do not address the effect of any imposition of any withholding tax
on any payments under the leases, the subclass A-9 notes or otherwise. See "Risk
Factors -- Risks Relating to Tax" and "Tax Considerations" for a discussion of
withholding taxes that may be applicable.
A rating is not a recommendation to buy, sell or hold the subclass A-9
certificates because ratings do not comment as to market price or suitability
for a particular investor and may be subject to revision, suspension or
withdrawal at any time by the assigning rating agency. If a rating agency
lowers, suspends or withdraws its rating of the subclass A-9 certificates, no
person or entity has any obligation to support our obligations under the
subclass A-9 certificates or the subclass A-9 notes in any way.
Ranking. The subclass A-9 certificates we are offering in this exchange
offer will rank equally in right of payment with our outstanding subclass A-6
and A-8 certificates. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Resources and Liquidity" for
more information regarding our total outstanding indebtedness and "-- Overview
of Priority of Payments" and "Description of Securities -- The Notes and
Guarantees -- Principal Amortization of Floating Rate Notes" and "-- Priority of
Payments" for a more detailed discussion of the priority of payment of principal
and interest among the subclasses and classes of notes.
We have summarized the other terms of the subclass A-9 certificates below:
Payment Dates.............. We must pay interest monthly in arrears on the
fifteenth day of each month, which we call the
"PAYMENT DATE." If the fifteenth day of any month
is not a business day, the relevant payment date
will be the next day that is a business day. By
"BUSINESS DAY," we mean a day on which a bank may
deal in U.S. dollar deposits on the London
inter-bank market and commercial banks and foreign
exchange markets are open in New York and London.
Record Date................ The "RECORD DATE" is the close of business on the
day that is 15 calendar days prior to a payment
date, regardless of whether that day is a business
day or not.
Calculation of Interest.... To calculate interest payable, Bankers Trust
Company, as "REFERENCE AGENT," will determine LIBOR
for the relevant interest accrual period two
business days prior to the payment date on which
the interest accrual period begins. An "INTEREST
ACCRUAL PERIOD" is a period beginning on, and
including, a payment date or, in the case of the
first interest accrual period, March 15, 2001, and
ending on, but excluding, the next payment date or,
in the case of the last interest accrual period,
the final maturity date.
Calculation Date........... AerFi Cash Manager Limited, as cash manager, will
calculate accrued interest on the outstanding
principal balance and other amounts on which we
must pay interest as of the "CALCULATION DATE,"
which will be the fourth business day before each
payment date.
Accrued Interest........... Any accrued interest that we do not pay on any
payment date as a result of the allocation of our
available cash collections will bear interest at
the then current interest rate.
Sources of Payments........ The only sources of payment for the subclass A-9
certificates will be the subclass A-9 notes and
guarantees issued by Airplanes Limited and
Airplanes Trust, including proceeds from any
disposition of them. Generally, payment of
principal or interest on the subclass A-9
certificates
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will only be made if the 2001 refinancing trust
receives payment on the subclass A-9 notes or
guarantees. Generally, the only sources of payment
for the subclass A-9 notes and guarantees and our
other obligations are:
- payments made by the lessees under the leases;
- proceeds from the disposition of any aircraft;
- insurance proceeds from the loss of any
aircraft;
- net payments to us under our swap agreements and
other hedging instruments;
- interest earned on investments of our cash
balances; and
- net cash proceeds received from the sale of any
refinancing notes.
We will make payments on the subclass A-9 notes and
guarantees only to the extent that we have cash
remaining on the relevant payment date after paying
expenses and satisfying other requirements
described under "Description of Securities -- The
Notes and Guarantees -- Priority of Payments." We
expect, based on our assumptions, that we will have
enough funds to pay interest on the subclass A-9
notes and to pay principal and premium, if any, on
or before their final maturity date.
Subclass A-9 Guarantees.... Each of Airplanes Limited and Airplanes Trust fully
and unconditionally guarantees the obligations of
the other under the subclass A-9 notes. Airplanes
Limited's guarantee of the Airplanes Trust subclass
A-9 notes ranks equally in terms of payment and
security with Airplanes Limited's subclass A-9
notes. Airplanes Trust's guarantee of the Airplanes
Limited subclass A-9 notes ranks equally in terms
of payment and security with Airplanes Trust's
subclass A-9 notes.
Security for our
Obligations................ Neither you nor the trustee has any security
interest, mortgage, charge or any similar interest
in any aircraft in our portfolio or in the leases.
However, as security for our various obligations,
including those under the notes and the guarantees,
we have granted Bankers Trust Company, as security
trustee for the benefit of the holders of the
notes, a security interest in:
- one-third of the ordinary share capital of the
subsidiaries of Airplanes Group, including
AeroUSA, Airplanes Holdings and their
subsidiaries;
- our cash balances in the accounts; and
- investments made with our cash balances.
Principal Payments......... We have determined the expected principal payments
on the subclass A-9 certificates and notes based
on, among other things, assumptions regarding:
- the timing and amount of payments under our
current and future leases and the residual value
of the aircraft upon sale;
- the terms of future leases; and
- the amount of operating costs incurred in the
ordinary course of our business.
It is unlikely that actual experience will
correspond to the assumptions, therefore the
principal payments you receive may vary from the
expected
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principal payments and the actual repayment of the
subclass A-9 certificates is likely to occur
earlier or later than expected.
Redemption of the Subclass
A-9
Notes.................... We may redeem the subclass A-9 notes, in whole or
in part, on any payment date at the redemption
price stated below, together with any accrued but
unpaid interest:
- if we are using available collections, including
proceeds from the sale of aircraft, to redeem
the subclass A-9 notes pursuant to the priority
of payments described under "Description of
Securities -- The Notes and Guarantees --
Priority of Payments," the redemption price will
be equal to the outstanding principal balance of
the subclass A-9 notes being redeemed; and
- if we are using amounts other than available
collections to redeem the subclass A-9 notes,
the redemption price will be equal to the
product of the redemption premium set out below
and the outstanding principal balance of the
subclass A-9 notes being redeemed.
REDEMPTION DATE REDEMPTION PREMIUM
--------------- ------------------
After March 15, 2001..................... 101.00%
On or after March 15, 2002............... 100.50
On or after March 15, 2003............... 100.00
If we redeem any subclass A-9 notes in part, we
will apply the redemption price proportionately to
the subclass A-9 notes of each holder.
In addition, we also may redeem the subclass A-9
notes on any payment date, in whole but not in
part, at a redemption price equal to the
outstanding principal balance of the subclass A-9
notes being redeemed without any premium, plus
accrued but unpaid interest, if any of the adverse
tax events described in "Description of Securities
-- The Notes and Guarantees -- Redemption" occurs.
Redemption of the Subclass
A-9 Certificates........... If the subclass A-9 notes are redeemed on any
payment date, the subclass A-9 certificates also
will be redeemed on the same payment date and at
the same redemption price.
Refinancing of the Subclass
A-9 Certificates........... We may refinance the subclass A-9 certificates and
notes by issuing refinancing certificates and
notes. If we do so, we will repay to you on any
payment date the outstanding principal amount of
the subclass A-9 certificates, together with the
redemption premium referred to above, if any, and
any accrued but unpaid interest.
Future Sales of Aircraft... We may sell aircraft subject to the conditions
described in "Description of Securities -- Payment
of Principal and Interest -- Indenture Covenants --
Limitation on Aircraft Sales." The net proceeds
from a sale of aircraft will be available to pay
interest and principal on the notes as described
under "-- Redemption of the Subclass A-9 Notes."
Operating Covenants........ Airplanes Limited and Airplanes Trust are bound by
a number of covenants under the indentures that
restrict the operation of our business. For
example, we may only enter into future leases if
they comply with
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defined criteria, including geographic and other
concentration limits. These restrictions do not
apply to renewals, extensions or restructurings of
existing leases. We may vary from some of these
criteria with the approval of the rating agencies.
For further information on the terms of the
indentures, see "Description of Securities -- The
Notes and Guarantees."
Service Providers.......... We depend on GECAS and other service providers to
service our aircraft and perform other managerial
and administrative tasks. For a full description of
the services provided by our service providers, see
"Management of Airplanes Group." For a description
of the conflicts of interest that may arise in
connection with the provision of services by the
service providers, see "Risk Factors -- Risks
Relating to Airplanes Group and Certain Third
Parties."
Tax Considerations......... We have no obligation to make any additional
payments on the subclass A-9 certificates for any
withholding or deduction from payments under
applicable law with respect to the subclass A-9
certificates, the subclass A-9 notes or otherwise.
If we are required to make any withholding or
deduction from payments and we do not redeem the
subclass A-9 certificates, we will reduce the
amount of interest paid on the subclass A-9
certificates by the amount of that withholding or
deduction.
ERISA Considerations....... The subclass A-9 certificates may be eligible for
purchase by an employee benefit plan or other plan
subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended, or Section
4975 of the United States Internal Revenue Code of
1986, as amended. For a description of ERISA
considerations in connection with an investment in
the subclass A-9 certificates, see "ERISA
Considerations."
Denomination............... The subclass A-9 certificates are available in
minimum denominations of $100,000 or integral
multiples of $1,000 for certificates in excess of
that amount, except that a single subclass A-9
certificate may be issued in a denomination of less
than $100,000.
Listing.................... The old certificates were listed on the Luxembourg
Stock Exchange on March 15, 2001. Application has
been made to list the new certificates on the
Luxembourg Stock Exchange in accordance with its
rules.
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OVERVIEW
Airplanes Group. On March 28, 1996, we established eight separate pass
through trusts to issue and sell $4,048 million in aggregate principal amount of
subclass A-1, A-2, A-3, A-4 and A-5 and class B, C and D pass through
certificates in an underwritten offering. We used the proceeds from this
offering, together with the proceeds from the sale of the class E notes of
Airplanes Limited and Airplanes Trust to GPA Group plc (now known as debis
AirFinance Ireland plc), to acquire our portfolio of 229 aircraft from GPA Group
and its subsidiaries. On March 16, 1998, we established four additional pass
through trusts to issue and sell $2,437 million in aggregate principal amount of
subclass A-6, A-7 and A-8 and class B certificates in connection with the
refinancing of our subclass A-1, A-2 and A-3 and class B certificates. On
November 20, 1998, GE Capital acquired the class E notes from GPA Group (then
known as AerFi Group and now known as debis AirFinance Ireland) and its
subsidiaries. On that date, a subsidiary of AerFi Group also granted GE Capital
an option to acquire the residual interest in Airplanes Trust. See "-- Ownership
Structure" for a chart summarizing the structure of Airplanes Group as of
January 31, 2001 and "The Parties -- Airplanes Trust" for more information about
the option. The subclass A-5 certificates were fully repaid as of May 15, 1998.
Each pass through trust is a New York trust established pursuant to the
trust agreement. The certificates issued by each pass through trust each
represent a fractional undivided beneficial interest in two corresponding
classes or subclasses of notes issued and cross-guaranteed by Airplanes Limited
and Airplanes Trust pursuant to indentures dated as of March 28, 1996 (as
amended or supplemented, the "INDENTURES") they entered into with Bankers Trust
Company, as trustee (the "INDENTURE TRUSTEE"), and held by that trust. The two
corresponding classes of notes and guarantees held by each trust are the
principal sources of payment for the class or subclass of certificates issued by
that trust. Through the 2001 refinancing trust, a new pass through trust that we
established on March 15, 2001, we issued $750 million in aggregate principal
amount of subclass A-9 certificates. We used the proceeds from this offering to
refinance our existing subclass A-4 and A-7 certificates and the corresponding
subclass A-4 and A-7 notes. We are now offering to exchange new certificates for
the old certificates. The new certificates will, upon their issuance, rank
equally in right of payment with our outstanding subclass A-6 and A-8
certificates. See "-- Overview of Priority of Payments" for a chart summarizing
the priority of payments on the notes and certificates and "-- The Certificates"
for more information about the subclass A-9 certificates.
The 2001 refinancing trust's principal address is c/o Bankers Trust
Company, Four Albany Street, Mail Stop 5091, New York, NY 10006, Attention:
Corporate Trust and Agency Group, and its telephone number is +1-212-250-2601.
The Portfolio. As of January 31, 2001, our portfolio of aircraft consisted
of 193 aircraft, 177 of which were owned by direct and indirect subsidiaries of
Airplanes Limited and 16 of which were owned by direct and indirect subsidiaries
of Airplanes Trust. The aggregate appraised value of our portfolio was
approximately $3,135.4 million as of January 31, 2001. Based on these appraised
values, no one aircraft represented more than 2.01% of our portfolio as of
January 31, 2001 by appraised value as of that same date. As of January 31,
2001, we had 187 aircraft on lease to 65 lessees in 35 countries and six
aircraft off-lease, with three of these off-lease aircraft subject to lease
agreements and one subject to a letter of intent for lease. The remaining two
unplaced aircraft represented 0.34% of our portfolio by appraised value as of
January 31, 2001. As of the date of this prospectus, one of the unplaced
off-lease aircraft had become subject to a letter of intent for lease, three of
the off-lease aircraft subject to lease agreements had been delivered to three
existing lessees, and three additional aircraft, representing 1.23% of our
portfolio by appraised value as of January 31, 2001, have become available for
lease. As of January 31, 2001, the weighted average remaining lease term of our
portfolio (weighted by appraised value as of that same date and without giving
effect to purchase or extension options) was 29 months. Our longest lease is
scheduled to expire in September 2008. Therefore, we will be required to
re-lease all of our aircraft at least once before the expected final payment
date for the subclass A-9 certificates. See "-- The Aircraft and Lessees" for
charts that provide a statistical overview of our portfolio.
Some of our lessees are in weak financial condition and face or have
recently faced serious financial difficulties. As of January 31, 2001, 18 of our
current lessees were in arrears. The 36 aircraft on lease to these lessees
represented 20.46% of our portfolio by appraised value as of January 31, 2001.
The total amount of rental payments, maintenance reserves and other amounts that
were in arrears for a period greater than 30 days with
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respect to these lessees was $13.2 million as of January 31, 2001, which
represented 3.1% of our annual contracted lease rental payments as of that same
date. As of January 31, 2001, we had security deposits of $10.4 million against
these arrears.
Service Providers. We do not have any employees or executive management of
our own to manage or service our portfolio. Instead, we have engaged GECAS to
act as the servicer for our portfolio. Among other things, GECAS markets our
portfolio for lease or sale and monitors lessee compliance with lease payment,
maintenance and insurance terms. We have also engaged AerFi Financial Services
(Ireland) Limited to act as our administrative agent and AerFi Cash Manager
Limited to act as our cash manager. Both of these entities are subsidiaries of
debis AirFinance Ireland. For a full description of these servicing and other
arrangements and any potential conflicts of interest with these service
providers, see "Risk Factors -- Risks Relating to Airplanes Group and Third
Parties," "Management of Airplanes Group -- The Servicer" and "-- The
Administrative Agent and Cash Manager."
Outstanding Debt. The following is a summary of selected terms of the
outstanding debt of Airplanes Group as of March 15, 2001, the most recent
payment date. See "-- Overview of Priority of Payments" for a chart illustrating
the priority of payments among the classes of notes.
OUTSTANDING
PRINCIPAL ANNUAL
CLASS OR SUBCLASS OF CERTIFICATES AMOUNT AS OF INTEREST RATE ASSUMED FINAL FINAL
AND NOTES MARCH 15, 2001 (PAYABLE MONTHLY) PAYMENT DATE(1) MATURITY DATE
- --------------------------------- ----------------- ----------------- ----------------- --------------
($ MILLIONS)
Subclass A-6................. 445.4 LIBOR+0.340% January 15, 2004 March 15, 2019
Subclass A-8................. 700.0 LIBOR+0.375% March 15, 2003 March 15, 2019
Subclass A-9................. 750.0 LIBOR+0.550% November 15, 2008 March 15, 2019
Class B...................... 278.3 LIBOR+0.750% February 15, 2017 March 15, 2019
Class C...................... 349.8 8.150% December 15, 2013 March 15, 2019
Class D...................... 395.1 10.875% February 15, 2017 March 15, 2019
Class E (notes only)(2)...... 591.2 20.000% -- March 15, 2019
- ---------------
(1) The Assumed Final Payment Dates for our outstanding classes and subclasses
of certificates and notes were determined based on the assumptions described
under "Airplanes Group Performance Assumptions."
(2) The annual interest rate on the class E notes is adjusted by reference to
changes in the U.S. Consumer Price Index since March 28, 1996. As of March
15, 2001, the annual interest rate on the class E notes was 22.0%. Except
for the class E minimum interest amount and supplemental interest amount,
payable at 1% and 10% per annum, respectively, no principal or interest is
payable on the class E notes until the more senior classes of notes have
been paid in full. See "Description of Securities" for more information on
the terms of the class E notes and the other classes of notes. As of March
15, 2001, the accrued but unpaid class E minimum interest amount and
supplemental interest amount was $1,051 million.
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THE AIRCRAFT AND LESSEES
The following pie charts summarize our exposure as of January 31, 2001 by
types of aircraft, age of aircraft, noise restrictions applying to aircraft,
individual lessees and the countries and regions in which the lessees are based.
All percentages have been calculated by reference to the appraised value of our
portfolio as of January 31, 2001. For a more detailed summary of our portfolio
and related leases, see Appendix 1.
LOGO LOGO
LOGO LOGO
LOGO LOGO
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OWNERSHIP STRUCTURE
The following chart illustrates the ownership relationships among the
different members of Airplanes Group, their subsidiaries, GECAS and GE Capital
as of January 31, 2001.
LOGO
- ---------------
(1) Neither the old certificates nor the new certificates are obligations of, or
guaranteed by, or offered for sale by, GE Capital, GECAS or any of their
affiliates.
(2) For tax and other reasons, we may establish additional subsidiaries to
directly or indirectly lease aircraft from the aircraft owning subsidiaries
or other subsidiaries of Airplanes Holdings or AeroUSA and to sub-lease them
to operators. Any additional subsidiaries will be subject to restrictions
set forth in the indentures.
(3) The shares of AeroUSA and its wholly-owned subsidiary are held by voting
trusts with First Security Bank of Utah, National Association acting as
trustee in order to satisfy regulations of the U.S. Federal Aviation
Administration regarding the U.S. citizenship of the owners of
U.S.-registered aircraft. Airplanes Trust holds voting trust certificates
representing these shares.
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OVERVIEW OF PRIORITY OF PAYMENTS
The following chart summarizes the priority of payments on the notes and
other obligations of Airplanes Group as described in more detail in "Description
of Securities -- The Notes and Guarantees -- Priority of Payments." See
"Description of Securities -- The Notes and Guarantees -- Principal Amortization
of Floating Rate Notes" for a description of the payment priority among the
subclasses of the class A notes. Priority of payments on the certificates tracks
the priority of payments on the corresponding class or subclass of notes.
LOGO
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SUMMARY COMBINED FINANCIAL DATA
The summary combined financial data set out below for each of the years in
the five year period ended March 31, 2000 have been extracted or derived from
the audited financial statements of Airplanes Group included elsewhere in this
prospectus, which have been audited by KPMG, independent chartered accountants.
See "Experts" for more information on the role of KPMG. These financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States. The selected financial data set forth below for
the nine month periods ended December 31, 1999 and December 31, 2000 have not
been audited but in the opinion of management reflect all adjustments,
consisting only of normal and recurring adjustments, necessary to present a fair
statement of the information presented.
The summary combined financial data set forth below are presented on the
basis that the aircraft have been operated by Airplanes Group separately from
debis AirFinance Ireland or its predecessors for all periods presented. However,
since Airplanes Group has only conducted independent business operations since
March 28, 1996, some adjustments and allocations were made on some items for the
period before March 28, 1996, as further described in Note 2 to the financial
statements. While Airplanes Group believes that the summary combined financial
data set forth below are an appropriate presentation, the data for the period
prior to March 28, 1996 is not necessarily indicative of the financial results
that might have occurred had Airplanes Group been an independently financed and
managed group during that period.
The summary combined financial data set forth below combine the operating
results, assets, liabilities and cash flows of Airplanes Limited and Airplanes
Trust. The separate balance sheets, statements of operations, statements of
changes in shareholders' deficit/net liabilities and statements of cash flows of
Airplanes Limited and Airplanes Trust are contained in the financial statements
included elsewhere in this prospectus. The directors of Airplanes Limited and
the controlling trustees of Airplanes Trust believe that a combined presentation
is most appropriate because:
- the assets of Airplanes Limited and Airplanes Trust are managed on the
basis of one combined aircraft fleet, and
- each of Airplanes Limited and Airplanes Trust has fully and
unconditionally guaranteed the performance of the other under their
respective notes.
You should note that the notes and the guarantees comprise obligations of two
different legal entities owning different assets. However, the notes and
guarantees have been structured in the indentures to ensure that no payments are
made on a junior class of notes or guarantees of Airplanes Trust before all
amounts due and payable on a more senior class of notes or guarantees of
Airplanes Limited have been paid, and no payments are made on a junior class of
notes or guarantees of Airplanes Limited before all amounts due and payable on a
more senior class of notes or guarantees of Airplanes Trust have been paid.
Aircraft assets are stated on the "PREDECESSOR COST BASIS," that is,
reflecting debis AirFinance Ireland's historical cost less accumulated
depreciation. The difference between the predecessor cost basis and the amount
of Airplanes Group's indebtedness is a significant component of total
shareholders' deficit in the combined balance sheet data.
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COMBINED STATEMENT OF OPERATIONS DATA(1)
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
----------------------------------------------- -----------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS)
REVENUES(2)
Aircraft leasing................ $ 616 $ 604 $ 585 $ 526 $ 501 $ 383 $ 356
Aircraft sales.................. -- -- 94 132 3 2 14
Other income.................... -- -- -- -- 1 1 --
EXPENSES
Cost of aircraft sold........... -- -- (90) (118) (1) (1) (9)
Depreciation and amortization... (207) (223) (192) (176) (174) (131) (128)
Net interest expense(3)(4)...... (368) (383) (411) (428) (468) (345) (396)
Provision for maintenance....... (97) (91) (88) (69) (64) (52) (39)
Bad and doubtful debts.......... 28 -- -- (11) (4) 1 (8)
Provision for loss making
leases(5)..................... 15 12 17 12 4 6 (11)
Other lease costs............... (21) (21) (30) (14) (10) (14) (21)
Selling general and
administrative expenses....... (35) (38) (38) (35) (34) (27) (26)
Tax benefit/(charge)............ 13 10 3 3 (7) -- 4
------- ------- ------- ------- ------- ------- -------
Net loss........................ $ (56) $ (130) $ (150) $ (178) $ (253) $ (177) $ (264)
======= ======= ======= ======= ======= ======= =======
COMBINED BALANCE SHEET DATA(1)
AS OF
AS OF MARCH 31, DECEMBER 31,
----------------------------------------------- -----------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS)
Aircraft, net, and net
investment in capital and
sales type leases............. $ 3,965 $ 3,731 $ 3,436 $ 3,128 $ 2,947 $ 2,993 $ 2,808
Total assets.................. 4,236 4,048 3,743 3,453 3,206 3,296 3,056
Indebtedness(3)................. (4,634) (4,397) (4,078) (3,842) (3,636) (3,679) (3,525)
Provision for maintenance....... (311) (313) (315) (283) (274) (290) (259)
Total liabilities............. (5,252) (5,194) (5,039) (4,927) (4,933) (4,947) (5,047)
Net liabilities................. (1,016) (1,146) (1,296) (1,474) (1,727) (1,651) (1,991)
COMBINED STATEMENT OF CASH FLOWS(1)
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------- -------------
1996 1997 1998 1999 2000 1999 2000
----- ----- ----- ----- ----- ----- -----
(IN MILLIONS)
Cash paid in respect of interest(3)(4)....... $ 323 $ 265 $ 267 $ 223 $ 214 $ 158 $ 166
===== ===== ===== ===== ===== ===== =====
Net cash provided by operating activities
(after payment of interest)................ $ 216 $ 224 $ 214 $ 111 $ 181 $ 147 $ 85
Net cash (used in)/provided by investing
activities................................. 13 19 101 135 8 6 15
Net cash (used in)/provided by financing
activities................................. (144) (238) (322) (240) (210) (166) (113)
----- ----- ----- ----- ----- ----- -----
Net increase/(decrease) in cash.............. $ 85 $ 5 $ (7) $ 6 $ (21) $ (13) $ (13)
===== ===== ===== ===== ===== ===== =====
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OTHER DATA(1)
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------- ---------------
1996 1997 1998 1999 2000 1999 2000
----- ----- ----- ----- ----- ------ ------
(IN MILLIONS)
Deficiency of combined earnings after
combined fixed charges(6)................... $ (69) $(140) $(153) $(181) $(246) $(177) $(268)
- ---------------
(1) The financial statements of Airplanes Group are stated in U.S. dollars which
is the principal operating currency of Airplanes Group and the aviation
industry.
(2) Revenues include maintenance reserve receipts. See Note 15 to the financial
statements.
(3) For all periods and dates prior to March 28, 1996, net interest expense,
indebtedness and cash paid in respect of interest have been based on various
assumptions as described more fully in Note 2 to the financial statements.
For all periods and dates since March 28, 1996, net interest expense,
indebtedness and cash paid in respect of interest have reflected the actual
terms of the existing notes.
(4) Net interest expense is significantly higher than cash paid in respect of
interest in all periods reflecting the high interest rate accruing on the
class E notes (20% adjusted for inflation) relative to the lower amount of
cash interest payable on the class E notes for so long as the other classes
of notes remain outstanding. Net interest expense is stated after crediting
interest income of $8 million in 1996, $17 million in 1997, $16 million in
1998, $14 million in 1999, $13 million in 2000, $10 million in the nine
months ended December 31, 1999 and $8 million in the nine months ended
December 31, 2000.
(5) A lease agreement is deemed to be "loss making" in circumstances where the
contracted rental payments are insufficient to cover the depreciation and
interest attributable to the aircraft plus various direct costs attributable
to the lease over its term.
(6) Deficiency of combined earnings after combined fixed charges represents the
amount by which Airplanes Group's loss before income taxes and fixed charges
exceeded fixed charges. Fixed charges consists of interest expense. Because
our fixed charges exceeded earnings for all periods presented, a ratio of
earnings to fixed charges is not presented.
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RISK FACTORS
You should carefully consider the following risks and uncertainties before
investing in the subclass A-9 certificates. These risks and uncertainties are
not the only ones relevant to the subclass A-9 certificates, the subclass A-9
notes and guarantees, the 2001 refinancing trust or Airplanes Group. Additional
risks and liabilities that we are not currently aware of or currently believe
are not material may turn out to adversely affect our ability to pay interest,
principal or any premium on the subclass A-9 certificates and you may lose all
or part of your investment.
This prospectus contains forward-looking statements that involve risks and
uncertainties. In most cases, you can identify these forward-looking statements
by terms such as "may," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential," "continue" or similar terms that relate to
the future or express uncertainty. Our actual results could differ materially
from those anticipated in these forward-looking statements. In evaluating these
statements, you should specifically consider various factors, including the
risks outlined below, that may impact our results of operations.
RISKS RELATING TO PAYMENTS ON THE SUBCLASS A-9 CERTIFICATES
YOU HAVE NO SECURITY INTEREST IN THE AIRCRAFT OR THE LEASES TO SECURE OUR
REPAYMENT OF THE SUBCLASS A-9 CERTIFICATES.
None of you, the trustee or the security trustee has any security interest,
mortgage, charge or similar interest in any aircraft in our portfolio or in the
related leases. If the 2001 refinancing trust defaults on payments to you on the
subclass A-9 certificates, neither you nor anybody on your behalf can sell the
aircraft or exercise other remedies with respect to the aircraft or the leases
to repay the principal and interest that we owe you, which you would have been
able to do if you had held a security interest in the aircraft or the leases.
Airplanes Limited and Airplanes Trust have, however, pledged to the security
trustee, as security for the subclass A-9 notes and their other obligations,
one-third of the ordinary share capital of each of AeroUSA, Airplanes Holdings
and their subsidiaries, cash balances in the accounts and investments made with
our cash balances.
THE 2001 REFINANCING TRUST HAS LIMITED SOURCES OF INCOME FROM WHICH TO
REPAY THE SUBCLASS A-9 CERTIFICATES.
The 2001 refinancing trust is a pass through trust. The principal assets of
the 2001 refinancing trust will be the subclass A-9 notes and guarantees, and
its only sources of payment on the subclass A-9 certificates will be payments by
Airplanes Limited and Airplanes Trust on those notes and guarantees, including
proceeds from any disposition of them. If Airplanes Limited and Airplanes Trust
do not make payments on the subclass A-9 notes and guarantees to the 2001
refinancing trust, the 2001 refinancing trust will have limited or no funds to
make payments to you on the subclass A-9 certificates. The subclass A-9
certificates and subclass A-9 notes are not guaranteed by the trustee, the
security trustee, the indenture trustee, the servicer, the administrative agent,
the cash manager or any of their affiliates, and you cannot look to them or
anyone else to repay you if we default in payment on the subclass A-9
certificates.
AIRPLANES LIMITED AND AIRPLANES TRUST HAVE LIMITED SOURCES OF INCOME FROM
WHICH TO REPAY THE SUBCLASS A-9 NOTES AND GUARANTEES.
The principal assets of Airplanes Limited and Airplanes Trust are shares of
their direct subsidiaries and intercompany loans to their direct and indirect
subsidiaries. Airplanes Limited and Airplanes Trust do not directly own any of
the aircraft and are dependent on payments and distributions from their
subsidiaries for their cash flow. If their subsidiaries do not make principal or
interest payments to Airplanes Limited and Airplanes Trust on the intercompany
loans, or if their subsidiaries do not make any distributions to them, Airplanes
Limited and Airplanes Trust may not have enough funds to make payments to the
2001 refinancing trust on the subclass A-9 notes or guarantees. Also, if
withholding or other taxes are imposed on payments or distributions to Airplanes
Limited and Airplanes Trust, or if other significant tax liabilities arise,
Airplanes Limited and Airplanes Trust may not have enough funds to make payments
to the 2001 refinancing trust. In these circumstances, the 2001 refinancing
trust may not have enough funds to make payments to you on the subclass A-9
certificates.
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AIRPLANES LIMITED AND AIRPLANES TRUST HAVE OTHER CLAIMS THAT RANK SENIOR OR
EQUAL TO THE SUBCLASS A-9 NOTES AND GUARANTEES.
Administrative and lease expenses and some other specified payments in the
ordinary course of business of Airplanes Limited and Airplanes Trust rank senior
in priority of payment to the notes and guarantees, including the subclass A-9
notes and guarantees, and will be paid out of our available funds before
payments are made on the notes and guarantees, including the subclass A-9 notes
and guarantees, and passed through to you. Airplanes Limited has also guaranteed
a significant number of its subsidiaries' obligations to lessees. Payments on
these guarantees will be treated as lease expenses and will rank ahead of other
payment obligations of Airplanes Limited, including the subclass A-9 notes and
guarantees. Airplanes Limited and Airplanes Trust have outstanding subclass A-6
and A-8 notes and guarantees that will rank equally in right of payment with the
subclass A-9 notes and guarantees. As of March 15, 2001, these other obligations
amounted to $1,145.4 million. See "Description of Securities -- The Notes and
Guarantees -- Principal Amortization of Floating Rate Notes" and "-- Priority of
Payments" for the priority of payments according to which our available funds
will be paid out among the subclass A-9 notes and guarantees and these other
subclasses and classes of notes and guarantees.
CLAIMS ON OUR SUBSIDIARIES ARE EFFECTIVELY SENIOR TO YOUR CLAIMS ON
AIRPLANES LIMITED AND AIRPLANES TRUST, AND OUR SUBSIDIARIES MAY HAVE
MATERIAL CONTINGENT LIABILITIES UNKNOWN TO US.
Any claims on the subsidiaries of Airplanes Limited and Airplanes Trust are
effectively senior to the subclass A-9 notes and guarantees because the
subsidiaries would generally have to make payments on those claims before making
payments or distributions to Airplanes Limited and Airplanes Trust. These claims
include any payment obligations to lessees and other contingent liabilities,
such as liabilities to third parties from operating and leasing the aircraft.
There may also be liabilities of this type that arose before we acquired our
subsidiaries from GPA Group (now known as debis AirFinance Ireland) in 1996 that
we are not aware of. If the subsidiaries are called upon to pay any of these
contingent liabilities, we may not have enough funds to make payments to you.
THE SUBCLASS A-9 NOTES AND CERTIFICATES ARE SUBJECT TO EARLY REFINANCING OR
REDEMPTION WHICH MAY REDUCE THE YIELD ON YOUR INVESTMENT IN THE SUBCLASS
A-9 CERTIFICATES.
The subclass A-9 notes, and the corresponding subclass A-9 certificates,
may be refinanced or redeemed at the applicable redemption price at our option
on any payment date. They may also be redeemed at par upon the occurrence of
specified adverse tax events affecting Airplanes Group. Available funds from the
sale of aircraft and other available collections will also be used to repay the
subclass A-9 certificates as we describe under "Description of Securities -- The
Notes and Guarantees -- Priority of Payments." If any refinancing or early
redemption of the subclass A-9 certificates occurs, the yield on your investment
in the subclass A-9 certificates could be adversely affected.
THERE IS NO PUBLIC MARKET FOR THE SUBCLASS A-9 CERTIFICATES.
We expect the subclass A-9 certificates to have a limited trading market
which may harm your ability to sell them or depress the price at which you sell
them. The subclass A-9 certificates will be listed only on the Luxembourg Stock
Exchange. No one has an obligation to make a market in the subclass A-9
certificates. We do not intend to seek approval for quotation through any
automated quotation system. Future trading prices for the subclass A-9
certificates will depend on many factors, including general economic conditions,
our financial condition, performance and prospects and the market's then current
perception of the commercial aircraft industry and the operating lease business
generally.
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RISKS RELATING TO AIRPLANES GROUP AND THIRD PARTIES
WE HAVE A HISTORY OF INCURRING NET LOSSES IN OUR OPERATIONS.
Airplanes Group has incurred net losses since its inception and expects to
continue to incur net losses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a further discussion of these
net losses.
WE HAVE NO MANAGEMENT RESOURCES AND DEPEND ON SERVICE PROVIDERS TO OPERATE
OUR BUSINESS AND COLLECT OUR REVENUES.
We have no employees or executive management resources of our own and rely
solely on the servicer, administrative agent, cash manager and other service
providers for all aircraft servicing, leasing, re-leasing, sales and other
executive and administrative functions relating to our portfolio. If these
service providers do not perform their contractual obligations to us, our
operations and cash flow may suffer, thereby adversely affecting the timing of
payments on, and ultimate repayment of, the certificates. We may find it
difficult to recover damages for any of these third parties' poor performance
pursuant to their contracts and may not be able to terminate these contracts by
ourselves. In particular, our rights to terminate the servicing agreement are
very limited. We cannot guarantee that we will continue our arrangements with
the existing service providers or that they will continue their relationship
with us until the certificates are paid in full. If a service provider resigns
or if we terminate any service provider, we may be unable to find a suitable
replacement that we can engage on suitable terms, which would harm our
operations and impede our cash flow. The appointment of replacement service
providers may also cause the rating agencies to lower or withdraw the ratings on
the certificates. You should refer to "Management of Airplanes Group" for more
detailed information on the responsibilities we have delegated to the service
providers.
THE SERVICER WILL NOT BE LIABLE TO US FOR LOSSES WE INCUR IN CONNECTION
WITH ITS PERFORMANCE OF THE SERVICES.
The servicer will not be liable to us for losses we incur in connection
with its performance of the services, except where a court has finally
adjudicated that the losses have been directly caused by the servicer's wilful
misconduct or gross negligence. In addition, we have agreed to indemnify the
servicer on an after-tax basis for a broad range of losses in connection with
its performance of the services. Any such indemnification payments will rank
senior to payments on the notes and guarantees, which may result in our not
having enough funds to make payments on the notes and certificates.
WE DEPEND ON SWAP COUNTERPARTIES IN MANAGING INTEREST RATE RISKS. IF OUR
SWAP COUNTERPARTIES DEFAULT, OR IF WE ARE UNABLE TO FIND SUITABLE SWAP
COUNTERPARTIES, THERE MAY BE A MISMATCH BETWEEN OUR FIXED AND FLOATING RATE
ASSETS AND LIABILITIES WHICH COULD REDUCE OUR CASH FLOW.
We manage interest rate risks arising from any mismatch between fixed and
floating rate lease rental payments and fixed and floating rate interest
obligations through swaps and other derivative instruments. This strategy for
managing interest rate risks is dependent upon our ability to enter into
interest rate swaps, including, if applicable, as a result of exercising
swaptions, with eligible counterparties and on the counterparties fulfilling
their contractual obligations. If a counterparty defaults or if we are unable to
enter into interest rate swaps with eligible counterparties, a mismatch between
our fixed and floating rate interest obligations and fixed and floating rate
lease payments may arise, which could harm our cash flow and adversely affect
our ability to make payments on the notes and certificates.
GECAS, THE SERVICER, MAY HAVE CONFLICTS OF INTEREST IN MANAGING OUR
PORTFOLIO AS A RESULT OF ITS OTHER AIRCRAFT MANAGEMENT ACTIVITIES.
In addition to acting as the servicer for Airplanes Group, GECAS manages a
large portfolio of aircraft owned by its affiliates, including the GE group of
companies, and third parties, including debis AirFinance Ireland and its
affiliates, and other securitization vehicles such as Aircraft Finance Trust.
GECAS also arranges aircraft or engine financings and other lease transactions
and GE Capital, an affiliate of GECAS, is the owner of
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the class E notes. GECAS may therefore face conflicts of interest in managing
and marketing our portfolio for re-lease or sale. The aircraft it manages for
itself or others may compete with our aircraft when they are being marketed for
re-lease or sale. These conflicts will arise as decisions affecting some
aircraft that GECAS is managing or that GECAS or one of its affiliates owns may
be adverse to other aircraft also managed by GECAS. The servicing agreement
provides that the standard of care applicable in cases where such conflicts
arise requires that GECAS not discriminate between aircraft on an unreasonable
basis. For a fuller description of the standard of care, see "Management of
Airplanes Group -- The Servicer -- The Servicing Agreement." While GECAS has
agreed to perform the services for us with reasonable care and diligence at all
times, GECAS may give preference to its affiliates and other third parties under
the terms of its other marketing and servicing arrangements. In addition, GECAS
is not obliged to inform us of any conflicts of interest of which it is aware.
If, as a result of a conflict of interest, GECAS makes a decision potentially
adverse to us, it could have a material adverse effect on the servicing of our
aircraft, which may cause a reduction in our cash flow, thereby potentially
adversely affecting the timely or full repayment of the notes and certificates.
See "Management of Airplanes Group -- The Servicer" for more information on the
activities of the servicer.
THE ADMINISTRATIVE AGENT AND CASH MANAGER MAY HAVE CONFLICTS OF INTEREST
BECAUSE OF THEIR PARENT COMPANIES' OTHER AIRCRAFT MANAGEMENT ACTIVITIES AND
OWNERSHIP INTERESTS.
debis AirFinance B.V. and debis AirFinance Ireland, parent companies of the
administrative agent and the cash manager, manage a large portfolio of aircraft
owned by themselves, their affiliates and third parties. debis AirFinance
Ireland also acts as the servicer for AerCo Limited, a securitization vehicle
similar to Airplanes Group, and currently holds the class D-2, E-1 and E-2 notes
issued by AerCo. Subsidiaries of debis AirFinance Ireland also act as
administrative agent and cash manager for AerCo. As a result, the administrative
agent and the cash manager of Airplanes Group may from time to time have
conflicts of interest in performing their obligations to Airplanes Group. While
the roles of the administrative agent and the cash manager are more limited than
those of the servicer, any conflicts of interest that they cannot resolve could
have an adverse impact on Airplanes Group and on our ability to make payments on
the notes and certificates.
OUR LEGAL COUNSEL MAY HAVE CONFLICTS OF INTEREST IN NEGOTIATING SOME OF OUR
AGREEMENTS BECAUSE THEY ALSO REPRESENT PARTIES WITH WHICH WE DEAL.
Airplanes Group and debis AirFinance Ireland are represented by the same
Jersey, Irish and United States legal counsel, and we anticipate that this
multiple representation will continue. Our legal counsel may face conflicts of
interest when negotiating agreements between Airplanes Group and debis
AirFinance Ireland. If a significant dispute does arise in the future between
Airplanes Group and debis AirFinance Ireland or any of their respective
affiliates, we anticipate that we will retain separate counsel to represent us.
RISKS RELATING TO THE AIRCRAFT
THE COMMERCIAL AIRCRAFT MARKET IS CYCLICAL. DECREASED DEMAND FOR OR EXCESS
SUPPLY OF AIRCRAFT CAN DEPRESS AIRCRAFT VALUES AND LEASE RATES, WHICH MAY
CAUSE US TO BE UNABLE TO RE-LEASE OR SELL AIRCRAFT ON FAVORABLE TERMS AND
CAN DECREASE CASH AVAILABLE TO MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.
The market for commercial jet aircraft is cyclical and can produce sharp
increases or decreases in aircraft values and lease rates depending on the level
of supply and demand. The aircraft leasing industry is currently experiencing an
oversupply of turboprop aircraft, Stage 2 aircraft and various types of used
Stage 3 aircraft, especially older widebody aircraft and some older narrowbody
aircraft. As airlines increasingly prefer jet aircraft over turboprop aircraft
and new generation Stage 3 aircraft over older Stage 3 aircraft, the markets for
these types of aircraft, on which we partly depend, remain unfavorable for both
aircraft values and lease rates. The condition of the aircraft market will vary
at different points when our aircraft are being marketed for re-lease or sale,
depending on, among other things, the business cycle for the lessees and buyers
of aircraft. Unfavorable conditions in the aircraft market may affect our
ability to re-lease or, where applicable, sell our aircraft on satisfactory
terms, which could decrease the cash available to make payments on the notes and
certificates.
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THE AIRCRAFT VALUES AND LEASE RATES FOR AIRCRAFT MAY FLUCTUATE
SIGNIFICANTLY BECAUSE OF FACTORS OUTSIDE OUR CONTROL AND AFFECT OUR CASH
FLOW.
Decreases in aircraft values or lease rates may cause a decrease in our
cash flows. Depending on market conditions, we may be unable to re-lease or sell
aircraft on terms that will allow us to make payments on the notes and
certificates. Aircraft values and lease rates depend on various factors that are
outside our control, including:
- general economic conditions affecting lessee operations, including
passenger demand and the cost of fuel and other expenses;
- the supply of and demand for used aircraft;
- manufacturer production levels and prices for new aircraft;
- interest rates, currency exchange rates and credit availability;
- retirement and obsolescence of aircraft models;
- re-introduction into service of aircraft previously in storage;
- governmental regulations; and
- lack of capacity in the aircraft traffic control system.
Additional factors outside our control that may lead to sharp increases or
decreases in aircraft values or lease rates for specific aircraft include:
- manufacturer production levels and competition between aircraft
manufacturers, such as the current competition between The Boeing
Company and Airbus Industrie, which has led to an increased supply of
new aircraft at lower prices;
- manufacturers merging or leaving the aircraft industry, such as the
merger between Boeing and McDonnell Douglas and the bankruptcy of Fokker
N.V., which has led to the termination of production of MD and Fokker
aircraft and a resulting decrease in the values and lease rates for our
MD and Fokker aircraft;
- the maintenance and operating history of the aircraft;
- the number of operators using a particular type of aircraft and the
supply of that type of aircraft;
- legal or regulatory requirements that prevent re-leasing or selling that
type of aircraft;
- the discovery of manufacturing defects in an aircraft model; and
- new regulatory requirements relating to an aircraft model.
THE CONCENTRATION OF AIRCRAFT TYPES IN OUR PORTFOLIO COULD MAGNIFY THE
IMPACT OF DECLINES IN LEASE RATES OR AIRCRAFT VALUES AND ADVERSELY AFFECT
OUR CASH FLOW.
As of January 31, 2001, each of the B737-400, MD-83 and A320-200 models of
aircraft comprised more than 10% of our portfolio by appraised value as of that
same date and, in addition, each of the B737-300, B737-500, B767-300ER, DC8,
MD-11 and F-100 models of aircraft comprised more than 5% of our portfolio by
appraised value as of that same date. Furthermore, widebody and turboprop
aircraft each comprised more than 5% of our portfolio by appraised value as of
January 31, 2001. This concentration on particular models or types of aircraft
could magnify the adverse impact to our cash flow if there is a decline in lease
rates or aircraft values for these models or types of aircraft, or if
significant costs are required to be incurred with respect to these aircraft.
The negative impact can be especially severe where (a) there is a sharp decrease
of lease rates or aircraft values or (b) if specific governmental or technical
regulations are imposed on particular aircraft types, as we have seen with (x)
the increasing unpopularity of the turboprop aircraft, the discontinuation of
production of MD-83s and MD-11s, the reduction in demand for B767s, the
bankruptcy of Fokker, (y) noise regulations restricting the use of Stage 2
aircraft which, as of January 31, 2001, accounted for approximately 5% of our
portfolio by
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appraised value as of that same date, and (z) the Airworthiness Directives
("ADS") with respect to the MD-80s, MD-11s and B737s, all as described more
fully in "The Aircraft, Related Leases and Collateral." These events have
caused, and could continue to cause, our overall lease rates or the aircraft
values to significantly decrease and may cause us to incur significant costs
which would reduce our cash flow.
THE ACTUAL MARKET VALUE OF THE AIRCRAFT MAY BE LESS THAN THE APPRAISED
VALUE AND PROCEEDS FROM DISPOSITIONS OF THE AIRCRAFT MAY BE INADEQUATE TO
MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.
We have determined the scheduled principal payments and the expected final
payment dates for the notes and certificates based on the appraised values of
the aircraft, which are determined based on the assumption that there is an
"open, unrestricted stable market environment with a reasonable balance of
supply and demand." Appraised values for an aircraft, however, do not
necessarily reflect the market value for the aircraft at a specific time and you
should not rely on appraised values as an indication of the price that we could
obtain if we sold an aircraft. The aircraft market is cyclical and there may be
imbalances of supply and demand at any one time, especially for specific
aircraft types. At the high point in the industry cycle, the current market
value of some aircraft may be at or above their appraised values while the
current market value of others may be significantly less than their appraised
values. At a low point in the industry cycle, the current market value of most
aircraft types is likely to be less, or in many cases, much less, than appraised
values. If we sell an aircraft to repay the notes, the proceeds may be
significantly less than its appraised value. We may therefore have insufficient
cash to make payments on the notes to pass through to you. Market values may
also be affected by market lease rates for aircraft.
SOME OF OUR LESSEES MAY EXERCISE PURCHASE OPTIONS AT PRICES THAT ARE LESS
THAN THE PROPORTIONATE SHARE OF THE UNPAID PRINCIPAL OF THE NOTES AND
CERTIFICATES ALLOCABLE TO THE RELEVANT AIRCRAFT AND, THEREFORE, WE MAY BE
UNABLE TO MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.
As of January 31, 2001, 12 lessees had options to purchase a total of 33
aircraft, representing 14.00% of our portfolio by appraised value as of that
same date. There is a risk that the purchase prices may be less than the
proportionate share of the unpaid principal of the notes and certificates
allocable to the aircraft being purchased. If those options are exercised, there
could be a reduction in the amount, or a delay in the timing, of payments on the
notes and certificates.
WE MAY BE UNABLE TO REPOSSESS, RE-LEASE OR SELL THE AIRCRAFT IF THE LESSEES
DO NOT DISCHARGE LIENS ON THE AIRCRAFT, WHICH WOULD REDUCE CASH AVAILABLE
TO US TO MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.
Liens which secure the payment of airport taxes, customs duties, air
navigation charges, landing charges, crew wages, repairer's charges or salvage
may attach to the aircraft in the normal course of operations. The sums which
these liens secure may be substantial and could exceed the value of the
aircraft. In some jurisdictions, a holder of aircraft liens may have the right
to detain, sell or cause the forfeiture of the aircraft. While our lessees are
generally required to discharge all liens arising during the term of their
leases, their failure to discharge any liens may impair our ability to
repossess, re-lease or sell the aircraft if the lessee defaults, which could
have an adverse effect on our cash flow.
OUR LESSEES MAY FAIL TO MAINTAIN REGISTRATION OF OUR AIRCRAFT, WHICH MAY
AFFECT THEIR ABILITY TO MAKE PAYMENTS TO US AND OUR ABILITY TO MAKE
PAYMENTS ON THE NOTES AND CERTIFICATES.
All aircraft in operation must be duly registered with an appropriate
aviation authority. If any lessee fails to maintain a valid registration of an
aircraft, the lessee operator or, in some cases, the owner or lessor may be
subject to penalties which may result in a lien being placed on the aircraft.
Loss of registration could also have other adverse effects, including grounding
of the aircraft and loss of insurance, which may prevent the aircraft from
generating cash flow and have an adverse effect on our ability to make payments
on the notes and certificates.
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THE AVAILABILITY OF NEW, MORE TECHNOLOGICALLY ADVANCED AIRCRAFT MAY IMPAIR
OUR ABILITY TO RE-LEASE OR SELL AIRCRAFT AND REDUCE OUR CASH AVAILABLE TO
MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.
The availability of newer, more technologically advanced aircraft could
adversely affect our ability to re-lease or sell our aircraft because lessees
and buyers of used aircraft tend to favor these newer, more technologically
advanced models. In particular, within the last year, demand for some older
narrowbody Stage 3 aircraft, which make up a significant proportion of our
portfolio, has been adversely affected by the availability of new generation
narrowbody Stage 3 aircraft. Although this risk is common to all aircraft
lessors, it is particularly significant for us because we have a comparatively
older portfolio and will need to re-lease all of our aircraft at least once
before the expected final payment date of the subclass A-9 certificates. We may
also need to sell aircraft that are close to the end of their useful economic
lives in order to meet our payment obligations on the notes and certificates.
Our ability to manage these technological risks through modifications to
aircraft and sales of aircraft is limited by the significant costs of
modifications and by the restrictions imposed on modifications to and sale of
aircraft under the indentures.
INCREASED REGULATION OF THE AIRCRAFT INDUSTRY MAY CAUSE US TO INCUR MORE
EXPENSES OR MAY IMPAIR OUR ABILITY TO RE-LEASE OR SELL AIRCRAFT AND REDUCE
OUR CASH AVAILABLE TO MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.
The aircraft industry is heavily regulated and aviation authorities may
adopt additional regulations in jurisdictions where our aircraft are registered
or operate. In particular, governmental regulations, especially in North America
and Europe, impose increasingly strict noise and emissions levels and enhanced
safety requirements for aircraft, such as fire safety insulation, traffic
collision avoidance systems and emergency locator transmitters. We may have to
incur significant costs in order to comply with additional regulations. In
addition, because our portfolio is composed of a significant number of older
aircraft and we have a heavy concentration of some types of aircraft,
increasingly stringent noise or emissions regulations that disproportionately
affect older aircraft or particular types of aircraft, such as the recent U.S.
Federal Aviation Administration ("FAA") fire safety regulations on MD-80 and
MD-11 aircraft, could have a significant adverse impact on our results. We will
incur significant costs in order to comply with these regulations. For example,
it will cost an estimated $18 million to comply with the MD-11 and MD-80 fire
safety regulations. In addition, aircraft that fail to comply with noise or
emissions regulations could be prohibited from flying into some jurisdictions,
which will adversely affect their values and lease rates.
RISKS RELATING TO THE LEASES AND CASH FLOWS FROM LEASE PAYMENTS
THE RENTAL PAYMENTS AND SALE PROCEEDS FROM THE AIRCRAFT MAY NOT BE ADEQUATE
TO SUPPORT THE REQUIRED PAYMENTS ON THE NOTES AND CERTIFICATES.
Our primary sources of cash flow are payments under the leases and proceeds
from the sale of aircraft. This cash flow is affected by our ability to manage
maintenance and other costs, collect payments under the leases and maintain a
constant stream of cash flows by re-leasing aircraft upon lease expiration or
termination and by selling aircraft on favorable terms. It is also dependent on
factors outside our control, such as performance by the lessees and the service
providers, exercise by lessees of any purchase or early termination options, and
external economic factors. It is therefore possible that we may not have enough
funds from these rental payments and sale proceeds to make payments on the notes
and certificates.
As discussed under "Summary -- Overview -- Summary Performance to Date,"
the appraised value of our portfolio has declined at a rate greater than that
originally expected in March 1996 (when Airplanes Group was formed) and our
overall cash performance has been less than expected. Continuation of these
factors over a prolonged period may increase the risk that one or more of the
rating agencies may decide to lower their ratings on one or more classes of the
certificates.
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OUR OPERATIONAL AND FINANCIAL RESTRICTIONS MAY AFFECT OUR ABILITY TO
COMPETE AND MAINTAIN THE CASH FLOW TO REPAY THE NOTES AND CERTIFICATES.
The indentures and constitutive documents of Airplanes Limited and
Airplanes Trust impose restrictions on how we operate our business. These
restrictions may limit our ability to compete against other lessors who are not
subject to similar restrictions or who have greater financial resources than we
do. For example, we are not permitted to grant concessionary rental rates to
airlines in return for equity investments in the airlines. Additionally, we
cannot sell aircraft at prices below a specified target price except in limited
circumstances and in limited aggregate amounts, which may restrict our ability
to sell aircraft to generate cash flow. For example, the current market value of
our MD-11s is below the specified target price, which prevents us from selling
these aircraft in compliance with the indenture requirements. See "The Aircraft,
Related Leases and Collateral -- The Lessees -- Commercial Opportunities for our
MD-11 Aircraft" for more information on our MD-11 aircraft. There are also
restrictions on who we can lease our aircraft to and limits on leasing to
lessees in particular geographic regions. Many competing aircraft lessors do not
operate under similar restrictions or have a stronger financial position or
other strengths and therefore have a competitive advantage over us when
negotiating leases and sales. This could adversely affect the amount and timing
of payments on the notes and certificates.
WE MAY NOT BE ABLE TO GENERATE SUFFICIENT FUNDS TO REPAY THE NOTES AND
CERTIFICATES IF WE CANNOT RE-LEASE AIRCRAFT QUICKLY AND ON FAVORABLE TERMS.
We may not be able to re-lease the aircraft upon expiration or termination
of the leases without incurring significant downtime. If we cannot quickly
re-lease the aircraft, or if we cannot obtain favorable rates and lease terms
for the aircraft, our cash flow could be negatively affected. Our ability to
re-lease aircraft at acceptable lease rates and terms may suffer because of a
number of factors, including:
- economic conditions affecting the airline industry;
- the supply of competing aircraft and demand for particular aircraft
types;
- increased bargaining power of lessees as they join global alliances with
other airlines;
- competition from other lessors; and
- restrictions on our flexibility imposed by the indentures.
The following table shows the number and type of aircraft as of January 31,
2001 that we must re-lease during the next five years. The table assumes that
(1) no lease terminates early, (2) there are no sales of aircraft and (3)
existing letters of intent will result in leases. Additional aircraft may need
to be re-leased if they become available through early terminations, if letters
of intent do not result in leases or if new leases are for short terms.
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AIRPLANES GROUP EXPECTED LEASE PLACEMENT REQUIREMENT AS OF JANUARY 31, 2001
YEAR ENDING DECEMBER 31,
----------------------------------------
AIRCRAFT TYPE 2001 2002 2003 2004 2005
- ------------- ---- ---- ---- ---- ----
A300-B4-200......................................... -- -- -- 1 1
A300-C4-200......................................... -- 1 -- -- --
A320-200............................................ -- 1 7 4 --
ATR42-300........................................... 2 2 -- -- --
B727-200A........................................... 2 -- -- -- --
B737-200A........................................... 4 3 4 2 4
B737-300............................................ -- 4 4 1 --
B737-400............................................ 3 9 2 2 3
B737-500............................................ 3 2 1 1 1
B757-200............................................ 1 1 -- -- 1
B767-300ER.......................................... 1 -- 2 -- --
DC8-71F............................................. 2 8 6 2 --
DC8-73F............................................. -- -- -- 1 --
DC9-32.............................................. -- 6 -- -- --
DC9-51.............................................. 4 -- -- -- --
DHC8-100............................................ 2 2 1 -- 1
DHC8-300............................................ 5 6 2 -- --
DHC8-300C........................................... 2 -- -- -- --
F-100............................................... -- -- 8 -- --
MD-11............................................... 1 2 -- -- --
MD-82............................................... -- -- -- 2 --
MD-83............................................... 5 6 7 5 --
MD-87............................................... -- 1 -- -- --
METRO-III........................................... -- 3 -- -- --
--- --- --- --- ---
Total............................................. 37 57 44 21 11
=== === === === ===
Our longest lease is scheduled to expire in September 2008. Therefore we
will be required to re-lease all of our aircraft at least once before the
expected final payment date for the subclass A-9 certificates. We currently
expect that the turboprop aircraft, older widebody aircraft, Stage 2 aircraft
and some older Stage 3 narrowbody aircraft may prove difficult to re-lease
because of the factors noted above. If we cannot timely re-lease the aircraft
that are coming off lease or can only re-lease them at lower lease rates than
the current lease rates, we may not have enough funds to make payments on the
notes and certificates.
WE MAY NOT BE ABLE TO OBTAIN REQUIRED LICENSES, CONSENTS AND APPROVALS, AND
CONSEQUENTLY OUR CASH FLOW MAY BE REDUCED.
A number of leases require specific licenses, consents or approvals for
different aspects of the lease. These include consents from governmental or
regulatory authorities to make payments under the leases and to the import,
re-export or de-registration of the aircraft. If we cannot obtain the required
governmental licenses, consents and approvals, if these requirements are
increased by subsequent changes in applicable law or administrative practice, or
if the licenses, consents or approvals are withdrawn, we may be unable to
re-lease or sell our aircraft. In that case, our cash flow may be insufficient
to make payments on the notes and certificates.
LESSEES MAY NOT PERFORM REQUIRED AIRCRAFT MAINTENANCE, CAUSING THE AIRCRAFT
VALUES AND LEASE RATES TO DECLINE AND THEREBY REDUCING OUR CASH FLOW.
The standard of maintenance observed by our lessees and the condition of
the aircraft at the time of lease or sale may affect the aircraft values and
lease rates on our aircraft. If a lessee fails to perform required or
recommended maintenance on an aircraft during the term of the lease or does not
comply with all applicable governmental requirements, the aircraft could be
grounded and we may incur substantial costs to restore the aircraft to an
acceptable maintenance condition before its re-lease or sale. Also, an
increasing number of lessees
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with better credit no longer provide any cash maintenance reserves. If the
lessees do not perform their maintenance obligations in any month, or if the
maintenance costs for any month exceed the maintenance payments made by the
lessees or are more than our maintenance reserves, we will have to fund these
maintenance costs out of cash flow from the leases for that month. As a result,
our cash flow may be volatile from month to month and we may not have enough
funds left to make payments on the notes and certificates after paying
significant maintenance costs, especially as the aircraft age.
OUR AIRCRAFT INSURANCE MAY NOT BE ADEQUATE TO COVER THE LOSSES OR
LIABILITIES WE INCUR, REDUCING CASH OTHERWISE AVAILABLE TO MAKE PAYMENTS ON
THE NOTES AND CERTIFICATES.
Our lessees are required under the leases to maintain property and
liability insurance covering their operation of the aircraft and to indemnify us
against any damages. Although we believe that this insurance will be adequate to
cover all likely claims, we cannot guarantee that losses and liabilities from
one or more aviation accidents and other catastrophic events will not exceed the
insurance coverage limits. If the proceeds of insurance held by the lessees or
contingent policies held by us do not cover the losses or liabilities we incur,
or if our lessees default in fulfilling their insurance or indemnification
obligations, we may not have enough funds remaining after covering these losses
or liabilities to make payments on the notes and certificates.
OUR HEDGING POLICY MAY NOT ADEQUATELY MANAGE OUR INTEREST RATE RISKS,
INCLUDING THE ASSOCIATED LESSEE CREDIT RISKS, AND WE MAY NOT BE ABLE TO
PURCHASE AN ADEQUATE PORTFOLIO OF SWAPTIONS TO MITIGATE OUR INTEREST RATE
RISKS, INCLUDING THE ASSOCIATED LESSEE CREDIT RISKS. IN THIS CASE, THERE
COULD BE A MISMATCH BETWEEN OUR FIXED AND FLOATING RATE ASSETS AND
LIABILITIES WHICH COULD REDUCE OUR CASH FLOW.
We manage our interest rate risks, including the associated lessee credit
risks, through the use of swaps and swaptions which we enter into with third
parties. However, our hedging policy may not adequately manage these risks. We
may also have insufficient cash flow available to purchase the full requirement
of swaptions. If our hedging policy does not adequately manage our interest rate
risks, including the associated lessee credit risks, or we do not have
sufficient cash flow to purchase the full requirement of swaptions, a mismatch
between our fixed and floating rate interest obligations and fixed and floating
rate lease payments may arise, which could harm our cash flow and adversely
affect our ability to make payments on the notes and certificates.
WITHHOLDING TAXES MAY BE IMPOSED ON LEASE RENTALS, INCREASING OUR COSTS AND
REDUCING OUR CASH FLOW.
We have tried to structure our leases so that either withholding taxes do
not apply to lease payments or, if withholding taxes do apply, the lessees are
obliged to pay corresponding additional amounts so that we always receive the
full lease payment. However, if withholding taxes must be paid and we cannot
recover additional amounts from the lessees, we may not have sufficient funds to
make payments on the notes and certificates.
RISK OF LESSEE DEFAULT
LESSEES IN WEAK FINANCIAL CONDITION COULD FAIL TO MAKE LEASE PAYMENTS,
CAUSING OUR REVENUES TO FALL BELOW THE LEVEL REQUIRED TO MAKE PAYMENTS ON
THE NOTES AND CERTIFICATES.
There is a significant risk that lessees in weak financial condition may
default on their obligations under the leases. If lessees do not make rent and
maintenance payments or are significantly in arrears, we may not have enough
funds to make payments on the notes and certificates. The ability of each lessee
to perform its obligations under its lease will depend primarily on its
financial condition, which may be affected by many factors beyond its control,
including competition, fare levels, passenger demand, currency exchange rates,
operating costs (including fuel and labor costs), cost and availability of
financing, and environmental and other governmental regulation. Because a
substantial portion of business and, especially, leisure airline travel is
discretionary, the general economic conditions of the geographic regions where
our lessees operate will also affect their ability to meet their lease
obligations. Since the majority of our leases require lease payments in U.S.
dollars, any weakness in the local currency in which a lessee operates against
the U.S. dollar could also adversely affect its ability to pay us.
Some of our current lessees are in a weak financial position and you should
expect this to continue to be the case with future lessees. In particular, many
of our lessees are based or operate in regions such as Asia or Latin
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America that from time to time experience severe economic crises. As a result, a
large proportion of lessees may consistently be significantly in arrears in
their rental payments or maintenance payments. The current level of defaults and
lessee arrears may not be representative of future defaults and arrears, and
defaults and arrears may increase as the aircraft industry experiences
anticipated cyclical downturns, particularly in regions such as Asia or Latin
America. See "The Aircraft, Related Leases and Collateral -- The Lessees" and
"The Commercial Aircraft Industry" for a more detailed discussion of the
regional concentrations of our lessees and the economic trends of the regions
that may impact their financial condition.
WE MAY NOT BE ABLE TO TERMINATE LEASES OR REPOSSESS AIRCRAFT WHEN A LESSEE
DEFAULTS, CAUSING US TO INCUR UNEXPECTED REPOSSESSION COSTS THAT REDUCE OUR
CASH FLOW.
If there is an event of default under a lease, we have the right to
terminate the lease and repossess the aircraft. However, it may be difficult,
expensive and time-consuming for us to enforce our rights in some circumstances,
especially if the lessee contests the termination or is bankrupt or under court
protection. Delays resulting from proceedings to repossess an aircraft add to
the period when the aircraft is not generating cash flow for us. In addition, we
may incur significant costs in trying to repossess an aircraft and in performing
maintenance and other work necessary to make the aircraft available for re-lease
or sale, including retrieval or reconstruction of aircraft records. We may also
incur swap breakage costs. Our efforts to repossess an aircraft following a
lessee's default may also be limited by the laws of the local jurisdiction which
may delay or prevent repossession. All of this may adversely affect our cash
flow.
RISKS RELATING TO TAX
OWNING THE CERTIFICATES MAY HAVE TAX CONSEQUENCES FOR YOU AND MAY REDUCE
YOUR INCOME.
Ownership of the certificates may subject you to withholding of income
taxes in the United States, Jersey or other jurisdictions in which Airplanes
Group, its aircraft-owning and aircraft-leasing subsidiaries and the lessees are
organized, reside or operate. The tax consequences of the purchase of the
certificates depend to some extent upon your individual circumstances. You
should consult a tax advisor and refer to "Tax Considerations" for a more
detailed discussion of the possible tax consequences of owning the certificates.
PRE-1998 AEROUSA LOSSES MAY NOT BE AVAILABLE TO OFFSET FUTURE TAXABLE
INCOME OF AEROUSA, AS A RESULT OF WHICH AEROUSA MAY HAVE TO PAY ADDITIONAL
U.S. FEDERAL INCOME TAX AND HAVE LESS CASH FLOW TO PAY AIRPLANES TRUST
WHICH WILL HAVE LESS CASH TO MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.
AeroUSA had net operating loss carryforwards for U.S. federal income tax
purposes when GE Capital acquired all of the class E notes on November 20, 1998.
As a result of that acquisition, AeroUSA's pre-1998 net operating loss
carryforwards may only be utilized to offset up to $452,000 of taxable income
per year and possibly to offset certain "built in" gains (which existed at the
time of the acquisition) on aircraft sold prior to November 20, 2003. To the
extent that the pre-1998 net operating loss carryforwards are not available to
offset taxable income of AeroUSA in future years, AeroUSA will be required to
pay additional U.S. federal income tax which will reduce the amount available to
pay to Airplanes Trust and have a negative impact on the cash flow of Airplanes
Trust available to make payments on the notes and certificates.
AEROUSA MAY INCUR ADDITIONAL TAX LIABILITIES AS A RESULT OF FILING
CONSOLIDATED TAX RETURNS WITH GENERAL ELECTRIC COMPANY ("GE") OR DEBIS
AIRFINANCE, INC. THERE WILL BE A NEGATIVE IMPACT ON THE CASH FLOW OF
AIRPLANES GROUP IF AEROUSA INCURS ANY SUCH LIABILITIES.
AeroUSA and its wholly owned subsidiary, AeroUSA 3 Inc. (together, the
"AEROUSA GROUP"), filed U.S. federal consolidated tax returns and certain state
and local tax returns with GPA, Inc. (now known as debis AirFinance, Inc.) and
its subsidiaries (together, the "AERFI U.S. TAX GROUP") through November 20,
1998. Since November 20, 1998, the AeroUSA group has filed U.S. federal
consolidated tax returns and certain state and local tax returns with GE and its
subsidiaries (together, the "GE U.S. TAX GROUP"). As members of the consolidated
tax groups, the AeroUSA group is jointly and severally liable for the applicable
U.S. federal or state and local tax liabilities of the AerFi U.S. tax group for
the period through November 20, 1998 and of the GE U.S. tax group for
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the period since November 20, 1998. There are ongoing U.S. federal, state and
local tax audits with respect to taxes previously reported by the AerFi U.S. tax
group.
GE, AeroUSA and Airplanes Trust have entered into a tax sharing agreement
pursuant to which GE has agreed to indemnify members of the AeroUSA group
against any U.S. federal, state or local tax liabilities of any member of the GE
U.S. tax group (other than an AeroUSA group member) which are imposed on the
AeroUSA group that are related to any tax period or portion of a tax period
beginning after November 20, 1998 and are tax liabilities that the AeroUSA group
would not have incurred if they were not members of the GE U.S. tax group.
Furthermore, under this tax sharing agreement, (1) AeroUSA has agreed to pay GE
(in cash if a payment is then due by the GE U.S. tax group to a tax authority,
otherwise in the form of subordinated non-interest bearing notes) its share of
tax liabilities based on the amount of tax liabilities that the AeroUSA group
would have incurred if it were not included in the GE U.S. tax group and (2) GE
has agreed to pay AeroUSA, at the time such tax savings are realized, an amount
equal to any tax savings by any member of the GE U.S. tax group (other than a
member of the AeroUSA group) for any tax period after November 20, 1998 as a
result of any tax asset generated by the AeroUSA group. Similar provisions
contained in a tax sharing agreement between GPA Group (now known as debis
AirFinance Ireland), GPA, Inc. (now known as debis AirFinance, Inc.), AeroUSA
and Airplanes Trust which terminated on November 20, 1998 remain applicable in
respect of tax periods ending on or before November 20, 1998.
The receipt by Airplanes Trust or AeroUSA of any amounts from GE, debis
AirFinance Ireland or debis AirFinance, Inc., as applicable, pursuant to the tax
sharing agreements will depend upon the financial condition and liquidity of GE,
debis AirFinance Ireland or debis AirFinance, Inc., as applicable, at the time
any claim is made. To the extent any tax claims are successfully made against
the AeroUSA group and those amounts are not indemnified by GE, debis AirFinance
Ireland or debis AirFinance, Inc. under the relevant tax sharing agreements,
those claims will have a negative impact on the cash flow available to Airplanes
Group to make payments on the notes and certificates. In addition, because the
notes and certificates are not secured directly or indirectly by the aircraft or
the leases, substantially all of the assets of the AeroUSA group, including the
aircraft, would be available for attachment and satisfaction of any of those
claims.
AIRPLANES LIMITED, AIRPLANES HOLDINGS AND AIRPLANES HOLDINGS' NON-U.S.
SUBSIDIARIES MAY BE SUBJECT TO U.S. FEDERAL INCOME TAX AS A RESULT OF
ACTIONS OF THE SERVICER OR ADMINISTRATIVE AGENT OR, IN THE CASE OF
AIRPLANES HOLDINGS AND ITS IRISH TAX RESIDENT AIRCRAFT OWNING SUBSIDIARIES,
BECAUSE THEY MAY NOT BENEFIT FROM THE U.S.-IRISH TAX TREATY, WHICH WOULD
NEGATIVELY AFFECT THEIR CASH FLOW.
Whether Airplanes Limited, Airplanes Holdings and Airplanes Holdings'
non-U.S. subsidiaries will be subject to U.S. federal income tax may depend on
the manner in which the activities of the servicer and administrative agent are
performed, and in the case of Airplanes Holdings and its Irish tax resident
aircraft owning subsidiaries, will depend on qualification for the benefits of
the income tax treaty between the United States and Ireland (the "TREATY").
Prior to GE Capital's acquisition of the class E notes, Airplanes Holdings
and its Irish tax resident aircraft owning subsidiaries qualified for treaty
benefits by virtue of a ruling obtained by AerFi Group (now known as debis
AirFinance Ireland) from the U.S. competent authority, which applied to AerFi
Group and its qualified affiliates. Following the acquisition of the class E
notes by GE Capital, Airplanes Holdings and its Irish tax resident aircraft
owning subsidiaries are no longer affiliates of AerFi Group. Accordingly, the
AerFi Group ruling no longer applies to Airplanes Holdings and its Irish tax
resident aircraft owning subsidiaries. Airplanes Holdings intends to seek its
own competent authority ruling on similar grounds to those on which the AerFi
Group ruling was based. However, there can be no assurance that such a ruling
will be granted to Airplanes Holdings and its Irish tax resident aircraft owning
subsidiaries, or even if the ruling is obtained, that the activities of the
servicer or the administrative agent will not subject Airplanes Limited,
Airplanes Holdings and Airplanes Holdings' non-U.S. subsidiaries to U.S. federal
income tax on some or all of their income.
In the event that Airplanes Limited, Airplanes Holdings or Airplanes
Holdings' non-U.S. subsidiaries are subject to U.S. federal income tax on some
or all of their income, the cash flow available to make payments on the notes
and certificates would be reduced.
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THE OPERATIONS OF AIRPLANES LIMITED, AIRPLANES TRUST AND AEROUSA MAY BECOME
SUBJECT TO IRISH CORPORATE TAXES WHICH WOULD REDUCE THEIR CASH FLOWS.
Airplanes Limited, Airplanes Trust and AeroUSA do not intend to be treated
as doing business in Ireland and, therefore, do not expect to be subject to
Irish corporate tax. However, if their operations differ from those intended,
they could become subject to Irish taxes.
WE WILL NOT PAY ANY ADDITIONAL AMOUNTS TO MAKE UP FOR ANY WITHHOLDING TAX
THAT MAY APPLY AND REDUCE THE AMOUNTS YOU RECEIVE.
We will not make any additional payments to you for any withholding or
deduction required by applicable law on payments on either the notes or the
certificates. We will use reasonable efforts to avoid the application of
withholding taxes or other deductions. If withholding taxes cannot be avoided,
however, we may redeem the notes and certificates. If we do not redeem them, we
will reduce the net amount of interest that is passed through to you by the
amount of any withholding or deduction.
WE MAY LOSE IRISH CORPORATE TAX BENEFITS WHICH WOULD REDUCE OUR CASH FLOW
AND IMPAIR OUR ABILITY TO REPAY THE NOTES AND CERTIFICATES.
Airplanes Limited owns 95% of the capital stock of Airplanes Holdings and
GECAS owns the remaining 5%. The 5% shareholding by GECAS is intended to entitle
Airplanes Holdings and some of its Irish tax-resident subsidiaries to continue
to be eligible for a reduced rate of corporate tax and other corporate tax
benefits for Shannon, Ireland certified companies, including a preferential 10%
corporate tax rate. If GECAS reduces or relocates its operations for any reason
so that it fails to maintain, among other things, specified employment levels in
Ireland, or if GECAS resigns or its appointment is terminated in accordance with
the terms of the servicing agreement, then Airplanes Holdings and those other
companies (a) may become subject to Irish corporate taxation at general Irish
statutory rates, which are currently 20% for trading income, and are expected to
fall to 16% for 2002 and 12.5% for 2003 and subsequent years, and (b) may lose
the ability to deduct interest payments to Airplanes Limited from their income
in calculating their liability to Irish tax. The loss of these tax benefits
would likely have a materially adverse effect on Airplanes Limited's ability to
make payments on its notes and guarantees.
Upon the scheduled termination of the preferential 10% tax rate on December
31, 2005, Airplanes Holdings and its Irish tax resident subsidiaries will become
subject to Irish corporate tax on their net trading income, which would include
leasing income, at a 12.5% tax rate as provided for in the Irish Finance Act of
1999. There can be no assurance that this tax rate will not be changed in the
future.
RISKS RELATING TO BANKRUPTCY
OUR ASSETS MAY BE CONSOLIDATED WITH THOSE OF DEBIS AIRFINANCE IRELAND OR
ITS SUBSIDIARIES IF THEY BECOME BANKRUPT OR INSOLVENT, LEAVING FEWER ASSETS
AVAILABLE TO REPAY THE CERTIFICATES.
We have taken steps to structure Airplanes Group and our transactions,
especially the 1996 transaction whereby we acquired our portfolio of aircraft
from GPA Group (now known as debis AirFinance Ireland), to ensure that our
assets would not be consolidated with the assets of debis AirFinance Ireland and
would not become available to debis AirFinance Ireland's creditors in any
bankruptcy or insolvency proceeding involving debis AirFinance Ireland or any of
its affiliates. If debis AirFinance Ireland or any of its subsidiaries becomes
bankrupt or insolvent, there is a legal risk that a court or other authority
could decide that these steps were not effective to insulate our assets from
debis AirFinance Ireland's assets or that debis AirFinance Ireland's transfer of
aircraft to us in 1996 was improper. As a result, the aircraft and our other
assets could become available to repay debis AirFinance Ireland's creditors and
we could lose all of our rights in the aircraft and our other assets. If that
happens, we may not have sufficient funds left to repay the certificates.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD CERTIFICATES
Upon the terms and the conditions set forth in this prospectus and in the
accompanying letter of transmittal which together constitute the exchange offer,
we will accept for exchange old certificates which are properly tendered on or
before the expiration date and not withdrawn as permitted below. The term
"expiration date" means 5:00 p.m., New York City time, on [the 20th business day
following commencement of the offer], 2001. If we, however, in our sole
discretion, extend the period for which the exchange offer is open, the
expiration date means the latest time and date to which the exchange offer is
extended.
On or about the date set forth on the cover page of this prospectus, we
will first send this prospectus, together with the letter of transmittal, to all
holders of old certificates known to us. Our obligation to accept old
certificates for exchange is subject to certain conditions as listed under "--
Conditions to the Exchange Offer" below.
We expressly reserve the right to extend the time during which the exchange
offer is open, and delay acceptance of any old certificates, by giving oral or
written notice of any extension to the exchange agent and the holders. During
any extension, all old certificates previously tendered will remain subject to
the exchange offer and may be accepted for exchange by us. We have agreed under
the registration rights agreement to keep the exchange offer open for at least
20 business days after the date notice of the exchange offer is mailed to the
holders of the old certificates or longer if required by applicable law.
We expressly reserve the right to amend or terminate the exchange offer,
and to refuse any old certificates not accepted for exchange, upon the
occurrence of any of the conditions of the exchange offer specified below under
"-- Conditions to the Exchange Offer." We will give oral or written notice of
any extension, amendment, non-acceptance or termination to the holders of the
old certificates as promptly as practicable. We will also issue such notice in
the case of any extension by means of a press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration date.
Holders of old certificates do not have any appraisal or dissenters' rights
under the indenture in connection with the exchange offer. We intend to conduct
the exchange offer in accordance with the applicable requirements of the
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission.
PROCEDURES FOR TENDERING OLD CERTIFICATES
The tender to us of old certificates by a holder as described below and our
acceptance will constitute a binding agreement between the tendering holder and
us upon the terms and subject to the conditions set forth in this prospectus and
in the accompanying letter of transmittal.
Except as set forth below, a holder including any participant in the
Depository Trust Company ("DTC") system whose name appears on a security
position listing as a holder of such old certificates who wishes to tender old
certificates for exchange under the exchange offer must transmit to the exchange
agent on or before the expiration date either:
- a properly completed and executed letter of transmittal or a facsimile
of the letter, including all other documents required by the letter of
transmittal, to the exchange agent at the address listed below under "--
Exchange Agent"; or
- a computer-generated message, transmitted through DTC's ATOP system and
received by the exchange agent and forming part of a book-entry
confirmation, in which the holder agrees to be bound by the terms of the
letter of transmittal.
To ensure timely delivery of the old certificates:
- the exchange agent must receive a confirmation of a book-entry transfer
of the old certificates into its account at DTC before the expiration
date; or
- the holder of old certificates must comply with the guaranteed delivery
procedures described below.
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THE METHOD OF DELIVERY OF OLD CERTIFICATES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT YOUR ELECTION AND RISK. IF THE DELIVERY IS
BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, WITH RETURN RECEIPT
REQUESTED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE TIMELY
DELIVERY. NO LETTERS OF TRANSMITTAL SHOULD BE SENT TO US.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the old certificates surrendered for exchange are tendered by
a holder of the old certificates who has not completed the box entitled "Special
Issuance Instructions" on the letter of transmittal or for the account of a firm
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in the United States. If
signatures on a letter of transmittal or a notice of withdrawal are required to
be guaranteed, the guarantees must be by a firm which is a member of a
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc. or by a commercial bank or trust company having an
office or correspondent in the United States.
We will determine in our sole discretion all questions as to the validity,
form, eligibility and acceptance of old certificates tendered for exchange. Our
decision in this respect will be final and binding. We reserve the absolute
right to reject any tenders of any old certificates not properly tendered or to
reject any old certificates acceptance of which might, in our judgment or that
of our counsel, be unlawful. We also reserve the absolute right in our sole
discretion to waive any defects or irregularities or conditions of the exchange
offer as to any old certificates either before or after the expiration date. Our
interpretation of the terms and conditions of the exchange offer or any old
certificates either before or after the expiration date shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with the tenders of old certificates for exchange must be cured
within a reasonable period of time as we shall determine. None of us, the
exchange agent nor any other person shall be under any duty to give notification
of any defect or irregularity with respect to any tender of old certificates for
exchange, nor shall any of us or them incur any liability for failure to give
such notification.
If a person or persons other than the holders of old certificates sign the
letter of transmittal, the letter of transmittal must be accompanied by
appropriate powers of attorney, signed exactly as the name or names of the
holders that appear on the security position listing maintained by DTC.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, sign the letter of transmittal or powers of attorney, such person
should so indicate when signing and, unless waived by us, proper evidence
satisfactory to us of its authority to so act must be submitted.
By tendering, each holder of old certificates will represent to us that:
- the person receiving the new certificates, whether or not the person is
a holder, is acquiring the new certificates under the exchange offer in
the ordinary course of business,
- neither the holder of old certificates nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of the new certificates,
- if the holder is not a broker-dealer, or is a broker-dealer but will not
receive new certificates for its own account in exchange for old
certificates, neither the holder nor any such other person is engaged in
or intends to participate in the distribution of the new certificates,
and
- neither the holder nor any other person is an "affiliate" of us within
the meaning of Rule 405 under the Securities Act.
By tendering old certificates, each holder of old certificates that is a
broker-dealer, whether or not it is also an affiliate, that will receive new
certificates for its own account pursuant to the exchange offer will represent
that old certificates to be exchanged were acquired by it as a result of
market-making activities or other trading activities and will acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the new certificates. However, by so acknowledging
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.
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ACCEPTANCE OF OLD CERTIFICATES FOR EXCHANGE; DELIVERY OF NEW CERTIFICATES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all old certificates
properly tendered and will issue the new certificates promptly after acceptance
of the old certificates. For purposes of the exchange offer, we shall be deemed
to have accepted properly tendered old certificates for exchange when, as and if
we have given oral or written notice thereof to the exchange agent.
In all cases, issuance of new certificates for old certificates that are
accepted for exchange under the exchange offer will be made only after timely
receipt by the exchange agent of all the documents listed under "-- Procedures
for Tendering Old Certificates". If any tendered old certificates are not
accepted for any reason set forth in the terms and conditions of the exchange
offer, such unaccepted or non-exchanged old certificates will be credited to an
account maintained with DTC as promptly as practicable after the expiration or
termination of the exchange offer.
INTEREST ON THE NEW CERTIFICATES
Holders of old certificates that are accepted for exchange will not receive
accrued interest on the old certificates at the time of exchange. However, each
new certificate will bear interest from the most recent date to which interest
has been paid on the old certificates.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account for the old
certificates at DTC for purposes of the exchange offer promptly after the date
of this prospectus. All deliveries of old certificates must be made by
book-entry transfer to the account maintained by the exchange agent at DTC. Any
financial institution that is a participant in the DTC system may make
book-entry delivery of old certificates by causing DTC to transfer such old
certificates into the exchange agent's account in accordance with DTC's ATOP
procedures for transfer. Holders of old certificates who are unable to deliver
confirmation of the book-entry tender of their old certificates into the
exchange agent's account at DTC or all other documents required by the letter of
transmittal to the exchange agent on or prior to the expiration date, must
tender their old certificates according to the guaranteed delivery procedures
described below.
GUARANTEED DELIVERY PROCEDURES
If a holder of the old certificates desires to tender them and time will
not permit the holder's required documents to reach the exchange agent on or
before the expiration date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
- the tender is made through a firm which is a member of a registered
national securities exchange or a member of the National Association of
Security Dealers, Inc. or a commercial bank or trust company having an
office or correspondent in the United States,
- on or before the expiration date, the exchange agent receives from such
firm, commercial bank or trust company either a properly completed and
duly executed letter of transmittal, or facsimile thereof or a properly
transmitted agent's message and notice of guaranteed delivery,
substantially in the form provided by us listing:
-- the name and address of the holder of old certificates,
-- the amount of old certificates tendered,
-- stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, a book-entry
confirmation and all other documents required by the letter of
transmittal will be deposited by such firm, commercial bank or trust
company with the exchange agent, and
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- a book-entry confirmation and all other documents required by the letter
of transmittal, are received by the exchange agent within five New York
Stock Exchange trading days after the date of execution of the notice of
guaranteed delivery.
WITHDRAWAL RIGHTS
Tenders of old certificates may be withdrawn at any time before the
expiration date.
For a withdrawal to be effective, either a written notice of withdrawal
must be received by the exchange agent at one of the addresses set forth below
under "-- Exchange Agent" or the appropriate procedures of DTC's ATOP system
must be complied with. Any notice of withdrawal must specify the name of the
person that tendered the old certificates to be withdrawn and identify the old
certificates to be withdrawn. Any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn old certificates
and otherwise comply with the procedures of DTC. All questions as to the
validity, form and eligibility of such notices will be determined by us, and our
determination shall be final and binding on all parties. Any old certificates so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the exchange offer. Any old certificates which holders have tendered
for exchange but which are not exchanged for any reason will be credited to an
account maintained with DTC for the old certificates as soon as practicable
after withdrawal, rejection of tender or termination of the exchange offer.
Holders who have properly withdrawn old certificates may retender old
certificates by following one of the procedures described under "-- Procedures
for Tendering Old Certificates" above at any time on or before the expiration
date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, we shall not be
required to accept any old certificates for exchange or to issue new
certificates in exchange for any old certificates. We may terminate or amend the
exchange offer if, at any time before the acceptance of such old certificates
for exchange or the exchange of the new certificates for such old certificates,
such acceptance or issuance would violate applicable law or any interpretation
of the staff of the Commission.
The foregoing condition is for our sole benefit and we may assert it
regardless of the circumstances giving rise to such condition or we may waive it
in whole or in part at any time and from time to time in our sole discretion.
Any failure on our part at any time to exercise the foregoing rights shall not
be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any old certificates tendered,
and no new certificates will be issued in exchange for any such old
certificates, if at such time any stop order shall be threatened or in effect
with respect to either the registration statement of which this prospectus
constitutes a part or the qualification of the indentures under the Trust
Indenture Act of 1939, as amended.
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EXCHANGE AGENT
Bankers Trust Company has been appointed as the exchange agent for the
exchange offer. All executed letters of transmittal should be delivered to the
exchange agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this prospectus or of the
letter of transmittal and requests for notices of guaranteed delivery should be
directed to the exchange agent, addressed as follows:
Delivery To: Bankers Trust Company, as Exchange Agent
By Facsimile: By Overnight Mail or Courier: By Hand Delivery:
BT Services Tennessee, Inc. BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust & Agency Corporate Trust & Agency
P.O. Box 292737 Group Group
Nashville, Tennessee Reorganization Unit Attn: Reorganization
37229-2737 648 Grassmere Park Road Department
Nashville, Tennessee 37211 Receipt & Delivery Window
123 Washington Street, 1st
Floor
New York, New York 10006
Facsimile Transmission Confirm by Telephone: Information:
Number: (615) 835-3572 (800) 735-7777
(615) 835-3701
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AN ADDRESS
SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN TO A NUMBER SET
FORTH ABOVE WILL NOT BE A VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation is being made by mail. Additional solicitation
may be made by telegraph, telephone or in person by the exchange agent, on our
behalf. No additional compensation will be paid to the exchange agent who
engages in soliciting tenders. We will not pay brokers, dealers, or others
soliciting acceptances of the exchange offer. We will, however, pay the exchange
agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection with the exchange offer.
The cash expenses to be incurred in connection with the exchange offer will
be paid by us and are estimated in the aggregate to be $500,000.
TRANSFER TAXES
Holders who tender their old certificates for exchange will not be
obligated to pay any transfer taxes. If, however, a transfer tax is imposed for
any reason other than the transfer of old certificates to us or our order
pursuant to the exchange offer, the amount of any such transfer taxes will be
payable by the tendering holder. If a tendering holder does not submit
satisfactory evidence of payment of or exemption from such taxes, the amount of
such transfer taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old certificates who do not exchange their old certificates for
new certificates under the exchange offer will continue to be subject to the
transfer restrictions of the old certificates. In general, the old certificates
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. We do not intend to
register the old certificates under the Securities Act.
To comply with the securities laws of certain jurisdictions, it may be
necessary to qualify for sale or register the new certificates prior to offering
or selling such new certificates. We have agreed to register or qualify the new
certificates held by broker-dealers for offer or sale under the securities or
blue sky laws of such jurisdictions as any such holder reasonably requests in
writing. Unless a holder makes such a request, we do not intend to take any
action to register or qualify the new certificates for resale in any such
jurisdictions. In addition, the tender of old certificates pursuant to the
exchange offer will reduce the principal amount of the old certificates
outstanding. This may have an adverse effect upon, and increase the volatility
of, the market price of the old certificates due to a reduction in liquidity.
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THE PARTIES
THE TRUST AND TRUSTEE
The 2001 refinancing trust is one of six separate pass through trusts of
Airplanes Pass Through Trust that have been organized under New York law
pursuant to the trust agreement and are existing as of the date of this
prospectus. The sole purpose of each pass through trust is to issue a class or
subclass of certificates, to acquire and hold the class or subclass of notes and
guarantees corresponding to these certificates and to engage in other specified
activities related to those certificates. The only assets of each pass through
trust are the class or subclass of notes and guarantees corresponding to the
certificates issued by it and any funds on deposit in that trust's accounts.
Upon the issuance of each class or subclass of certificates, the purchasers of
those certificates own all of the certificates of that class or subclass. Except
for the new certificates that will be issued in connection with this exchange
offer, no additional certificates will be issued by the 2001 refinancing trust.
Bankers Trust Company acts as the trustee for each trust. The trustee will
hold title to each class or subclass of notes and guarantees for the benefit of
the holders of the corresponding class or subclass of certificates.
Airplanes Limited and Airplanes Trust will pay the trustee's fees and
expenses and will indemnify the trustee for any loss, liability or expenses it
incurs except if it is a result of the trustee's negligence, bad faith, wilful
misconduct or breach of any of its representations or warranties in the trust
agreement. If the loss, liability or expense is tax-related, the trustee is also
entitled to reimbursement from the relevant pass through trust and will have a
lien on the assets of that trust for any taxes incurred without negligence, bad
faith or wilful misconduct on the part of the trustee.
If an event of default occurs with respect to any class or subclass of
certificates, the trustee (1) may vote all of the corresponding class or
subclass of notes to declare the outstanding principal amounts of the notes,
together with any accrued interest, due and payable, and (2) upon the direction
of the holders of 25% of that class or subclass of certificates, shall vote a
corresponding amount of the corresponding class or subclass of notes to direct
the indenture trustee to declare the outstanding principal amount of the notes,
together with any accrued interest, due and payable in accordance with the
provisions of the indentures; provided that the trustee and holders of any class
of certificates will not be permitted to direct the indenture trustee until the
payment in full of all amounts due and payable with respect to any class of
notes ranking senior to the notes corresponding to that class of certificates.
Under the terms of the indentures, all of the notes will become immediately due
and payable upon the declaration by the indenture trustee for, or the vote of
the appropriate percentage of the holders of, the most senior class of notes
then outstanding. See "Description of Securities -- The Certificates -- Events
of Default and Remedies" for a further discussion of your rights if there is an
event of default. Generally, however, the certificate holders have no management
powers other than to receive payments and specified information according to the
terms of the certificates and the trust agreement. See "Reports to Certificate
Holders" for a form of the report to certificate holders required by the trust
agreement.
The trustee may resign at any time upon at least 90 days' prior written
notice. A trustee will also have to resign if (a) it becomes entitled to be
reimbursed by the trust for any taxes or if taxes on the certificates can be
avoided with a different trustee, and (b) Airplanes Limited and Airplanes Trust
have not agreed to pay those taxes. We can also remove the trustee if it ceases
to be eligible to continue as trustee, becomes incapable of acting as trustee or
becomes insolvent. A holder of any certificate of the affected class or subclass
may also petition a court to remove the trustee for these same reasons if some
other conditions are met. In addition, a majority of the certificate holders of
any class or subclass can remove their trustee for any reason. However, any
resignation or removal of the trustee will only be effective when a successor
trustee is appointed and accepts appointment as successor trustee under the
trust agreement.
The 2001 refinancing trust's principal address is c/o Bankers Trust
Company, Four Albany Street, Mail Stop 5091, New York, NY 10006, Attention:
Corporate Trust and Agency Group, and its telephone number is +1-212-250-2601.
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AIRPLANES LIMITED
Airplanes Limited is a special purpose limited liability company formed on
November 3, 1995 under the laws of Jersey, Channel Islands. Its sole purposes
are to (a) acquire, own, manage, maintain, lease, re-lease, modify and sell
(subject to restrictions under its indenture) the aircraft, (b) finance and
refinance these activities, including guaranteeing the obligations of its
subsidiaries and of Airplanes Trust, (c) manage its interest rate and currency
risks, and (d) engage in other activities related to the aircraft and their
financing.
Airplanes Limited's principal assets are the intercompany loans it has
advanced to its subsidiaries and 95% of the capital stock of Airplanes Holdings.
As of January 31, 2001, Airplanes Holdings owned a total of 177 aircraft
directly and through its aircraft-owning subsidiaries, and owned a number of
aircraft-leasing subsidiaries which lease aircraft from the aircraft-owning
subsidiaries and sublease them to lessees. The remaining 5% of the capital stock
of Airplanes Holdings is owned by GECAS. See "Risk Factors -- Risks Relating to
Tax" for a discussion of the tax benefits of this 5% ownership by GECAS and the
risk of losing these benefits. Airplanes Limited has no ownership or leasehold
interests in any real property.
Airplanes Limited has an authorized share capital of 10,000 ordinary
shares, with $1 par value per share. 30 ordinary shares of Airplanes Limited
have been issued and are outstanding. These shares are held by Juris Limited and
Lively Limited, each a Jersey limited liability company, as bare nominees for
the benefit of the following three "CHARITABLE TRUSTS":
TITLE OF CLASS NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
- -------------- ---------------- ---------------- ----------------
Common stock............ Mourant & Co. Trustees Limited as trustee 10 Shares 33 1/3%
of Holdings Trust I, 22 Grenville Street,
St. Helier, Jersey, Channel Islands
Common stock............ Mourant & Co. Trustees Limited as trustee 10 Shares 33 1/3%
of Holdings Trust II, 22 Grenville Street,
St. Helier, Jersey, Channel Islands
Common stock............ Mourant & Co. Trustees Limited as trustee 10 Shares 33 1/3%
of Holdings Trust III, 22 Grenville
Street, St. Helier, Jersey, Channel
Islands
Under its articles of association, Airplanes Limited pays an annual fixed
cumulative preferential dividend of $4,500 (the "ANNUAL DIVIDEND AMOUNT") to the
holders of its capital stock, but only when it has distributable profits which
may lawfully be paid as dividends and provided that no event of default has
occurred and is continuing.
Mourant & Co. Trustees Limited, as trustee of each of the three charitable
trusts, has agreed pursuant to a shareholders' agreement with Airplanes Limited
and the indenture trustee not to transfer any part of the capital stock of
Airplanes Limited without the prior written approval of the indenture trustee
and all the directors of Airplanes Limited, unless the transferee is a trustee
of a substantially identical charitable trust and enters into a substantially
identical shareholders' agreement.
Airplanes Limited is managed by a board of directors, which is currently
composed of five directors. See "Management of Airplanes Group -- Directors and
Controlling Trustees" for details on these directors. Airplanes Limited does not
have any employees or executive management of its own and relies solely on
service providers to service, lease and re-lease aircraft and perform other
executive and administrative responsibilities. For a description of the services
provided by the service providers, see "Management of Airplanes Group -- The
Servicer" and "-- The Administrative Agent and Cash Manager."
We have taken steps to structure Airplanes Limited and its acquisition of
the aircraft-owning and aircraft-leasing subsidiaries from GPA Group (now known
as debis AirFinance Ireland) in 1996 to ensure that its assets would not be
consolidated with the assets of debis AirFinance Ireland and would not otherwise
become available to its creditors in any bankruptcy or insolvency proceeding
involving debis AirFinance Ireland or any of its affiliates. For a description
of the risks you could face if these steps are not effective, see "Risk Factors
- --Risks Relating to Bankruptcy."
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39
None of Airplanes Limited or its subsidiaries are involved in any
litigation or arbitration proceedings which are material in the context of the
issue of the subclass A-9 certificates, and Airplanes Limited is not aware of
any threatened or pending litigation or arbitration proceedings that are or
could be material in the context of the issue of the subclass A-9 certificates.
The registered and principal office of Airplanes Limited is located at 22
Grenville Street, St. Helier, Jersey, Channel Islands, and its telephone number
is +44-1534-609000.
AIRPLANES TRUST
Airplanes Trust is a Delaware statutory business trust formed in November
1995. Its sole purposes are to (a) acquire, own, manage, maintain, lease,
re-lease, modify and sell (subject to restrictions under its indenture) the
aircraft, (b) finance and refinance these activities, including guaranteeing the
obligations of its subsidiaries and of Airplanes Limited, (c) manage its
interest rate and currency risks and (d) engage in other activities related to
the aircraft and their financing.
Airplanes Trust's principal assets are the intercompany loans it has
advanced to its subsidiaries and 100% of the capital stock of AeroUSA, which as
of January 31, 2001 owned 16 aircraft through its direct subsidiary, AeroUSA 3.
The shares of AeroUSA and AeroUSA 3 are held by separate voting trusts with
First Security Bank of Utah, acting as trustee, in order to satisfy the U.S.
Federal Aviation Administration regulations regarding the U.S. citizenship of
the owners of U.S.-registered aircraft. Airplanes Trust has no ownership or
leasehold interests in any real property.
debis AirFinance, Inc., a wholly-owned subsidiary of debis AirFinance
Ireland, holds the residual ownership interest in all of the property of
Airplanes Trust. In connection with the sale of the class E notes to GE Capital
by GPA Group (now known as debis AirFinance Ireland) and its subsidiaries in
1998, GPA, Inc. (now known as debis AirFinance, Inc.) granted an option to GE
Capital for it to purchase this residual ownership interest in Airplanes Trust
for $1.00. If GE Capital does not exercise this option before its expiry date,
which is 30 days after notice of the dissolution of the trust, the option will
become void. Upon repayment in full of all of the indebtedness of Airplanes
Trust and the dissolution of Airplanes Trust, legal title to the AeroUSA shares
and other property of Airplanes Trust will revert to debis AirFinance, Inc. or
GE Capital, if GE Capital has exercised its option.
Airplanes Trust has five controlling trustees, who are the same individuals
as those who currently serve as directors of Airplanes Limited, and a Delaware
trustee, Wilmington Trust Company. For information on its management, see
"Management of Airplanes Group -- Directors and Controlling Trustees." Airplanes
Trust does not have any employees or executive officers of its own and relies
solely on service providers to service, lease and re-lease the aircraft and
perform other executive and administrative responsibilities. For a description
of these services, see "Management of Airplanes Group -- The Servicer" and "--
The Administrative Agent and Cash Manager."
We have taken steps to structure Airplanes Trust and its acquisition of the
aircraft-owning and aircraft-leasing subsidiaries from GPA Group (now known as
debis AirFinance Ireland) in 1996 to ensure that its assets would not be
consolidated with the assets of debis AirFinance Ireland and would not otherwise
become available to its creditors in any bankruptcy or insolvency proceeding
involving debis AirFinance Ireland or any of its affiliates. For a description
of the risks you could face if these steps are not effective, see "Risk Factors
- -- Risks Relating to Bankruptcy."
None of Airplanes Trust, AeroUSA or AeroUSA 3 is involved in or subject to
any litigation or arbitration proceedings which are material in the context of
the issue of the subclass A-9 certificates, and Airplanes Trust is not aware of
any threatened or pending litigation or arbitration that are or could be
material in the context of the issue of the subclass A-9 certificates.
The office of Airplanes Trust in the State of Delaware is 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001, c/o Wilmington
Trust Company, and its telephone number is +1-302-651-1000.
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USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new
certificates offered hereby. New certificates will be exchanged for old
certificates as described in this prospectus on our receipt of old certificates
in like principal amount. We will cancel all of the old certificates surrendered
to us in exchange for the new certificates. The net cash proceeds to us from the
sale of the old certificates were approximately $750.0 million. We used these
net proceeds to refinance our then existing subclass A-7 certificates ($550.0
million) and subclass A-4 certificates ($200.0 million) on March 15, 2001.
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THE AIRCRAFT, RELATED LEASES AND COLLATERAL
OVERVIEW
As of January 31, 2001, our portfolio comprised a total of 193 aircraft, of
which 187 aircraft were on lease to 65 lessees in 35 countries and six aircraft
were off-lease. At January 31, 2001, three of these off-lease aircraft were
subject to lease agreements and one was subject to a letter of intent for lease.
The remaining two unplaced aircraft represented 0.34% of our portfolio by
appraised value as of January 31, 2001. As of the date of this prospectus, one
of the unplaced off-lease aircraft had become subject to a letter of intent for
lease, three of the off-lease aircraft subject to lease agreements had been
delivered to three existing lessees, and three additional aircraft, representing
1.23% of our portfolio by appraised value as of January 31, 2001, have become
available for lease. As of January 31, 2001, the weighted average remaining
contracted lease term of our portfolio (by appraised value as of that same date
and without giving effect to purchase options or extension options) was 29
months. Our longest lease is scheduled to expire in September 2008. Therefore we
will be required to re-lease all of our aircraft at least once before the
expected final payment date for the subclass A-9 certificates. See "Risk Factors
- -- Risks Relating to the Leases and Cash Flows for Lease Payments" for a
description of the risks you could face if any aircraft is not re-leased.
APPRAISALS
Under the indentures, we are required, at least once each year and in any
case no later than March 1 of each year, to deliver to the indenture trustee
appraisals of the value of each of the aircraft in our portfolio from at least
three independent appraisers. This value (the "APPRAISED VALUE") for each
aircraft is the value for that aircraft at normal utilization rates in an open,
unrestricted and stable market, adjusted to take account of the reported
maintenance standard of that aircraft, except for the aircraft that are subject
to finance leases, which are valued at their lease receivable book values. The
appraisals are not based on physical inspection of the aircraft and do not take
into account the value of the leases, maintenance reserves or security deposits.
For the appraisals as of January 31, 2001, we obtained independent
appraisals from three independent appraisers and calculated the appraised value
of each aircraft by taking the average of the three appraisals. On this basis,
the average appraised value for our portfolio of 193 aircraft was approximately
$3,135.4 million as of January 31, 2001, as compared to $3,310.1 million for the
same 193 aircraft based on appraisals as of February 18, 2000. The reduction in
value represents utilization for the period.
The appraised value of each aircraft in our portfolio by each of the three
independent appraisers as of January 31, 2001 can be found in Appendix 1 to this
prospectus. The aggregate appraised values calculated by each of the three
independent appraisers for our portfolio, calculated by adding up the appraised
value by that appraiser of each aircraft in our portfolio, are as follows:
AGGREGATE
APPRAISED VALUE
APPRAISER AS OF JANUARY 31, 2001
- --------- ----------------------
(IN MILLIONS)
Airclaims Limited........................................... $2,933.5
Aircraft Information Services, Inc.......................... 3,195.9
BK Associates, Inc.......................................... 3,276.7
Average of three appraisers................................. $3,135.4
You should not rely on the appraised value as a measure of the realizable
value of any aircraft. See "Risk Factors -- Risks Relating to the Aircraft" for
a discussion of the risks associated with the appraised value.
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PORTFOLIO INFORMATION
The tables set forth below summarize important information about our
portfolio. For a more detailed analysis of the aircraft, see Appendix 1 to this
prospectus.
As of January 31, 2001, 95.02% of the aircraft in our portfolio by
appraised value as of that same date held or were capable of holding a noise
certificate issued under Chapter 3 of Volume 1, 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 (assuming for this purpose that turboprop aircraft are
Stage 3 aircraft). We refer to this as being "STAGE 3" compliant and call these
aircraft "STAGE 3 AIRCRAFT."
The remaining 4.98% of the aircraft by appraised value as of January 31,
2001 held or were capable of holding a noise certificate issued under Chapter 2
of the Chicago Convention or have been shown to comply with the Stage 2 noise
levels set out in Section 36.5 of Appendix C of Part 36 of the United States
Federal Aviation Regulations but do not comply with the requirements for a Stage
3 aircraft. We refer to this as being "STAGE 2" compliant and call these
aircraft "STAGE 2 AIRCRAFT." Most jurisdictions have adopted these U.S.
classifications, which consider Stage 2 aircraft that have been hushkitted to be
Stage 3 aircraft. For purposes of the table below, Stage 2 aircraft that have
been hushkitted are considered to be Stage 3 aircraft and referred to as "STAGE
3HK."
The following table lists the aircraft by type and number as of January 31,
2001 and the percentage of our portfolio they represent by appraised value as of
that same date. For the purpose of this table, turboprop aircraft are considered
to be Stage 3 aircraft.
% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
MANUFACTURER TYPE OF AIRCRAFT AIRCRAFT BODY TYPE STAGE OF JANUARY 31, 2001
- ------------ ---------------- --------- --------- ----- -------------------
Boeing (46.68%).................. B727-200A 2 Narrowbody 2 0.23%
B737-200A 16 Narrowbody 2 2.58
B737-200A 6 Narrowbody 3hk 0.79
B737-300 8 Narrowbody 3 5.07
B737-300QC 2 Narrowbody 3 1.14
B737-400 22 Narrowbody 3 16.82
B737-500 11 Narrowbody 3 6.97
B747-200SF 1 Freighter 3 0.96
B757-200 3 Narrowbody 3 3.53
B767-200ER 1 Widebody 3 1.37
B767-300ER 4 Widebody 3 7.23
McDonnell Douglas (30.52%)....... DC8-71F 18 Freighter 3 7.64
DC8-73CF 1 Freighter 3 0.54
DC9-32 6 Narrowbody 2 0.71
DC9-51 4 Narrowbody 2 0.43
MD-11 3 Widebody 3 5.94
MD-82 2 Narrowbody 3 1.06
MD-83 23 Narrowbody 3 13.82
MD-87 1 Narrowbody 3 0.39
Airbus (11.45%).................. A300-B4-200 2 Widebody 2 0.57
A300-C4-200 1 Widebody 2 0.47
A320-200 12 Narrowbody 3 10.41
Fokker (6.15%)................... F-100 16 Narrowbody 3 6.15
De Havilland of Canada (4.43%)... DHC8-100 6 Turboprop 3 0.98
DHC8-300 13 Turboprop 3 3.00
DHC8-300C 2 Turboprop 3 0.45
ATR (0.68%)...................... ATR42-300 4 Turboprop 3 0.68
Fairchild (0.09%)................ METRO-III 3 Turboprop 3 0.09
--- ------
Total.......................... 193 100.00%
=== ======
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The following table sets forth the exposure of our portfolio by lessee as
of January 31, 2001 according to the number of aircraft and the appraised value
as of that same date.
% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
LESSEE(1) AIRCRAFT OF JANUARY 31, 2001
- --------- --------- -------------------
Air Canada Capital Limited.................................. 11 8.95%
Viacao Aerea Rio-Grandense S.A. (VARIG)..................... 3 5.94
Turk Hava Yollari A.O. (THY Turkish Airlines)............... 7 5.28
Aerovias Nacionales de Colombia S.A. (AVIANCA).............. 6 5.08
BAX Global Inc.............................................. 10 4.24
Airtours International Airways Limited...................... 4 3.54
Spanair S.A................................................. 6 3.50
Compania Mexicana de Aviacion, S.A. de C.V. (MEXICANA)...... 10 3.34
Rio-Sul Servicos Aereos Regionais S.A....................... 5 3.23
TAM Transportes Aereos Meridionais S.A...................... 8 3.04
China Southern Airlines Company Limited..................... 4 2.47
Malev Hungarian Airlines plc................................ 3 2.41
Trans World Airlines Inc. (TWA)............................. 2 2.39
Lan Chile Airlines.......................................... 4 2.34
Compania Hispano Irlandesa de Aviacion S.A. (FUTURA)........ 3 2.26
Aerovias de Mexico, S.A. de C.V. (AEROMEXICO)............... 9 2.15
Meridiana SpA............................................... 3 1.89
Compagnie Nationale Air France (AIR FRANCE)................. 2 1.72
Schreiner Airways B.V....................................... 7 1.58
Air Espana S.A. (AIR EUROPA)................................ 2 1.54
Air One SpA................................................. 2 1.44
Pegasus Hava Tasimaciligi A.S............................... 2 1.42
Asiana Airlines Inc......................................... 2 1.40
Emery Worldwide Airlines, Inc............................... 3 1.40
Philippine Airlines Inc..................................... 2 1.35
American Airlines Inc....................................... 2 1.28
Aircraft International Leasing Limited (A.I.L.L.)(2)........ 3 1.27
Transportes Aereos Mercantiles Pan Americanos S.A.
(TAMPA)................................................... 3 1.27
China Xinjiang Airlines..................................... 1 1.20
Transwede Leisure AB........................................ 1 1.18
America West Airlines Inc................................... 2 1.14
Balkan Bulgarian Airlines A.D............................... 2 1.13
Eurofly SpA................................................. 2 1.09
Other (32 lessees).......................................... 51 14.23
Off-lease(3)................................................ 6 2.32
--- ------
Total..................................................... 193 100.00%
=== ======
- ---------------
(1) Total number of lessees = 65
(2) A.I.L.L. is an indirect 100% subsidiary of Lan Chile.
(3) As of January 31, 2001, three of the six off-lease aircraft were subject to
lease agreements with existing lessees and one was subject to a letter of
intent for lease to a new lessee. As of the date of this prospectus, one of
the unplaced off-lease aircraft had become subject to a letter of intent for
lease, three of the off-lease aircraft subject to lease agreements had been
delivered to Philippine Airlines, Merpati Nusantara Airlines and PT Garuda
Indonesia, all existing lessees, and three additional aircraft, representing
1.23% of our portfolio by appraised value as of January 31, 2001, have
become available for lease.
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The following table sets forth the exposure of our portfolio by country of
domicile of lessees as of January 31, 2001 according to the number of aircraft
and the appraised value of the portfolio as of that same date.
% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
COUNTRY(1) AIRCRAFT OF JANUARY 31, 2001
- ---------- --------- -------------------
United States of America.................................... 29 13.06%
Brazil...................................................... 16 12.20
Canada...................................................... 11 8.95
Spain....................................................... 11 7.29
Turkey...................................................... 10 7.17
Colombia.................................................... 10 6.55
Mexico...................................................... 19 5.49
Italy....................................................... 7 4.43
United Kingdom.............................................. 8 4.33
China....................................................... 5 3.66
Chile....................................................... 7 3.61
Hungary..................................................... 3 2.41
France...................................................... 3 2.37
Indonesia................................................... 7 1.73
Netherlands................................................. 7 1.58
South Korea................................................. 2 1.40
Philippines................................................. 2 1.35
Tunisia..................................................... 2 1.26
Sweden...................................................... 1 1.18
Bulgaria.................................................... 2 1.13
Other (15 countries)........................................ 25 6.51
Off-lease(2)................................................ 6 2.32
--- ------
Total..................................................... 193 100.00%
=== ======
- ---------------
(1) Total number of countries = 35
(2) As of January 31, 2001, three of the six off-lease aircraft were subject to
lease agreements with lessees in Indonesia and the Philippines and one was
subject to a letter of intent for lease to a lessee in the U.K. As of the
date of this prospectus, one of the unplaced off-lease aircraft had become
subject to a letter of intent for lease, three of the off-lease aircraft
subject to lease agreements had been delivered to two lessees in Indonesia
and one lessee in the Philippines, and three additional aircraft,
representing 1.23% of our portfolio by appraised value as of January 31,
2001, have become available for lease.
The following table sets forth the exposure of our portfolio by regions in
which lessees are domiciled as of January 31, 2001 according to the number of
aircraft and the appraised value of our portfolio as of that same date.
% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
REGION(1) AIRCRAFT OF JANUARY 31, 2001
- --------- --------- -------------------
Europe (excluding CIS Countries)............................ 56 33.65%
Latin America............................................... 62 29.91
North America............................................... 40 22.01
Asia & Far East............................................. 20 10.02
Africa...................................................... 2 1.26
Other (including CIS Countries)............................. 3 0.54
Australia & New Zealand..................................... 4 0.29
Off-Lease(1)................................................ 6 2.32
--- ------
Total..................................................... 193 100.00%
=== ======
- ---------------
(1) As of January 31, 2001, three of the six off-lease aircraft were subject to
lease agreements with lessees in Asia & Far East and one was subject to a
letter of intent for lease to a lessee in Europe. As of the date of this
prospectus, one of the unplaced off-lease aircraft had become subject to a
letter of intent for lease, three of the off-lease aircraft subject to lease
agreements had been delivered to three lessees in Asia & Far East, and three
additional aircraft, representing 1.23% of our portfolio by appraised value
as of January 31, 2001, have become available for lease.
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45
The following table sets forth the exposure of the portfolio by year of
aircraft manufacture or conversion to freighter as of January 31, 2001 according
to the number of aircraft and the appraised value of the aircraft as of that
same date. See note 4 to Appendix 1 for the original manufacture dates for the
aircraft that were converted into freighters.
% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
YEAR OF MANUFACTURER/ FREIGHTER CONVERSION AIRCRAFT OF JANUARY 31, 2001
- ------------------------------------------ --------- -------------------
1988........................................................ 15 5.37%
1989........................................................ 9 4.66
1990........................................................ 19 10.08
1991........................................................ 43 23.65
1992........................................................ 53 41.10
1993........................................................ 7 3.30
Other....................................................... 47 11.84
--- ------
Total..................................................... 193 100.00%
=== ======
The following table sets forth the exposure of the portfolio by seat
category as of January 31, 2001 according to the number of aircraft and the
appraised value of the portfolio as of that same date.
% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
SEAT CATEGORY AIRCRAFT TYPES AIRCRAFT OF JANUARY 31, 2001
- ------------- -------------- --------- -------------------
Less than 51 DHC8, METRO-III, ATR42............................ 28 5.21%
91-120 B737-200, B737-500, DC9-32/51, MD-87, F-100....... 60 18.02
121-170 B727-200, B737-300/300QC/400, MD-82/83, 71 48.54
A320-200..........................................
171-240 B757-200, B767-200ER.............................. 4 4.90
241-350 B767-300ER, MD-11, A300........................... 10 14.20
Freighter B747-200SF, DC8-71F/73CF.......................... 20 9.14
--- ------
193 100.00%
=== ======
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The following table sets forth information with respect to the body type,
number of seats, engine manufacturer, production years, current fleet, number of
aircraft on order and number of operators of each aircraft type in our portfolio
as of January 31, 2001.
AIRCRAFT TYPICAL NUMBER OF ENGINE CURRENT ON NUMBER OF
TYPE & VARIANT BODY SEATS ENGINES MANUFACTURER(1) PRODUCTION YEARS FLEET ORDER OPERATORS(2)
- --------------------- ---- ------- --------- --------------- ---------------- ------- ----- ------------
A300-B4.............. Widebody 260 2 GE 1975-1985 115 -- 32
A300-C4.............. Widebody 245 2 GE 1976-1982 3 -- 1
A320-200............. Narrowbody 150 2 CFM 1988- 531 153 51
TBA -- 149 --
ATR42-300............ Turboprop 45 2 PW 1985-1997 273 -- 60
B727-200A............ Narrowbody 150 3 PW 1972-1984 854 -- 109
B737-200A............ Narrowbody 110 2 PW 1971-1988 784 -- 133
B737-300............. Narrowbody 130 2 CFM 1984-1999 1103 -- 114
B737-400............. Narrowbody 145 2 CFM 1988-1999 482 -- 75
B737-500............. Narrowbody 110 2 CFM 1989-1999 387 -- 41
B747-200............. Widebody 385 4 GE 1970-1990 204 -- 30
B757-200............. Narrowbody 195 2 RR 1982- 534 31 38
B767-200ER........... Widebody 210 2 PW 1984-1993 36 -- 8
TBA -- 1 --
B767-300ER........... Widebody 250 2 PW 1987- 161 6 27
TBA -- 6 --
DC8-71............... Freighter -- 4 CFM 1966-1969 52 -- 6
DC8-73............... Freighter -- 4 CFM 1968-1970 50 -- 4
DC9-32............... Narrowbody 95 2 PW 1967-1982 307 -- 29
DC9-51............... Narrowbody 120 2 PW 1974-1981 126 -- 9
DHC8-100............. Turboprop 35 2 PW 1983- 295 1 49
DHC8-300............. Turboprop 50 2 PW 1988- 169 31 38
F-100................ Narrowbody 100 2 RR 1987-1996 275 -- 25
MD-11................ Widebody 285 3 GE 1989-2000 195 -- 26
MD-82................ Narrowbody 145 2 PW 1981-1997 583 -- 26
MD-83................ Narrowbody 145 2 PW 1984-1999 277 -- 27
MD-87................ Narrowbody 115 2 PW 1986-1992 75 -- 12
METRO-III............ Turboprop 20 2 Garrett 1979-1992 266 -- 89
- ---------------
Source: Airclaims Limited.
(1) The above table identifies engine manufacturers by the following
abbreviations:
CFM = CFM International
GE = General Electric
PW = Pratt & Whitney
RR = Rolls Royce
TBA = To be announced (orders only)
(2) The number of operators does not include lessors.
THE LEASES
Most of the leases are operating leases under which we generally retain the
benefit, and bear the risk, of the residual value of the aircraft at the end of
the lease. As of January 31, 2001, we had 187 leases in effect, covering our
whole portfolio except for six aircraft which were off-lease. As of January 31,
2001, three of these off-lease aircraft were subject to lease agreements and one
was subject to a letter of intent for lease. The remaining two unplaced aircraft
represented 0.34% of our portfolio by appraised value as of January 31, 2001. As
of the date of this prospectus, one of the unplaced off-lease aircraft had
become subject to a letter of intent for lease, three of the off-lease aircraft
subject to lease agreements had been delivered to three existing lessees, and
three additional
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47
aircraft, representing 1.23% of our portfolio by appraised value as of January
31, 2001, have become available for lease. All leases are managed by the
servicer according to the servicing agreement.
Although the lease documentation is fairly standardized in many respects,
significant variations do exist as a result of negotiation with each lessee.
Under a majority of our leases, the lessee is responsible, either directly
or through indemnification of the lessor, for all operating expenses, including
maintenance, operating, overhaul, fuel, crews, airport and navigation charges,
taxes, licenses, consents and approvals, aircraft registration and hull and
liability insurance. In addition, the lessees must remove all liens on the
aircraft except liens that are permitted by the lease.
Each of our current leases requires the lessee to make periodic rental
payments during the term of the lease. Some of the leases also require the
lessee to pay periodic amounts as maintenance reserves or to deliver letters of
credit or guarantees for this purpose. Almost all the leases require the lessees
to make payments to us without set-off or counterclaim, and most of them include
an obligation for the lessee to gross-up payments under the lease if the lease
payments are subject to withholding or other taxes. The leases also generally
contain indemnification of the lessor for tax liabilities such as value added
tax and stamp duty tax, but not income tax.
Each lease also contains provisions which specify our rights and remedies
if the lessee defaults in making payments or performing its other obligations
under the lease. These remedies include terminating the lease and repossessing
the aircraft. However, any default by a lessee may lead to reduction of payments
under the leases and cause us to incur significant repossession and other costs,
including breakage costs under swaps. If there is an event of default due to a
lessee's bankruptcy, we may also face delays in asserting our rights if the
relevant jurisdiction imposes a mandatory waiting period between default and
repossession.
The following is a summary of the principal terms of the leases as of
January 31, 2001, with reference to appraised values as of that same date.
LEASE TERM................. As of January 31, 2001 the weighted average
remaining contracted lease term of the aircraft
(weighted by appraised value as of January 31, 2001
and without giving effect to purchase options,
early terminations or extensions) was 29 months.
The longest lease was scheduled to expire in
September 2008.
RENTALS.................... Rent under 180 of the leases, representing 92.10%
by appraised value of our portfolio as of January
31, 2001, is payable monthly in advance, and rent
under seven of the leases, representing 5.58% by
appraised value of our portfolio as of January 31,
2001, is payable monthly in arrears.
These rental payments are calculated based on a
floating rate or a fixed rate or may change from
one to the other over the course of the lease. The
rent under all of the leases is currently payable
in U.S. dollars, although in the future, some rent
may be payable in euros. Some rental payments are
based on the number of flight hours an aircraft is
operated or may vary depending on the time of year
during which the aircraft is operating.
EXTENSION OPTIONS.......... Some of the leases contain an extension option
pursuant to which, depending on the negotiations
with the lessee at the time of signing of the
lease, either we or the lessee could extend the
term of the lease at either the existing lease rate
or at the future market rate. As of January 31,
2001, 44 of the leases representing 26.03% of our
portfolio by appraised value as of that same date
include an extension option.
EARLY TERMINATION
OPTIONS.................... Some of the leases contain an early termination
option pursuant to which the lessee may terminate
the lease before the scheduled expiration date if
specified conditions are met. As of January 31,
2001, 26 of the leases representing 9.14% of our
portfolio by appraised value as of the same date
include an early termination option. Assuming that
all these options are
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exercised for the earliest possible termination,
the weighted average remaining lease term of our
portfolio would be 28 months.
PURCHASE OPTIONS........... As of January 31, 2001, 12 lessees had outstanding
options to purchase a total of 33 aircraft,
representing 14.00% of our portfolio by appraised
value as of that same date. The latest date on
which a purchase option could be exercised is
November 4, 2006 for a purchase of a B767-200ER.
SECURITY DEPOSITS.......... As of January 31, 2001, lessees under 166 of the
leases representing 86.15% of our portfolio by
appraised value as of that same date have provided
security for their obligations. As of January 31,
2001, we had $35.4 million in cash security
deposits in respect of 105 aircraft representing
56.28% of our portfolio by appraised value as of
that same date, and $288.8 million in letters of
credit in respect of 129 aircraft representing
45.56% of our portfolio by appraised value as of
that same date.
GUARANTEES................. In twelve of the leases, we have received
guarantees of the lessee's performance obligations
under the lease. These guarantees were issued by
the lessee's parent company or shareholders.
MAINTENANCE................ The leases contain detailed provisions specifying
maintenance standards and aircraft redelivery
conditions generally to be met at the lessees'
expense. During the term of each lease, we require
the lessee to maintain the aircraft in accordance
with an agreed maintenance program designed to
ensure that the aircraft meets applicable
airworthiness and other regulatory requirements.
Lessees must provide monthly maintenance reserves
under approximately 110 of the leases. Under the
balance of the leases, the lessee or the lessor may
be required to make certain adjustment payments to
one another if at redelivery the aircraft or
specified items do not meet the required standards
under the lease. Heavy maintenance on significant
components of an aircraft, such as the airframe and
the engines, is generally required to be performed
on a cycle of several years and the cost of this
maintenance may be material in relation to the
value of the aircraft, with the overhaul of a
single component often exceeding $1 million.
Pursuant to the leases, if and when an aircraft is
transferred from one lessee to another between
maintenance overhauls, the transferring lessee is
generally required to pay for that portion of the
succeeding overhaul that can be attributed to its
use of the aircraft under its lease.
Depending on the credit of the lessee and other
factors, we may require that the lessee pay cash
maintenance reserves (61 leases as of January 31,
2001, representing 34.51% of our portfolio by
appraised value as of that same date) or provide a
combination of maintenance reserves and letters of
credit or guarantees (51 leases as of January 31,
2001, representing 25.22% of our portfolio by
appraised value as of that same date). If the
lessee pays maintenance reserves, we will have to
reimburse it for maintenance it actually performs
on the aircraft. Our obligation to reimburse
maintenance is classified as an expense and
therefore ranks senior to any payments on the
certificates.
If the lessee is not required to pay maintenance
reserves or provide letters of credit or
guarantees, we have to rely on the lessee's credit
and its ability to maintain the aircraft during the
lease term and return it in good condition or make
any maintenance payments required at the end of the
lease. If maintenance is required on the aircraft
but not performed, or the
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lessee fails to pay, we have to fund this
maintenance ourselves. As of December 31, 2000, we
recorded approximately $259 million of maintenance
reserves liability.
Maintenance payments by lessees will depend upon
numerous factors including the financial condition
of the lessee and the ability of Airplanes Group to
obtain satisfactory maintenance terms in leases. An
increasing number of leases do not provide for any
maintenance payments to be made by lessees as
security for their maintenance obligations. Any
significant variations in these factors may
materially adversely affect the ability of
Airplanes Group to make payments of interest,
principal and premium, if any, on the notes and
certificates.
REDELIVERY CONDITIONS...... At least 90% of the leases provide for the aircraft
to be redelivered in a specified condition upon
expiration of the lease and/or stipulate the
payments to be made by the lessee to us or, in some
cases, by us to the lessee, to reflect the extent
to which the actual redelivery condition of the
aircraft falls below or exceeds the redelivery
condition specified in the lease.
INSURANCE.................. The lessees bear responsibility through an
operational indemnity to carry insurance for any
liabilities arising out of the operation of the
aircraft. The indemnity includes liabilities for
death or injury to persons and damage to property
that ordinarily would attach to the operator of the
aircraft. The lessees are also required to carry
comprehensive liability insurance and hull
insurance, and any further insurance that is
customary in the commercial aircraft industry, and
to indemnify us against all liabilities, including
where the liability to us as owner and lessor
attaches by law. We are required under the leases
to be named as an additional insured on hull and
liability policies. Most of the leases also require
the lessee to maintain the liability insurance for
a specified period between one and three years
after termination of that lease. Under the
servicing agreement, the servicer is required to
monitor the lessees' performance of obligations
with respect to the insurance provisions of the
applicable leases. We also carry contingent hull
and liability insurance to cover any insurable loss
in excess of the lessee's coverage. The amount of
the contingent liability policies may not be the
same as the insurance required under the lease. The
amount of third party contingent insurance is
subject to a number of limitations imposed by the
air transportation insurance industry.
Most insurance certificates contain a breach of
warranty endorsement so that an additional insured
party remains protected even if the lessee violates
any of the terms, conditions or warranties of the
insurance policies, provided that the additional
insured party has not caused, contributed to or
knowingly condoned the breach.
THIRD PARTY LIABILITY
INSURANCE.................. The minimum third party liability limits under the
leases range from $250 million in respect of
turboprop aircraft to $750 million in respect of
widebody aircraft. In some cases, the lessee
carries significantly more insurance than the
minimum specified in the lease. We also have in
place our own contingent liability coverage to
cover any liability in excess of the lessee's
coverage or any liability resulting from a lapse
for any reason of a lessee's coverage.
AIRCRAFT PROPERTY
INSURANCE.................. In all cases, the sum of the stipulated loss value
and our own additional coverage in place is at
least equal to the appraised value of the aircraft.
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Permitted deductibles, which generally apply only
in the case of a partial loss, range from $50,000
for turboprop aircraft to $1 million for widebody
aircraft.
POLITICAL RISK INSURANCE... With respect to some leases, we may arrange
separate political risk repossession insurance for
our own benefit, covering (a) confiscation,
nationalization and requisition of title of the
relevant aircraft by the government of the country
of registration and denegation and deprivation of
legal title and rights, and (b) the failure of the
authorities in that country to allow
de-registration and export of the aircraft, subject
to the conditions of the policies.
SUBLEASES AND WET LEASES... Under most of our current leases, the lessee may
sublease the aircraft without our consent if
specified conditions are met. Under most of our
current leases, the lessee may also "WET LEASE" the
aircraft (leasing the aircraft to a lessee with a
crew and services provided by the lessor) without
our consent so long as the lessee does not part
with operational control of the aircraft. Where
there is a sublease or a wet lease, the lessee
remains fully liable to us for all its payment and
performance obligations under the lease and we have
no contractual relationship with the sublessee or
the wet lessee. The following lessees sublease
their aircraft: A.I.L.L. subleases three aircraft
to Aerotransportes MAS de Carga, S.A. de C.V. (MAS
Air Cargo); Schreiner Airways subleases two
aircraft to Aero Contractors Co. of Nigeria Ltd;
and National Jet Systems Pty. Limited subleases one
aircraft to Eastern Australia Airlines. In
addition, we currently lease one ATR 42-300 to
Idefix, a subsidiary of ATR, and Idefix subleases
the aircraft to American Eagle. Leases with new
lessees will be based on a pro forma lease that
will include restrictions on subleases and wet
leases into specified prohibited countries.
COMPLIANCE WITH GOVERNMENTAL AND TECHNICAL REGULATION
In addition to the general requirements regarding maintenance of the
aircraft, aviation authorities from time to time issue ADs requiring the
operators of aircraft to take particular maintenance actions or make particular
modifications with respect to all aircraft of a particular type. Manufacturer
recommendations may also be issued. To the extent that a lessee fails to perform
ADs that are required to maintain its certificate of airworthiness or other
manufacturer requirements in respect of an aircraft (or if the aircraft is not
currently subject to a lease), Airplanes Group may have to bear or share (if the
lease requires it) the cost of compliance. Other governmental regulations
relating to noise and emissions levels may be imposed not only by the
jurisdictions in which the aircraft are registered, including as part of the
airworthiness requirements, but also in other jurisdictions where the aircraft
operate. A number of jurisdictions including the United States have adopted, or
are in the process of adopting, noise regulations which ultimately will require
all aircraft to comply with the most restrictive currently applicable standards.
Some of the jurisdictions that impose these regulations restrict the future
operation of aircraft that do not meet Stage 3 noise requirements and prohibit
the operation of those aircraft in those jurisdictions. As 4.98% of our
portfolio by appraised value as of January 31, 2001 did not meet the Stage 3
requirements as of that same date, these regulations may adversely affect
Airplanes Group because our non-compliant aircraft will not be able to operate
in those jurisdictions and we may incur substantial costs to comply with the
Stage 3 requirements.
Moreover new ADs or noise or emissions reduction requirements may be
adopted in the future and these could result in significant costs to Airplanes
Group or adversely affect the value of, or our ability to re-lease, Stage 2 or
Stage 3 aircraft. In particular, certain organizations and jurisdictions are
currently considering "STAGE 4" requirements which would tighten noise and
emissions certification requirements for newly manufactured aircraft. If these
more restrictive requirements are adopted or applied to existing aircraft types,
it
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could result in significant costs to Airplanes Group or adversely affect the
value of, or our ability to re-lease, aircraft in our portfolio.
Volume 2 of Annex 16 of the Chicago Convention also contains standards and
recommendations regarding limitations on vented fuel and smoke and gaseous
emissions for aircraft. While a number of countries have adopted regulations
implementing these recommendations, these regulations generally have been
prospective in nature, requiring only that newly manufactured engines meet
particular standards after a particular date. To the extent that these
regulations require modifications to the engines owned by Airplanes Group, they
would be treated similarly to ADs under the leases.
Aviation authorities in Europe and North America have recently adopted
regulations requiring the installation of traffic collision avoidance systems,
automatic emergency locator transmitters and various other systems. Depending on
whether the costs of complying with these regulations are borne by us or the
lessees, installation of these systems could result in significant cash capital
expenditures by Airplanes Group in the future.
The FAA recently issued an AD concerning insulation for the purpose of
increasing fire safety on MD-80 and MD-11 aircraft. We have three MD-11 and 26
MD-80 aircraft, representing a total of 21.21 % of our portfolio by appraised
value as of January 31, 2001. We will incur significant costs (currently
estimated to be approximately $18 million) in ensuring these aircraft comply
with these standards. We expect to complete the modification of 17 of the 29
aircraft by December 2001 at an estimated cost of approximately $11 million and
to modify the remaining 12 aircraft by December 2005.
The FAA is expected to issue an AD by the end of 2001 mandating the
modification of affected lapjoints on Boeing 737 aircraft when the aircraft has
completed 50,000 cycles. The estimated cost to implement this modification for
each aircraft is approximately $230,000 per aircraft. Based on the current
cycles completed to date by our 65 Boeing 737 aircraft, representing 33.36% of
our portfolio by appraised value as of January 31, 2001, our Boeing 737 aircraft
are not likely to require these modifications prior to 2007. However, we could
incur significant costs in the future in ensuring our Boeing 737 aircraft comply
with these standards, which could impact adversely our results of operations.
The FAA is also expected to issue an AD within 12 months mandating a
re-design of the rudder systems of Boeing 737 aircraft. The average cost per
aircraft of these modifications is expected to be approximately $50,000.
Depending on the time period within which the modifications are required to be
made, the costs may be the responsibility of existing lessees. However, if the
costs are not the responsibility of some or all existing lessees, we could incur
significant costs in ensuring that our Boeing 737 aircraft comply with these
modifications, which could impact adversely our results of operations.
THE LESSEES
As of January 31, 2001, our aircraft were on lease to 65 lessees in 35
countries throughout the world. See "-- Portfolio Information" for the countries
and regions where our lessees reside.
A number of our lessees are in a relatively weak financial position. As of
January 31, 2001, amounts outstanding for a period greater than 30 days in
respect of rental payments, maintenance reserves and other miscellaneous amounts
due under the leases (net of amounts in respect of default interest and cash in
transit) amounted to $13.2 million in respect of 18 lessees (who leased a
combined total of 36 aircraft representing 20.46% of our portfolio by appraised
value as of that date) and $16.0 million in respect of seven former lessees. Of
the total $29.2 million, $4.4 million was in arrears for a period greater than
30 days, $2.4 million was in arrears for a period greater than 60 days and $22.4
million was in arrears for a period greater than 90 days. Some of these lessees,
as well as other lessees, have consistently been significantly in arrears in
their respective rental payments and some are known to be currently experiencing
financial difficulties.
As of January 31, 2001, in addition to the $29.2 million in respect of
payments past due more than 30 days, we had agreed to allow four lessees to
defer rent, maintenance and miscellaneous payments totaling $8.7 million for
periods ranging from six months for one lessee in respect of $5.6 million and up
to 36 months for three lessees in respect of $3.1 million. In the past,
restructurings have typically involved delaying rental payments for periods of
up to 12 months. In addition, some restructurings have involved voluntary
terminations of leases prior
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to lease expiration, the replacement of aircraft with less expensive aircraft
and the arrangement of sub-leases from the lessee to another aircraft operator.
In other cases, it has been necessary to repossess aircraft from lessees which
have defaulted and re-lease the aircraft to other lessees.
In addition to difficulties which have affected lessees in a given region,
individual lessees have experienced periodic difficulties in meeting their
maintenance obligations under the related leases. The difficulties have arisen
from, among other things, the failure of the lessee to have in place a
sufficiently well established maintenance program, adverse climate and other
environmental conditions in the locations where the related aircraft is operated
or financial and labor difficulties experienced by the relevant lessee. A
continuous failure by a lessee to meet its maintenance obligations under the
relevant lease could result in a grounding of the aircraft, cause us to incur
substantial costs in restoring the aircraft to an acceptable maintenance
condition before we can re-lease or sell it and adversely affect the value of
the aircraft.
The following is a discussion of the lessees experiencing difficulty by
region in which they are located.
LATIN AMERICA
Lessees with respect to 29.91% of the aircraft by appraised value as of
January 31, 2001 operate in Latin America, principally Brazil, Mexico, Colombia
and Chile. The prospects for lessee operations in these countries depend in part
on the general level of political stability and economic activity and policies
in those countries. Future developments in the political systems or economies of
these countries or the implementation of future governmental policies in these
countries may materially affect lessee operations in those countries.
Brazil. During 1999, Brazil experienced significant downturns in its
economy and financial markets, including large decreases in financial asset
prices and dramatic decreases in the value of its currency. While there has been
some stabilization in the Brazilian economy within the last twelve months, any
future general deterioration in the Brazilian economy will mean that lessees may
be unable to generate sufficient revenues in Brazilian currency to pay rental
payments in U.S. dollars under the leases. Future developments in the political
systems or economies of Brazil and other Latin American countries may have a
material adverse effect on lessee operations in those countries. At January 31,
2001, Airplanes Group leased 16 aircraft representing 12.20% of our portfolio by
appraised value as of that same date to operators in Brazil. Accordingly, any
future deterioration in the Latin American economies, especially Brazil, could
lead to a material decrease in Airplanes Group's leasing revenues and an
increase in default related costs.
At January 31, 2001, we had eight Fokker 100 aircraft, representing 3.04%
of our portfolio by appraised value as of that same date, on lease to a
Brazilian lessee that was party to a 2000 restructuring agreement with us in
respect of the leases for six Fokker 100 aircraft. Under the 2000 restructuring
agreement, all arrears are to be paid with interest by December 31, 2003. At
January 31, 2001, this lessee was current on all payments.
In addition, in 1999, we entered into a restructuring agreement with
Transbrasil, a former lessee, under which it repaid a restructured amount of
approximately $1.9 million over 12 months. At January 31, 2001, Transbrasil had
arrears of $3.0 million secured by a second priority mortgage over two of its
own aircraft, and the servicer is currently in negotiations with Transbrasil
regarding repayment. An accounting provision has been made against our
receivables for the excess of the arrears over the cash security held.
Following the default by the Brazilian airline VASP under its leases, GPA
Group (now known as debis AirFinance Ireland) sought and obtained in November
1992 a preliminary injunction for repossession of 13 aircraft and three engines,
and subsequently repossessed these aircraft and engines. Airplanes Group
acquired seven of these aircraft from GPA Group in March 1996, four of which
remain in our portfolio and represented 1.8% of our portfolio by appraised value
as of January 31, 2001. In December 1996, the High Court in Sao Paolo, Brazil,
found in favor of VASP on appeal and granted it the right to the return of the
aircraft and engines or the right to seek damages against debis AirFinance
Ireland. debis AirFinance Ireland has challenged this decision and in January
2000, the High Court granted a stay of the 1996 judgment while it considers
debis AirFinance Ireland's rescission action. The risk of repossession only
arises where VASP is successful in seeking repossession of the aircraft and
where the aircraft are located in Brazil. Although none of our lessees which
lease any of the relevant aircraft is based in Brazil, some of them may operate
those aircraft into Brazil from time to time. debis
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AirFinance Ireland has informed Airplanes Group that it has been advised by its
Brazilian counsel that the December 1996 High Court decision was incorrect as a
matter of Brazilian law and that it is actively pursuing all available courses
of action, including appeals to superior courts to overturn the High Court
decision.
Colombia. Colombia has recently suffered economically as a result of the
deterioration in the value of the Colombian peso and the resulting negative
impact on the Colombian economy. As of January 31, 2001, we leased 10 aircraft,
representing 6.55% of our portfolio by appraised value as of that same date, to
three Colombian lessees. Because of the continued weakness in the value of the
Colombian peso, as well as general deterioration in the Colombian economy, these
lessees may be unable to generate sufficient revenues in Colombian pesos to pay
the U.S. dollar denominated rental payments under the leases.
In particular, as of January 31, 2001, we leased six aircraft, representing
5.08% of our portfolio by appraised value as of that same date, to one of our
three Colombian lessees. At January 31, 2001, this lessee was $12.0 million in
arrears, including deferrals. The servicer agreed not to exercise its remedies
in respect of events of default currently existing under the leases in order to
permit the Colombian lessee to have a stable business environment in which to
develop, negotiate and commence implementing a long-term business plan. During
the period to January 31, 2001 we have received approximately 77% of amounts due
under the leases in cash, with the remainder provided by way of secured and
unsecured notes issued by the lessee with a maturity date of January 31, 2001.
The Colombian lessee's other aircraft lessors and major creditors agreed similar
forbearance arrangements. The servicer is in discussion with the lessee
regarding its proposed business plan and the continued operation of the leases
which may include the reduction of rentals or the return of some or all of the
aircraft.
NORTH AMERICA
As of January 31, 2001, we had 29 aircraft, representing 13.06% of our
portfolio by appraised value as of that same date, on lease to 11 U.S. lessees
and 11 aircraft, representing 8.95% of our portfolio by appraised value as of
that same date, on lease to one Canadian lessee. The commercial aircraft
industry in North America is highly sensitive to general economic conditions.
Since air travel is largely discretionary, the industry has suffered severe
financial difficulties during economic downturns. Over the last several years,
nearly half of the major North American passenger airlines have entered into
plans of reorganization or sought protection through bankruptcy, insolvency or
other similar proceedings and several major U.S. airlines have ceased
operations.
On January 10, 2001, TWA, one of our lessees, filed for Chapter 11
bankruptcy protection in the U.S. TWA leased two aircraft from Airplanes Group,
which represented 2.39% of our aircraft by appraised value as of January 31,
2001. On April 9, 2001, American Airlines assumed the leases in respect of these
aircraft subject to certain amendments, including an extension of the lease term
by 11 years in respect of the MD-83 aircraft and a reduction of the lease term
by 4.5 years in respect of the B767-300ER aircraft and a reduction in monthly
rentals by 26.5% in respect of the MD-83 aircraft and by 6% in respect of the
B767-300ER aircraft.
In March 1998, we reached an agreement with Tower Air, then the lessee of
our only B747-200SF, representing 0.96% of our portfolio by appraised value as
of January 31, 2001, which allowed Tower Air to defer payment of a security
deposit and of two months rent. In March 2000, owing to its deteriorating
financial condition, Tower Air agreed to return the aircraft and subsequently
filed for protection from its creditors under Chapter 11 of the U.S. bankruptcy
laws. The aircraft was subsequently re-leased to another U.S. lessee.
As of the date of this prospectus, the servicer is in discussions with a
North American lessee of two B737-200A aircraft, representing 0.40% of our
portfolio by appraised value as of January 31, 2001, in respect of a request by
the lessee to defer a portion of monthly rental payments in the period to July
2001.
ASIA & FAR EAST
As of January 31, 2001, 20 aircraft representing 10.02% of our portfolio by
appraised value as of that same date were on lease to 11 lessees in this region.
The commercial aircraft industry in Asia was adversely affected by the severe
economic and financial difficulties experienced in the region during 1998 and
1999. Since 1999, there has been some stabilization and recovery in the
economies of this region. Prior to 1998, the market in this region
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for aircraft on operating lease demonstrated significant growth rates. If the
recessionary conditions that prevailed in large parts of the region were to
recur it would have an adverse impact on global aircraft demand.
During the year to March 31, 2000, a rescheduling agreement was signed with
a Philippine lessee which committed to pay its balance of $2.7 million over the
36 months to September 2002. As of the date of this prospectus, the lessee has
paid in accordance with the rescheduling agreement.
EUROPE (EXCLUDING CIS)
As of January 31, 2001, 56 aircraft representing 33.65% of our portfolio by
appraised value as of that same date were on lease to 21 lessees in this region.
The commercial aircraft industry in European countries, as in the rest of the
world generally, is highly sensitive to general economic conditions. Because a
substantial portion of airline travel (business and especially leisure) is
discretionary, the industry has tended to suffer severe financial difficulties
during economic downturns. Accordingly, the financial prospects for European
lessees can be expected to depend largely on the level of economic activity in
Europe generally and in the specific countries in which these lessees operate. A
recession or other worsening of economic conditions in one or more of these
countries, particularly if combined with high fuel prices and/or a weak euro,
may have a material adverse effect on the ability of European lessees to meet
their financial and other obligations under the leases. In addition, commercial
airlines in Europe face, and can be expected to continue to face, increased
competitive pressures, in part as a result of the continuing deregulation of the
airline industry by the EU. There can be no assurance that competitive pressures
resulting from such deregulation will not have a material adverse impact on the
operations of our European lessees.
Bulgaria. On February 15, 2001, the servicer terminated the leases with a
Bulgarian lessee in respect of two B737-300 aircraft representing 1.13% of our
portfolio by appraised value as of January 31, 2001. The aircraft were returned
by the lessee on February 27, 2001. The lessee was $252,000 in arrears as of
January 31, 2001 and $638,000 in arrears as of the date of this prospectus. The
costs of repossession and the technical costs required to ensure that the
aircraft are in a suitable condition for re-leasing may be significant.
Turkey. As of January 31, 2001, ten aircraft, representing 7.17% of our
portfolio by appraised value as of that same date, were leased to three lessees
in Turkey. The recent fall in the value of the deutsche mark, the principal
currency in which the Turkish airlines receive their revenues, and of the
Turkish lira may affect the ability of these airlines to meet the U.S. dollar
denominated rental and other payments due under the leases.
Spain. As of January 31, 2001, one Spanish lessee, representing 3.50% of
our portfolio by appraised value as of that same date, was in negotiations with
the servicer on a restructuring of its payment obligations under its leases with
Airplanes Group, which would also include an extension of certain of the leases
to compensate for any proposed reduction in lease rentals.
Ireland. As of January 31, 2001, an Irish airline which formerly leased
one A300-B4-200 aircraft, representing 0.28% of our portfolio by appraised value
as of that same date, was $3.6 million in arrears (including previously
rescheduled amounts). A liquidator has been appointed to the airline to wind up
its business. As of January 31, 2001, this aircraft was subject to a letter of
intent for lease to a new lessee.
PURCHASE OPTIONS
As of January 31, 2001, 12 lessees with respect to 33 aircraft,
representing 14.00% of our portfolio by appraised value as of that same date,
held options to purchase aircraft at various dates between 2001 and 2006 at
prices generally at or above their estimated appraised value at the exercise
date. Since March 31, 1998, one lessee has exercised its option to purchase four
B737-200A aircraft, one of which was delivered on January 15, 2000 and three of
which were delivered on January 5, 2001. This lessee had options to purchase a
further three aircraft, one of which has been exercised as of the date of this
prospectus. At January 31, 2001, four lessees with respect to four aircraft,
representing 2.61% of our portfolio by appraised value as of that same date, had
options to purchase aircraft at prices below estimated appraised value at the
exercise date. For the purposes of this paragraph, the estimated appraised value
has been arrived at by deducting the estimated depreciation (as
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calculated by Airplanes Group's existing depreciation policy) from January 31,
2001 to the option exercise date from the appraised value of each aircraft.
COMMERCIAL OPPORTUNITIES FOR OUR MD-11 AIRCRAFT
As of January 31, 2001, we leased three MD-11 aircraft, representing 5.94%
of our portfolio by appraised value as of that same date, to a Latin American
lessee. These leases are expected to expire between December 2001 and September
2002. Because the market for re-leasing these aircraft in their current
passenger configuration is currently, and is expected to remain, very weak, we
are examining all possibilities in respect of these aircraft, including, subject
to the restrictions in our indentures, selling them or converting them to
freighter aircraft. The current market value of these aircraft is such that we
would not be able to sell the aircraft at prices that would meet the indenture
requirements. Although there is currently stronger demand for converted MD-11
aircraft, conversion into freighter aircraft would involve substantial cash
expenditures by us.
AIRCRAFT SALES
Based on the recommendations of the servicer and the administrative agent,
the board of directors of Airplanes Limited and the controlling trustees of
Airplanes Trust have identified a number of aircraft types for potential sale so
long as the terms of a proposed sale for a particular aircraft are commercially
advantageous to Airplanes Group and the sale complies with the requirements of
the indentures. The aircraft types which have been identified for potential sale
are B737-200, B727-200, DC-9, A300 and turboprop aircraft. At January 31, 2001,
there was a total of 65 aircraft of these aircraft types in our portfolio
representing 10.98% of our portfolio by appraised value as of the same date.
Since June 1999, Airplanes Group has sold five aircraft of these aircraft types
for an aggregate of $22.0 million, which has been applied in accordance with the
priority of payments described under "Description of Securities -- The Notes and
Guarantees -- Priority of Payments."
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AIRPLANES GROUP PERFORMANCE ASSUMPTIONS
We have determined the expected final payment date, weighted average life
and yield of the subclass A-9 notes and certificates based on the assumptions
regarding Airplanes Group's future performance as described below. We refer to
the scenario in which all of these assumptions prove to be correct as our "BASE
CASE" in this prospectus. We have set out in the tables that follow the possible
revenue scenarios that we developed by fixing some of the assumptions and
varying other assumptions and factors that affect Airplanes Group's revenues,
costs and expenses. The assumptions do not represent a complete list of the
factors that may affect the revenues, costs and expenses of Airplanes Group, but
rather indicate those factors that could significantly affect Airplanes Group's
performance in future years. In addition, the range of possible outcomes with
respect to each assumption and the combinations of assumptions do not indicate a
comprehensive set of possible results for Airplanes Group. More severe stresses
than we have included in the tables may lead to payments of principal on the
notes, and hence also on the certificates, being delayed or decreased or, in
some cases, to an event of default.
Accordingly, you should understand that the following tables are only an
illustration of some, but not all, of the payment sensitivities of the subclass
A-9 notes and certificates to some, but not all, market and economic stresses,
and are not intended to be projections, estimates, forecasts or forward-looking
statements. It is highly likely that actual experience will vary from the
assumptions and the possible revenue scenarios reflected in the tables. The
principal factors that could cause Airplanes Group's actual revenues to differ
materially from such scenarios are the stresses we describe below and the risks
we describe under "Risk Factors," including the risks that we may not be
entitled to the benefits of the U.S.-Irish tax treaty or that we lose a part of
our net operating loss carryforwards.
We have not updated or revised the information presented to reflect changes
occurring after February 9, 2001 and we do not intend to do so. As of the date
of this prospectus, however, we are not aware of events or circumstances since
February 9, 2001 that would cause the assumptions to be unreasonable.
SUMMARY OF THE BASE CASE
In this table, Base Case items are shown as a percentage of lease rentals
on the basis of the 193 aircraft in our portfolio as of January 31, 2001.
BASE CASE RELATED ASSUMPTION
--------- ------------------
(SEE BELOW)
------------------
Lease rentals............................................... 100.0% (1)
Net stress-related costs.................................... (6.0) (2)
-------
Net lease rentals........................................... 94.0
Interest earned............................................. 2.0 (3)
Net maintenance............................................. 0.0 (4)
-------
Total cash collections...................................... 96.0
Aircraft operating expenses................................. (5.0) (5)
SG&A(1)..................................................... (8.0) (6)
-------
Total cash expenses......................................... (13.0)
-------
Net cash collections........................................ 83.0%
=======
- ---------------
(1) Stated as a percentage of Assumed First Year's Net Revenue.
Net cash collections represent the amount available to pay interest and
principal on the notes and certificates.
You should refer to Appendix 2 to this prospectus for the month-by-month
roll-out of our assumed lease rentals from the first payment date after March
15, 2001 through the final maturity date under the Base Case.
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PRIMARY REVENUE ASSUMPTIONS
We make the following assumptions about each of our main revenue line
items:
LEASE RENTALS
"LEASE RENTALS" represents all rental payments received under the leases
and the net proceeds of any aircraft sales.
We assume that: (1)
- we re-lease aircraft coming off lease at a monthly rental rate that is a
function of the age of the aircraft and the contracted monthly rental
rate as of February 9, 2001 or, for the aircraft that are available for
lease on February 9, 2001, the contracted monthly rental rate of an
aircraft in our portfolio of comparable type on that date, with lease
rates being assumed to decline according to the following schedule:
YEAR IN AIRCRAFT'S PERCENTAGE DECLINE
EXPECTED USEFUL LIFE PER ANNUM
-------------------- ------------------
1-5 2%
6-15 1%
16-20 3%
21-25 5%
- we sell each aircraft only at the end of its expected useful life for a
price that is equal to 12% of the aircraft's assumed value when new,
except for the three B737-200A aircraft which are subject to existing
finance leases where their value is assumed to be the final payment under
the finance leases, which is $1 million for each of the aircraft.
NET STRESS-RELATED COSTS
"NET STRESS-RELATED COSTS" represents the net total of lost revenue due to
the combination of the following five inter-related items:
-- lost rental revenue due to aircraft downtime following the termination
or expiration of a lease;
-- bad debts realized and/or provided for; and
-- aircraft repossession costs;
offset by
-- security deposits drawn after an event of default; and
-- other leasing income, which includes lease termination payments and
default interest.
- We assume that net stress-related costs are 6% per annum of lease
rentals. (2)
INTEREST EARNED
"INTEREST EARNED" represents interest earned by funds on deposit in the
collection account and any other cash balances, including the cash portion of
the liquidity reserve amount, rental payments received and accrued maintenance
expenses.
- We assume that the interest rate at which the cash balances described
above earn interest is one month LIBOR. (3)
NET MAINTENANCE
"NET MAINTENANCE" represents maintenance payments received from lessees
under the terms of the applicable leases, less maintenance costs that we make or
expect to incur under the leases and any modification payments that we make.
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58
- We assume that net maintenance is zero overall, although there are
likely to be variations from period to period due to the unpredictable
timing of payments. (4)
OTHER REVENUE-RELATED ASSUMPTIONS
In addition to the revenue assumptions above, we make the following
revenue-related assumptions:
- We assume that future lease terms are five years.
- We assume that we grant no purchase options to lessees and that no
existing purchase options are exercised except for the three B737-200A
aircraft which are subject to existing finance leases.
- We assume that we grant no new lease termination or extension options to
lessees and that existing termination or extension options are exercised
only when to do so would result in a rental rate at the time that is
lower than the rental rate that we would otherwise assume under
assumption (1) above.
- We assume that each aircraft has an expected useful life that
corresponds to its aircraft type as set forth in the table below or, if
longer, the number of years from the date of manufacture or conversion
to freighter service of the aircraft to the date of termination of the
current lease of the aircraft:
EXPECTED
AIRCRAFT TYPE USEFUL LIFE
------------- -----------
(YEARS)
Passenger Jet Aircraft.............................. A300 25
A320-200 25
B727-200A 22.5
B737-200A 25
B737-300/400/500 25
B757-200 25
B767-200ER/300ER 25
DC9-32/51 22.5-25
F-100 25
MD-11 25
MD-82/3/7 25
Freighter Jet Aircraft(1)........................... B747-200SF 20
DC8-71F/73CF 20
Turboprops.......................................... ATR42-300 22.5
DHC8-100/300/300C 22.5
METRO-III 22.5
- ---------------
(1) Expected Useful Life in years from the date of conversion to
freighter service.
- We assume that aircraft values decline over time in accordance with the
depreciation curve described under "Description of Securities -- The
Notes and Guarantees -- Principal Amortization of Floating Rate Notes."
EXPENSE-RELATED ASSUMPTIONS
We make the following assumptions about each of our main expenses:
AIRCRAFT OPERATING EXPENSES
"AIRCRAFT OPERATING EXPENSES" represent certain operating costs incurred in
the ordinary course of the operating lease business, including insurance
expenses and leasing transaction expenses.
- We assume that aircraft operating expenses are 5.0% per annum of lease
rentals. (5)
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SG&A
"SG&A EXPENSES" represents the sum of the following expense items:
-- fees paid to GECAS as servicer of the aircraft, a portion of which will
decrease with the number of aircraft remaining in the portfolio, as
described under "Management of Airplanes Group -- The Servicer;"
-- fees paid to the administrative agent, an element of which (currently $2
million) will begin to decrease proportionately according to the number
of aircraft remaining in our portfolio, after our portfolio has been
reduced to 153 aircraft;
-- fees paid to the cash manager;
-- legal fees, underwriting fees, printing and other expenses of the
issuance and sale of any refinancing certificates and any certificates
issued in this exchange offer; and
-- other selling, general and administrative expenses and other expenses.
- Assumed SG&A expenses is approximately 8.0% per annum of lease rentals
for the twelve months ending March 15, 2002, declining over time
thereafter as mentioned above. (6)
FINANCING-RELATED ASSUMPTIONS
We make the following financing-related assumptions:
- We assume that one month LIBOR remains constant at 5.20% per annum.
- We assume that Airplanes Group makes and receives swap payments in
accordance with the contracted terms of the swaps that we had in place
on March 15, 2001.
- We assume that we issue A-9 certificates that rank equally in right of
payment with the outstanding class A certificates and senior to the
other classes of certificates outstanding, in each case in amounts and
with interest rates as set forth in the following table, and that we
make payments in accordance with the order of priorities set forth under
"Description of the Securities -- The Notes and Guarantees -- Priority
of Payments."
ASSUMED
OUTSTANDING
PRINCIPAL
AMOUNT AS OF ANNUAL INTEREST RATE
CLASS OR SUBCLASS OF CERTIFICATES MARCH 15, 2001 (PAYABLE MONTHLY)
--------------------------------- -------------- ------------------------
($ MILLIONS)
A-6........................................ $ 445.4 LIBOR + 0.340%
A-8........................................ 700.0 LIBOR + 0.375%
A-9........................................ 750.0 LIBOR + 0.550%
B.......................................... 278.3 LIBOR + 0.750%
C.......................................... 349.8 8.150%
D.......................................... 395.1 10.875%
--------
$2,918.6
========
- We assume that we will issue and sell refinancing certificates on the
expected final payment date of the subclass A-8 certificates as
established at the time of their initial issuance and on each subsequent
expected final payment date of any refinancing certificates that are
soft bullet certificates, as established at the time of their initial
issuance, in each case on the same terms with respect to payment
priority, redemption and interest rate as the certificates being
refinanced and with maturities and amortization schedules paid with the
application of the Minimum and Supplemental Principal Payment Amounts.
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PRINCIPAL REPAYMENTS UNDER THE BASE CASE
The following table shows, for each payment date presented, the percentage
of the initial outstanding principal balance of the subclass A-6, A-8 and A-9
certificates expected to be outstanding on the payment date based on the
assumptions. It is highly unlikely that the assumptions will correspond to
actual experience. Therefore, principal payments on the certificates may occur
earlier or later than set forth in the table. Airplanes Group may fail to pay
principal of any class or subclass of its certificates on or prior to the
expected final payment date of that class or subclass because it does not have
the funds to make the payment according to the priorities described under
"Description of Securities -- The Notes and Guarantees -- Priority of Payments."
Such a failure will not, by itself, be an event of default.
PERCENTAGE OF INITIAL OUTSTANDING PRINCIPAL BALANCE OF THE
CERTIFICATES BASED ON THE BASE CASE
AGGREGATE
CLASS A
CERTIFICATES,
INCLUDING
SUBCLASS SUBCLASS SUBCLASS REFINANCING
PAYMENT DATE OCCURRING IN MARCH A-6 A-8 A-9 CERTIFICATES
- ------------------------------- -------- -------- -------- -------------
2001 (Closing Date)................................... 52% 100% 100% 82%
2002.................................................. 31% 100% 100% 75%
2003.................................................. 14% 0% 100% 68%
2004.................................................. 0% 0% 95% 62%
2005.................................................. 0% 0% 73% 54%
2006.................................................. 0% 0% 49% 46%
2007.................................................. 0% 0% 29% 40%
2008.................................................. 0% 0% 11% 34%
2009.................................................. 0% 0% 0% 28%
2010.................................................. 0% 0% 0% 23%
2011.................................................. 0% 0% 0% 17%
2012.................................................. 0% 0% 0% 12%
2013.................................................. 0% 0% 0% 8%
2014.................................................. 0% 0% 0% 5%
2015.................................................. 0% 0% 0% 2%
2016.................................................. 0% 0% 0% 1%
2017.................................................. 0% 0% 0% 0%
2018.................................................. 0% 0% 0% 0%
2019.................................................. 0% 0% 0% 0%
Weighted Average Life (years)......................... 1.3 2.0 5.1 6.3
- ---------------
The "WEIGHTED AVERAGE LIFE" of a certificate equals P/I, where:
P = the sum of the following amounts calculated for each payment date: A X
Y,
where:
A = the principal amount that is assumed to be paid on that payment
date, and
Y = the number of years from the date that class or subclass of
certificates was issued to the relevant payment date, and
I = the initial principal balance of the relevant class or subclass of
certificate.
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DECLINING BALANCES OF THE CLASS A CERTIFICATES AND ASSUMED PORTFOLIO VALUE UNDER
THE BASE CASE
($ MILLIONS)
ASSUMED PORTFOLIO
SUBCLASS A-8 SUBCLASS A-9 SUBCLASS A-6 VALUE
------------ ------------ ------------ -----------------
2001 700 750 445 1213
2001 700 750 393 1250
2001 700 750 383 1244
2001 700 750 365 1242
2001 700 750 353 1239
2001 700 750 343 1233
2001 700 750 329 1233
2001 700 750 320 1227
2001 700 750 310 1222
2001 700 750 298 1219
2002 700 750 290 1213
2002 700 750 278 1210
2002 700 750 266 1207
2002 700 750 257 1201
2002 700 750 246 1197
2002 700 750 229 1199
2002 700 750 219 1193
2002 700 750 208 1189
2002 700 750 195 1187
2002 700 750 184 1182
2002 700 750 172 1179
2002 700 750 153 1182
2003 700 750 140 1180
2003 700 750 125 1179
2003 700 750 117 1171
2003 700 750 104 1169
2003 700 750 90 1167
2003 700 750 76 1164
2003 700 750 65 1159
2003 700 750 53 1155
2003 700 750 41 1151
2003 700 750 29 1146
2003 700 750 16 1142
2003 700 750 4 1138
2004 700 742 0 1133
2004 700 730 0 1128
2004 700 716 0 1125
2004 700 703 0 1121
2004 700 680 0 1127
2004 700 665 0 1126
2004 700 652 0 1122
2004 700 640 0 1118
2004 700 627 0 1114
2004 700 614 0 1110
2004 700 602 0 1105
2004 700 588 0 1103
2005 700 575 0 1099
2005 700 563 0 1094
2005 700 550 0 1090
2005 700 536 0 1087
2005 700 521 0 1085
2005 700 506 0 1084
2005 700 492 0 1081
2005 700 480 0 1076
2005 700 463 0 1076
2005 700 449 0 1073
2005 700 435 0 1071
2005 700 418 0 1071
2006 700 405 0 1068
2006 700 385 0 1072
2006 700 367 0 1073
2006 700 354 0 1069
2006 700 342 0 1066
2006 700 329 0 1062
2006 700 317 0 1059
2006 700 304 0 1055
2006 700 292 0 1052
2006 700 280 0 1048
2006 700 267 0 1044
2006 700 255 0 1040
2007 700 243 0 1037
2007 700 231 0 1033
2007 700 219 0 1029
2007 700 206 0 1025
2007 700 195 0 1021
2007 700 183 0 1018
2007 700 171 0 1014
2007 700 159 0 1011
2007 700 148 0 1007
2007 700 136 0 1003
2007 700 125 0 999
2007 700 113 0 995
2008 700 101 0 992
2008 700 90 0 987
2008 700 79 0 984
2008 700 67 0 980
2008 700 56 0 976
2008 700 45 0 972
2008 700 34 0 968
2008 700 23 0 964
2008 700 12 0 960
2008 700 1 0 956
2008 690 0 0 952
2008 679 0 0 948
2009 669 0 0 944
2009 658 0 0 939
2009 647 0 0 935
2009 636 0 0 930
2009 625 0 0 926
2009 615 0 0 921
2009 604 0 0 916
2009 593 0 0 911
2009 583 0 0 906
2009 572 0 0 901
2009 562 0 0 896
2009 551 0 0 891
2010 540 0 0 886
2010 530 0 0 880
2010 520 0 0 874
2010 509 0 0 869
2010 499 0 0 863
2010 488 0 0 857
2010 478 0 0 851
2010 468 0 0 844
2010 458 0 0 838
2010 448 0 0 832
2010 438 0 0 825
2010 427 0 0 818
2011 417 0 0 811
2011 407 0 0 804
2011 398 0 0 797
2011 388 0 0 789
2011 378 0 0 782
2011 369 0 0 775
2011 359 0 0 767
2011 350 0 0 760
2011 341 0 0 752
2011 331 0 0 745
2011 322 0 0 736
2011 313 0 0 728
2012 304 0 0 720
2012 295 0 0 712
2012 286 0 0 703
2012 277 0 0 694
2012 269 0 0 685
2012 260 0 0 676
2012 252 0 0 667
2012 243 0 0 658
2012 235 0 0 649
2012 227 0 0 639
2012 219 0 0 629
2012 211 0 0 620
2013 203 0 0 610
2013 195 0 0 599
2013 188 0 0 589
2013 180 0 0 579
2013 173 0 0 569
2013 166 0 0 558
2013 159 0 0 548
2013 152 0 0 537
2013 145 0 0 527
2013 139 0 0 516
2013 132 0 0 505
2013 126 0 0 494
2014 120 0 0 483
2014 114 0 0 472
2014 108 0 0 461
2014 102 0 0 450
2014 97 0 0 438
2014 91 0 0 426
2014 86 0 0 414
2014 81 0 0 402
2014 76 0 0 390
2014 71 0 0 378
2014 66 0 0 366
2014 61 0 0 353
2015 57 0 0 341
2015 53 0 0 328
2015 49 0 0 315
2015 44 0 0 302
2015 41 0 0 289
2015 37 0 0 275
2015 34 0 0 262
2015 30 0 0 249
2015 27 0 0 236
2015 24 0 0 223
2015 22 0 0 210
2015 19 0 0 197
2016 17 0 0 185
2016 14 0 0 172
2016 12 0 0 159
2016 11 0 0 147
2016 9 0 0 135
2016 7 0 0 123
2016 6 0 0 112
2016 5 0 0 101
2016 4 0 0 91
2016 3 0 0 81
2016 2 0 0 71
2016 1 0 0 61
2017 1 0 0 51
2017 0 0 0 43
2017 0 0 0 36
2017 0 0 0 29
2017 0 0 0 24
2017 0 0 0 20
2017 0 0 0 15
2017 0 0 0 12
2017 0 0 0 8
2017 0 0 0 6
2017 0 0 0 4
2017 0 0 0 4
2018 0 0 0 3
2018 0 0 0 3
2018 0 0 0 2
2018 0 0 0 2
In each of the following tables, "EXPECTED MATURITY" means the period,
expressed in years, from March 15, 2001 through the expected final payment date.
EFFECT OF INABILITY TO REFINANCE SUBCLASS A-8 CERTIFICATES
The table below is based on the assumptions we described above, except that
we have assumed that no refinancing certificates are issued. If no refinancings
occur, the expected maturities (Exp) and weighted average lives (Avg) of the
subclass A-9 certificates would be as set forth below.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
EXPECTED MATURITY/
WEIGHTED AVERAGE LIFE
------------------------------------
BASE CASE NO REFINANCINGS
-------------- ----------------
EXP AVG EXP AVG
---- ---- ----- -----
Subclass A-9 Certificates............................. 7.7 5.1 15.9 10.5
MINIMUM REVENUE PERCENTAGE REQUIRED TO RETIRE CERTIFICATES
The table below shows the minimum percentage of lease rentals that will be
necessary to repay all interest and principal on the class A certificates,
including the subclass A-9 certificates, by the final maturity date. If
Airplanes Group received actual revenues below the percentages of lease rentals
indicated below and all of the other assumptions prove to be correct, Airplanes
Group would be unable to make the required payments on the notes, which would
constitute an event of default under the certificates.
PERCENTAGE OF LEASE RENTALS NECESSARY TO REPAY THE
CERTIFICATES BY THE FINAL MATURITY DATE ASSUMING ACTUAL
EXPERIENCE CORRESPONDS TO THE BASE CASE UNTIL THE BEGINNING OF THE YEAR STATED
CLOSING DATE YEAR 3 YEAR 6 YEAR 10
------------ ------ ------ -------
Class A Certificates................................. 57.2% 54.2% 47.9% 36.0%
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EFFECT OF A PERMANENT CHANGE IN LEASE RENTALS
We have prepared the tables below based on the assumptions we described
above, except that we have varied the revenue received by Airplanes Group from
lease rentals by the indicated percentages, beginning in years 3 and 6 after
March 15, 2001. If Airplanes Group received actual lease rentals as indicated
below and all of the other assumptions prove to be correct, then the expected
maturities and weighted average lives of the subclass A-9 certificates would be
as set forth below.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
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-9 Certificates... 7.7 5.0 7.7 5.0 7.7 5.1 8.3 5.5 8.3 5.8
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
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-9 Certificates... 7.7 5.1 7.7 5.1 7.7 5.1 7.7 5.1 8.1 5.2
EFFECT OF PERMANENT CHANGE IN PORTFOLIO VALUE
If the value of our portfolio, as adjusted for our appraisals, becomes
significantly less than the value of our portfolio based on the assumptions we
described above, the Principal Adjustment Amount payable to holders of the class
A certificates may be increased. You should refer to "Description of Securities
- -- The Notes and Guarantees -- Principal Amortization of Floating Rate Notes"
for a description of how these amounts are determined. Payment of this increased
amount may shorten the weighted average lives of the class A certificates and
lengthen the weighted average lives of the classes of certificates that rank
behind the class A certificates in priority of payment. The following tables
show the expected maturity and weighted average life of the subclass A-9
certificates if the adjusted portfolio value permanently changed to a given
percentage of the assumed portfolio value, beginning in years 1 and 5 after
March 15, 2001.
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EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
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
-------------------------------------------------------------------
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-9 Certificates... 8.1 5.7 7.9 5.4 7.7 5.1 7.3 5.1 7.3 5.1
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
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
-------------------------------------------------------------------
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-9 Certificates... 8.1 5.5 7.9 5.3 7.7 5.1 7.3 5.1 7.3 5.1
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AIRPLANES GROUP CASH FLOW ANALYSIS
COMPARISON OF ACTUAL CASH FLOWS VERSUS THE ADJUSTED 1998 BASE CASE FOR THE
THIRTY-FIVE MONTH PERIOD FROM MARCH 11, 1998 TO FEBRUARY 15, 2001.
The financial information set forth in this Airplanes Group Cash Flow
Analysis, which was not prepared in accordance with U.S. GAAP, shows the cash
receipts and payments of Airplanes Group for the thirty-five month period from
March 11, 1998 to February 15, 2001 (the "THIRTY-FIVE MONTH PERIOD"). You should
read this information together with the financial statements and related notes
of Airplanes Group.
The Adjusted 1998 Base Case referred to below represents the 1998 Base Case
adjusted to take account of the 21 aircraft sales which have occurred since
March 1998 (three DC8-71Fs, one B737-300, four B737-200As, two B737-200QCs,
three A300-B4-100s and eight DC9s), which sales were not anticipated in the 1998
Base Case.
The following is a discussion of the Total Cash Collections, Total Cash
Expenses, Interest Payments and Principal Payments of Airplanes Group for the
Thirty-Five Month Period. You should read this discussion in conjunction with
the analysis under "-- Airplanes Cash Flow Performance for the Period from March
11, 1998 to February 15, 2001 (35 Months) Comparison of Actual Cash Flows versus
Adjusted 1998 Base Case Cash Flows."
CASH COLLECTIONS
"TOTAL CASH COLLECTIONS" include Net Lease Rentals, Interest Earned,
Aircraft Sales, Net Maintenance and Other Receipts (each as defined below). In
the Thirty-Five Month Period, Airplanes Group generated approximately $1,427.5
million in Total Cash Collections, $56.0 million less than the Total Cash
Collections contemplated by the Adjusted 1998 Base Case. This difference is due
to a combination of the factors set out below. The numbers in square brackets
below refer to the line item number in the analysis under "-- Airplanes Cash
Flow Performance for the Period from March 11, 1998 to February 15, 2001 (35
Months) Comparison of Actual Cash Flows versus Adjusted 1998 Base Case Cash
Flows."
[2] RENEGOTIATED LEASES
"RENEGOTIATED LEASES" refers to the loss in rental revenue caused by a
lessee negotiating a reduction in the lease rental. Typically, this can be a
permanent reduction over the remaining lease term in exchange for other
contractual concessions from the lessee. In the Thirty-Five Month Period, the
amount of revenue loss attributed to Renegotiated Leases was $2.6 million, as
compared to $Nil assumed in the Adjusted 1998 Base Case, and related to leases
renegotiated with two lessees. The renegotiated rentals were set at the then
prevailing market rate for these aircraft types.
[3] RENTAL RESETS, INCLUDING INTEREST RATE ADJUSTMENTS FOR FLOATING RATE LEASES
"RENTAL RESETS" is a measure of the loss in rental revenue when new lease
rates are different than those assumed in the Adjusted 1998 Base Case, including
lease rate adjustments for changes in interest rates on floating rate leases.
Rental Resets amounted to $24.3 million in the Thirty-Five Month Period, as
compared to $Nil assumed in the Adjusted 1998 Base Case.
[5] CONTRACTED LEASE RENTALS
"CONTRACTED LEASE RENTALS" represents the current contracted lease rental
rollout, which is equal to the Adjusted 1998 Base Case Lease Rentals less
adjustments for Renegotiated Leases and Rental Resets. For the Thirty-Five Month
Period, Contracted Lease Rentals were $1,334.6 million, which was $26.9 million
less than that assumed in the Adjusted 1998 Base Case. The difference is due to
losses from Renegotiated Leases and Rental Resets as discussed above.
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65
[6] MOVEMENT IN CURRENT ARREARS BALANCE
"CURRENT ARREARS" is the total Contracted Lease Rentals outstanding from
current lessees at a given date but excluding any amounts classified as Bad
Debts. There was a net negative movement of $20.9 million in the Current Arrears
balance over the Thirty-Five Month Period, compared to $Nil assumed in the
Adjusted 1998 Base Case.
NET STRESS-RELATED COSTS
"NET STRESS-RELATED COSTS" is a combination of all the factors which can
cause actual lease rentals to vary from the Contracted Lease Rentals. The
Adjusted 1998 Base Case assumed gross stress-related costs equal to 6.0% of the
Adjusted 1998 Base Case Lease Rentals. However, the Adjusted 1998 Base Case also
assumed the recovery of certain deferred arrears equal to 1.1% of the Adjusted
1998 Base Case Lease Rentals in the Thirty-Five Month Period, resulting in an
overall Net Stress-Related Costs assumption of 4.9% of the Adjusted 1998 Base
Case Lease Rentals. For the Thirty-Five Month Period, Net Stress-Related Costs
incurred amounted to a net cash outflow of $48.8 million (3.5% of Lease Rentals)
compared to the $67.3 million outflow assumed in the Adjusted 1998 Base Case, a
variance of $18.5 million that is due to the following five factors described in
items [8] to [12] below.
[8] BAD DEBTS
"BAD DEBTS" are arrears owed by lessees who have defaulted and which are
deemed irrecoverable. They amounted to $5.2 million (0.4% of Lease Rentals) for
the Thirty-Five Month Period, $8.6 million less than the Adjusted 1998 Base Case
assumption of $13.8 million (1.0% of Lease Rentals). Actual Bad Debts related to
four lessees.
[9] DEFERRED ARREARS BALANCE
"DEFERRED ARREARS BALANCE" refers to current arrears that have been
capitalized and restructured into a deferred balance. In the Thirty-Five Month
Period, Airplanes Group received payments totalling $16.5 million in accordance
with these restructurings. Payments totalling $15.4 million were assumed to be
received in accordance with restructurings included in the Adjusted 1998 Base
Case.
[10] AIRCRAFT ON GROUND ("AOG")
AOG is defined as the Adjusted 1998 Base Case Lease Rentals lost when an
aircraft is off-lease and non-revenue earning. In the Thirty-Five Month Period,
the amount of revenue lost attributed to AOG was $48.2 million (3.5% of Lease
Rentals), as compared to $57.9 million under the Adjusted 1998 Base Case, and
relates to 37 aircraft which were off-lease at different times during this
period. At January 31, 2001, six aircraft were AOG.
[11] OTHER LEASING INCOME
"OTHER LEASING INCOME" consists of miscellaneous income received in
connection with a lease other than contracted rentals, maintenance receipts and
security deposits, such as early termination payments or default interest. In
the Thirty-Five Month Period, Other Leasing Income amounted to $4.9 million, as
compared to $Nil assumed under the Adjusted 1998 Base Case.
[12] REPOSSESSION COSTS
"REPOSSESSION COSTS" cover legal and aircraft technical costs incurred as a
result of repossessing an aircraft. In the Thirty-Five Month Period, Airplanes
Group repossessed 15 aircraft from nine lessees, resulting in Repossession Costs
totalling $16.8 million (1.2% of Lease Rentals), as compared to $11.0 million
under the Adjusted 1998 Base Case.
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[14] NET LEASE RENTALS
"NET LEASE RENTALS" is Contracted Lease Rentals less any movement in
Current Arrears Balance and Net Stress-Related Costs. In the Thirty-Five Month
Period, Net Lease Rentals amounted to $1,264.9 million, $29.3 million less than
that assumed in the Adjusted 1998 Base Case. The variance was attributable to
the combined effect of the factors outlined in items [2] and [3] and in items
[6] to [12] above.
[15] INTEREST EARNED
"INTEREST EARNED" relates to interest received on cash balances held in the
Collection and Expense Accounts, which are described in greater detail in
"Description of Securities -- The Accounts." In the Thirty-Five Month Period,
interest earned amounted to $34.6 million, $5.3 million more than that assumed
in the Adjusted 1998 Base Case. The difference is due to a combination of two
offsetting factors: (1) the Adjusted 1998 Base Case made no assumption as to the
interest earned on the intra-month cash balances in the Collection Account and
Expense Account and (2) the average actual reinvestment rate for the Thirty-Five
Month Period was 5.62% (excluding a $5 million guaranteed investment contract)
as compared to the 5.75% assumed in the Adjusted 1998 Base Case.
[16] AIRCRAFT SALES
Since March 1998, Airplanes Group has received net sales proceeds of $160.0
million in respect of the sale of 28 aircraft (including final bullet payments
on four finance leases), 21 of which were not anticipated in the 1998 Base Case.
The net sales proceeds on the 28 aircraft of $160.0 million compares with
the relevant Note Target Price at the date of the respective sale of $146.6
million and a depreciated (using the depreciation curve assumed in the
indentures) Initial Appraised Value (appraised as of October 1995) at the date
of the respective sale of $157.0 million.
[17] NET MAINTENANCE
"NET MAINTENANCE" refers to maintenance reserve revenue received less any
maintenance reimbursements paid to lessees. In the Thirty-Five Month Period, Net
Maintenance costs of $41.4 million were incurred. The Adjusted 1998 Base Case
makes no assumptions for Net Maintenance as it assumes that, over time,
maintenance revenue will equal maintenance expenditure. The negative maintenance
cashflow performance is primarily due to the acceleration of maintenance events
due to aircraft repossessions, the return of approximately $7 million in
maintenance reserves to a Latin American lessee as a result of the restructuring
of its leases and a greater than expected incidence of maintenance events in the
Thirty-Five Month Period.
[18] OTHER RECEIPTS
"OTHER RECEIPTS" totalling $9.4 million during the Thirty-Five Month Period
comprise the following two receipts: a payment of $8.4 million from GE under the
tax sharing agreement for the period ended December 31, 1999 and net proceeds of
$1.0 million resulting from the exercise by Airplanes Group of an option to
purchase shares in a lessee which Airplanes Group had been granted under the
terms of a lease to that lessee and the subsequent sale of those shares. No
Other Receipts were anticipated in the Adjusted 1998 Base Case.
CASH EXPENSES
"TOTAL CASH EXPENSES" include Aircraft Operating Expenses and Selling,
General and Administrative ("SG&A") Expenses. In the Thirty-Five Month Period,
Total Cash Expenses were $190.8 million compared to $129.7 million assumed in
the Adjusted 1998 Base Case, a negative variance of $61.1 million. A number of
offsetting factors discussed below have given rise to this.
"AIRCRAFT OPERATING EXPENSES" includes all operational costs related to the
leasing of aircraft including costs of insurance, re-leasing and other overhead
costs.
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[20] RE-LEASING AND OTHER OVERHEAD COSTS
"RE-LEASING AND OTHER OVERHEAD COSTS" consist of miscellaneous re-delivery
and leasing costs associated with re-leasing events, costs of insurance and
other lessee-related overhead costs. In the Thirty-Five Month Period, these
costs amounted to $82.4 million (or 6.0% of Lease Rentals) compared to $27.6
million (or 2.0% of Lease Rentals) assumed in the Adjusted 1998 Base Case.
Actual Re-leasing and Other Overhead Costs exceeded the Adjusted 1998 Base Case
assumption primarily due to higher than assumed transition costs on aircraft
delivery to new lessees and payments made in the form of lessor contributions to
defray certain technical costs during the term of certain leases.
SG&A Expenses relate to fees paid to the servicer and to other service
providers.
[21] AIRCRAFT SERVICER FEES
The "AIRCRAFT SERVICER FEES" are defined as amounts paid to the servicer in
accordance with the terms of the servicing agreement. In the Thirty-Five Month
Period, the total Aircraft Servicer Fees paid were $70.8 million, $4.4 million
more than assumed in the Adjusted 1998 Base Case, principally as a result of
higher incentive fees than assumed in the Adjusted 1998 Base Case.
Aircraft Servicer Fees consist of:
$ MILLIONS
----------
Retainer Fee................................................ 62.8
Minimum Incentive Fee....................................... 4.5
Core Cash Flow/Sales Incentive Fee.......................... 3.5
----
Total Aircraft Servicer Fees.............................. 70.8
====
The Retainer Fee is a fixed amount per month per aircraft and changes only
as aircraft are sold.
[23] OTHER SERVICER FEES AND OTHER OVERHEADS
"OTHER SERVICER FEES AND OTHER OVERHEADS" relate to fees and expenses paid
to other service providers including the administrative agent, the cash manager,
financial advisors, legal advisors and accountants, and to the directors. In the
Thirty-Five Month Period, Other Servicer Fees and Other Overheads amounted to
$37.6 million, $1.9 million more than an assumed expense of $35.7 million in the
Adjusted 1998 Base Case.
NET CASH COLLECTIONS
"NET CASH COLLECTIONS" is defined as Total Cash Collections less Total Cash
Expenses, Interest Payments and Swap Payments, each as defined below.
[30] INTEREST PAYMENTS
In the Thirty-Five Month Period, interest payments to investors amounted to
$658.6 million, which is $2.9 million lower than the Adjusted 1998 Base Case. As
a result of a greater decline in aircraft appraisals over the Thirty-Five Month
Period than that implied by the depreciation curve contemplated by the
indentures, which resulted in a reallocation of cash flows in favour of the
class A notes, there was a suspension of payments of the class E minimum
interest amount of 1% from February 1999 to January 2000 and from May 2000 to
February 2001. Total class E minimum interest payments suspended during these
periods amounted to $10.8 million (also see Item [33] below). Higher actual
amounts outstanding on each class of notes than those assumed under the Adjusted
1998 Base Case, the impact of which has been partly offset by a slightly lower
than expected level of average interest rates, resulted in interest payments to
the holders of the class A, B, C and D notes which were $7.9 million higher than
that assumed by the Adjusted 1998 Base Case. The Adjusted 1998 Base Case assumed
LIBOR to be 5.75% whereas the average monthly LIBOR rate was 5.73%.
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[31] SWAP PAYMENTS
Airplanes Group had net swap payments of $1.1 million during the
Thirty-Five Month Period compared with $1.8 million assumed in the Adjusted 1998
Base Case. Included in the net swap payments of $1.1 million for the Thirty-Five
Month Period is a net cash inflow of approximately $11 million on the
re-couponing and unwinding of 30 of Airplanes Group's portfolio of 44 swaps in
November 1999. Also included in net swap payments are net payments of $3.9
million in respect of the minimum and supplemental hedge payments in the
Thirty-Five Month Period.
[33] PRINCIPAL PAYMENTS
In the period from March 11, 1998 to February 15, 2001, total principal
payments amounted to $580.9 million (comprising $493.2 million on the class A
notes, $57.6 million on the class B notes, $25.2 million on the class C notes
and $4.9 million on the class D notes), $109.6 million less than assumed in the
Adjusted 1998 Base Case. See "Summary -- Overview -- Summary Performance to
Date" for a breakdown of this $109.6 million variance.
Applying the declining value assumptions to the original March 1996
appraisals and adjusting for aircraft sales, the total appraised value of the
aircraft was assumed to be $4,073.0 million at March 15, 1998 and $3,424.3
million at February 15, 2001. Our portfolio is appraised annually and the most
recent appraisal dated January 31, 2001, which was effective for the February
2001 payment date, valued our portfolio at $3,135.4 million. Applying the
declining value assumptions to this appraisal, the total appraised value was
$3,125.4 million at February 15, 2001.
As a consequence of the cumulative excess decline in appraised values
experienced in the period from March 1996 to February 2001, combined with
overall cash performance during that period, Airplanes Group's available cash
flows after payment of expenses, interest and class A and B minimum principal
amounts, have been redirected in accordance with the priority of payments to pay
class A principal adjustment amounts in April 1998 and May 1998 and from
February 1999 to February 2001. Since the principal adjustment amounts on the
class A notes rank ahead of the scheduled principal payments on the class C and
D notes, and since available cash flows were not sufficient to pay all of the
class A principal adjustment amounts, some of the scheduled principal payments
on the class C and D notes have been deferred on some payment dates during these
periods. In particular, an adverse movement in cashflow performance in the ten
month period from the April 2000 payment date to the February 2001 payment date
which arose due to the factors described above and in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," together with
the cumulative decline in appraised values to date, resulted in available
cashflows not being sufficient to pay all of the class A principal adjustment
amounts in the ten month period. As a result, no payments of the class C and D
scheduled principal amounts were made in that ten month period. Consequently,
total deferrals of class C and class D scheduled principal amounts amounted to
$13.1 million and $6.1 million, respectively, as of February 15, 2001. The class
E minimum interest amount was also suspended during the Thirty-Five Month Period
(refer to Item 30 above).
Based on the most recent appraisal as of January 31, 2001, the decline in
aircraft valuations in the period from February 2000 to February 2001 was
approximately $10 million more than the decrease implied by the aircraft
depreciation schedules that form part of the terms of the notes. Details of the
appraised values are contained in "The Aircraft, Related Leases and Collateral
- -- Appraisals." The decline in appraised values in this period results in an
increase of $6.2 million in the principal adjustment amount outstanding from
$32.4 million to $38.6 million on the class A notes as of February 15, 2001.
The continued payment of class A principal adjustment amount will result in
the continued reallocation of cashflows in favour of the class A notes until
such time as the class A Target Loan to Value Ratio has been restored.
Accordingly, payments of the class C and D scheduled principal amounts will
continue to be deferred and the current suspension of payments of the class E
minimum interest amount will also continue. There can be no assurance that cash
collections will be sufficient to restore this ratio in the foreseeable future.
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NOTE REPORT LINE NAME DESCRIPTION
- ---- ---------------- -----------
CASH COLLECTIONS
[1] Lease Rentals........................ Assumptions as per the Adjusted 1998 Base Case
[2] Renegotiated Leases.................. Change in contracted rental cash flow caused by a
renegotiated lease
[3] Rental Resets........................ Re-leasing events where new lease rate deviated from the
Adjusted 1998 Base Case
[4] Other................................
[5]k[1]...[4] CONTRACTED LEASE RENTALS............. Current Contracted Lease Rentals due as at the latest
Calculation Date
[6] Movement in Current Arrears Current Contracted Lease Rentals not received as at the
Balance.............................. latest Calculation Date, excluding Bad Debts
[7] Less Net Stress related Costs
[8] Bad Debts............................ Arrears owed by former lessees and deemed irrecoverable
[9] Deferred Arrears Balance............. Current arrears that have been capitalised and restructured
as a Note Payable
[10] AOG.................................. Loss of rental due to an aircraft being off-lease and
non-revenue earning
[11] Other Leasing Income................. Includes lease termination payments, rental guarantees and
late payments charges
[12] Repossession......................... Legal and technical costs incurred in repossessing
aircraft.
[13]k[8]...[12] Sub-total
[14] [5]+[6]+[13] NET LEASE RENTALS.................... Contracted Lease Rentals less Movement in Current Arrears
Balance and Net Stress-related costs
[15] Interest Earned...................... Interest earned on monthly cash balances
[16] Aircraft Sales....................... Proceeds, net of fees and expenses, from the sale of
aircraft.
[17] Net Maintenance...................... Maintenance Revenue Reserve received less reimbursements to
lessees
[18] Other Receipts....................... Net proceeds received from the sale of shares held in an
airline and amounts received under the Tax Sharing
Agreement for the utilisation by GE Capital of tax losses
of Airplanes Group companies.
[19]k[14]...[18] Total Cash Collections............... Net Lease Rentals + Interest Earned + Aircraft Sales + Net
Maintenance + Other Receipts
CASH EXPENSES
Aircraft Operating Expenses.......... All operational costs related to the leasing of aircraft.
[20] Releasing and Other Overheads........ Costs associated with transferring an aircraft from one
lessee to another, costs of insurance and other
lessee-related overheads
SG&A Expenses
[21] Aircraft Servicer Fees............... Monthly and annual fees paid to the servicer
Retainer Fee......................... Fixed amount per month per aircraft
Minimum Incentive Fee................ Minimum annual fee paid to Servicer for performance above
an annually agreed target.
Core Cash Flow/Sales Incentive Fee Fees (in excess of Minimum Incentive Fee above) paid to the
Servicer for performance above an annually agreed target/on
sale of an aircraft.
[22] [21] Sub-total
[23] Other Servicer Fees and Other Administrative agent, trustee and professional fees paid to
Overheads............................ other service providers and other overheads
[24] [22]+[23] Sub-total
[25] [20]+[24] Total Cash Expenses.................. Aircraft Operating Expenses + SG&A Expenses
NET CASH COLLECTIONS
[26] [19] Total Cash Collections............... Line 19 above
[27] [25] Total Cash Expenses.................. Line 25 above
[28] Movement in Expense Account.......... Relates to reduction in accrued expense amounts
[29] Refinancing Expenses (accrued March Costs relating to the March 98 refinancing accrued on
98).................................. closing and paid post March 98
[30] Interest Payments.................... Interest paid on all outstanding debt
[31] Swap payments........................ Net swap payments (paid)/received
[32]k[26]...[31] Total
[33] PRINCIPAL PAYMENTS................... Principal payments on debt
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AIRPLANES CASH FLOW PERFORMANCE FOR THE PERIOD FROM MARCH 11, 1998 TO FEBRUARY
15, 2001 (35 MONTHS)
COMPARISON OF ACTUAL CASH FLOWS VERSUS ADJUSTED 1998 BASE CASE CASH FLOWS
% OF LEASE RENTALS UNDER
THE ADJUSTED 1998 BASE CASE*
---------------------------------
ADJUSTED ADJUSTED
1998 BASE 1998 BASE
ACTUAL CASE* VARIANCE ACTUAL CASE* VARIANCE
------- --------- -------- ------ ------------- --------
$M $M $M
CASH COLLECTIONS
[1] Lease Rentals........................... 1,361.5.. 1,361.5 (0.0) 100.0% 100.0% 0.0%
[2] Renegotiated Leases..................... (2.6) 0.0 (2.6) (0.2%) 0.0% (0.2%)
[3] Rental Resets........................... (24.3) 0.0 (24.3) (1.8%) 0.0% (1.8%)
[4] Other................................... 0.0.... 0.0 0.0 0.0% 0.0% 0.0%
------- ------- ------ ------ ------ -----
[5] [1-4] CONTRACTED LEASE RENTALS................ 1,334.6.. 1,361.5 (26.9) 98.0% 100.0% (2.0%)
[6] Movement in Current Arrears Balance..... (20.9) 0.0 (20.9) (1.5%) 0.0% (1.5%)
[7] less Net Stress Related Costs
[8] Bad Debts............................... (5.2) (13.8) 8.6 (0.4%) (1.0%) 0.6%
[9] Deferred Arrears Balance................ 16.5... 15.4 1.1 1.2% 1.1% 0.1%
[10] AOG..................................... (48.2) (57.9) 9.7 (3.5%) (4.2%) 0.7%
[11] Other Leasing Income.................... 4.9.... 0.0 4.9 0.4% 0.0% 0.4%
[12] Repossession............................ (16.8) (11.0) (5.8) (1.2%) (0.8%) (0.4%)
------- ------- ------ ------ ------ -----
[13] [8-12] Sub-total............................... (48.8) (67.3) 18.5 (3.5%) (4.9%) 1.4%
[14] [5+6+13] NET LEASE RENTAL........................ 1,264.9.. 1,294.2 (29.3) 93.0% 95.1% (2.1%)
[15] Interest Earned......................... 34.6... 29.3 5.3 2.5% 2.1% 0.4%
[16] Aircraft Sales.......................... 160.0.. 160.0 (0.0) 11.7% 11.7% (0.0%)
[17] Net Maintenance......................... (41.4) 0.0 (41.4) (3.0%) 0.0% (3.0%)
[18] Other Receipts.......................... 9.4.... 0.0 9.4 0.7% 0.0% 0.7%
------- ------- ------ ------ ------ -----
[19] [14-18] Total Cash Collections.................. 1,427.5.. 1,483.5 (56.0) 104.9% 108.9% (4.0%)
======= ======= ====== ====== ====== =====
CASH EXPENSES
Aircraft Operating Expenses
[20] Re-leasing and other overheads.......... (82.4) (27.6) (54.8) (6.0%) (2.0%) (4.0%)
SG&A Expenses
[21] Aircraft Servicer Fees
Retainer Fee............................ (62.8) (62.0) (0.8) (4.6%) (4.6%) (0.0%)
Minimum Incentive Fee................... (4.5) (4.4) (0.1) (0.3%) (0.3%) (0.0%)
Core Cash Flow/Sales Incentive Fee...... (3.5) 0.0 (3.5) (0.3%) 0.0% (0.3%)
------- ------- ------ ------ ------ -----
[22] [21] Sub-total............................... (70.8) (66.4) (4.4) (5.2%) (4.9%) (0.3%)
[23] Other Servicer Fees and Other (37.6) (35.7) (1.9) (2.8%) (2.6%) (0.2%)
Overheads...............................
------- ------- ------ ------ ------ -----
[24] [22+23] Sub-total............................... (108.4) (102.1) (6.3) (8.0%) (7.5%) (0.5%)
------- ------- ------ ------ ------ -----
[25] [24+20] Total Cash Expenses..................... (190.8) (129.7) (61.1) (14.0%) (9.5%) (4.5%)
======= ======= ====== ====== ====== =====
NET CASH COLLECTIONS
[26] [19] Total Cash Collections.................. 1,427.5.. 1,483.5 (56.0) 104.9% 108.9% (4.0%)
[27] [25] Total Cash Expenses..................... (190.8) (129.7) (61.1) (14.0%) (9.5%) (4.5%)
[28] Movement in Expense Account............. 20.7... 0.0 20.7 1.5% 0.0% 1.5%
[29] Refinancing Expenses (accrued Mar 98)... (16.8) 0.0 (16.8) (1.2%) 0.0% (1.2%)
[30] Interest Payments....................... (658.6) (661.5) 2.9 (48.4%) (48.6%) 0.2%
[31] Swap Payments........................... (1.1) (1.8) 0.7 (0.1%) (0.1%) 0.0%
------- ------- ------ ------ ------ -----
[32] [26-31] TOTAL................................... 580.9.. 690.5 (109.6) 42.7% 50.7% (8.0%)
------- ------- ------ ------ ------ -----
[33] PRINCIPAL PAYMENTS
Subclass A-5............................ 93.6... 93.6 (0.0) 6.9% 6.9% (0.0%)
Subclass A-6............................ 399.6.. 475.6 (76.0) 29.3% 34.9% (5.6%)
Subclass B.............................. 57.6... 72.0 (14.4) 4.2% 5.3% (1.1%)
Subclass C.............................. 25.2... 38.3 (13.1) 1.9% 2.8% (0.9%)
Subclass D.............................. 4.9.... 11.0 (6.1) 0.4% 0.8% (0.4%)
------- ------- ------ ------ ------ -----
Total................................... 580.9.. 690.5 (109.6) 42.7% 50.7% (8.0%)
======= ======= ====== ====== ====== =====
DEBT BALANCES AT FEBRUARY 15, 2001
Subclass A-4............................ 200.0 200.0 0.0
Subclass A-6............................ 450.4 374.4 76.0
Subclass A-7............................ 550.0 550.0 0.0
Subclass A-8............................ 700.0 700.0 0.0
Subclass B.............................. 279.4 265.0 14.4
Subclass C.............................. 349.8 336.7 13.1
Subclass D.............................. 395.1 389.0 6.1
------- ------- ------
2,924.7 2,815.1 109.6
======= ======= ======
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MAR-98 ADJUSTED 1998
CLOSING ACTUAL BASE CASE*
------- ------- -------------
$M $M $M
NET CASH COLLECTIONS...................... 580.9 690.5
Add Back Interest and Swap Payments....... 659.7 663.3
------- -------
a Net Cash Collections (excl. interest and
swap payments)............................ 1,240.6 1,353.8
======= =======
b Swaps..................................... 1.1 1.8
c Class A Interest.......................... 381.2 375.8
d Class A Minimum........................... 0.0 0.0
e Class B Interest.......................... 58.7 57.5
f Class B Minimum........................... 52.4 31.7
g Class C Interest.......................... 86.0 85.1
h Class D Interest.......................... 126.3 125.9
i Class A Principal Adjustment.............. 368.6 0.0
j Class C Scheduled......................... 25.2 38.3
k Class D Scheduled......................... 4.9 11.0
l Permitted Aircraft Modifications.......... 0.0 0.0
m Step-up Interest.......................... 0.0 0.0
n Class E Minimum Interest.................. 6.4 17.2
o Class B Supplemental...................... 5.2 40.3
p Class A Supplemental...................... 124.6 569.2
------- -------
Total..................................... 1,240.6 1,353.8
======= =======
(1) INTEREST COVERAGE RATIO
Class A................................... 3.2 3.6 = a/(b+c)
Class B................................... 2.8 3.1 = a/(b+c+d+e)
Class C................................... 2.1 2.5 = a/(b+c+d+e+f+g)
Class D................................... 1.8 2.0 = a/(b+c+d+e+f+g+h)
(2) DEBT COVERAGE RATIO
Class A................................... 3.2 3.6 = a/(b+c+d)
Class B................................... 2.5 2.9 = a/(b+c+d+e+f)
Class C................................... 1.1 1.9 = a/(b+c+d+e+f+g+h+i+j)
Class D................................... 1.1 1.9 = a/(b+c+d+e+f+g+h+i+j+k)
LOAN TO VALUE RATIOS (IN US DOLLARS)
(3) Expected Portfolio Value.................. 4,073.0 3,424.3
(4) Adjusted Portfolio Value.................. 3,125.4
Liquidity Reserve Amount
Of which -- Cash.......................... 174.4 156.5 174.4
-- Accrued Expenses....................... 0.0 16.0 0.0
------- ------- -------
Subtotal.................................. 174.4 172.5 174.4
Less Lessee Security Deposits............. 54.4 36.5 54.4
------- ------- -------
Subtotal.................................. 120.0 136.0 120.0
------- ------- -------
(5) Total Asset Value......................... 4,193.0 3,261.4 3,544.3
======= ======= =======
MARCH 15, FEBRUARY 15, FEBRUARY 15,
1998 2001 2001
NOTE BALANCES AS AT: --------------- --------------- ---------------
Class A................................ 2,393.6 57.1% 1,900.4 58.3% 1,824.4 51.5%
Class B................................ 337.0 65.1% 279.4 66.8% 265.0 59.0%
Class C................................ 375.0 74.1% 349.8 77.6% 336.7 68.5%
Class D................................ 400.0 83.6% 395.1 89.7% 389.0 79.4%
------- -------
3,505.6 2,924.7 2,815.1
======= ======= =======
- ---------------
* Adjusted 1998 Base Case equals the 1998 Base Case as adjusted for aircraft
sales which have occurred and which were not anticipated in the 1998 Base
Case
(1) "INTEREST COVERAGE RATIO" is equal to Net Cash Collections (excluding
interest and swap payments) expressed as a ratio of the interest payable on
each subclass of notes plus the interest and minimum principal payments
payable on each subclass of notes that rank senior in priority of payment to
the relevant subclass of notes.
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(2) "DEBT SERVICE RATIO" is equal to Net Cash Collections (excluding interest
and swap payments) expressed as a ratio of the interest and
Minimum/Scheduled Principal Payments payable on each subclass of notes plus
the interest and Minimum/Scheduled Principal Payments payable on each
subclass of notes that ranks equally with or senior to the relevant subclass
of notes in the priority of payments. In respect of the class A notes,
Principal Adjustment Amount payments have been excluded as they are a
function of aircraft values.
(3) "EXPECTED PORTFOLIO VALUE" represents the Initial Appraised Value of each
aircraft in our portfolio multiplied by the Depreciation Factor at payment
date divided by the Depreciation Factor at the March 1996 closing date.
(4) "ADJUSTED PORTFOLIO VALUE" represents the appraised value of each aircraft
in our portfolio as determined by the most recent appraisal multiplied by
the Depreciation Factor at payment date divided by the Depreciation Factor
as of the relevant appraisal date.
(5) "TOTAL ASSET VALUE" is equal to Total Expected/Adjusted Portfolio Value plus
Liquidity Reserve Amount minus lessee security deposits.
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THE COMMERCIAL AIRCRAFT INDUSTRY
The demand for air travel in the world market can be measured in Revenue
Passenger Miles, or "RPMS." RPMs are calculated by multiplying the number of
fare-paying passengers carried (on Western commercial aircraft) by the distance
flown in miles. In 2000, the total number of RPMs flown was 2,089 billion. The
data presented in this section for 2000 is based on data published by The
Airline Monitor.
The global air travel market grew 6.5% in 2000 and had a compound annual
growth rate from 1990 to 2000 of approximately 5.6%. There is a high degree of
consistency among analysts and competitors about the likely growth in this
industry. The Airline Monitor expects growth to continue and is projecting an
underlying growth rate over the next ten years of 5.1%. Boeing expects the
market to grow by 4.2% and Airbus expects it to grow by 5.2% for the same
period. However, this projected rate of increase is not uniform and varies both
over time and between regions, primarily as a result of economic factors and the
maturity of the relevant market. For example, Airbus forecasts a 6.2% annual
average increase in travel from Europe to Asia over the 10 year period, while it
expects travel within the United States to increase at an annual rate of 2.9%
over the same period.
The world's airlines have recently enjoyed relative profitability. The
Airline Monitor has presented summary financial data for the major world
airlines. We have extracted these results for 48 airlines over the last 9 years
to examine the overall trend. The following chart shows the increase in
profitability for these airlines. Airline results are however coming under
pressure as growth slows and fuel prices rise.
RELATIVE AIRLINE PROFITABILITY
[RELATIVE AIRLINE PROFITABILITY GRAPH]
In addition to the underlying cyclical economic factors, the operating
environment within the air travel industry has changed dramatically during the
1990s. The trend of U.S.-style deregulation and privatization of airlines is now
virtually complete in Europe and is increasingly evident in other countries and
regions all over the world. Deregulation of travel between countries and regions
is also increasing, with open skies agreements now concluded between the U.S.
and 35 countries and also between the EU and the Mercosur countries in South
America.
The airlines' load factors, which measure how many passengers an aircraft
is carrying as a proportion of the maximum number that it could carry, were 4.4%
higher in 1999 than in 2000 as the airlines operate much more efficiently.
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WORLD LOAD FACTORS
[GRAPH]
GRAPH SHOWING WORLD LOAD FACTORS 1990-1999 (SOURCE: THE AIRLINE MONITOR)
The demand for new aircraft has also been strong since 1996 with relatively
low availability of used aircraft and deliveries of new aircraft in subsequent
years reaching historically high levels. Some of this demand is artificially
increased as many of the first and second generation commercial jets are being
retired either because of age or obsolescence. This program of retirement is
still at a relatively early stage and as at December 31, 2000 only 2,424
aircraft had been retired. At that date, 2,561 jet aircraft that were more than
25 years old retired had not been retired, although 536 of these were in
storage. The Airline Monitor expects 5,765 new aircraft to be delivered between
2001 and 2005, of which 3,396 will be required for growth and 1,608 will be
required for aircraft replacement.
AIRCRAFT DELIVERIES AND RETIREMENTS
[GRAPH]
GRAPH SHOWING AIRCRAFT DELIVERIES AND RETIREMENTS AS PERCENTAGE OF WORLD FLEET
AND NET RETIRALS 1990-1999 (SOURCE: THE AIRLINE MONITOR)
The primary factor in determining the operating lease rate that can be
obtained for an aircraft is the availability of competing aircraft at the time.
The number of overall surplus aircraft peaked at 1,094 in December 1993
representing 9.5% of the fleet. This number declined significantly over the
following four years. The level has increased again in the period from 1998 to
2000 and stood at 541 aircrafts at December 2000. However, the
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increase in percentage terms is not as large, representing 3.5% of the fleet. An
increase in the number of new aircraft being delivered combined with the slower
overall growth in air travel has led to the recent increase in the number of
surplus aircraft and, as a result, to a reduction in the operating lease rates
that can be obtained for competing aircraft. In recent years, however, there
have been comparatively more widebody aircraft available (as a percentage of the
world widebody fleet) than narrowbody aircraft because of technological
developments and the economic and financial difficulties experienced in Asia.
Other material factors in determining lease rates include the cost of new
aircraft and the level of interest rates.
AIRCRAFT AVAILABLE FOR SALE OR LEASE
[GRAPH]
GRAPH SHOWING NUMBERS OF AIRCRAFT AVAILABLE FOR SALE OR LEASE (NARROWBODY AND
WIDEBODY) 1990 - AUGUST 2000 (SOURCE: THE AIRLINE MONITOR)
The types of aircraft required by an airline are dictated principally by
the structure of its routes and traffic volume. Approximately 70% of
western-built commercial jet aircraft are narrowbody aircraft with the balance
being widebody aircraft. Within the widebody sector, the availability of newer,
twin-engined, long-range aircraft is likely to result in a continued weak market
for earlier models such as the A300-B4, A310, B747-100, B747-200 and DC10. The
new models have lower operating costs and allow airlines to develop new
long-haul routes more efficiently as well as to increase service frequency on
established routes. This development has caused more widebody aircraft to be
withdrawn from service relative to their age than narrowbody aircraft, where
technological change has been less significant.
There are currently only two major manufacturers of commercial jet
aircraft, Boeing and Airbus. This is a result of a long-term trend toward
consolidation of the commercial aircraft manufacturing industry, as evidenced by
the merger between Boeing and McDonnell Douglas, the formation by three European
manufacturers, Aerospatiale-Matra, DASA and CASA and other entities, of the
European Aeronautic Defence and Space Company, also known as EADS, and the exit
of former participants such as Fokker and Lockheed. The long lead time, high
capital cost and technological sophistication required to bring a new aircraft
model to the market create significant barriers to entry into the industry,
particularly for narrowbody and widebody jet aircraft.
Although most new aircraft are ordered under long-term, multi-aircraft
contracts, the volume of aircraft production has varied significantly over the
years, reflecting the changing state of the commercial aviation industry and the
economy in general. Manufacturers generally adjust production levels in response
to their customers' needs and financial capacity to take delivery of ordered
aircraft which in turn may be affected by the level of air traffic and the
availability of competing used aircraft. The level of production in 2000 was
above the long-term requirement implied by industry forecasts, including those
published by Boeing and Airbus. These levels of production have been accompanied
by very aggressive pricing strategies in an effort by these manufacturers to
maximize their market share.
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MANAGEMENT OF AIRPLANES GROUP
Neither you nor the trustee have any right to participate in the management
or affairs of Airplanes Group except in the limited circumstances described
under "Description of Securities -- The Notes and Guarantees -- Indenture
Covenants" and "-- Note Event of Default." In particular, neither you nor the
trustee can supervise the functions relating to the leasing and re-leasing of
the aircraft, which have generally been delegated to the servicer under the
servicing agreement.
DIRECTORS AND CONTROLLING TRUSTEES
The business and affairs of Airplanes Limited are managed by its board of
directors, although Airplanes Limited has no executive management resources of
its own and relies on the servicer and other service providers for executive and
administrative functions. The board of directors is comprised of five members.
The majority holders of the class E notes of Airplanes Limited have the right to
appoint one director of Airplanes Limited and the remaining directors are
independent directors appointed by a majority of the then standing directors. GE
Capital, as the majority holder of the class E notes, has appointed Brian Hayden
as the class E note director. If no independent directors are serving on the
board at any time, the Articles of Association of Airplanes Limited require that
four new independent directors be appointed. Certain significant transactions or
proceedings of Airplanes Limited or its subsidiaries require the unanimous
approval of all the directors of Airplanes Limited, including those relating to
specified insolvency proceedings, amendments to the Memorandum and Articles of
Association of Airplanes Limited, mergers or (subject to some exceptions) the
sale of all or substantially all of the assets of Airplanes Limited.
The business and affairs of Airplanes Trust are managed by its controlling
trustees, although Airplanes Trust has no executive management resources of its
own and relies on the servicer and other service providers for executive and
administrative functions. Airplanes Trust has five controlling trustees. The
majority holders of the class E notes of Airplanes Trust have the right to
appoint one controlling trustee of Airplanes Trust and the remaining controlling
trustees are independent controlling trustees appointed by a majority of the
then standing controlling trustees. GE Capital, as the majority holder of the
class E notes, has appointed Brian Hayden as the class E note controlling
trustee. The four independent controlling trustees are the same individuals as
the independent directors of Airplanes Limited. Certain significant transactions
or proceedings of Airplanes Trust or its subsidiary AeroUSA require the
unanimous approval of all of the controlling trustees of Airplanes Trust,
including specified insolvency proceedings, amendments to their constituent
documents, mergers or (subject to some exceptions) the sale of all or
substantially all of their assets. Wilmington Trust Company serves as Delaware
trustee for Airplanes Trust to fulfil the requirement that a Delaware business
trust must have a trustee located in the State of Delaware, but does not
participate in the management of the business and affairs of Airplanes Trust.
The directors and controlling trustees of Airplanes Limited and Airplanes
Trust, respectively, their ages and principal activities are set forth below:
OFFICES HELD
---------------------------------------------------------
NAME AGE AIRPLANES LIMITED AIRPLANES TRUST
- ---- ---- --------------------- --------------------------------
Richard E. Cavanagh............... 54 Independent director Independent controlling trustee
Roy M. Dantzic.................... 56 Independent director Independent controlling trustee
Hugh R. Jenkins................... 67 Independent director Independent controlling trustee
William M. McCann................. 56 Chairman and Chairman and independent
independent director controlling trustee
Brian T. Hayden................... 53 Class E note director Class E note controlling trustee
Richard Cavanagh is the President and Chief Executive Officer of The
Conference Board, Inc., a global business research and membership enterprise
based in New York City. Before taking up his current position in 1995, he served
for eight years as Executive Dean of the Kennedy School of Government at Harvard
University. Before that, he was a partner at 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.
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Mr. Cavanagh also serves as a director of Aircraft Finance Trust (another
aircraft securitization vehicle), the BlackRock Mutual Fund family, Arch
Chemicals (formerly Olin), The Fremont Group (formerly Bechtel Investments) and
The Guardian Life Insurance Company.
Roy Dantzic qualified as a chartered accountant in 1968 and started his
career with Coopers & Lybrand.
Between 1970 and 1980, he engaged in corporate advisory work, principally as a
director of Samuel Montagu. In 1980, Mr. Dantzic was appointed by the British
Government as the finance director of British National Oil Corporation and he
served in this capacity until 1984. Between 1985 and 1989, he was a director of
the corporate broking division of Wood McKenzie. In 1989 he joined the board of
directors of Stanhope Properties and served as its finance director from 1992
until the company was acquired in 1995. In August 1995, Mr. Dantzic became a
director of the corporate broking division of Merrill Lynch International Ltd.
In addition, he has served as a non-executive director on the boards of Central
Electricity Generating Board, British Nuclear Fuels Limited, Saxon Oil Limited
and Total Oil Holdings Ltd. Mr. Dantzic is currently the managing director of
Lattice Property Holdings Ltd.
Hugh Jenkins has spent over 20 years in senior investment management
positions. He served as Director-General of Investments for the pension plans of
the National Coal Board from 1973-1985, a director of Heron International, N.V.
from 1985-1986, Group Investment director of Allied Dunbar Insurance Plc from
1986-1989, and an executive director of the Prudential Corporation plc and
Chairman/Chief Executive of its investment management subsidiary from 1989 to
December 1995. He is currently the Chairman of Development Securities plc and a
non-executive director of The Rank Group plc, EMI Group plc, Johnson Matthey
plc, Gartmore European Investment Trust plc and Development Securities
(Investments) plc.
William McCann, a chartered accountant, was the Managing Partner of Craig
Gardner/Price Waterhouse in the Republic of Ireland from 1987 to 1995. From 1991
to 1995 he was a member of the Price Waterhouse World Board. He was a director
of the Central Bank of Ireland from 1993 to 1998. Mr. McCann was a member of the
Electricity Supply Board, Ireland from 1986 to 2001 and Chairman from 1996 to
2001. Mr. McCann is currently Deputy Chairperson of the Irish Takeover Panel. He
is also a director of Anglo Irish Bank Corporation plc, Canada Life Assurance
(Ireland) Limited and Readymix plc and is Chairman or a director of a number of
other companies. He is a member of the Irish National Competitiveness Council
and is a Board Member of the University College Dublin Graduate School of
Business.
Brian Hayden qualified as a mechanical engineer in 1970 and started his
career with Aer Lingus. He worked in various management positions within Aer
Lingus during the next 19 years. In 1989, he moved to GPA Group (now known as
debis AirFinance Ireland) to head the technical division as Senior Vice
President -- Technical. In 1993, he joined GECAS and is presently an Executive
Vice President with responsibility for technical management of the GECAS-owned
and managed fleet. He is a director of GECAS and a former director of Irish
Helicopters.
Neither Airplanes Limited nor Airplanes Trust has any employees or
executive management. The board of directors of Airplanes Limited and the
controlling trustees of Airplanes Trust rely on the servicer, the administrative
agent, the cash manager and the other service providers for all servicing,
executive and administrative functions. See "Risk Factors -- Risks Relating to
Airplanes Group and Third Parties" for a description of the risks involved in
relying on service providers to operate our business. The directors and
controlling trustees of Airplanes Limited and Airplanes Trust, as well as other
individuals, serve as directors of various of our subsidiaries.
MANAGEMENT COMPENSATION
All directors of Airplanes Limited and controlling trustees of Airplanes
Trust are compensated for travel and other expenses incurred in the performance
of their duties. Each independent director and independent controlling trustee
is paid an index-linked annual fee, currently $79,479.75, for their services in
both capacities. The chairman of Airplanes Limited and Airplanes Trust also
receives an additional index-linked annual fee, currently $52,986.50, for his
services in that capacity. In addition, Mr. Dantzic, Mr. Jenkins and Mr. McCann
each receive annual amounts, currently $7,500, $2,500 and $7,500, respectively,
for their services as directors of Airplanes Holdings and some of its
subsidiaries. Mr. Dantzic, Mr. Jenkins and Mr. McCann are also entitled to
receive an
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additional $1,000 in respect of each board meeting which they attend, subject to
a maximum payment of $5,000 annually for each of them. Mr. Cavanagh and Mr.
Dantzic are also each entitled to receive an aggregate of $2,500 annually from
AeroUSA and AeroUSA 3 for their services as directors of these companies and are
also entitled to receive an additional $1,000 in respect of each board meeting
of these companies which they attend, subject to a maximum payment of $5,000
annually. On July 1, 2000, the independent directors and independent controlling
trustees were paid a one-off amount by Airplanes Limited and Airplanes Trust
equal to the amount they would have received had their fees been index-linked
from April 1, 1996, taking account of inflation from April 1, 1996 to April 1,
1999. The aggregate fees paid to the independent directors and independent
controlling trustees by Airplanes Trust and Airplanes Limited may not exceed
$550,000 in any year. The directors and controlling trustees are reimbursed for
travel and other expenses, and premiums for directors' and officers' insurance
are paid on their behalf. Neither the director nor the controlling trustee
appointed by the holder of a majority in aggregate principal amount of the class
E notes receives remuneration from Airplanes Limited or Airplanes Trust for his
services, except reimbursement of travel and other expenses and payment of
premiums for directors' and officers' insurance.
The directors and the controlling trustees do not receive any additional
cash or non-cash compensation from Airplanes Limited or Airplanes Trust (either
in the form of stock options, stock appreciation rights or pursuant to any
long-term incentive plan, benefit or actuarial plan or any other similar
arrangements of any kind) as salary or bonus for their services as directors or
controlling trustees. None of the directors or controlling trustees currently
has an employment contract with either Airplanes Limited or Airplanes Trust or
serves as a member of a compensation committee of either Airplanes Limited or
Airplanes Trust. The compensation of the directors of Airplanes Limited is set
forth in the Articles of Association of Airplanes Limited and that of the
controlling trustees is set forth in the Airplanes Trust Agreement. None of the
directors or controlling trustees has any beneficial ownership in any of the
equity securities of Airplanes Limited, Airplanes Trust or any of their
subsidiaries.
None of the directors, controlling trustees or any member of their
families, or any person owning five percent or more of Airplanes Limited's
capital stock, has been party to any transaction, or is party to any currently
proposed transaction, with Airplanes Limited, Airplanes Trust or any of their
subsidiaries. No director or controlling trustee or any member of his family, or
any corporation, organization or trust in which that director or controlling
trustee is an executive officer, partner, trustee or has a beneficial interest,
has been indebted in any amount to Airplanes Limited or Airplanes Trust.
AUDIT COMMITTEES
The audit committees of Airplanes Limited and Airplanes Trust, each
established in August 2000, consist of their four independent directors or
controlling trustees, respectively. The duties of each audit committee include:
(a) consideration of the independence and appointment of external
auditors and audit fees;
(b) discussion of the nature and scope of the audit with the external
auditor before any audit commences;
(c) review of the annual financial statements before submission to the
board of Airplanes Limited or controlling trustees of Airplanes
Trust;
(d) discussion of any issues and reservations arising from the audit and
any matters the auditor may wish to discuss, if necessary, in the
absence of the administrative agent, cash manager and servicer;
(e) review of Airplanes Group's internal control systems; and
(f) consideration of other topics as defined by the board of Airplanes
Limited or controlling trustees of Airplanes Trust.
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THE SERVICER
The certificates are not obligations of, or guaranteed by, GECAS, its
affiliate, GE Capital, or any of its other affiliates. GECAS and its affiliates
cannot be held responsible for any liabilities of Airplanes Group, including any
payments due to you on the subclass A-9 certificates.
GECAS provides various aircraft-related services to us as servicer under
the servicing agreement. On November 20, 1998, GECAS' affiliate, GE Capital,
acquired the class E notes previously held by GPA Group (now known as debis
AirFinance Ireland) and its subsidiaries. As the holder of the majority of the
class E notes, GE Capital has the right to appoint one director to the board of
Airplanes Limited and one controlling trustee of Airplanes Trust. GECAS also
holds 5% of the ordinary share capital of Airplanes Holdings, and its affiliate,
GE Capital, has an option to acquire the residual interest in Airplanes Trust
from debis AirFinance, Inc.
GECAS is a global commercial aviation financial services company that
offers a broad range of aircraft financial products and provides management,
marketing and technical support services to airlines, aircraft owners, lenders
and investors and various of its affiliates, including the GE Group, and other
third parties, including Aircraft Finance Trust, debis AirFinance Ireland and
Airplanes Group. As of January 31, 2001, GECAS and its affiliates managed a
portfolio consisting of 1071 aircraft on lease to more than 161 lessees in 62
countries throughout the world. As of January 31, 2001 GECAS has also committed
to purchase a total of 417 new aircraft from manufacturers, deliverable through
December 2007.
GECAS and its affiliates offer such financial products as finance leases
(including both direct financing and leveraged leases), operating leases and
other structured finance products (including aircraft securitization vehicles).
Its management services include collecting rental payments, arranging and
monitoring aircraft maintenance performed by others, limited technical
inspection of aircraft, arranging and monitoring insurance, arranging for
aircraft valuations, registration and de-registration, monitoring compliance
with leases, enforcement of lease provisions against lessees, confirming
compliance with applicable ADs and facilitating delivery and redelivery of
aircraft. GECAS also arrange sales of aircraft to third parties. GECAS, its
affiliate, GE Capital, or any of its other affiliates may acquire debt or
beneficial interests in other securitization vehicles that own a portfolio of
aircraft assets.
GECAS is headquartered in Shannon, Ireland where it had 97 employees as of
January 31, 2001. GE Capital Aviation Services, Inc., of which GECAS is a
subsidiary, has a further 130 employees worldwide and has operations in
Stamford, Connecticut; Shannon, Ireland; Miami, Florida and a number of other
locations.
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The table below sets forth the different aircraft comprising the GECAS
managed portfolio as of January 31, 2001 by manufacturer and by whether the
aircraft are owned and managed by affiliates of GE Capital or managed for third
parties or Airplanes Group.
GE CAPITAL OTHER MANAGED AIRPLANES
AIRCRAFT TYPE AND CLASS FLEET THIRD PARTIES(1) GROUP TOTAL
- ----------------------- ---------- ---------------- --------- -----
Airbus
A300....................................... 16 -- 3 19
A310....................................... 7 1 -- 8
A319....................................... 56 -- -- 56
A320....................................... 48 13 12 73
A321....................................... 6 -- -- 6
A330....................................... 7 -- -- 7
Boeing
B727....................................... 8 -- 2 10
B737-200................................... 42 4 22 68
B737-300/400/500........................... 202(2) 18 43 263
B737-600/700/800........................... 86 -- -- 86
B747....................................... 30 -- 1 31
B757-200................................... 26 -- 3 29
B767-200ER................................. 5 2 1 8
B767-300ER................................. 33 10 4 47
B777-200................................... 6 -- -- 6
McDonnell Douglas
DC8........................................ 2 -- 19 21
DC9........................................ -- 24 10 34
DC10....................................... 9 3 -- 12
MD-11...................................... 6 2 3 11
MD-81...................................... -- 10 -- 10
MD-82...................................... 30 21 2 53
MD-83...................................... 16 8 23 47
MD-87...................................... -- 5 1 6
MD-88...................................... 12 -- -- 12
Fokker
F-100...................................... 10 3 16 29
Other Jets................................... 80 1 -- 81
Turboprops................................... 3 7 28 38
--- --- --- -----
Total................................... 746 132 193 1,071
=== === === =====
Body Type:
Widebody................................... 120 18 12 150
Narrowbody................................. 626 114 181 921
Stage Compliance(3):
Stage 2.................................... 22 6 34 62
Stage 3.................................... 724 126 159 1,009
- ---------------
(1) The third parties include debis AirFinance Ireland and Aircraft Finance
Trust. Certain aircraft included in the Other Managed Third Parties fleet
are owned by joint ventures or pursuant to other arrangements in which
unaffiliated parties have interests.
(2) For purposes of this table, seven B737 aircraft which GE Capital leases to
debis AirFinance Ireland and which are subleased to the operating lessee,
have been included in the GE Capital fleet.
(3) Turboprop and Stage 3 hushkitted aircraft have been classified as Stage 3
compliant.
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THE SERVICING AGREEMENT
GECAS provides services with respect to all of the aircraft in our
portfolio pursuant to the servicing agreement. The servicing agreement provides
that the servicer will act in accordance with applicable law and with our
directions in performing the aircraft services described below. In addition, the
servicer has agreed to perform its services in accordance with the following
"GECAS SERVICES STANDARD" and "GECAS CONFLICTS STANDARD":
- GECAS must use reasonable care and diligence at all times in the
performance of the services.
- If a conflict of interest arises regarding GECAS's management, servicing
or marketing of (a) any two aircraft in our portfolio or (b) any
aircraft in our portfolio and any other aircraft managed by GECAS, GECAS
will perform its services in good faith. If the two aircraft or the
aircraft in our portfolio and the other aircraft managed by GECAS are
substantially similar in terms of objectively identifiable
characteristics that are relevant for the particular services to be
performed, GECAS will not discriminate among the aircraft or between any
of the aircraft in our portfolio and any other aircraft managed by GECAS
on an unreasonable basis. GECAS is not obliged to inform us of any
conflicts of interest.
The servicer does not have any fiduciary duty or other implied duties to us
or any other person, including any certificate holders, and its obligations will
be limited to the express terms of the servicing agreement. GECAS will not be
liable to us for any of our losses arising out of, in connection with or related
to, GECAS's management of our portfolio, except where those losses are finally
adjudicated to have resulted directly from GECAS's gross negligence or wilful
misconduct. The servicer is not obliged to take any action that it believes is
reasonably likely to violate any applicable law with respect to GECAS or its
affiliates, violate any established written policies of GE related to legal,
ethical and social matters in business practices, or lead to an investigation by
any governmental authority. In addition, the servicer does not assume any
liability or accountability for (a) the terms and conditions of the notes, (b)
the ability of Airplanes Limited or Airplanes Trust to comply with the terms and
conditions of the notes or the guarantees and (c) the structuring or
implementation of any aspect of the various transactions contemplated by this
prospectus.
Airplanes Limited, Airplanes Trust, Airplanes Holdings and AeroUSA have
agreed to indemnify the servicer and its affiliates on an after-tax basis for
any of its losses arising out of, in connection with or related to its
performance of the services, except where those losses are finally adjudicated
to have resulted directly from GECAS's gross negligence or wilful misconduct in
respect of its obligation to apply the GECAS services standard or GECAS
conflicts standard in respect of its performance of the services.
AIRCRAFT SERVICES
The main categories of the services that are provided by the servicer are:
- lease marketing, including re-marketing, lease negotiation and
execution;
- aircraft management, including lease rent collection, ensuring aircraft
maintenance, insurance monitoring and procurement, contract compliance
by, and enforcement against, lessees, and accepting delivery and
re-delivery of aircraft;
- aircraft sales as we direct;
- monitoring of maintenance reporting, and provision of records and
information about the aircraft;
- arranging valuations and monitoring regulatory developments;
- commercially reasonable assistance in complying with covenants relating
to the aircraft under the indentures;
- assistance in connection with public or private offerings of
certificates;
- legal and other professional services in the ordinary course of the
operating lease business; and
- periodic reporting of operational information relating to the aircraft.
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The servicer has also agreed to give us and our agents access to
information and its personnel for monitoring purposes, and to separate its own
funds from our funds.
OPERATING GUIDELINES
Under the servicing agreement, GECAS is entitled to exercise the authority
necessary to give it a practicable and working autonomy in performing the
services. Airplanes Holdings, acting on behalf of Airplanes Group through the
administrative agent, has established monitoring and control procedures to
enable the servicer to properly manage our business and assets.
All transactions the servicer enters into on our behalf must be at arm's
length and on fair market value terms unless we agree otherwise. Some
transactions or matters involving the aircraft require the prior written
approval of Airplanes Holdings. These include:
- sales of aircraft unless required by a lease;
- entering into any leases, renewals or extensions on terms that do not
comply with the operating covenants under the indentures;
- terminating any lease or leases to any single lessee with respect to
aircraft having an aggregate depreciated net book value in excess of
$200 million;
- entering into any contract for the modification or maintenance of
aircraft where the costs to be incurred (a) exceed the greater of (1)
the estimated aggregate cost of a heavy maintenance check for a similar
aircraft and (2) available maintenance reserves or other collateral
under the related lease, or (b) are outside the ordinary course of our
business;
- issuing any guarantee for us, or otherwise pledging our credit, other
than with respect to trade payables in the ordinary course of business;
and
- any transaction with GE Capital or any of its affiliates not
contemplated in the servicing agreement.
BUDGET
Airplanes Holdings adopts an annual budget each year with respect to the
aircraft. The servicer has agreed to use reasonable commercial efforts to
attempt to achieve the budget each year.
SERVICING FEES
Airplanes Limited, Airplanes Holdings and AeroUSA pay an annual
index-linked fee to the servicer, payable monthly in arrears for the period each
aircraft is under management. For the year to March 31, 2001, this fee is 0.53%
of the agreed book value of each aircraft, payable monthly in arrears for the
period of time that aircraft is under GECAS's management. The servicer is
entitled to additional incentive fees based on annual cash flow generated by
leases in excess of targets and sales of aircraft, with a minimum fee of $1.5
million annually. The servicer is also entitled to additional fees in connection
with the services required to be provided by GECAS in respect of any offerings
and sales by us of certificates. Airplanes Limited, Airplanes Holdings and
AeroUSA also pay expenses incurred or approved by the servicer on our behalf,
including aircraft maintenance costs and insurance, outside professional
advisory fees and other out of pocket expenses, which may be a significant
component of our overhead costs. In the nine months ended December 31, 2000,
aircraft maintenance reserve expenses were $56.8 million. Other expenses,
including servicer fees, outside professional advisory fees, insurance and other
out of pocket expenses amounted to $26.4 million for the same period.
TERM AND TERMINATION
The initial term of the servicing agreement expires on the earlier of March
28, 2014 and the payment in full of all amounts outstanding under the notes.
Each party has the right to terminate under specified circumstances. The
servicer has the right to terminate the servicing agreement if any of the
following occur:
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- Airplanes Limited, Airplanes Trust, Airplanes Holdings and/or AeroUSA
fail to pay when due any servicing fees or other amounts owed to the
servicer after appropriate notice;
- Airplanes Limited, Airplanes Trust, Airplanes Holdings and/or AeroUSA
fail to perform or observe or violate in any material respect any
material term, covenant, condition or agreement under the servicing
agreement;
- any of Airplanes Limited, Airplanes Trust, Airplanes Holdings, AeroUSA
or their respective subsidiaries or affiliates has made a false or
misleading representation or warranty in the servicing agreement or any
related document that is reasonably likely to have a material adverse
effect on the servicer or on its rights and obligations under the
servicing agreement;
- an involuntary proceeding under applicable bankruptcy, insolvency,
receivership or similar law against Airplanes Limited, Airplanes Trust,
Airplanes Holdings, AeroUSA or any of their significant subsidiaries
continues for 75 days or if any of these entities goes into liquidation
or suffers a receiver or mortgagee to take possession of all or
substantially all of our or its assets, or if any of these entities
commences a voluntary proceeding under bankruptcy, insolvency,
receivership or similar law or make a general assignment for the benefit
of their creditors;
- Airplanes Limited, Airplanes Trust, AeroUSA, Airplanes Holdings and
their respective subsidiaries and affiliates no longer own any aircraft;
- the indentures cease to be in full force and effect; or
- any guarantee in favor of the servicer by any of Airplanes Limited,
Airplanes Trust, AeroUSA, Airplanes Holdings and their respective
subsidiaries and affiliates ceases to be legal, valid and binding.
Airplanes Holdings, on behalf of itself, AeroUSA and Airplanes Limited, has
the right to terminate the servicing agreement if any of the follow occur:
- the servicer ceases to be at least 75% owned, directly or indirectly, by
GE or GE Capital;
- the servicer fails in any material respect to perform any material
services required by the servicing agreement in accordance with the
GECAS services standard or the GECAS conflicts standard, and this
failure has a material adverse effect on Airplanes Group as a whole; or
- an involuntary proceeding under bankruptcy, insolvency, receivership or
similar law against GE, GE Capital or the servicer continues undismissed
for 75 days or any of those entities goes into liquidation or suffers a
receiver or mortgagee to take possession of all or substantially all of
its assets, or if GE, GE Capital or the servicer commences a voluntary
proceeding under bankruptcy, insolvency, receivership or similar law or
makes a general assignment for the benefit of its creditors.
Airplanes Limited, AeroUSA and Airplanes Holdings also have the right to
terminate the servicing agreement upon six months' written notice to the
servicer if:
- the servicer fails to perform any of its specified tax related
undertakings to preserve the Shannon tax benefits as described below;
and
- as a result, we experience a material adverse tax event as defined in
the servicing agreement.
The servicer may resign if it determines that directions given, or services
required, would, if carried out:
- be unlawful under applicable law;
- violate GE policy as written and in effect for GE and its controlled
subsidiaries at that time;
- be likely to lead to an investigation by any governmental authority;
- expose the servicer to liabilities for which, in the servicer's good
faith opinion, it is not adequately indemnified; or
- place the servicer in a conflict of interest so that, in the servicer's
good faith opinion, it could not continue to perform its obligations
under the servicing agreement according to its terms.
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Generally, the servicer may only resign, and the parties may only terminate
the servicing agreement, if a replacement servicer has been appointed and the
rating agencies have confirmed that the current ratings of any certificates will
not be lowered or withdrawn.
TAX STATUS
Because GECAS owns 5% of the outstanding issued ordinary share capital of
Airplanes Holdings and it maintains particular employment levels in Shannon,
Ireland, Airplanes Holdings and its Irish tax-resident subsidiaries enjoy
reduced rates of corporation tax, and improved entitlements to capital
allowances. In addition, these Shannon tax benefits include the right to pay
interest in various circumstances without paying Irish withholding tax, and to
deduct payments of interest in calculating corporate tax liability. While we
expect Airplanes Holdings and our Irish tax resident subsidiaries to continue to
benefit from their status as Shannon certified companies until the scheduled
termination of the preferential tax regime on December 31, 2005, we cannot
guarantee that the management of the aircraft by the servicer will not expose
Airplanes Holdings or the Irish tax resident companies to tax liabilities
outside Ireland. The servicing agreement sets out various tax-related
undertakings of the servicer to maintain a favorable tax treatment in Ireland
for Airplanes Holdings and its Irish tax resident subsidiaries. These include:
- maintaining minimum levels of employment in Ireland if required for
Airplanes Holdings or its Irish tax resident subsidiaries to maintain
their Shannon licences and tax certification;
- holding meetings of the board of directors of the servicer in Shannon at
least quarterly, and only occasionally outside Shannon;
- holding meetings of the servicer's transaction approval committee in
Shannon at least monthly and only occasionally outside Ireland;
- a majority of the committee members must be employees of the servicer;
- generally signing aircraft-related contracts in Ireland or outside of
Ireland pursuant to a limited power of attorney;
- compensating any of the servicer's affiliates for services provided
outside Ireland in respect of the aircraft only to the extent those
services are provided by express agreement;
- ensuring the managing director of the servicer is an officer and
employee based in Shannon; and
- maintaining no offices outside Shannon.
If the servicer breaches a tax-related undertaking as a result of its gross
negligence or wilful misconduct and we experience a material tax event, our sole
remedy is to terminate the servicing agreement after notice. The servicer has
the right for any good faith commercial reason to modify the tax-related
undertakings, which could lead to a loss of favorable tax treatment for
Airplanes Holdings and its Irish tax resident subsidiaries.
ASSIGNMENT OF SERVICING AGREEMENT
None of the servicer, Airplanes Limited, Airplanes Holdings or AeroUSA can
assign their rights and obligations under the servicing agreement without the
other parties' consent. However, the servicer may delegate a portion, but not
all, of its duties to GE Capital or GE or any 75% or more owned subsidiary of GE
Capital or GE.
PRIORITY OF PAYMENT OF SERVICING FEES AND REIMBURSABLE EXPENSES
The fees and expenses of the servicer rank senior in priority of payment to
all payments of interest, principal and any premium on the notes.
The obligations of Airplanes Limited, Airplanes Holdings and AeroUSA under
the servicing agreement have been guaranteed by each other, Airplanes Trust and
their respective subsidiaries and affiliates.
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GECAS's address is GE Capital Aviation Services Limited, Aviation House,
Shannon, Ireland and its telephone number is +353-61-706500.
THE ADMINISTRATIVE AGENT AND CASH MANAGER
DEBIS AIRFINANCE IRELAND
Subsidiaries of debis AirFinance Ireland serve as our administrative agent
and cash manager. debis AirFinance Ireland is a wholly-owned indirect subsidiary
of debis AirFinance B.V., a major participant in the global commercial aviation
industry. debis AirFinance B.V., directly and through debis AirFinance Ireland
and other subsidiaries, also owns and manages aircraft, both for its own account
and for third parties, including AerCo, another aircraft securitization vehicle.
At December 31, 2000, debis AirFinance B.V. directly had 194 aircraft in its
portfolio which were on lease to 75 lessees in 34 countries and, through debis
AirFinance Ireland, had 103 aircraft in its portfolio which were on lease to 52
lessees in 25 countries. debis AirFinance Ireland is also the holder of all of
the subclass D-2, E-1 and E-2 notes of AerCo and acts as servicer for AerCo's
portfolio of aircraft. Subsidiaries of debis AirFinance Ireland also act as
administrative agent and cash manager to AerCo. Other subsidiaries of debis
AirFinance Ireland act as administrative agent and cash manager to GPA-ATR
Limited, a turboprop aircraft joint venture company in which AerFi Jetprop
Limited holds 50% of the share capital.
GPA Group (now known as debis AirFinance Ireland), directly or indirectly
owned all of the aircraft, the aircraft-owning and aircraft-leasing subsidiaries
that we acquired in March 1996. We have taken steps to structure Airplanes Group
and the acquisition from debis AirFinance Ireland in 1996 to ensure that our
assets would not be consolidated with the assets of debis AirFinance Ireland and
would not otherwise become available to their creditors in any bankruptcy or
insolvency proceeding involving debis AirFinance Ireland or any of its
affiliates. For a description of the risks you could face if these steps are not
effective, see "Risk Factors -- Risks Relating to Bankruptcy."
At December 31, 2000, debis AirFinance B.V. employed 105 people worldwide,
with 32 employees in Shannon, Ireland, where debis AirFinance Ireland is
located. debis AirFinance B.V. has its headquarters in Amsterdam, the
Netherlands and has subsidiaries with offices in Malmo, Sweden and Fort
Lauderdale, Florida.
ADMINISTRATIVE AGENT
AerFi Financial Services (Ireland) Limited, as administrative agent, is
responsible for providing administrative and accounting services to the
directors and controlling trustees. Its duties include:
- monitoring the performance of the servicer;
- liaising with rating agencies;
- maintaining accounting ledgers (although we retain responsibility for
all discretionary decisions and judgments relating to the preparation
and maintenance of ledgers and accounts, and we retain responsibility
for, and prepare, our financial statements);
- preparing and presenting annual budgets to us for approval;
- authorizing payment of various expenses;
- coordinating any amendments to the transaction documents other than the
leases;
- supervising outside counsel and coordinating legal advice;
- preparing and coordinating reports to investors and the SEC and managing
investor relations with the assistance of outside counsel and auditors,
if appropriate;
- preparing, or coordinating the preparation of, all required tax returns
for our approval and filing;
- maintaining, or monitoring the maintenance of, our books and records
that are not maintained by our company secretary or the Delaware
trustee;
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- preparing agendas and any required papers for meetings of the governing
bodies of Airplanes Group entities;
- assisting us in (i) developing and implementing our interest rate
management policy and developing financial models, cash flow projections
and forecasts, and (ii) making aircraft lease, sale and capital
investment decisions;
- advising us as to the appropriate levels of the liquidity reserve
amount; and
- assisting us in the refinancing of all or a portion of the notes and
certificates.
We may also ask the administrative agent to provide additional services. We
pay an annual index-linked fee of $6 million to the administrative agent,
payable monthly in arrears, and an additional annual fee of approximately $2
million, which varies according to the number of aircraft owned. We reimburse
the administrative agent for expenses incurred on our behalf and indemnify the
administrative agent for any liability it incurs, other than through its own
deceit, fraud, wilful default or gross negligence.
The administrative agent may resign upon 60 days' written notice in defined
circumstances. We may remove the administrative agent upon 120 days' written
notice with or without cause. However, the resignation or removal of the
administrative agent will not become effective until a successor administrative
agent has been appointed with the consent of the servicer and has accepted
appointment as the successor administrative agent under the administrative
agency agreement.
CASH MANAGER
AerFi Cash Manager Limited, as cash manager, provides cash management and
related services to us, including establishing and administering our accounts,
providing information about our accounts and investing the funds held by us in
the collection account and the lessee funded account in prescribed investments
("PERMITTED ACCOUNT INVESTMENTS") on permitted terms. These accounts (but not
the rental accounts) are maintained in the name of the security trustee. See
"Description of Securities -- The Accounts" for a more detailed description of
our accounts.
The cash manager calculates monthly payments and makes other calculations
required under the cash management agreement based on data it receives from the
servicer. The cash manager also provides the trustee with the information
required for the monthly reports to the certificate holders. It is the
responsibility of the cash manager to ensure that the proceeds from the lease or
sale of our assets are deposited in the collection account. Upon the occurrence
of a note event of default, the cash manager will distribute funds in the manner
set forth in the indentures.
We pay the cash manager an annual fee of $1 million and indemnify the cash
manager against any loss or liability it incurs, other than through its own
deceit, fraud, wilful default or gross negligence, or simple negligence in the
handling of funds.
The cash manager may resign upon 30 days' written notice so long as a
replacement cash manager has been appointed. We may remove the cash manager at
any time with or without cause.
COMPANY SECRETARY
Mourant & Co. Secretaries Limited, as company secretary for Airplanes
Limited, provides secretarial services for, and maintains the books and records,
including minute books and stock transfer records, of Airplanes Limited.
DELAWARE TRUSTEE
Wilmington Trust Company, as the Delaware Trustee for Airplanes Trust,
maintains the books and records, including minute books and trust certificate
records, of Airplanes Trust.
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SELECTED COMBINED FINANCIAL DATA
The selected combined financial data set out below for each of the years in
the five year period ended March 31, 2000 have been extracted or derived from
the audited financial statements of Airplanes Group included elsewhere in this
prospectus, which have been audited by KPMG, independent chartered accountants.
See "Experts" for more information on the role of KPMG. These financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States. The selected financial data set forth below for
the nine month periods ended December 31, 1999 and December 31, 2000 have not
been audited but in the opinion of management reflect all adjustments,
consisting only of normal and recurring adjustments, necessary to present a fair
statement of the information presented.
The selected combined financial data set forth below are presented on the
basis that the aircraft have been operated by Airplanes Group separately from
debis AirFinance Ireland or its predecessors for all periods presented. However,
since Airplanes Group has only conducted independent business operations since
March 28, 1996, some adjustments and allocations were made on some items for the
period before March 28, 1996, as further described in Note 2 to the financial
statements. While Airplanes Group believes that the selected combined financial
data set forth below are an appropriate presentation, the data for the period
prior to March 28, 1996 is not necessarily indicative of the financial results
that might have occurred had Airplanes Group been an independently financed and
managed group during that period.
The selected combined financial data set forth below combine the operating
results, assets, liabilities and cash flows of Airplanes Limited and Airplanes
Trust. The separate balance sheets, statements of operations, statements of
changes in shareholders' deficit/net liabilities and statements of cash flows of
Airplanes Limited and Airplanes Trust are contained in the financial statements
included elsewhere in this prospectus. The directors of Airplanes Limited and
the controlling trustees of Airplanes Trust believe that a combined presentation
is most appropriate because:
- the assets of Airplanes Limited and Airplanes Trust are managed on the
basis of one combined aircraft fleet, and
- each of Airplanes Limited and Airplanes Trust has fully and
unconditionally guaranteed the performance of the other under their
respective notes.
You should note that the notes and the guarantees comprise obligations of two
different legal entities owning different assets. However, the notes and
guarantees have been structured in the indentures to ensure that no payments are
made on a junior class of notes or guarantees of Airplanes Trust before all
amounts due and payable on a more senior class of notes or guarantees of
Airplanes Limited have been paid, and no payments are made on a junior class of
notes or guarantees of Airplanes Limited before all amounts due and payable on a
more senior class of notes or guarantees of Airplanes Trust have been paid.
Aircraft assets are stated on the "predecessor cost basis," that is,
reflecting debis AirFinance Ireland's historical cost less accumulated
depreciation. The difference between the predecessor cost basis and the amount
of Airplanes Group's indebtedness is a significant component of total
shareholders' deficit in the combined balance sheet data.
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COMBINED STATEMENT OF OPERATIONS DATA(1)
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
----------------------------------------------- -----------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS)
REVENUES(2)
Aircraft leasing................ $ 616 $ 604 $ 585 $ 526 $ 501 $ 383 $ 356
Aircraft sales.................. -- -- 94 132 3 2 14
Other income.................... -- -- -- -- 1 1 --
EXPENSES
Cost of aircraft sold........... -- -- (90) (118) (1) (1) (9)
Depreciation and amortization... (207) (223) (192) (176) (174) (131) (128)
Net interest expense(3)(4)...... (368) (383) (411) (428) (468) (345) (396)
Provision for maintenance....... (97) (91) (88) (69) (64) (52) (39)
Bad and doubtful debts.......... 28 -- -- (11) (4) 1 (8)
Provision for loss making
leases(5)..................... 15 12 17 12 4 6 (11)
Other lease costs............... (21) (21) (30) (14) (10) (14) (21)
Selling general and
administrative expenses....... (35) (38) (38) (35) (34) (27) (26)
Tax benefit/(charge)............ 13 10 3 3 (7) -- 4
------- ------- ------- ------- ------- ------- -------
Net loss........................ $ (56) $ (130) $ (150) $ (178) $ (253) $ (177) $ (264)
======= ======= ======= ======= ======= ======= =======
COMBINED BALANCE SHEET DATA(1)
AS OF
AS OF MARCH 31, DECEMBER 31,
----------------------------------------------- -----------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS)
Aircraft, net, and net
investment in capital and
sales type leases............. $ 3,965 $ 3,731 $ 3,436 $ 3,128 $ 2,947 $ 2,993 $ 2,808
Total assets.................. 4,236 4,048 3,743 3,453 3,206 3,296 3,056
Indebtedness(3)................. (4,634) (4,397) (4,078) (3,842) (3,636) (3,679) (3,525)
Provision for maintenance....... (311) (313) (315) (283) (274) (290) (259)
Total liabilities............. (5,252) (5,194) (5,039) (4,927) (4,933) (4,947) (5,047)
Net liabilities................. (1,016) (1,146) (1,296) (1,474) (1,727) (1,651) (1,991)
COMBINED STATEMENT OF CASH FLOWS(1)
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------- ---------------
1996 1997 1998 1999 2000 1999 2000
----- ----- ----- ----- ----- ------ ------
(IN MILLIONS)
Cash paid in respect of interest(3)(4)....... $ 323 $ 265 $ 267 $ 223 $ 214 $ 158 $ 166
===== ===== ===== ===== ===== ===== =====
Net cash provided by operating activities
(after payment of interest)................ $ 216 $ 224 $ 214 $ 111 $ 181 $ 147 $ 85
Net cash (used in)/provided by investing
activities................................. 13 19 101 135 8 6 15
Net cash (used in)/provided by financing
activities................................. (144) (238) (322) (240) (210) (166) (113)
----- ----- ----- ----- ----- ----- -----
Net increase/(decrease) in cash.............. $ 85 $ 5 $ (7) $ 6 $ (21) $ (13) $ (13)
===== ===== ===== ===== ===== ===== =====
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OTHER DATA(1)
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------- ---------------
1996 1997 1998 1999 2000 1999 2000
----- ----- ----- ----- ----- ------ ------
(IN MILLIONS)
Deficiency of combined earnings after
combined fixed charges(6)................... $ (69) $(140) $(153) $(181) $(246) $(177) $(268)
- ---------------
(1) The financial statements of Airplanes Group are stated in U.S. dollars which
is the principal operating currency of Airplanes Group and the aviation
industry.
(2) Revenues include maintenance reserve receipts. See Note 15 to the financial
statements.
(3) For all periods and dates prior to March 28, 1996, net interest expense,
indebtedness and cash paid in respect of interest have been based on various
assumptions as described more fully in Note 2 to the financial statements.
For all periods and dates since March 28, 1996, net interest expense,
indebtedness and cash paid in respect of interest have reflected the actual
terms of the existing notes.
(4) Net interest expense is significantly higher than cash paid in respect of
interest in all periods reflecting the high interest rate accruing on the
class E notes (20% adjusted for inflation) relative to the lower amount of
cash interest payable on the class E notes for so long as the other classes
of notes remain outstanding. Net interest expense is stated after crediting
interest income of $8 million in 1996, $17 million in 1997, $16 million in
1998, $14 million in 1999, $13 million in 2000, $10 million in the nine
months ended December 31, 1999 and $8 million in the nine months ended
December 31, 2000.
(5) A lease agreement is deemed to be "loss making" in circumstances where the
contracted rental payments are insufficient to cover the depreciation and
interest attributable to the aircraft plus various direct costs attributable
to the lease over its term.
(6) Deficiency of combined earnings after combined fixed charges represents the
amount by which Airplanes Group's loss before income taxes and fixed charges
exceeded fixed charges. Fixed charges consists of interest expense. Because
our fixed charges exceeded earnings for all periods presented, a ratio of
earnings to fixed charges is not presented.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION
The following discussion and analysis is based primarily on the combined
operating results of Airplanes Limited and Airplanes Trust and not on their
results reported as individual entities. You should note that the notes and the
guarantees comprise obligations of two different legal entities owning different
assets. The directors and the controlling trustees believe that a combined
discussion is the most appropriate basis of presentation because:
- Airplanes Limited and Airplanes Trust are not intended to be regarded as
separate businesses but rather on the basis of one combined aircraft
fleet, and
- each of Airplanes Limited and Airplanes Trust has fully and
unconditionally guaranteed the performance of the other under their
respective notes.
The notes and guarantees have been structured in the indentures to ensure that
no payments are made on a junior class of notes of Airplanes Trust or Airplanes
Limited, as the case may be, before all amounts due and payable on a more senior
class of notes of Airplanes Limited or Airplanes Trust, respectively, have been
paid pursuant to the terms of the more senior classes of notes or the guarantees
of these notes.
Substantially all of Airplanes Group's future business is expected to
consist of aircraft operating lease activities. Airplanes Group may also engage
in aircraft sales subject to specified limitations and guidelines. Airplanes
Group's revenues and operating cash flows are determined by a number of
significant factors, including:
- trading conditions in the civil aviation industry and, in particular,
the market for aircraft on operating leases,
- the mix, relative age and popularity of the various aircraft types in
our portfolio, and
- Airplanes Group's financial resources and liquidity position relative to
its competitors who may possess substantially greater financial
resources.
Except to the extent that the strength of the U.S. dollar against some
local currencies may adversely affect the ability of some of our lessees who
operate in those currencies to pay us, the effect of changes in currency rates
on Airplanes Group is minimal because Airplanes Group conducts its business
almost entirely in U.S. dollars.
RESULTS OF OPERATIONS -- NINE MONTHS ENDED DECEMBER 31, 2000 COMPARED WITH NINE
MONTHS ENDED DECEMBER 31, 1999
Airplanes Group's results for the nine months ended December 31, 2000
reflected a continuation of difficult trading conditions for some of its
lessees, along with an unfavorable market for some of its aircraft, in
particular widebody aircraft, and increased levels of aircraft downtime.
Overall, Airplanes Group generated $85 million in cash from operations in the
nine months ended December 31, 2000, compared to $147 million in the nine months
ended December 31, 1999. The decrease in cash generated from operations in the
nine month period ended December 31, 2000 is primarily attributable to a
reduction in lease revenues due to a greater number of off-lease aircraft during
the nine months ended December 31, 2000 and a smaller portfolio of aircraft due
to prior aircraft sales. In addition, there was a net outflow of maintenance
payments and a net increase in the level of receivables, as compared with the
nine months ended December 31, 1999. This was partially offset by a cash receipt
from GE Capital under the terms of the tax sharing agreement. There was a net
loss after taxation for the nine months to December 31, 2000 of $264 million
(Airplanes Limited: $243 million; Airplanes Trust: $21 million) compared to a
net loss after taxation for the nine months ended December 31, 1999 of $177
million (Airplanes Limited: $160 million; Airplanes Trust: $17 million). The
increase in the net loss for the nine months ended December 31, 2000 was
primarily attributable to additional interest being charged on accrued but
unpaid class E note interest, a reduction in revenue due to aircraft downtime
and provisions for loss making leases and bad debts.
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LEASING REVENUES
Leasing revenues (which include maintenance reserve receipts which
Airplanes Group receives from some of its lessees) for the nine months ended
December 31, 2000 were $356 million (Airplanes Limited: $324 million; Airplanes
Trust: $32 million) compared with $383 million (Airplanes Limited: $352 million;
Airplanes Trust: $31 million) for the nine months ended December 31, 1999. The
decrease in 2000 was primarily attributable to the reduction in the number of
aircraft on lease in the nine months ended December 31, 2000 and, to a lesser
extent, a smaller portfolio of aircraft due to prior aircraft sales. At December
31, 2000, Airplanes Group had 193 of its 197 aircraft on lease (Airplanes
Limited: 176 aircraft; Airplanes Trust: 17 aircraft) compared to 195 of its 201
aircraft on lease (Airplanes Limited: 177 aircraft; Airplanes Trust: 18
aircraft) at December 31, 1999.
AIRCRAFT SALES
Sales revenues of $14 million (Airplanes Limited: $8 million, Airplanes
Trust: $6 million) in respect of the sale of an airframe of one A300 aircraft,
the sale of three engines from two A300 aircraft, the airframes of which had
been sold separately, and the sale of one B737-200A aircraft were received in
the nine months ended December 31, 2000. Sales revenues of $2 million (Airplanes
Limited $2 million; Airplanes Trust: $Nil) in respect of the sale of one
B737-200 aircraft and an engine from an A300 aircraft, the airframe of which had
previously been sold, were received in the nine months ended December 31, 1999.
The net book values of the aircraft sold were $9 million (Airplanes Limited: $4
million, Airplanes Trust: $5 million) in the nine months ended December 31, 2000
and $1 million (Airplanes Limited: $1 million; Airplanes Trust: $Nil) in the
nine months ended December 31, 1999.
DEPRECIATION AND AMORTIZATION
The charge for depreciation and amortization in the nine months ended
December 31, 2000 amounted to $128 million (Airplanes Limited: $116 million;
Airplanes Trust: $12 million) which is comparable with $131 million (Airplanes
Limited: $119 million; Airplanes Trust: $12 million) for the nine months ended
December 31, 1999.
OTHER INCOME
During the nine months ended December 31, 1999, Airplanes Group exercised
an option to purchase shares in an airline. The option was granted under a lease
which Airplanes Group acquired when it acquired its portfolio in 1996. The
shares were subsequently sold, yielding a profit of $1 million.
NET INTEREST EXPENSE
Net interest expense was $396 million (Airplanes Limited: $360 million;
Airplanes Trust: $36 million) in the nine month period ended December 31, 2000
compared to $345 million (Airplanes Limited: $313 million; Airplanes Trust: $32
million) in the nine month period ended December 31, 1999. The increase in net
interest expense was primarily due to a combination of offsetting factors:
additional interest charged on accrued but unpaid class E note interest of $52
million and a higher interest rate on the notes, being offset by lower average
debt in the nine months to December 31, 2000.
The weighted average interest rate on the class A, B, C and D notes (taking
into account the interest rate swaps entered into by Airplanes Group) during the
nine months ended December 31, 2000 was 7.67% and the average debt in respect of
the class A, B, C and D notes outstanding during that period was $3,002 million.
The class E notes accrue interest at a rate of 20% per annum, as adjusted to
take account of changes to the U.S. consumer price index since March 28, 1996.
The weighted average interest rate on the class A, B, C and D notes (also taking
into account the interest rate swaps entered into by Airplanes Group) during the
nine months ended December 31, 1999 was 6.59% and the average debt in respect of
the class A, B, C and D notes outstanding during the period was $3,216 million.
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The difference between Airplanes Group's net interest expense of $396
million (Airplanes Limited: $360 million; Airplanes Trust: $36 million) and cash
paid in respect of interest of $166 million (Airplanes Limited: $151 million;
Airplanes Trust: $15 million) for the nine months ended December 31, 2000 is
substantially accounted for by the fact that Airplanes Group accrued interest on
the class E notes at a rate substantially higher than amounts paid in cash.
Net interest expense is stated after deducting interest income earned
during the relevant period. In the nine months ended December 31, 2000,
Airplanes Group earned interest income (including lessee default interest) of $8
million (Airplanes Limited: $8 million; Airplanes Trust: $Nil) compared with $10
million in the nine months ended December 31, 1999 (Airplanes Limited: $10
million; Airplanes Trust: $Nil).
At December 31, 2000, Airplanes Group had options to enter into interest
rate swaps ("SWAPTIONS") with a notional principal balance of $250 million.
BAD DEBT AND LOSS-MAKING LEASE PROVISIONS
Airplanes Group's practice is to provide specifically for any amounts due
but unpaid by lessees based primarily on the amount due in excess of security
held and also taking into account the financial strength and condition of a
lessee and the economic conditions existing in the lessee's operating
environment. While a number of Airplanes Group's lessees failed to meet their
contractual obligations in the nine month period ended December 31, 2000,
resulting in the requirement for additional provisions in respect of bad and
doubtful debts in respect of these lessees, the credit exposure with regard to
other carriers improved in the period. Overall, there was a net charge of $8
million in respect of bad and doubtful debts (Airplanes Limited: $5 million;
Airplanes Trust: $3 million) in the nine months ended December 31, 2000,
compared with an overall net credit of $1 million for the nine months ended
December 31, 1999 (Airplanes Limited: $Nil; Airplanes Trust: $1 million). The
net charge in the nine months ended December 31, 2000 was primarily as a result
of provisions in respect of one Turkish lessee, one Colombian lessee, one Irish
lessee and one U.S. lessee.
A lease agreement is deemed to be "loss making" in circumstances where the
contracted rental payments are insufficient to cover the depreciation and
allocated interest attributable to the aircraft plus certain direct costs, such
as legal fees and registration costs, attributable to the lease over its term.
For these purposes, interest is allocated to individual aircraft based on the
weighted average interest cost of the principal balance of the notes, excluding,
in the case of the class E notes, the element of interest (9% per annum) which
is payable only in the event that the principal amount of all the other classes
of notes is repaid. This results in a significant number of leases being loss
making while still being cash positive. In the nine months ended December 31,
2000, the significant loss making leases signed related to two B737-400 aircraft
and one B737-200 aircraft on lease to two European lessees and three DC9
aircraft and two B767 aircraft on lease to two North American lessees.
Consequently, there was an overall net charge of $11 million (Airplanes Limited:
$11 million; Airplanes Trust: $Nil) in respect of loss making leases in the nine
months ended December 31, 2000, compared with the nine month period ended
December 31, 1999, where there was an overall net release of $6 million
(Airplanes Limited: $5 million; Airplanes Trust: $1 million).
OTHER LEASE COSTS
Other lease costs, comprising mainly aircraft related technical
expenditure, in the nine months ended December 31, 2000 amounted to $21 million
(Airplanes Limited: $20 million; Airplanes Trust: $1 million) compared to other
lease costs of $14 million (Airplanes Limited: $13 million; Airplanes Trust: $1
million) in the nine months ended December 31, 1999. The increase in the nine
months ended December 31, 2000 is attributable to an increased number of
aircraft being remarketed, partially offset by a release of $6 million in
relation to a continuing review of the adequacy of maintenance reserves when
aircraft are re-leased.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the nine month period
ended December 31, 2000 amounted to $26 million (Airplanes Limited: $24 million;
Airplanes Trust: $2 million). This is a comparable expense to that
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incurred in the nine months ended December 31, 1999 of $27 million (Airplanes
Limited: $25 million; Airplanes Trust: $2 million).
The most significant element of selling, general and administrative
expenses are the aircraft servicing fees paid to GECAS. Substantially all of
these amounts represent asset based fees calculated as an annual percentage of
agreed values of aircraft under management pursuant to the servicing agreement.
Selling, general and administrative expenses in both the nine months ended
December 31, 2000 and the nine months ended December 31, 1999 include $18
million (Airplanes Limited: $17 million; Airplanes Trust: $1 million) relating
to GECAS servicing fees.
A further significant element of Airplanes Group's actual selling, general
and administrative expenses reported in the nine months ended December 31, 2000
was $7 million (Airplanes Limited: $7 million; Airplanes Trust: $Nil) in respect
of administrative agency and cash management fees payable to the administrative
agent and the cash manager, similar to the charge of $7 million for the nine
months ended December 31, 1999.
OPERATING LOSS
The operating loss for the nine months ended December 31, 2000 was $268
million (Airplanes Limited: $246 million; Airplanes Trust: $22 million) compared
with an operating loss of $177 million for the nine months ended December 31,
1999 (Airplanes Limited: $160 million; Airplanes Trust: $17 million). Airplanes
Limited and Airplanes Trust are expected to continue to report substantial
losses in the future.
TAXES
There was a tax credit of $4 million (Airplanes Limited: $3 million;
Airplanes Trust: $1 million) in the nine months ended December 31, 2000, as
compared with no tax benefit or charge for the nine months ended December 31,
1999.
NET LOSS
The net loss after taxation for the nine months ended December 31, 2000 was
$264 million (Airplanes Limited: $243 million; Airplanes Trust: $21 million)
compared with a net loss after taxation for the nine months ended December 31,
1999 of $177 million (Airplanes Limited: $160 million; Airplanes Trust: $17
million).
RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 2000 COMPARED WITH YEAR ENDED
MARCH 31, 1999
Airplanes Group's results for the year ended March 31, 2000 reflected a
continuation of difficult trading conditions for some of its lessees, along with
an unfavorable market for some of its aircraft, in particular, widebody
aircraft. The net loss for the year ended March 31, 2000 was $253 million,
compared to $178 million for the year ended March 31, 1999. The increase of $75
million was primarily attributable to a reduction in lease rentals of $25
million and an increase of $40 million in net interest expense due to additional
interest being charged on accrued but unpaid class E note interest, partially
offset by lower average debt outstanding. Profit on sales also reduced by $12
million. There was a decrease in the provision for bad debts of $7 million; a
net decrease in the utilization of loss-making lease provisions of $8 million
and there was a decrease in other lease costs of $4 million. Finally, there was
an increase in the deferred tax charge of $10 million.
Airplanes Group generated $181 million in cash from operations in the year
ended March 31, 2000, compared to $111 million in the year ended March 31, 1999.
The increase in cash generated from operations in the year to March 31, 2000 is
primarily attributable to a reduction in the level of receivables of $11 million
compared to an increase of $20 million in the year ended March 31, 1999. In
addition, there was a reduction in the net outflow of maintenance revenues of
$20 million, due largely to the acceleration of maintenance events in the year
ended March 31, 1999 (including as a result of aircraft repossessions) in the
amount of $15 million and the return of $7 million in maintenance reserves due
to a Latin American lessee as a result of the restructuring of its leases. There
was a reduction in the amount of cash paid as interest during the year ended
March 31, 2000 of $27 million, as a result of lower average debt and due to the
generation of $11 million in cash from the re-couponing or unwinding of
Airplanes Group's swap portfolio. See "-- Interest Rate Sensitivity -- Interest
Rate
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Risk and Management" for a further description of this re-couponing and
unwinding of our swap portfolio. These factors were somewhat offset by a
reduction of $25 million in leasing revenues, which arose due to aircraft sales
and an increased level of aircraft downtime, particularly in respect of some
B767 aircraft.
LEASING REVENUES
Leasing revenues (which include maintenance reserve receipts which
Airplanes Group receives from some of its lessees) for the year ended March 31,
2000 were $501 million (Airplanes Limited: $460 million; Airplanes Trust: $41
million) compared with $526 million (Airplanes Limited: $484 million; Airplanes
Trust: $42 million) for the year ended March 31, 1999. The decrease of $25
million consists of $20 million in lease rentals and $5 million in maintenance
billings. The decrease of $20 million in lease rentals arises primarily from $4
million foregone as a result of aircraft sales and $14 million resulting from a
higher level of downtime. At March 31, 2000, Airplanes Group had 193 of its 199
aircraft on lease (Airplanes Limited: 175 aircraft; Airplanes Trust: 18
aircraft) compared to 201 of its 202 aircraft on lease (Airplanes Limited: 183
aircraft; Airplanes Trust: 18 aircraft) at March 31, 1999.
AIRCRAFT SALES
Sales revenues of $3 million (Airplanes Limited: $3 million; Airplanes
Trust: $Nil) in respect of the sale of three aircraft were received in the year
ended March 31, 2000. The net book value of these three aircraft at the date of
sale was $1 million (Airplanes Limited: $1 million; Airplanes Trust: $Nil). In
the year ended March 31, 1999, Airplanes Group received sales revenues of $132
million (Airplanes Limited: $37 million, Airplanes Trust: $95 million) in
respect of the sale of nineteen aircraft. The net book value of these nineteen
aircraft at the date of disposal was $118 million (Airplanes Limited: $32
million; Airplanes Trust: $86 million).
OTHER INCOME
During the year to March 31, 2000, Airplanes Group exercised an option to
purchase shares in an airline. The option was granted under a lease which
Airplanes Group acquired when it acquired its portfolio in 1996. The shares were
subsequently sold, yielding a profit of $1 million.
DEPRECIATION AND AMORTIZATION
The charge for depreciation and amortization in the year ended March 31,
2000 amounted to $174 million (Airplanes Limited: $157 million; Airplanes Trust:
$17 million) compared with $176 million (Airplanes Limited: $159 million;
Airplanes Trust: $17 million) in the year ended March 31, 1999. The decrease
arose as a result of the reduction in the number of aircraft owned by Airplanes
Group.
NET INTEREST EXPENSE
Net interest expense was $468 million (Airplanes Limited: $425 million;
Airplanes Trust: $43 million) in the year ended March 31, 2000 compared to $428
million (Airplanes Limited: $388 million; Airplanes Trust: $40 million) in the
year ended March 31, 1999. The increase of $40 million in net interest expense
was primarily due to additional interest charged on accrued but unpaid class E
note interest of $57 million, offset by reduced interest on the class A, B, C
and D notes due to a lower average level of debt.
The weighted average interest rate on the class A, B, C and D notes during
the year to March 31, 2000 was 6.73% and the average debt in respect of the
class A, B, C and D notes outstanding during that year was $2,395 million. The
class E notes accrue interest at a rate of 20% per annum as adjusted to take
account of changes to the U.S. consumer price index, since March 28, 1996. The
weighted average interest rate on the class A, B, C, and D notes during the year
ended March 31, 1999 was 6.73% and the average debt in respect of the class A,
B, C, and D notes outstanding during that year was $3,346 million. LIBOR in the
year ended March 31, 2000 was comparable to the year ended March 31, 1999 and
the weighted average interest rate on the class A, B, C and D notes remained
constant during the year ended March 31, 2000 as compared to the year ended
March 31, 1999.
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For the year ended March 31, 2000, the difference in Airplanes Group's net
interest expense of $468 million (Airplanes Limited: $425 million; Airplanes
Trust: $43 million) and cash paid in respect of interest of $214 million
(Airplanes Limited: $193 million; Airplanes Trust: $21 million) is substantially
accounted for by the fact that Airplanes Group accrued interest on the class E
notes at a rate substantially higher than amounts paid in cash in the year ended
March 31, 2000.
Net interest expense is stated after deducting interest income earned
during the relevant year. In the year ended March 31, 2000, Airplanes Group
earned interest income (including lessee default interest) of $13 million
(Airplanes Limited: $13 million; Airplanes Trust: $Nil) compared with $14
million in the year ended March 31, 1999 (Airplanes Limited: $14 million;
Airplanes Trust: $Nil). The decrease is primarily as a result of lower average
cash balances in the year to March 31, 2000.
At March 31, 2000, Airplanes Group had swaptions with a notional principal
balance of $289 million. During the year ended March 31, 2000, the value of the
swaptions decreased by approximately $1 million as swap rates increased. As
swaptions do not qualify for hedge accounting under U.S. GAAP, the decrease in
fair value of $1 million has been included in net interest expense in the
statement of operations.
BAD DEBT AND LOSS-MAKING LEASE PROVISIONS
There was a net charge of $4 million in respect of bad and doubtful debts
(Airplanes Limited: $2 million; Airplanes Trust: $2 million) in the year ended
March 31, 2000, compared with a net charge for the year ended March 31, 1999 of
$11 million (Airplanes Limited: $9 million; Airplanes Trust: $2 million).
Airplanes Group's practice is to provide specifically for any amounts due but
unpaid by lessees based primarily on the amount due in excess of security held
and also taking into account the financial strength and condition of a lessee
and the economic conditions existing in the lessee's operating environment. A
number of Airplanes Group's lessees failed to meet their contractual obligations
in the year ended March 31, 2000, resulting in the requirement for additional
provisions in respect of bad and doubtful debts in respect of these lessees,
while the arrears with regard to certain other carriers reduced in the year. The
overall net charge in 2000 was primarily as a result of provisions required in
respect of one Colombian lessee, one Israeli lessee, one Philippine lessee and
one Irish lessee, which were partially offset by a reduction in the provisions
required in respect of two Brazilian lessees.
The only significant loss making leases signed in the year to March 31,
2000 were in respect of two Fokker 100 aircraft leased to a Brazilian lessee,
one B737-200A aircraft leased to an Asian lessee and one B737-200A aircraft
leased to a European lessee. Consequently, there was an overall net utilization
of $4 million (Airplanes Limited: $3 million; Airplanes Trust: $1 million) in
respect of loss making lease provisions in the year ended March 31, 2000,
compared with the year to March 31, 1999, where there was an overall net
utilization of $12 million (Airplanes Limited: $10 million; Airplanes Trust: $2
million). The provision required in the year ended March 31, 1999 was primarily
required in respect of one B767 aircraft on lease to a Latin American lessee and
one A320 aircraft on lease to a Canadian lessee.
OTHER LEASE COSTS
Other lease costs in the year ended March 31, 2000 amounted to $10 million
(Airplanes Limited: $9 million; Airplanes Trust: $1 million) compared to other
lease costs of $14 million (Airplanes Limited: $13 million; Airplanes Trust: $1
million) in the year ended March 31, 1999. The decrease in other lease costs of
$4 million relate primarily to a release of $11 million of maintenance reserves
following a continuing review of the adequacy of maintenance reserves, when
aircraft are re-leased. There was a release of $9 million withholding tax
provisions in the year ended March 31, 1999, following updated advice that they
were no longer required for certain jurisdictions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the year ended March 31,
2000 amounted to $34 million (Airplanes Limited: $31 million; Airplanes Trust:
$3 million). This is a comparable expense to that incurred in the year to March
31, 1999 of $35 million (Airplanes Limited: $32 million; Airplanes Trust: $3
million).
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The most significant element of selling, general and administrative
expenses are the aircraft servicing fees paid to GECAS. Substantially all of
these amounts represent asset based fees calculated as an annual percentage of
agreed values of aircraft under management pursuant to the servicing agreement.
Selling, general and administrative expenses of $34 million in the year to March
31, 2000 includes $22 million (Airplanes Limited: $20 million; Airplanes Trust:
$2 million) relating to GECAS servicing fees, comparable with the $24 million
incurred in the year to March 31, 1999 (Airplanes Limited: $22 million;
Airplanes Trust: $2 million).
A further significant element of Airplanes Group's actual selling, general
and administrative expenses reported in the year ended March 31, 2000 was $9
million (Airplanes Limited: $8 million; Airplanes Trust: $1 million) in respect
of administrative agency and cash management fees payable to the administrative
agent and cash manager, in line with the charge of $9 million for the year to
March 31, 1999.
OPERATING LOSS
The operating loss for the year ended March 31, 2000 was $246 million
(Airplanes Limited: $220 million; Airplanes Trust: $26 million) compared with an
operating loss of $181 million for the year ended March 31, 1999 (Airplanes
Limited: $168 million; Airplanes Trust: $13 million). Airplanes Limited and
Airplanes Trust are expected to continue to report substantial losses in the
future.
TAXES
There was an overall tax charge of $7 million (Airplanes Limited: $15
million; Airplanes Trust: tax benefit of $8 million) in the year ended March 31,
2000, as compared with an overall tax benefit of $3 million in the year ended
March 31, 1999 (Airplanes Limited: $3 million; Airplanes Trust: $Nil). The
increase in deferred tax arises as a result of the enactment of a 12.5%
corporation tax rate in Ireland applicable to Airplanes Limited's Irish
subsidiaries after December 31, 2005. This has been partially offset by a tax
benefit of $8 million resulting from the utilization by GE of the current year
losses of AeroUSA and AeroUSA 3 for which GE has compensated Airplanes Trust
pursuant to the tax sharing agreement.
NET LOSS
The net loss after taxation for the year ended March 31, 2000 was $253
million (Airplanes Limited: $235 million; Airplanes Trust: $18 million) compared
with a net loss after taxation for the year ended March 31, 1999 of $178 million
(Airplanes Limited: $165 million; Airplanes Trust: $13 million).
RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 1999 COMPARED WITH YEAR ENDED
MARCH 31, 1998
Airplanes Group's results for the year ended March 31, 1999 reflected a
continuation of reasonably favorable industry conditions for the year,
notwithstanding the fact that, in the latter part of the year in particular,
certain of its lessees continued to experience difficult trading conditions,
particularly its Brazilian lessees who experienced a recent downturn in the
Brazilian economy and a currency devaluation. The net loss for the year ended
March 31, 1999 was $178 million, compared to $150 million for the year ended
March 31, 1998. The increase of $28 million was primarily attributable to a
reduction in lease rentals of $40 million, that was partially offset by an
associated reduction in depreciation of $17 million, primarily as a result of
aircraft sales. There was also an increase of $17 million in net interest
expense due to additional interest being charged on accrued but unpaid class E
note interest, partially offset by lower average debt outstanding and a lower
interest rate environment. There was an increase in the bad debts provision of
$11 million and a net decrease in the utilization of loss-making lease
provisions of $5 million. There was also an increase of $10 million in the
profit on aircraft sold and there was a reduction in other lease costs of $16
million, due primarily to a release of withholding tax provisions, following
updated advice that they were no longer required for certain jurisdictions in
the year ended March 31, 1999.
Overall, Airplanes Group generated $111 million in cash from operations in
the year ended March 31, 1999 compared to $214 million in the year ended March
31, 1998. The decrease in cash generated from operations in the year to March
31, 1999 is primarily attributable to lease rental and maintenance revenues
foregone of $33 million as a result of aircraft sales. Lease revenues further
declined by $6 million due to lower rentals and no
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maintenance billings in respect of six Fokker 100 aircraft on lease to a
Brazilian lessee, and lower rentals in relation to three MD-11 aircraft on lease
to another Brazilian lessee. There was also a lease revenue reduction of $8
million in relation to maintenance billings reaching capped levels for two
lessees and a lease revenue reduction of $12 million resulting from a higher
level of downtime and a lower interest rate environment (which impacts the
pricing of certain lease rentals). In addition there was an increase of $20
million in receivables outstanding. There was an increase in net outflow of
maintenance reserves due to the acceleration of maintenance events (including as
a result of aircraft repossessions) in the amount of $15 million and the return
of $7 million in maintenance reserves due to a Latin American lessee as a result
of the restructuring of its leases. In addition, during December 1997, one Latin
American lessee prepaid one year's rental in the amount of $15 million which
represents cash revenue foregone in the year ended March 31, 1999. Finally,
there was a reduction in the amount of cash paid as interest during the year
ended March 31, 1999 of $26 million, as a result of lower average debt and a
lower average interest rate.
LEASING REVENUES
Leasing revenues (which include maintenance reserve receipts which
Airplanes Group receives from certain of its lessees) for the year ended March
31, 1999 were $526 million (Airplanes Limited: $484 million; Airplanes Trust:
$42 million) compared with $585 million (Airplanes Limited: $512 million;
Airplanes Trust: $73 million) for the year ended March 31, 1998. The decrease of
$59 million consists of $40 million in lease rentals and $19 million in
maintenance billings. The decrease of $40 million in lease rentals arises
primarily from $26 million foregone as a result of aircraft sales, $2 million as
a result of lower rentals in respect of six Fokker 100 aircraft and three MD-11
aircraft on lease to two Brazilian lessees and a lease revenue reduction of $12
million resulting from a higher level of downtime and a lower interest rate
environment. The $19 million decrease in maintenance billings arises as a result
of $7 million foregone as a result of aircraft sales, a decrease of $4 million
as a result of no maintenance billings in respect of six Fokker 100 aircraft on
lease to a Brazilian lessee following the restructuring of its leases and $8
million in relation to maintenance billings reaching capped levels for two
lessees. At March 31, 1999, Airplanes Group had 201 of its 202 aircraft on lease
(Airplanes Limited: 184 aircraft; Airplanes Trust: 18 aircraft) compared to 217
of its 221 aircraft on lease (Airplanes Limited: 194 aircraft; Airplanes Trust:
23 aircraft) at March 31, 1998. In addition, there was a lower interest rate
environment (which impacts the pricing of certain lease rentals) in the year to
March 31, 1999.
AIRCRAFT SALES
Sales revenues of $132 million (Airplanes Limited: $37 million; Airplanes
Trust: $95 million) in respect of the sale of nineteen aircraft were received in
the year ended March 31, 1999. The net book value of these nineteen aircraft at
the date of sale was $118 million (Airplanes Limited: $32 million; Airplanes
Trust: $86 million). In the year ended March 31, 1998, Airplanes Group received
sales revenues of $94 million (Airplanes Limited: $37 million, Airplanes Trust:
$57 million) in respect of the sale of seven aircraft and the insurance proceeds
in respect of one aircraft which suffered a constructive total loss during
October 1997. The net book value of these eight aircraft at the date of disposal
was $90 million (Airplanes Limited: $32 million; Airplanes Trust: $58 million).
DEPRECIATION AND AMORTIZATION
The charge for depreciation and amortization in the year ended March 31,
1999 amounted to $176 million (Airplanes Limited: $159 million; Airplanes Trust:
$17 million) compared with $192 million (Airplanes Limited: $170 million;
Airplanes Trust: $22 million) for the comparative year in 1998. The decrease
arose as a result of the reduction in the number of aircraft owned by Airplanes
Group.
NET INTEREST EXPENSE
Net interest expense was $428 million (Airplanes Limited: $388 million;
Airplanes Trust: $40 million) in the year ended March 31, 1999 compared to $411
million (Airplanes Limited: $373 million; Airplanes Trust: $38 million) in the
year ended March 31, 1998. The increase of $17 million in net interest expense
was primarily due to a combination of offsetting factors including additional
interest charged on accrued but unpaid class E note
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interest of $35 million, a reduction in the value of swaptions of $1 million, a
gain realized on the sale of swaptions of $2 million and lower average debt in
the year ended March 31, 1999.
The weighted average interest rate on the class A, B, C and D notes during
the year to March 31, 1999 was 6.73% and the average debt in respect of the
class A, B, C and D notes outstanding during that year was $3,346 million. The
class E notes accrue interest at a rate of 20% per annum (as adjusted by
reference to the U.S. consumer price index, effective March 28, 1996). The
weighted average interest rate on the class A, B, C and D notes during the year
ended March 31, 1998 was 6.83% and the average debt in respect of the class A,
B, C and D notes outstanding during that year was $3,678 million. Although LIBOR
was lower in the year ended March 31, 1999 as compared with the year ended March
31, 1998, the weighted average interest rate on the class A, B, C and D notes
only decreased marginally during the year ended March 31, 1999 as compared to
the year ended March 31, 1998. This was due to substantial amounts of Airplanes
Group's floating rate notes having paid down over time with relatively small
principal payments on the fixed rate notes resulting in an increase in the
relative proportion of fixed rate notes as compared with floating rate notes.
For the year ended March 31, 1999 the difference in Airplanes Group's net
interest expense of $428 million (Airplanes Limited: $388 million; Airplanes
Trust: $40 million) and cash paid in respect of interest of $223 million
(Airplanes Limited: $201 million; Airplanes Trust: $22 million) is substantially
accounted for by the fact that Airplanes Group accrues interest on the class E
notes at a rate substantially higher than the per annum rate of 1% actually paid
in cash in the year ended March 31, 1999. (The 1% cash payment has been
suspended from February 1999). Net interest expense is stated after deducting
interest income earned during the relevant year. In the year ended March 31,
1999, Airplanes Group earned interest income (including lessee default interest)
of $14 million (Airplanes Limited: $14 million; Airplanes Trust: $Nil) compared
with $16 million in the year ended March 31, 1998 (Airplanes Limited: $16
million; Airplanes Trust: $Nil). The decrease is primarily as a result of lower
average cash balances and lower interest rates in the year to March 31, 1999.
At March 31, 1999, Airplanes Group had swaptions with a notional principal
balance of $306 million. During the year ended March 31, 1999, the value of the
swaptions decreased by approximately $1 million as swap rates increased.
As swaptions do not qualify for hedge accounting under U.S. GAAP, the
decrease in fair value of $1 million has been included in net interest expense
in the statement of operations. During the year, Airplanes Group recognized a
gain on the sale of swaptions of $2 million.
BAD DEBT AND LOSS-MAKING LEASE PROVISIONS
There was a net charge of $11 million in respect of bad and doubtful debts
(Airplanes Limited: $9 million; Airplanes Trust: $2 million) in the year ended
March 31, 1999, compared with no overall net provision for the year ended March
31, 1998. Airplanes Group's practice is to provide specifically for any amounts
due but unpaid by lessees based primarily on the amount due in excess of
security held and also taking into account the financial strength and condition
of a lessee and the economic conditions existing in the lessee's operating
environment. A number of Airplanes Group's lessees failed to meet their
contractual obligations in the year ended March 31, 1999, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
respect of these lessees, while the arrears with regard to certain other
carriers reduced in the year. The overall net charge in 1999 was primarily as a
result of provisions required in respect of two Brazilian lessees, one North
American lessee, one Philippine lessee and one Peruvian lessee, which were
partially offset by a reduction in the provisions required in respect of one
Canadian lessee.
The only significant "loss making" leases signed in the year to March 31,
1999 were in respect of a B767 aircraft on lease to a Latin American lessee and
an A320 aircraft on lease to a Canadian lessee. Consequently, there was an
overall net utilization of $12 million (Airplanes Limited: $10 million;
Airplanes Trust: $2 million) in respect of "loss making" lease provisions in the
year ended March 31, 1999, compared with the year to March 31, 1998, where there
was an overall net utilization of $17 million (Airplanes Limited: $14 million;
Airplanes Trust: $3 million). The provision required in the year ended March 31,
1998 was primarily required in
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respect of six Fokker 100 aircraft on lease to a Brazilian lessee which were
restructured during that year. The reduced rental payable under the revised
terms of these leases required an additional "loss making" lease provision of
$13 million in the year ended March 31, 1998.
OTHER LEASE COSTS
Other lease costs in the year ended March 31, 1999 amounted to $14 million
(Airplanes Limited: $13 million; Airplanes Trust: $1 million) compared to other
lease costs of $30 million (Airplanes Limited: $29 million; Airplanes Trust: $1
million) in the year ended March 31, 1998. The decrease in other lease costs of
$16 million relate primarily to a decrease in technical costs relating to two
B737-200 aircraft which were redelivered early to Airplanes Group in the year
ended March 31, 1998, and a provision required of $5 million (including $3
million relating to costs payable to Eurocontrol, the European air traffic
control regulator) in respect of three MD-83 aircraft which were on lease to a
Turkish lessee which ceased to trade. In addition, there was a release of $9
million withholding tax provisions, following updated advice that they were no
longer required for certain jurisdictions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the year ended March 31,
1999 amounted to $35 million (Airplanes Limited: $33 million; Airplanes Trust:
$2 million). This is a comparable expense to that incurred in the year to March
31, 1998 of $38 million (Airplanes Limited: $35 million; Airplanes Trust: $3
million).
The most significant element of selling, general and administrative
expenses are the aircraft servicing fees paid to GECAS. Substantially all of
these amounts represent asset based fees calculated as an annual percentage of
agreed values of aircraft under management pursuant to a servicing agreement.
Selling, general and administrative expenses of $35 million in the year to March
31, 1999 includes $24 million (Airplanes Limited: $22 million; Airplanes Trust:
$2 million) relating to GECAS servicing fees, comparable with the $26 million
incurred in the year to March 31, 1998 (Airplanes Limited: $24 million;
Airplanes Trust: $2 million).
A further significant element of Airplanes Group's actual selling, general
and administrative expenses reported in the year ended March 31, 1999 was $9
million (Airplanes Limited: $9 million; Airplanes Trust: $Nil) in respect of
administrative agency and cash management fees payable to the administrative
agent and cash manager, similar to the charge of $9 million for the year to
March 31, 1998.
OPERATING LOSS
The operating loss for the year ended March 31, 1999 was $181 million
(Airplanes Limited: $168 million; Airplanes Trust: $13 million) compared with an
operating loss of $153 million for the year ended March 31, 1998 (Airplanes
Limited: $144 million; Airplanes Trust: $9 million). Airplanes Limited and
Airplanes Trust are expected to continue to report substantial losses in the
future.
TAXES
There was an overall tax benefit of $3 million (Airplanes Limited: $3
million; Airplanes Trust: $Nil) in the year ended March 31, 1999, as compared
with an overall tax benefit of $3 million in the year ended March 31, 1998
(Airplanes Limited: $3 million; Airplanes Trust: $Nil).
NET LOSS
The net loss after taxation for the year ended March 31, 1999 was $178
million (Airplanes Limited: $165 million; Airplanes Trust: $13 million) compared
with a net loss after taxation for the year ended March 31, 1998 of $150 million
(Airplanes Limited: $141 million; Airplanes Trust: $9 million).
FINANCIAL RESOURCES AND LIQUIDITY
Our primary source of liquidity is rental payments made by lessees under
the leases. Our principal uses of cash rental payments are expenses related to
the aircraft and their servicing, corporate expenses and the payment
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of interest, principal and any premium on indebtedness. See "-- Indebtedness"
for more information regarding our outstanding debt.
Airplanes Group's cash balances at December 31, 2000 amounted to $190
million (Airplanes Limited: $184 million; Airplanes Trust: $6 million) compared
to cash balances at December 31, 1999 of $211 million (Airplanes Limited: $205
million; Airplanes Trust: $6 million). This represented a decrease of $13
million in the cash balances for the nine months to December 31, 2000, compared
with a net decrease in the cash balances of $13 million for the nine months to
December 31, 1999. Airplanes Group's cash balances at March 31, 2000 amounted to
$203 million (Airplanes Limited: $197 million; Airplanes Trust: $6 million)
compared to cash balances at March 31, 1999 of $224 million (Airplanes Limited:
$218 million; Airplanes Trust: $6 million).
Under the terms of Airplanes Group's indebtedness, we are required to
maintain cash balances, which we refer to as the "LIQUIDITY RESERVE AMOUNT,"
equal to (1) the amount of security deposits ($39 million at December 31, 2000),
(2) a maintenance reserve and (3) a miscellaneous reserve amount. See
"Description of Securities -- The Accounts -- Liquidity Reserve Amount" for
circumstances under which these amounts may be increased or decreased. The terms
of Airplanes Group's indebtedness restrict the use of this cash so that it is
generally not available to service debt. The liquidity reserve amount has been
determined largely based on an analysis of historical experience, assumptions
regarding Airplanes Group's future performance and the frequency and cost of
certain contingencies in respect of the aircraft. It is intended to provide
liquidity for meeting the cost of maintenance obligations and non-maintenance,
aircraft-related contingencies such as removing liens, complying with ADs and
repossessing and re-leasing aircraft.
In analyzing the future impact of costs, assumptions have been made
regarding their frequency and amount based on historical experience. There can
be no assurance, however, that historical experience will prove to be relevant
or that actual cash received by Airplanes Group will not be significantly less
than that assumed. Any significant variation may materially adversely affect our
ability to make payments of interest and principal on the notes.
During the next two years, we may have to incur unusually high cash
expenditures for the purpose of airframe and engine overhauls and complying with
new regulatory requirements for aircraft operating in Europe and North America.
Depending on their level and timing, these payments could adversely affect our
ability to make certain principal payments on the notes since aircraft expenses
rank ahead of payments on the notes.
OPERATING ACTIVITIES
Operating cash flows depend on many factors including the performance of
lessees and Airplanes Group's ability to re-lease aircraft, the average cost of
the notes, the efficacy of Airplanes Group's interest rate hedging policies, the
ability of Airplanes Group's swap providers to perform under the terms of their
swap and similar obligations and whether Airplanes Group will be able to
refinance certain subclasses of notes that have not been repaid with lease cash
flows.
Net cash provided by operating activities in the nine months ended December
31, 2000 amounted to $85 million (Airplanes Limited: $82 million; Airplanes
Trust: $3 million) compared with $147 million in the nine months ended December
31, 1999 (Airplanes Limited: $132 million; Airplanes Trust: $15 million). This
includes cash paid in respect of interest of $166 million in the nine months
ended December 31, 2000 (Airplanes Limited: $151 million; Airplanes Trust: $15
million) compared with the $158 million in the nine months ended December 31,
1999 (Airplanes Limited: $143 million; Airplanes Trust: $15 million). The
decrease in cash provided by operating activities in the nine month period to
December 31, 2000 is primarily attributable to the number and type of off-lease
aircraft during the nine months ended December 31, 2000 and a reduction in lease
revenues due to previous aircraft sales. In addition, in the nine months to
December 31, 2000 there was a net increase in the level of receivables balances,
as compared to the nine months to December 31, 1999 when there was a reduction
in receivables.
Net cash provided by operating activities in the year ended March 31, 2000
amounted to $181 million (Airplanes Limited: $163 million; Airplanes Trust: $18
million) compared with $111 million in the year ended March 31, 1999 (Airplanes
Limited: $90 million; Airplanes Trust: $21 million). This reflects cash paid in
respect
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of interest of $214 million in the year ended March 31, 2000 (Airplanes Limited:
$193 million; Airplanes Trust: $21 million) compared with $223 million in the
year ended March 31, 1999 (Airplanes Limited: $201 million; Airplanes Trust: $22
million). The $70 million increase in cash provided by operating activities in
the year ended March 31, 2000 is primarily attributable to a reduction in the
level of receivables of $11 million compared to an increase of $20 million in
the year ended March 31, 1999.
In addition, there was a reduction in the net outflow of maintenance
revenues of $20 million, due largely to the acceleration of maintenance events
in the year ended March 31, 1999 (including as a result of aircraft
repossessions) in the amount of $15 million and the return of $7 million in
maintenance reserves due to a Latin American lessee as a result of the
restructuring of its leases. There was a reduction in the amount of cash paid as
interest during the year ended March 31, 2000 of $27 million, as a result of
lower average debt and the generation of $11 million in cash from the
re-couponing or unwinding of Airplanes Group's portfolio of swaps. See "--
Interest Rate Sensitivity -- Interest Rate Risk and Management" for a further
description of this re-couponing and unwinding of our swap portfolio. These
factors were somewhat offset by a reduction of $25 million in leasing revenues,
which arose due to aircraft sales and an increased level of aircraft downtime.
INVESTING AND FINANCING ACTIVITIES
Cash flows from investing activities in the nine months to December 31,
2000, reflect the cash provided by capital and sales type leases which was $4
million (Airplanes Limited: $4 million; Airplanes Trust: $Nil) as compared to $6
million in the nine months ended December 31, 1999 (Airplanes Limited: $6
million; Airplanes Trust: $Nil). In the nine months ended December 31, 2000,
Airplanes Group also received sales proceeds of $14 million (Airplanes Limited:
$8 million; Airplanes Trust: $6 million) compared to the receipt of $2 million
(Airplanes Limited: $2 million; Airplanes Trust: $Nil) in the nine months ended
December 31, 1999.
Cash flows from investing activities in the nine months to December 31,
2000, primarily reflect the repayment of $113 million of principal on the
subclass A-6 notes and class B notes by Airplanes Group (Airplanes Limited: $103
million; Airplanes Trust: $10 million) compared with $166 million of principal
repaid on the subclass A-6, class B and C notes by Airplanes Group (Airplanes
Limited: $151 million; Airplanes Trust: $15 million) in the nine months to
December 31, 1999. The decrease in principal repayments in the nine months ended
December 31, 2000 as compared to the nine months ended December 31, 1999, is due
to a decrease in cash provided by operating activities as discussed above.
Cash flows from investing activities in the year ended March 31, 2000,
amounted to $8 million (Airplanes Limited: $8 million; Airplanes Trust: $Nil)
compared to $135 million in the year ended March 31, 1999. This $127 million
decrease primarily reflects the proceeds of $132 million (Airplanes Limited: $37
million; Airplanes Trust: $95 million) from the sale of 19 aircraft during the
year ended March 31, 1999 compared with sales proceeds of $3 million for the
year ended March 31, 2000. Cash provided by capital and sales type leases
amounted to $8 million (Airplanes Limited: $8 million; Airplanes Trust: $Nil) as
compared with $8 million in the comparative period to March 31, 1999 (Airplanes
Limited: $8 million; Airplanes Trust: $Nil). In the year ended March 31, 2000,
this included the repayment of $1 million as a final bullet payment in relation
to one B737-200A aircraft.
Cash flows from financing activities in the year to March 31, 2000
primarily reflect the repayment of $210 million of principal on subclass A-6,
class B notes, class C notes and class D notes by Airplanes Group (Airplanes
Limited: $192 million; Airplanes Trust: $18 million) compared with $240 million
of principal repaid on subclass A-5, A-6, class B notes, class C notes and class
D notes by Airplanes Group (Airplanes Limited: $219 million; Airplanes Trust:
$21 million) in the year ended March 31, 1999. The decrease in principal
repayments in the year ended March 31, 2000 as compared to the year ended March
31, 1999, is due to a net reduction in cash provided by investing and operating
activities as discussed above.
INDEBTEDNESS
Airplanes Group's outstanding indebtedness consisted of class A, B, C, D
and E notes in the amount of $3,636 million (Airplanes Limited: $3,313 million;
Airplanes Trust: $323 million) at March 31, 2000 and $3,842 million (Airplanes
Limited: $3,500 million; Airplanes Trust: $342 million) at March 31, 1999.
Airplanes
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Group had $591 million of class E notes outstanding at March 31, 2000 and 1999.
The terms of each subclass of notes, including the outstanding principal amount
as of March 15, 2001, and estimated fair market value as of January 31, 2001,
are as follows:
OUTSTANDING ESTIMATED
PRINCIPAL ANNUAL FAIR MARKET
CLASS OR SUBCLASS OF AMOUNT AS OF INTEREST RATE FINAL VALUE AS OF
CERTIFICATES AND NOTES MARCH 15, 2001 (PAYABLE MONTHLY) MATURITY DATE JANUARY 31, 2001(1)
- ---------------------- ----------------- ----------------- -------------- -------------------
($ MILLIONS) ($ MILLIONS)
Subclass A-6.................. 450.4 LIBOR+0.340% March 15, 2019 457.5
Subclass A-8.................. 700.0 LIBOR+0.375% March 15, 2019 697.5
Subclass A-9.................. 750.0 LIBOR+0.550% March 15, 2019 (2)
Class B....................... 279.4 LIBOR+0.750% March 15, 2019 276.6
Class C....................... 349.8 8.150% March 15, 2019 335.4
Class D....................... 395.1 10.875% March 15, 2019 280.5
Class E (notes only)(3)....... 591.2 20.000% March 15, 2019 --
- ---------------
(1) Based on the outstanding principal amounts as of January 31, 2001, which, in
the case of the subclass A-6 notes, was $458.2 million and, in the case of
the class B notes, was $281.5 million.
(2) The subclass A-9 certificates were issued on March 15, 2001.
(3) The annual interest rate on the class E notes is adjusted by reference to
changes in the U.S. Consumer Price Index since March 28, 1996. As of March
15, 2001, the annual interest rate on the class E notes was 22.0%. Except
for the class E minimum interest amount and supplemental interest amount,
payable at 1% and 10% per annum respectively, no principal or interest is
payable on the class E notes until the more senior classes of notes have all
been paid in full. See "Description of Securities -- The Notes and
Guarantees -- Class E Notes" for more information on the terms of the class
E notes. As of March 15, 2001, the accrued and unpaid class E minimum
interest amount and supplemental interest amount was $1,051 million.
In order to repay principal on the subclass A-8 notes on their expected
final payment date (March 15, 2003) and avoid step-up interest, Airplanes Group
expects that it will have to refinance the subclass A-8 certificates in the
capital markets.
INTEREST RATE SENSITIVITY
Airplanes Group's principal market risk exposure is to changes in interest
rates. This exposure arises from the notes as illustrated in the table above and
the derivative instruments used by Airplanes Group to manage interest rate risk.
INTEREST RATE RISK AND MANAGEMENT
The leasing revenues of Airplanes Group are generated primarily from lease
rental payments which are based on either a fixed or floating rate, or a
combination of the two. In the case of floating rate leases, an element of the
rental varies in line with changes in LIBOR, generally six-month LIBOR. See "The
Aircraft, Related Leases and Collateral -- The Leases" for more information
regarding the terms of our leases. As of January 31, 2001, leases representing
approximately 75% of our portfolio by appraised value as of January 31, 2001
provided for fixed rate rental payments and approximately 25% provided for
floating rate payments.
In general, an interest rate exposure arises to the extent that Airplanes
Group's fixed and floating interest obligations in respect of the class A, B, C
and D notes do not correlate to the mix of fixed and floating rental payments
for different rental periods. This interest rate exposure can be managed through
the use of interest rate swaps and other derivative instruments. The class A and
class B notes bear floating rates of interest and the class C and class D notes
bear fixed rates of interest. The mix of fixed and floating rental payments
contains a higher percentage of fixed rate payments than the percentage of fixed
rate interest payments on the notes, including as a result of the fact that the
reset periods on floating rental payments are generally longer than the monthly
reset periods on the floating rate notes. In order to correlate the contracted
fixed and floating rental payments to the fixed and floating interest payments
on the notes, Airplanes Group enters into interest rate swaps.
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Under the swaps, Airplanes Group pays fixed amounts and receives floating
amounts on a monthly basis. The swaps amortize having regard to the expected pay
down schedule of the class A and B notes, the expiry dates of the leases under
which lessees are contracted to make fixed rate rental payments and the LIBOR
reset dates under the floating rate leases. At least every three months, and in
practice more frequently, the administrative agent seeks to enter into
additional swaps or sell at market value or unwind part or all of the swaps and
any future swaps in order to rebalance the fixed and floating mix of interest
obligations and the fixed and floating mix of rental payments.
As of January 31, 2001, Airplanes Group had unamortized swaps with an
aggregate notional principal balance of $2,000 million. The aggregate notional
principal balance of these swaps reduce by their terms to $1,785 million by
March 31, 2001, to an aggregate notional principal balance of $1,045 million by
March 31, 2002, to an aggregate notional principal balance of $380 million by
March 31, 2003 and to an aggregate notional principal balance of $90 million by
March 31, 2004. None of the swaps have maturity dates extending beyond September
15, 2004. The aggregate fair market value of the portfolio of 45 swaps as of
January 31, 2001 was estimated at $(32.5) million (that is, the swaps were
"out-of-the-money"), as detailed below:
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AIRPLANES GROUP SWAP BOOK AT JANUARY 31, 2001(1)
ESTIMATED FAIR
FINAL MATURITY FIXED RATE MARKET VALUE AS OF
SWAP NUMBER NOTIONAL AMOUNT(2) EFFECTIVE DATE DATE PAYABLE(3) JANUARY 31, 2001(4)
- ----------- ------------------- -------------- -------------- ----------- --------------------
(IN MILLIONS) (IN THOUSANDS)
1.................... $ 10 23-Dec-97 15-Mar-01 5.81750% $ (2)
2.................... 55 16-Oct-00 15-Mar-01 6.65500 (85)
3.................... 20 17-Nov-99 15-Apr-01 5.85500 (15)
4.................... 40 28-Mar-96 15-Apr-01 6.09250 (42)
5.................... 70 15-Aug-00 15-May-01 6.77500 (124)
6.................... 55 22-Dec-00 15-Jun-01 6.22500 (196)
7.................... 50 15-Dec-00 15-Jun-01 6.54000 (182)
8.................... 20 28-Oct-97 15-Jun-01 5.96000 (50)
9.................... 160 26-Jan-01 15-Jul-01 5.39500 (120)
10................... 15 15-Dec-99 15-Aug-01 6.20000 (46)
11................... 15 17-Apr-00 15-May-02 6.71500 (273)
12................... 20 27-May-98 15-Apr-02 6.28000 (308)
13................... 40 16-Aug-99 15-Apr-02 6.22500 (546)
14................... 15 15-Dec-99 15-Apr-02 6.31000 (198)
15................... 10 27-Oct-98 15-May-02 6.29000 (165)
16................... 325 15-Nov-99 15-Jun-02 6.12000 (2,312)
17................... 15 16-Feb-99 15-Jul-02 6.27000 (250)
18................... 20 15-Sep-98 15-Aug-02 6.17000 (136)
19................... 15 15-Jun-00 15-Dec-02 7.11250 (2,412)
20................... 135 15-Jul-98 15-Dec-02 6.24000 (2,226)
21................... 30 25-Aug-98 15-Feb-03 6.39000 (829)
22................... 15 15-Oct-98 15-Feb-03 6.38000 (570)
23................... 10 16-Nov-98 15-Feb-03 6.39000 (297)
24................... 50 15-Dec-98 15-Feb-03 6.28400 (1,014)
25................... 15 15-Feb-00 15-Mar-03 6.39650 (388)
26................... 15 18-Jan-00 15-Mar-03 6.38500 (443)
27................... 40 1-Jun-99 15-Mar-03 6.22000 (672)
28................... 45 21-Dec-99 15-Mar-03 6.58750 (998)
29................... 0(5) 15-Apr-01 15-Apr-03 7.18500 (773)
30................... 35 21-Jun-99 15-Jun-03 6.31000 (1,252)
31................... 55 15-Jul-99 15-Aug-03 6.29000 (1,404)
32................... 15 18-Jan-00 15-Oct-03 6.46500 (404)
33................... 30 17-Aug-99 15-Nov-03 6.33000 (853)
34................... 35 15-Dec-00 15-Nov-03 7.36250 (1,751)
35................... 25 26-Apr-00 15-Nov-03 6.68750 (535)
36................... 15 20-Sep-00 15-Nov-03 6.56250 (1,383)
37................... 125 15-Nov-00 15-Nov-03 6.57750 (774)
38................... 25 24-Mar-00 15-Dec-03 6.84500 (878)
39................... 85 15-May-00 15-Jan-04 7.29950 (1,888)
40................... 25 26-Jun-00 15-Feb-04 6.97750 (819)
41................... 60 15-Aug-00 15-Feb-04 6.77000 (1,906)
42................... 65 18-Aug-00 15-Apr-04 6.77000 (664)
43................... 0(5) 17-Apr-01 15-May-04 6.82900 (1,184)
44................... 80 16-Oct-00 15-Jul-04 6.58500 (743)
45................... 0(5) 17-Sep-01 15-Sep-04 5.71250 (353)
------ --------
Total.............. $2,000 $(32,463)
====== ========
- ---------------
(1) As of the date of this prospectus, Airplanes Group had entered into one
further swap:
FINAL FIXED RATE
SWAP NUMBER NOTIONAL AMOUNT EFFECTIVE DATE MATURITY DATE PAYABLE
- ----------- ------------------- -------------- ------------- -----------
(IN MILLIONS)
46..................... $ 35 15-Feb-01 15-Nov-03 5.27500%
47..................... 135 15-Mar-01 15-Sep-03 4.89000
48..................... 0(5) 15-Apr-02 15-Dec-04 5.93750
(2) While some of the above swaps have a fixed notional amount, many amortize
over the period to the final maturity date.
(3) Airplanes Group makes fixed rate payments on a monthly actual/360 adjusted
basis under all swaps, with the exception of swap number 4 under which
Airplanes Group makes fixed rate payments calculated on a monthly 30/360
unadjusted basis.
(4) Under all swaps, Airplanes Group receives floating rate payments at one
month LIBOR, reset monthly.
(5) The initial amounts for swaps number 29, 43, 45 and 48 are $20 million, $25
million, $25 million and $40 million respectively.
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Pursuant to a decision of the directors of Airplanes Limited and the
controlling trustees of Airplanes Trust on November 8, 1999, Airplanes Group
either re-couponed or unwound and replaced 30 of its then portfolio of 44 swaps.
20 of these swaps were adjusted so that Airplanes Group's fixed payment rate
more closely reflected current market rates. Airplanes Group received a net cash
payment of $9.33 million with respect to these 20 swaps. In addition, ten of the
30 swaps were terminated, in return for a net payment to Airplanes Group of
$1.92 million. In aggregate, Airplanes Group received a net cash inflow of
$11.25 million as a result of this recouponing or unwinding and replacement, but
became subject to higher ongoing swap costs due to the re-calibrating of the
swaps to then current market rates. Simultaneously with these terminations,
Airplanes Group put in place a replacement swap to maintain a hedged position.
These adjustments and terminations released the positive value in Airplanes
Group's swaps and resulted in additional principal payments to the certificate
holders. These transactions were conducted in accordance with Airplanes Group's
interest rate risk management policies. The realized gain on the termination of
these swaps has been deferred and is being recognized over the life of the
hedged transaction in accordance with the guidance provided in ET Issue No.
84-7, "Termination of Interest Rate Swaps."
Additional interest rate exposure will arise to the extent that lessees
owing fixed rate rental payments default and interest rates have declined
between the contract date of the lease and the date of default. This exposure is
managed through the purchase of swaptions. Airplanes Group purchases swaptions
which, if exercised, will allow Airplanes Group to enter into interest rate swap
transactions under which it will pay floating amounts and receive fixed amounts.
Because not all lessees making fixed rate rental payments are expected to
default and not all lessee defaults are expected to occur following a decline in
interest rates, Airplanes Group purchases swaptions in a notional amount less
than the full extent of the exposure associated with the lessees making fixed
rate rental payments. This notional amount (the "TARGET HEDGE") will be varied
from time to time to reflect, among other things, changes in the mix of payments
bases under future leases and in the prevailing level of interest rates.
The payment of the premium for any of these swaptions may be made at two
points in the priority of payments under the indentures, as described in
"Description of Securities -- The Notes and Guarantees -- Priority of Payments."
Fifty percent of any swaption premium in any month is a "MINIMUM HEDGE PAYMENT"
and is paid fourth in Airplanes Group's order of priority of payments. The other
50% of the premium is expended as a "SUPPLEMENTAL HEDGE PAYMENT" and is paid
seventeenth in Airplanes Group's order of priority of payments.
If there are not sufficient amounts available for distribution and a
supplemental hedge payment would not be made in any month, then Airplanes Group
will reduce the aggregate notional amount of the swaptions bought in that month
to reflect the amount that can be bought for the premium payable as a minimum
hedge payment. As a result of the outstanding class A principal adjustment
amount, no supplemental hedge payments can be made until there are sufficient
cash flows in any given month to satisfy all obligations ranking senior to the
supplemental hedge payment under the terms of the notes. See "Description of
Securities -- The Notes and Guarantees -- Priority of Payments" for a fuller
description of the priority of payments. From time to time the administrative
agent may also sell at market value or unwind part or all of the swaption
portfolio, for example, to reflect any decreases in the target hedge.
In the period from March 28, 1996 to January 31, 2001, Airplanes Group
purchased swaptions with an aggregate notional principal balance of $556 million
and sold swaptions with an aggregate notional principal balance of $194 million
and swaptions with an aggregate notional principal balance of $46 million have
matured. The net aggregate notional principal balance of swaptions at January
31, 2001 therefore amounted to $316 million. The estimated fair market value of
the swaptions at January 31, 2001 was $1.9 million (December 31, 2000: $0.5
million). Because the swaptions do not qualify for hedge accounting under U.S.
GAAP, the decrease in value of $0.4 million between March 31, 2000 and December
31, 2000 has been
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included in net interest expense for the nine months ended December 31, 2000.
Airplanes Group was a party to 13 swaptions as of January 31, 2001, which are
listed below:
AIRPLANES GROUP SWAPTION BOOK AS OF JANUARY 31, 2001(1)
ESTIMATED FAIR MARKET
NOTIONAL EXERCISE DATE FINAL FIXED RATE VALUE AS OF
SWAPTION NUMBER AMOUNT(2) (ON OR AFTER) MATURITY DATE RECEIVABLE(3) JANUARY 31, 2001
- --------------- ------------- ------------- ------------- ------------- ---------------------
(IN MILLIONS) (IN THOUSANDS)
1....................... $ 24 15-Jan-98 15-May-01 5.00% $ 66
2....................... 50 15-Sep-98 15-Dec-01 5.30 138
3....................... 30 15-Jan-98 15-Apr-02 5.00 194
4....................... 20 17-Feb-98 15-Sep-02 5.10 89
5....................... 14 15-Apr-98 15-Sep-02 5.10 62
6....................... 15 16-Mar-98 15-Mar-03 5.10 84
7....................... 50 15-Jul-98 15-Mar-03 5.10 271
8....................... 12 15-Jan-01 15-Nov-02 5.25 42
9....................... 20 15-Apr-98 15-Jun-03 5.10 120
10...................... 10 15-Sep-98 15-Sep-03 5.30 59
11...................... 15 15-Jan-01 15-Nov-03 5.30 134
12...................... 10 16-Feb-99 15-Feb-04 5.40 101
13...................... 46 15-Jan-01 15-Jan-05 5.40 528
---- ------
$316 $1,888
==== ======
- ---------------
(1) As of the date of this prospectus, Airplanes Group had entered into two
further swaptions:
NOTIONAL EXERCISE DATE FINAL FIXED RATE
SWAPTION NUMBER AMOUNT (ON OR AFTER) MATURITY DATE RECEIVABLE
- --------------- ------------- ------------- ------------- -------------
(IN MILLIONS)
14............................. $ 19 15-Feb-01 15-Nov-02 5.20%
15............................. 20 15-Feb-01 15-Feb-06 5.55
16............................. 23 15-Mar-01 15-Feb-06 5.45
(2) Under each swaption, if exercised, Airplanes Group would receive fixed rate
payments at the rate indicated above on a monthly fixed 30/360 unadjusted
basis.
(3) Under each swaption, if exercised, Airplanes Group would pay floating rate
payments at one month LIBOR, reset monthly.
Through the use of swaps, swaptions and other interest rate hedging
products, Airplanes Group seeks to manage its exposure to adverse changes in
interest rates based on regular reviews of its interest rate risk. There can be
no assurance, however, that Airplanes Group's interest rate risk management
strategies will be effective in this regard.
The directors of Airplanes Limited and the controlling trustees of
Airplanes Trust are responsible for reviewing and approving the overall interest
rate management policies and transaction authority limits. Specific hedging
contracts are approved by officers of the administrative agent acting within the
overall policies and limits. Counterparty risk is monitored on an ongoing basis.
Counterparties are subject to the prior approval of the directors of Airplanes
Limited and the controlling trustees of Airplanes Trust. Airplanes Group's
counterparties consist of the affiliates of major U.S. and European financial
institutions who have credit ratings, or provide collateralization arrangements,
which are consistent with maintaining the ratings of the class A certificates.
NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Certain Hedging Activities," in June 1998 and SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activity, an
Amendment of SFAS 133," in June 2000. SFAS No. 133 and SFAS No. 138 require that
all derivative instruments be recorded
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on the balance sheet at their respective fair values. SFAS No. 133 and SFAS No.
138 are effective for all fiscal quarters of all fiscal years beginning after
June 30, 2000.
Airplanes Group expects that all of its interest rate swaps will be
designated as cash flow hedges while its swaptions will be designated as held
for trading instruments.
As part of its hedging policy, Airplanes Group has begun formally
documenting all relationships between hedging instruments and hedged items in
the context of the requirements of SFAS No. 133 and SFAS No. 138, including
linking all derivatives that are designated as cash-flow hedges to specific
liabilities on the balance sheet. Airplanes Group now formally assesses, both at
the hedge's inception and on an ongoing basis, whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in cash
flows of hedged items.
Changes in the fair value of a derivative that is highly effective and that
is designated and qualifies as a cash-flow hedge will be recorded in other
comprehensive income, until earnings are affected by the variability in cash
flows of the designated hedged item.
Airplanes Group will discontinue hedge accounting prospectively when it is
determined that the derivative is no longer highly effective in offsetting
changes in the cash flows of the hedged item, the derivative expires or is sold,
terminated or exercised, or it is determined that designation of the derivative
as a hedging instrument is no longer appropriate.
In all situations in which hedge accounting is discontinued, Airplanes
Group will continue to carry the derivative at its fair value on the balance
sheet, and will recognize any changes in its fair value in earnings.
In all situations where derivatives are designated as trading instruments,
they will be carried at fair value on the balance sheet and any changes in fair
value will be recognized in earnings.
The quantitative disclosure and other statements in this section are
forward-looking statements that involve risks and uncertainties. Although
Airplanes Group's policy is to limit its exposure to changes in interest rates,
it could suffer higher cash flow losses as a result of actual future changes in
interest rates. It should also be noted that Airplanes Group's future exposure
to interest rate movements will change as the composition of its lease portfolio
changes or if it issues new subclasses of additional notes or refinancing notes
with different interest rate provisions from the notes. You should refer to
"Risk Factors" for more information about risks, especially lessee credit risk,
that could intensify Airplanes Group's exposure to changes in interest rates.
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DESCRIPTION OF SECURITIES
The following description is a summary of the provisions of our outstanding
certificates and notes, the trust agreement, the indentures and related
documents. This summary does not restate these agreements in their entirety and
we urge you to read the trust agreement, the indentures and the security trust
agreement because these are principal documents that define your rights as a
holder of the certificates. The following discussion uses terms that have
specific definitions in the indentures and other transaction documents. You
should refer to the Index of Defined Terms for an index of the defined terms
used in this prospectus.
GENERAL
On March 12, 1996, in connection with our acquisition of the aircraft,
Airplanes Pass Through Trust issued $4,048 million in aggregate principal amount
of subclass A-1, A-2, A-3, A-4 and A-5 and class B, C and D pass through
certificates in an underwritten offering. Each of these certificates represents
a fractional undivided beneficial interest in two corresponding classes or
subclasses of notes issued by Airplanes Limited and Airplanes Trust on that same
date. Airplanes Limited and Airplanes Trust also issued $604 million in
aggregate principal amount of class E notes to GPA Group (now known as debis
AirFinance Ireland) and its subsidiaries on that same date, $13 million of which
was cancelled in July 1996 as an adjustment to the purchase price of the
aircraft pursuant to the purchase agreement for the aircraft.
In order to refinance the subclass A-1, A-2 and A-3 and class B
certificates, Airplanes Pass Through Trust issued $2,437 million of subclass
A-6, A-7 and A-8 and class B certificates on March 16, 1998. Each of these
certificates represents a fractional undivided beneficial interest in two
corresponding classes or subclasses of notes issued by Airplanes Limited and
Airplanes Trust on that same date. On November 20, 1998, AerFi Group (now known
as debis AirFinance Ireland) and its subsidiaries transferred the class E notes
they held to GE Capital. The subclass A-5 certificates were fully repaid on May
15, 1998.
Each subclass of the class A certificates and each class of the class B, C
and D certificates has been issued by a separate pass through trust formed under
a supplement to the trust agreement, which has been qualified under the Trust
Indenture Act of 1939, as amended. Each of the corresponding subclasses of class
A notes and each class of the class B, C and D notes, as well as the class E
notes, has been issued by Airplanes Limited and Airplanes Trust under their
indentures or a supplement to their indentures.
The old subclass A-9 certificates were issued by a new pass through trust,
the 2001 refinancing trust, formed on March 15, 2001 under another supplement to
the trust agreement. The 2001 refinancing trust will issue the new certificates.
The subclass A-9 notes were issued and guaranteed by Airplanes Limited and
Airplanes Trust pursuant to supplements to their indentures. The new
certificates will rank equally in right of payment of principal and interest
among themselves and will, as the old certificates currently do, rank equally in
right of payment with the subclass A-6 and A-8 certificates, and the subclass
A-9 notes and guarantees rank equally in right of payment of principal and
interest among themselves and rank equally in right of payment with the subclass
A-6 and A-8 notes and guarantees. Airplanes Limited and Airplanes Trust have
each agreed under the indentures to guarantee the other's obligations in respect
of the notes. Bankers Trust Company is both the trustee under the trust
agreement and the indenture trustee under each indenture.
The old certificates are, and the new certificates will be, direct
obligations of the 2001 refinancing trust only and will not be secured by the
aircraft or the leases. The old certificates do not, and the new certificates
will not, represent obligations of Airplanes Limited, Airplanes Trust, any
lessee, debis AirFinance B.V., debis AirFinance Ireland, Bankers Trust Company,
GE Capital or GECAS.
THE CERTIFICATES
Each certificate issued by each pass through trust represents a fractional
undivided beneficial interest in the two corresponding classes or subclasses of
notes and guarantees held by that pass through trust. Each pass through trust
has no significant assets other than (a) the class or subclass of notes and
guarantees issued by Airplanes Limited and Airplanes Trust that correspond to
the class or subclass of certificates it issued and (b) any funds held on
deposit in that pass through trust's account. Payments on the certificates will
only be made to the
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extent that the relevant pass through trust has funds available in its account
to make that payment. See "The Parties -- The Trust and Trustee" for more
information about Airplanes Pass Through Trust.
FORM AND DENOMINATION
The certificates are issued in minimum denominations of $100,000 and
integral multiples of $1,000 in excess of that amount, except a single
certificate of each class or subclass may be issued in a denomination of less
than $100,000.
The certificates of each class or subclass will be represented by one or
more Rule 144A or Regulation S global certificates registered in the name of
Cede & Co., as nominee of DTC, and deposited with Bankers Trust Company, as
custodian for DTC. Beneficial interests in the certificates will be in
electronic, book-entry form and shown only on, and transfers of book-entry
interests will be effected only through, records maintained by DTC or its
nominee and its participants, including Euroclear and Clearstream, Luxembourg.
You will receive a definitive certificate in exchange for your book-entry
interests only under the circumstances described under "Book-Entry Registration,
Global Clearance and Settlement -- Definitive Certificates." You should also
refer to "Book-Entry Registration, Global Clearance and Settlement" for a
description of how book-entry interests in the global certificates and
definitive certificates may be held and transferred and how payments on them
will be distributed.
RATINGS
Each outstanding class or subclass of certificates is rated as follows as
of the date of this prospectus:
RATING AGENCIES
--------------------------------------
STANDARD &
CLASS OR SUBCLASS OF CERTIFICATES FITCH MOODY'S POOR'S
- --------------------------------- ---------- ---------- ----------
Subclass A-6........................................... AA Aa2 AA
Subclass A-8........................................... AA Aa2 AA
Subclass A-9........................................... AA Aa2 AA
Class B................................................ A A2 A
Class C................................................ BBB Baa2 BBB
Class D................................................ BB Ba2 BB
The ratings of a class or subclass of certificates only address the
likelihood of the timely payment of interest and the ultimate payment of the
principal on that class or subclass of certificates on the final maturity date.
The rating agencies have not rated our ability to pay step-up interest on any
class or subclass of certificates or to repay their principal on their expected
final payment date. The ratings assigned to each class or subclass of
certificates also do not address the effect of any imposition of any withholding
tax on any payments under the leases, the certificates, the notes, the
guarantees or otherwise.
A rating is not a recommendation to buy, sell or hold any class or subclass
of certificates because it does not address market price or suitability for a
particular investor and may be subject to revision, suspension or withdrawal at
any time by the assigning rating agency. If a rating agency lowers, suspends or
withdraws its rating of any class or subclass of certificates, including the
subclass A-9 certificates, no person or entity has any obligation to support the
obligation of the trust under the affected certificates in any way.
PAYMENTS AND DISTRIBUTIONS
The trust agreement requires that the trustee of each class or subclass of
certificates establish and maintain, for the benefit of the certificate holders
of that class or subclass, a separate account for the deposit of payments on the
corresponding class or subclass of notes or the guarantees held in trust by the
trustee. On each payment date, if the trustee (or a paying agent in Luxembourg
appointed by the trustee) has confirmed receipt of any amount of interest,
principal or premium or any other payment paid on a class or subclass of notes
in the trust's account in respect of any class or subclass of certificates by
1:00 p.m., New York time, the trustee will pay (or instruct the
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paying agent to pay) that amount over to holders of the corresponding class or
subclass of certificates. If the trustee or the paying agent can only confirm
receipt of the payment after 1:00 p.m., New York time, then it will only pay
that amount to the holders of the corresponding class or subclass of
certificates on the next day which is a business day, without any extra interest
or penalty.
Payments on any class or subclass of certificates on any payment date will
be made to the certificate holders of record of that class or subclass on the
record date immediately preceding the relevant payment date, which is the close
of business on the day that is 15 days before that payment date, whether or not
it is a business day. For the final distribution on any class or subclass of
certificates, however, payment will only be made upon presentation and surrender
of those certificates by the certificateholder or its agent (including any
holder in street name) at the office or agency of the trustee or paying agent.
So long as any certificates are listed on the Luxembourg Stock Exchange, we will
appoint and maintain a paying agent in Luxembourg.
If the certificates of any class or subclass are issued in definitive form,
distributions by the trustee from the account on a payment date will be made by
check mailed to each certificateholder of a definitive certificate on the record
date at its address appearing on the register maintained with respect to that
class or subclass. Alternatively, if a certificateholder of more than $1,000,000
in aggregate principal amount of definitive certificates requests in writing not
later than the relevant record date, the trustee will distribute the payment by
wire transfer to an account designated by that certificateholder at a financial
institution in New York.
PAYMENT OF PRINCIPAL AND INTEREST
Each class or subclass of certificates is the direct obligation of the pass
through trust issuing those certificates and are not secured by the aircraft or
any leases. The trust's only sources of payment for any class or subclass of
certificates are payments by Airplanes Limited and Airplanes Trust on the
corresponding class or subclass of notes and guarantees held by the trust. If
Airplanes Limited and Airplanes Trust do not make payments on those notes and
guarantees, the trust will not have any funds to make payments on the
corresponding class or subclass of certificates.
Each class or subclass of certificates will bear the same rate of interest
as the corresponding class or subclass of notes. Interest on the certificates
will be payable monthly in arrears on the fifteenth day of each month, referred
to as the "payment date," unless that day is not a business day, in which case
the interest will be paid on the next day which is a business day. The subclass
A-9 certificates will bear interest at a rate equal to one month LIBOR plus
0.550%. See "Summary -- Overview -- Outstanding Debt" for the interest rate on
the other classes and subclasses of certificates. Interest on the certificates
that bear a floating rate of interest will be calculated on the basis of a
360-day year and the actual number of days elapsed in an interest accrual
period. Interest on the certificates that bear a fixed rate of interest will be
calculated on the basis of one-twelfth of an annual interest payment and, in the
case of an incomplete interest accrual period, on the basis of a 360-day year
consisting of twelve 30-day months.
The certificates all have a "FINAL MATURITY DATE," which is the date on
which all principal and accrued but unpaid interest on the certificates is due
and payable, of March 15, 2019. However, at the time we issued each class or
subclass of certificates, we established for that class or subclass an "EXPECTED
FINAL PAYMENT DATE," which is the date before the final maturity date on which
we expected the final payment of principal and interest on that class or
subclass of certificates to be made. For amortizing certificates, the expected
final payment date is the date on which we expected to repay the certificates in
full from our available cash flow based upon assumptions used at the time we
issued those certificates. For soft bullet certificates, the expected final
payment date is the date on which we expected to refinance them. The subclass
A-9 certificates are amortizing certificates and have an expected final payment
date of November 15, 2008.
Although we expected to repay each class or subclass of these certificates
in full on its expected final payment date determined at the time of their
initial issuance, the actual final payment date for that class or subclass of
certificates is likely to occur earlier or later than the expected final payment
date for that class or subclass as a result of a number of factors, including
the fact that the assumptions are unlikely to correspond to actual experience. A
class or subclass of certificates may be repaid prior to its expected final
payment date due to the early amortization of payments using available
collections or the refinancing, redemption or defeasance of the
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corresponding class or subclass of notes as described under "-- The Notes and
Guarantees -- Refinancing," "-- Redemption" and "-- Defeasance." A class or
subclass of certificates may be repaid later than its expected final payment
date because of a number of factors, including increased levels of aircraft
downtime, reduced rental payments and, in the case of the certificates which we
intend to repay by refinancing, the inability of Airplanes Group to issue
refinancing certificates. See "Risk Factors -- Risks Relating to Payments on the
Subclass A-9 Certificates" for a further discussion of the risk of nonpayment on
the expected final payment date of the subclass A-9 certificates.
If we do not repay the subclass A-8 certificates in full on or before their
expected final payment date, we will have to pay step-up interest of an
additional 0.50% per annum on the outstanding principal balance of those
certificates until they are repaid in full. So long as the subclass A-9
certificates are listed on the Luxembourg Stock Exchange, we will publish the
amount of interest that is payable by us in the manner required by the
indentures, including publication in a newspaper of general circulation in
Luxembourg, and give notice of this to the Luxembourg Stock Exchange. We may
issue additional certificates or refinancing certificates that will accrue
step-up interest after their expected final payment date. Step-up interest will
be subordinated to other amounts payable on the class A, B, C and D
certificates. The rating agencies have not rated our ability to pay step-up
interest on the certificates.
EVENTS OF DEFAULT AND REMEDIES
An "EVENT OF DEFAULT" with respect to any class of certificates is defined
as the occurrence and continuance of a note event of default with respect to the
corresponding class of notes under either indenture. See "-- The Notes and
Guarantees -- Note Events of Default" for a description of these note events of
default. As promptly as practicable, and in any case within 30 days, after the
occurrence of any event of default, the trustee will notify Airplanes Limited,
Airplanes Trust, the indenture trustee and the certificate holders by mail of
all uncured or unwaived defaults that it knows of as of the date of the notice.
If an event of default has occurred and is continuing with respect to any
class or subclass of certificates, the trustee (1) may vote all of the
corresponding class or subclass of notes to declare the outstanding principal
balance of the notes, together with accrued but unpaid interest, due and
payable, and (2) upon the direction of the holders of 25% of that class or
subclass of certificates, shall vote a corresponding amount of the corresponding
class or subclass of notes to direct the indenture trustee to declare the
outstanding principal amount of the notes, together with any accrued interest,
due and payable in accordance with the provisions of the indentures; provided
that the trustee and the holders of any class of certificates will not be
permitted to direct the indenture trustee until the payment in full of all
amounts due and payable with respect to any class ranking senior to the notes
corresponding to that class of certificates. Under the terms of the indentures,
all of the notes will become immediately due and payable upon the declaration by
the trustee for, or the vote of the appropriate percentage of the holders of,
the most senior class of notes then outstanding. Before exercising any right or
power under the trust agreement at the request or direction of a class of
certificate holders, the trustee will be entitled to indemnification by the
certificate holders of that class or subclass.
As an additional remedy, if an event of default has occurred and is
continuing with respect to any class or subclass of certificates, the trustee
for the most senior class or subclass of certificates may (and at the written
direction of the certificate holders of at least 25% of any class or subclass of
certificates by outstanding principal balance, will) sell all or part of the two
corresponding classes or subclasses of notes and guarantees for cash to any
person. Any proceeds received by the trustee upon sale will be deposited in the
trust's account for the class (allocated, in the case of the sale of any
subclass of class A notes, among the subclasses on a proportional basis in
relation to the outstanding principal balances, if any, of each subclass) and
will be distributed to the relevant certificate holders on the next payment
date. However, since the market for any class of notes and the related
guarantees in default would necessarily be very limited, the trustee may not be
able to sell those notes for their aggregate outstanding principal balances and
the certificate holders may receive a smaller amount of principal distributions
than anticipated as a result. If this happens, the certificates will suffer a
loss of principal and holders will have no further claim for the shortfall
against Airplanes Group or the trustee.
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Any funds representing payments on the corresponding class of notes in
default that is received by the trustee and any sales proceeds from selling
those notes will, to the extent practicable, be invested and reinvested by the
trustee, at the direction of the trustee of the most senior class of
certificates then outstanding, in permitted account investments pursuant to the
cash management agreement pending distribution of those funds.
The certificate holders of a majority of the outstanding principal balance
of each class or subclass of certificates may, on behalf of all of the
certificate holders of the same class or subclass, waive any past default or
event of default with respect to that class or subclass of certificates and
annul any previous direction given by the trustee with respect to any default or
event of default. This does not apply to (a) a default in the deposit or
distribution of any payment required to be made on the certificates, (b) a
payment default on the corresponding class or subclass of notes, or (c) a
default in respect of any covenant or provision of the trust agreement that by
its terms cannot be waived without the consent of each affected
certificateholder. If the certificate holders waive any past default or event of
default as described above, the trustee will vote a corresponding majority of
the related class or subclass of notes held by the trust in favor of a waiver of
the past default or event of default with respect to those notes under the
relevant indenture.
VOTING
Except as described in this prospectus under "-- Events of Default and
Remedies," "-- Modification of Agreements" and "-- The Notes and Guarantees --
Modification and Waivers," or otherwise required by New York law, the Trust
Indenture Act or the trust agreement, holders of the certificates will have no
voting rights or rights to give consents or waivers under the certificates, the
notes or any related documents. Where the certificate holders are entitled to
vote or give consents and waivers with respect to the notes or any related
documents, the trustee, as sole initial holder of the notes held by the trust,
will vote and give consents and waivers in respect of those notes and related
documents as directed by the certificate holders of the corresponding class or
subclass.
TERMINATION OF THE TRUST
The obligations of Airplanes Limited, Airplanes Trust and the trustee with
respect to any class or subclass of certificates will terminate upon:
- the distribution to the relevant certificate holders of the property of
the relevant pass through trust and the disposition of all property held
in that trust, and
- final payments being made in respect of the corresponding class or
subclass of notes.
Prior to any termination, the trustee will mail, between 20 and 60 days
before the final distribution, to the relevant certificateholder a notice of the
termination setting forth the amount of the proposed final payment, the proposed
date for the distribution of that final payment for the trust and the fact that
the final distribution to any certificateholder of the trust will be made only
upon surrender of a certificateholder's certificates at the office or agency of
the trustee specified in the notice of termination.
MODIFICATION OF AGREEMENTS
The trust agreement contains provisions permitting Airplanes Limited or
Airplanes Trust and the trustee to enter into supplemental trust agreements,
without the consent of any certificate holders, to:
(1) allow Airplanes Limited or Airplanes Trust to issue refinancing
notes;
(2) add to the covenants of Airplanes Limited and Airplanes Trust for the
benefit of the certificate holders of any class, or to surrender any
right or power of Airplanes Limited and Airplanes Trust under the
trust agreement;
(3) cure any ambiguity in, or to correct or supplement any defective or
inconsistent provision of, the trust agreement or any supplemental
trust agreement so long as this does not adversely affect the
interests of any certificate holders; or
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(4) make any modification necessary to continue the qualification of the
trust agreement under the Trust Indenture Act.
The trust agreement also contains provisions permitting Airplanes Limited
or Airplanes Trust and the trustee, with the consent of the holders of each
class or subclass of certificates of the applicable trust evidencing interests
aggregating not less than a majority of the outstanding principal balance of
that class or subclass to execute supplemental trust agreements adding any
provisions to or changing or eliminating any of the provisions of the trust
agreement or modifying the rights of the certificate holders of that class or
subclass. No supplemental trust agreement may, without the consent of each
affected certificate holder:
(1) reduce in any manner the amount of, or delay the timing of, the
trustee's receipt of payments on any of the related notes held in
each trust, or distributions in respect of any related certificate,
change the final maturity date or payment date on any certificate,
change the place of payment where, or the coin or currency in which,
any certificate is payable, or impair the right of any certificate
holder to institute suit for the enforcement of any payment when due,
(2) permit the disposition of any of the notes except as provided in the
trust agreement, or otherwise deprive any certificate holder of the
benefit of the ownership of those notes,
(3) reduce the percentage of the outstanding principal balance of the
certificates of any class or subclass provided for in the trust
agreement, the consent of the holders of which is required for a
supplemental trust agreement or for any waiver provided for in the
trust agreement, or
(4) adversely affect the status of the trust as a grantor trust for U.S.
federal income tax purposes.
If any trustee, as holder of the notes of any class or subclass held in the
related pass through trust, receives a request for its consent to an amendment,
modification or waiver under the related indenture, the notes, the cash
management agreement, administrative agency agreement or other documents related
to those notes, the trustee will mail a notice of the proposed amendment,
modification or waiver to each holder of the corresponding class or subclass of
certificates to seek their vote or consent. Upon the vote by the relevant
certificate holders, the trustee will vote or consent as to that amendment,
modification or waiver in the same proportion as the certificate holders that
actually voted.
GOVERNING LAW
The trust agreement, including all its supplements, are governed by New
York law. Each of Airplanes Limited, Airplanes Trust and the trustee has
submitted to the jurisdiction of the United States Federal and New York State
courts located in New York City for purposes of all suits arising out of or in
connection with, the trust agreement and the certificates, and have each
designated a person in New York City to accept service of any process on its
behalf.
NOTICES TO CERTIFICATE HOLDERS
Except as provided below, any notice to the certificate holders will be
valid if given:
(1) by publication in the Luxemburger Wort or, if it ceases to be
published or it is not practicable to timely publish the notice in this
newspaper, in any other English language newspaper or newspapers having
a general circulation in Europe that the trustee approves;
(2) by either (a) having the information contained in that notice
appearing on the relevant page of the Reuters screen or another medium
for the electronic display of data that is approved by the trustee and
notified to certificate holders or (b) publication in the Financial
Times and The Wall Street Journal (National Edition) or, if either of
them ceases to be published or it is not practicable to timely publish
the notice in those newspapers, in any other English language newspaper
or newspapers having a general circulation in Europe and the United
States that the trustee has approved; and
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(3) until any definitive certificates are issued and so long as the
certificates are registered in the name of a nominee for DTC, Euroclear
or Clearstream, Luxembourg, delivery of the relevant notice to DTC,
Euroclear or Clearstream, Luxembourg for communication by them to
certificate holders.
However, any notice to certificate holders of any class or subclass of
certificates specifying a floating interest rate for the certificates, any
payment date, any principal payment or any payment of premium, if any, shall be
validly given by delivery of the relevant notice to DTC, Euroclear or
Clearstream, Luxembourg, for communication by them to these certificate holders,
without the need for publication in the Luxemburger Wort.
Any notice to the certificate holders shall be deemed to have been given on the
first date on which any of these conditions have been met. So long as the
trustee notifies the certificate holders, it may also approve another method of
giving notice to the certificate holders if, in its opinion, the method:
(1) is reasonable given the number and identity of the certificate
holders or the prevailing market practice;
(2) is in the best interests of the certificate holders; and
(3) will comply with the rules of the Luxembourg Stock Exchange or any
other stock exchange (if any) on which the certificates are listed.
For so long as the certificates are listed on the Luxembourg Stock Exchange
and the rules of the Luxembourg Stock Exchange require, the trustee will give
the Luxembourg Stock Exchange notice specifying the rate, amount or payment date
in respect of any floating rate certificates, including the subclass A-9
certificates, or in respect of any repayment of principal on any notes or
certificates. However, until any definitive certificates are issued and so long
as the certificates are registered in the name of a nominee for DTC, Euroclear
or Clearstream, Luxembourg, this requirement is deemed to be satisfied by:
(1) delivery of the notice to DTC, Euroclear or Clearstream, Luxembourg
for communication by them to the certificate holders and note holders
without the need for publication in the Luxemburger Wort; and
(2) delivery of the notice to the Luxembourg Stock Exchange and the
paying agent in Luxembourg.
However, any notice specifying:
(1) an increase in the interest rate of any subclass of certificates due
to step-up interest or failure by Airplanes Group to comply with the
registration requirements for the certificates; or
(2) redemption of principal of any certificates,
must be published in the Luxemburger Wort or another daily newspaper of general
circulation in Luxembourg.
THE NOTES AND GUARANTEES
GENERAL
The notes are direct obligations of Airplanes Limited and Airplanes Trust
and are not secured by the aircraft or any leases. Generally, the only sources
of payment for the notes and the other obligations of Airplanes Group are:
- the payments made by the lessees under the leases;
- proceeds from the dispositions of any aircraft;
- insurance proceeds from any loss of any aircraft;
- net payments to us under our swap agreements and other hedging
instruments;
- interest earned on the investment of our cash balances; and
- net cash proceeds received from the sale of any refinancing notes.
Each class and subclass of notes and corresponding guarantee has the
priority given to it according to the priority of payments in the indentures, as
described under "-- Principal Amortization of Floating Rate Notes"
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and "-- Priority of Payments." The notes are subordinated to expenses and some
of our other obligations and we cannot make payment on any class or subclass of
notes on any payment date unless we have made or provided for all payments
ranking higher in the priority of payments to that class or subclass of notes on
that date. The subordination provisions of the indentures may not be amended or
modified without the agreement of each holder of a class or subclass of notes
that is affected by the amendment or modification and each holder of any class
or subclass of notes that ranks senior to the affected class. The priority of
the expenses, swap payments and swap breakage costs may not be amended or
modified under any circumstances.
If a note event of default occurs, holders of 25% of the class A notes by
outstanding principal balance may immediately deliver a default notice or
exercise any remedy available to them. Holders of class B, C and D notes may not
deliver a default notice or exercise any other remedy until all the class or
classes of notes senior to theirs have been paid in full.
GUARANTEES
Each of Airplanes Limited and Airplanes Trust has fully and unconditionally
guaranteed the obligations of the other under each class or subclass of notes.
Under the terms of the guarantees, the obligations of Airplanes Trust's
guarantee of each class or subclass of Airplanes Limited notes will rank equally
with Airplanes Trust's obligations under the corresponding class or subclass of
Airplanes Trust notes, and the obligations of Airplanes Limited under Airplanes
Limited's guarantee of each class or subclass of Airplanes Trust notes will rank
equally with Airplanes Limited's obligations under the corresponding class or
subclass of Airplanes Limited notes. In addition, the obligations of Airplanes
Trust and Airplanes Limited under their respective guarantees will be limited
under the terms of the indentures to the extent necessary so that they will not
constitute fraudulent conveyances under applicable laws.
INTEREST
Each note bears interest on its outstanding principal balance from its date
of issue, payable monthly in arrears on each payment date, until it is paid in
full. The subclass A-9 notes will bear interest for each interest accrual period
at a rate equal to one month LIBOR plus 0.550%. An interest accrual period is
the period from and including a payment date (or March 15, 2001, in the case of
the first interest accrual period) up to but excluding the next payment date.
The final interest accrual period for each subclass of notes will end on but
exclude the final maturity date or the date upon which all principal, interest
and any premium on the subclass of notes is paid in full. See "Summary --
Overview -- Outstanding Debt" for the interest rate on the other classes and
subclasses of notes. Interest on any class or subclass of notes that bears
interest at a floating rate, including the subclass A-9 notes, will be
calculated on the basis of a 360-day year and the actual number of days elapsed
in an interest accrual period. Interest on any class or subclass of notes that
bears interest at a fixed rate 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 interest accrual period, on the basis of a 360-day year
consisting of twelve 30-day months.
If we do not repay the subclass A-8 notes in full on or before March 15,
2003, their expected final payment date established at the time of their initial
issuance, we will have to pay step-up interest on those notes of an additional
0.50% per annum on the outstanding principal balance of those notes until they
are repaid in full. We may issue additional notes or refinancing notes that will
accrue step-up interest after their expected final payment date. Step-up
interest will be subordinated to other amounts payable on the class A, B, C and
D notes, including accrued but unpaid interest, the minimum principal payment
amount and the scheduled principal payment amount. The rating agencies have not
rated our ability to pay step-up interest on the notes.
REFERENCE AGENCY AGREEMENT
For the purpose of calculating the rate of interest payable on our floating
rate notes, including the subclass A-9 notes, we have entered into a reference
agency agreement with Bankers Trust Company, as reference agent, according to
which it will determine LIBOR for each interest accrual period. The
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"REFERENCE DATE" for determining LIBOR for each interest accrual period is the
date that is two business days before the payment date on which the interest
accrual period begins.
Under the reference agency agreement, the reference agent determines LIBOR
according to the following method:
- On each reference date, the reference agent will 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" in the
Telerate Monitor, or another page or service that replaces it for the
purpose of displaying LIBOR of major banks for U.S. dollar deposits, at
approximately 11:00 a.m., London time.
- If this offered rate is replaced by the corresponding rates of more than
one bank, then the determination of LIBOR shall be made on the basis of
the average of at least two rates appearing on the Telerate Monitor or
replacement page or service. If these rates do not appear or the
relevant page is unavailable, the reference agent will request each of
the banks whose offered rate would have been used for purposes of the
relevant page or any substitute reference bank in London to provide the
reference agent with its offered quotation to prime banks for dollar
deposits in London for the next interest accrual period as of 11:00
a.m., London time on the reference date. In this case, the floating rate
of interest for each subclass of notes will be the average of at least
two quotations received plus the applicable interest spread over LIBOR
and step-up interest, if payable.
- If on any reference date one or no reference bank provides a quotation,
the reference agent will determine the average of the U.S. dollar
lending rates which New York City banks selected by the reference agent
are quoting as their U.S. dollar lending rate to leading European banks
on the reference date for the next interest accrual period. In this
case, the interest rate for the next interest accrual period will be
this average rate plus the applicable interest spread over LIBOR and
step-up interest, if payable. If the banks selected do not provide these
quotations, the interest rate will be the rate that applied to the last
interest accrual period.
Once it determines the interest rate, the reference agent will calculate
the interest amount for the interest accrual period for each class or subclass
of notes as:
N
Interest amount = P X I X ---
360
where:
P = outstanding principal balance of the relevant class or subclass at the
beginning of the interest accrual period, as estimated by the reference
agent
I = applicable interest rate for the relevant class or subclass for the
interest accrual period, and
N = number of days in the interest accrual period.
The reference agent's determination of LIBOR, the interest rate and the
interest amount for the floating rate notes will, in the absence of negligence,
wilful default, bad faith or manifest error, be conclusive and binding upon all
parties, including holders of the floating rate certificates.
As promptly as practicable after each reference date, the reference agent
will notify Airplanes Limited, Airplanes Trust, the Luxembourg Stock Exchange,
the listing agent and the cash manager of LIBOR, the payment date, the interest
rate for each class or subclass of certificates for the relevant interest
accrual period and the amount of interest on each class or subclass of floating
rate notes. You can also get this information at the offices of the listing
agent or paying agent in Luxembourg, or from the monthly statements we file with
the SEC.
If the reference agent does not or is unable to determine the interest rate
and amount for an interest accrual period, the cash manager will determine the
rate of interest and calculate the interest amount in accordance with the above
provisions, and this determination and calculation will be deemed to have been
made by the reference agent.
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Airplanes Limited and Airplanes Trust reserve the right to terminate the
appointment of the reference agent at any time on 30 days' prior notice and to
appoint a replacement reference agent in its place. Notice of any termination of
the reference agent will be given to the holders of the floating rate
certificates. The reference agent may not be removed by us or resign its duties
unless a successor reference agent has been appointed.
PRINCIPAL AMORTIZATION GENERALLY
The principal repayment provisions of the notes are intended to produce
increasing levels of collateralization with respect to each class of notes as
our portfolio ages and the value of the aircraft declines and to ensure that the
principal amount of each class or subclass of notes is repaid in full prior to
its final maturity date. "COLLATERALIZATION" refers to the difference between
the outstanding principal balance of the various classes of notes relative to
the Initial Appraised Value of the aircraft, the Expected Portfolio Value and
the Adjusted Portfolio Value, as described further below. The obligations of
Airplanes Group to pay interest, principal and any premium will not, in fact, be
collateralized or secured by the aircraft or the leases of Airplanes Group.
The class A and class B notes are either "AMORTIZING NOTES," which require
and are entitled to repayment of principal on each payment date to the extent
there are sufficient funds for repayment in accordance with "-- Principal
Amortization of Floating Rate Notes," or "SOFT BULLET NOTES," which do not
require repayment of principal on any payment date prior to the "AMORTIZATION
COMMENCEMENT DATE" for that subclass of notes described below. The subclass A-6
and A-9 notes and the class B notes are amortizing notes and the subclass A-8
notes are soft bullet notes.
The amortization commencement date for the subclass A-8 notes will be the
earlier of:
(1) the date of repayment (in each case other than through an issue of
refinancing notes) in full of the subclass A-6 and A-9 notes and any
future subclass of class A notes designated as a subclass of amortizing
notes, and
(2) the date on which both the expected final payment date for the
subclass A-8 notes has occurred (March 15, 2003) and the subclass A-6
notes have been repaid in full.
We intend to refinance 100% of the outstanding principal balance of each
subclass of soft bullet notes by issuing and selling refinancing notes to the
trust on or before the expected final payment date established at the time of
initial issuance of the relevant subclass. The trust will finance the purchase
of these refinancing notes through the issuance and sale of a corresponding
subclass of refinancing certificates in the capital markets. However, our
failure to repay any subclass of soft bullet notes in full at its expected final
payment date will not result in a note event of default under the indentures.
If any subclass of the soft bullet notes is not repaid in full on its
amortization commencement date, that subclass of notes will convert
automatically into a class of amortizing notes with a principal repayment
schedule intended to ensure that the remaining outstanding principal balance of
that subclass will be repaid in full on or before its final maturity date. In
addition, after its expected final payment date established at the time of
initial issuance, each soft bullet note which remains outstanding will accrue
interest at a rate equal to its stated interest rate, plus step-up interest.
PRINCIPAL AMORTIZATION OF FLOATING RATE NOTES
Each class or subclass of amortizing notes and, following their
amortization commencement date, each class or subclass of soft bullet notes will
be entitled to a payment on each payment date equal to the sum of the following
amounts to the extent that there are sufficient funds in the collection account
to make that payment:
- the Minimum Principal Payment Amount;
- the Supplemental Principal Payment Amount; and
- with respect to the class A notes only, the Principal Adjustment Amount.
The terms "Minimum Principal Payment Amount," "Supplemental Principal Payment
Amount" and "Principal Adjustment Amount" are defined below. We call the sum of
these amounts for each class or subclass of notes, to
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the extent they are applicable to that class or subclass, the "PRINCIPAL
DISTRIBUTION AMOUNT" for that class or subclass.
To the extent any Minimum Principal Payment Amount, Supplemental Principal
Payment Amount or Principal Adjustment Amount is required to be paid with
respect to the class A notes, and there are sufficient funds in the collection
account to make that payment, these amounts will be applied to repay the
subclass of the class A notes in the following order:
(1) First, any amount outstanding under the subclass A-6 notes,
(2) Second, following their amortization commencement date, any amount
outstanding under the subclass A-8 notes, and
(3) Third, any amount outstanding under the subclass A-9 notes.
Any future subclasses of refinancing notes issued to refinance a subclass of
class A notes will not receive any payments of principal before the payment in
full of the outstanding principal amount of each outstanding subclass of class A
notes that has passed its expected final payment date established at the time of
initial issuance and was issued prior to the issuance of that subclass of
refinancing notes.
In the following definitions of Minimum Principal Payment Amount,
Supplement Principal Payment Amount and Principal Adjustment Amount, we use the
terms "Expected Portfolio Value" and "Adjusted Portfolio Value," which have the
following meanings:
The "EXPECTED PORTFOLIO VALUE" on each payment date will be equal to the
sum of the Expected Values of all the aircraft in our portfolio on that payment
date. The "EXPECTED VALUE" of each aircraft on each payment date will be
calculated as follows:
DF(t)
Expected Value = IAV X ---
DF(c)
where:
IAV = the "INITIAL APPRAISED VALUE" of that aircraft, which is
equal to the average of three appraised base values of the
aircraft as of October 31, 1995,
DF(t) = the Depreciation Factor for that aircraft on that payment
date, and
DF(c) = the Depreciation Factor for that aircraft on March 28, 1996,
the closing date of our acquisition of the aircraft.
For each aircraft, the "DEPRECIATION FACTOR" at time "T" will be calculated
as follows:
DF(t) = [1 - (kn)] X (1 + g)(n)
where:
n = age of the aircraft in years, and
1
k = ---------------------------------------------------------------------------------------
25 years for passenger aircraft and 15 years for aircraft converted into freighters;
g = 0.03
provided that the Depreciation Factor may not be less than zero at any time.
The Depreciation Factor for any aircraft on any payment date, and
consequently the assumed decline in aircraft value for that aircraft on that
payment date, will be determined by reference to:
- for purposes of calculating a Minimum Principal Payment Amount or
Supplemental Principal Payment Amount, the period of time between March
28, 1996 and the relevant payment date, and
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- for purposes of calculating a Principal Adjustment Amount, the period of
time between the most recent appraisal of the aircraft and the relevant
payment date.
The Depreciation Factors produce a "DEPRECIATION CURVE" that assumes that
the value of an aircraft will decline at an accelerating rate as the aircraft
ages. We have used these Depreciation Factors solely for the purpose of
determining repayments of principal of the notes. They are not intended to
predict or conform to actual declines in aircraft values over any period.
The "ADJUSTED PORTFOLIO VALUE" on each payment date will equal the sum of
the Adjusted Values of all the aircraft in our portfolio on that payment date.
The "ADJUSTED VALUE" of each aircraft on each payment date will be calculated as
follows:
DF(t)
Adjusted Value = ABV X ---
DF(a)
where:
ABV = the "ADJUSTED BASE VALUE" of that aircraft on that payment
date, which is equal to the average of three appraised
values of that aircraft as of the date of the most recent
appraisal before that payment date,
DF(t) = the Depreciation Factor for that aircraft on that payment
date, and
DF(a) = the Depreciation Factor for that aircraft on the date of the
most recent appraisal before that payment date.
Minimum Principal Payment Amount. The "MINIMUM PRINCIPAL PAYMENT AMOUNT"
for the amortizing notes and, following their respective amortization
commencement dates, the soft bullet notes on each payment date will be
calculated as follows:
Minimum Principal Payment Amount = OPB - TPB
where:
OPB = the outstanding principal balance of the relevant class of
notes on that payment date (subject to the qualifications
below for the class A notes), and
TPB = the Target Principal Balance for that class of notes for
that payment date, as calculated below;
provided that the Minimum Principal Payment Amount may not be less than zero on
any payment date.
The "TARGET PRINCIPAL BALANCE" of each class of notes on each payment date
will be calculated as follows:
Target Principal Balance = TLVR (LOGO) EPV
where:
TLVR = the Target Loan to Value Ratio for that class of notes on that
payment date as set forth in Appendix 4 to this prospectus, and
EPV = the "EXPECTED PORTFOLIO VALUE" for that payment date as set forth
in Appendix 3 to this prospectus.
However, for the class A notes, if on any payment date the outstanding
principal balance of that class is greater than the Adjusted Portfolio Value,
the class A Minimum Principal Payment Amount on that payment date will be
calculated as follows:
Minimum Principal Payment Amount = OPB - AB
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where:
OPB = the outstanding principal balance of the class A notes on
that payment date, and
AB = the "ADJUSTED BALANCE" of the class A notes for that payment
date, which is equal to the product of (1) the Target Loan
to Value Ratio for the class A notes for that payment date
as set forth in Appendix 4 to this prospectus and (2) the
Adjusted Portfolio Value on that payment date.
Principal Adjustment Amount. The "PRINCIPAL ADJUSTMENT AMOUNT" for the
class A notes on each payment date will be calculated as follows:
Principal Adjustment Amount = OPB - AB
where:
OPB = the outstanding principal balance of the class A notes
(after giving effect to any payment of the Minimum Principal
Payment Amount for that class of notes on that payment date)
on that payment date, and
AB = the Adjusted Balance of the class A notes for that payment
date;
provided that the Principal Adjustment Amount may not be less than zero on any
payment date.
The Principal Adjustment Amount is intended to adjust the principal
amortization schedule established on March 28, 1996 for declines in the value of
the aircraft which, at the time of any subsequent appraisal of the aircraft, are
in excess of the decline in value assumed by the Depreciation Factors.
Supplemental Principal Payment Amount. The "SUPPLEMENTAL PRINCIPAL PAYMENT
AMOUNT" for the amortizing notes and, following their respective amortization
commencement dates, the soft bullet notes on each payment date will be
calculated as follows:
Supplemental Principal Payment Amount = OPB - SPB
where:
OPB = the outstanding principal balance of that class of notes on
that payment date (after giving effect to any payment of the
Minimum Principal Payment Amount for that class and, in the
case of class A notes only, any Principal Adjustment Amount
on that payment date), and
SPB = the "SUPPLEMENTAL PRINCIPAL BALANCE" for that class of notes
on that payment date, which is equal to the product of (1)
the applicable Supplemental Loan to Value Ratio for that
class of notes on that payment date as set forth in Appendix
5 to this prospectus and (2) the Expected Portfolio Value on
that payment date;
provided that the Supplemental Principal Payment Amount may not be less than
zero on any payment date.
SCHEDULED PRINCIPAL REPAYMENT OF FIXED RATE NOTES
Each class of fixed rate notes will be entitled to a payment on each
payment date equal to the Scheduled Principal Payment Amount, if any, for that
class of notes to the extent there are sufficient funds in the collection
account for that payment.
Scheduled Principal Payment Amount. The "SCHEDULED PRINCIPAL PAYMENT
AMOUNT" for each class of fixed rate notes on each payment date will be
calculated as follows:
Scheduled Principal Payment Amount = OPB - TPB
where:
OPB = the outstanding principal balance of that class on that
payment date, and
TPB = the product of the initial outstanding principal balance of
that class and the "TARGET POOL FACTOR" for that class for
that payment date as set forth in Appendix 6 to this
prospectus and subject to recomputation to reflect any
redemption of principal as set forth below.
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The "ACTUAL POOL FACTOR" of each class of notes on any payment date (as
reported monthly in the report to holders) is calculated as follows (and rounded
to the seventh decimal place):
OPB
Actual Pool Factor = ---
IPB
where:
OPB = the outstanding principal balance of that class of notes on
that payment date (after giving effect to any payment of
principal on those notes on that payment date), and
IPB = the initial outstanding principal balance of that class of
notes.
The pool factor for the class C and D notes was 1.0000000 on March 28, 1996
before any repayments of principal on those classes of notes.
The amount of a note holder's proportionate interest of a class of notes
can be determined by multiplying the original denomination of that holder's
notes of that class by the Actual Pool Factor for that class of notes as of the
relevant payment date. The Actual Pool Factor for each class of fixed rate notes
will be mailed to holders of the relevant class on each payment date. In the
event of a partial redemption of a class of notes, the applicable Target Pool
Factor and the outstanding principal balance of that class will be calculated
and notice of that calculation will be mailed to the holders of those notes.
Each class of fixed rate notes will have a separate Target Pool Factor.
REDEMPTION
We can redeem any class or subclass of notes under the following
circumstances. Once we redeem the notes of any class or subclass, the trust will
also redeem the corresponding class or subclass of certificates at the same
redemption price.
Optional Redemption. We may elect to redeem, in whole or in part, any
subclass A-6, A-8 or A-9 or class B notes on any payment date at the applicable
redemption price set forth below, plus accrued but unpaid interest:
- if we are using available collections, including proceeds from the sale
of aircraft, to redeem the notes pursuant to the priority of payment
described under "-- Priority of Payments," the redemption price for the
floating rate notes will equal their outstanding principal balance; and
- if we are using amounts other than available collections to redeem the
notes, the redemption price for the floating rate notes will equal the
product of the applicable redemption premium set out below and the
outstanding principal balance of those notes.
REDEMPTION PREMIUM
----------------------------------------------------
SUBCLASS A-6 SUBCLASS A-8 SUBCLASS A-9 CLASS B
REDEMPTION DATE NOTES NOTES NOTES NOTES
- --------------- ------------ ------------ ------------ -------
On or after March 15, 2001 but before March 15,
2002............................................ 100.00% 100.25% 101.00% 100.50%
On or after March 15, 2002 but before March 15,
2003............................................ 100.00 100.00 100.50 100.25
On or after March 15, 2003........................ 100.00 100.00 100.00 100.00
We may also redeem, in whole or in part, any class C or class D notes on
any payment date at a redemption price equal to the product of the applicable
redemption premium set forth below and the outstanding principal balance of such
class of notes or portion thereof being redeemed, plus accrued but unpaid
interest. For each class of fixed rate notes being redeemed in part, the amount
of the outstanding principal balance being repaid will be applied in each case
proportionately among all fixed rate notes of that class to ratably reduce the
remaining expected principal payments of that class.
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REDEMPTION PREMIUM
--------------------
CLASS C CLASS D
REDEMPTION DATE NOTES NOTES
- --------------- ------- -------
On or after March 15, 2001 but before March 15, 2002........ 105.00% 107.00%
On or after March 15, 2002 but before March 15, 2003........ 104.00 106.00
On or after March 15, 2003 but before March 15, 2004........ 103.00 105.00
On or after March 15, 2004 but before March 15, 2005........ 102.00 104.00
On or after March 15, 2005 but before March 15, 2006........ 101.00 103.00
On or after March 15, 2006 but before March 15, 2007........ 100.00 102.00
On or after March 15, 2007 but before March 15, 2008........ 100.00 101.00
On or after March 15, 2008.................................. 100.00 100.00
It is a condition of any redemption that on the redemption date, all
amounts necessary for that redemption and all amounts necessary to pay accrued
but unpaid interest in respect of all classes or subclasses of notes ranking
equally with or prior to the notes to be redeemed have been paid or will be paid
on the redemption date.
Redemption for Taxation Purposes. All payments of principal, interest and
premium, if any, that we make in respect of any class or subclass of notes or
guarantees, or intercompany payments supporting the notes and guarantees, 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. If any
withholding or deduction is required by law, we will not be obliged to pay any
additional amounts in respect of that withholding or deduction. Furthermore, if
at any time:
(a) Airplanes Limited or Airplanes Trust is, or on the next payment date
will be, required to make any withholding or deduction under the laws
or regulations of any applicable tax authority with respect to any
payment in respect of any class or subclass of notes; or
(b) Airplanes Limited or Airplanes Trust is, or will be subject to any
circumstance (whether by reason of any law, regulation, regulatory
requirement or double-taxation convention, or the interpretation or
application thereof, or otherwise) leading to the imposition of a tax
(whether by direct assessment or by withholding at source) or other
similar imposition by any jurisdiction which would:
(1) materially increase the cost to Airplanes Limited or Airplanes
Trust of making payments in respect of any class or subclass of
notes or of complying with its obligations under or in connection
with any notes;
(2) materially increase the operating or administrative expenses of
Airplanes Limited or Airplanes Trust, or the charitable trusts
which hold the ordinary share capital of Airplanes Limited;
(3) otherwise oblige Airplanes Limited or Airplanes Trust 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
Airplanes Limited or Airplanes Trust, or by the cash manager on
behalf of Airplanes Limited or Airplanes Trust as contemplated by
the cash management agreement;
then Airplanes Limited or Airplanes Trust will inform the indenture trustee at
that time of the requirement or imposition and use their best efforts to avoid
the effect of the same. However, Airplanes Limited and Airplanes Trust will not
take any action to avoid the withholding tax or deduction unless each rating
agency has confirmed that the action would not result in the lowering or
withdrawal of the current rating of any outstanding class or subclass of
certificates.
If, after using its best efforts to avoid the adverse effect described
above, Airplanes Limited, Airplanes Trust or any subsidiary has not avoided the
effects of the withholding tax or deduction, then on any payment date, each of
Airplanes Limited and Airplanes Trust may, at its election, redeem the notes of
any or all classes or subclasses to which the withholding or deduction applies,
in whole but not in part, at the outstanding principal balance of that class or
subclass, without premium, plus accrued but unpaid interest. However, any
redemption for taxation purposes may not occur more than 30 days before the time
at which the requirement or imposition described in (a) or (b) above is to
become effective.
Method of Redemption. If Airplanes Limited and Airplanes Trust propose to
make an optional redemption or a redemption for taxation purposes, Airplanes
Limited and Airplanes Trust have to notify the indenture trustee
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at least 30 days before the redemption date and the indenture trustee will
notify holders of the relevant class or subclass of notes at least 20 days but
not more than 60 days before the redemption date. If we redeem any class or
subclass of notes in part, we will apply the redemption price proportionally to
each holder of that class or subclass. If we redeem all or any part of a class
or subclass of notes with available collections as required by the priority of
payments, we will not send a notice of redemption.
Each notice of redemption will state:
- the applicable redemption date,
- the indenture trustee's arrangements for making the redemption payments,
- the redemption price of the notes to be redeemed,
- in the case of a redemption in whole, that notes of the class or
subclass to be redeemed must be surrendered (which can be done by any
holder of the notes or its authorized agent) to the indenture trustee to
collect the redemption price and accrued but unpaid interest on those
notes, and
- in the case of redemptions in whole, that, unless we default in the
payment of the redemption price and any accrued but unpaid interest
thereon, interest on the class or subclass of notes called for
redemption will cease to accrue on and after the redemption date.
The indenture trustee may not deliver any notice of redemption unless and
until it has received satisfactory evidence that amounts sufficient for that
redemption and to pay all accrued but unpaid interest on any class or subclass
of notes that rank prior to or equally with the class or subclass or notes being
redeemed have been deposited into the defeasance/redemption account.
Once a notice of redemption for a redemption in whole is mailed, each class
or subclass of notes to which it applies will become due and payable on the
redemption date and at the redemption price stated in the notice, together with
accrued but unpaid interest, and will cease to bear interest after the
redemption date (unless there is a default in the redemption payment). If the
redemption payment is not paid upon surrender of the relevant note on the
redemption date, that note will continue to bear interest at the interest rate
then applicable to that note.
REFINANCING
We can refinance any class or subclass of notes by issuing refinancing
notes. If we do so, we will repay to the holders of the class or subclass of
notes being refinanced the outstanding principal amount of those notes, together
with the redemption premium referred to above, if any, and any accrued but
unpaid interest.
DEFEASANCE
We may at any time terminate all of our obligations under the notes and the
indentures. This is known as "LEGAL DEFEASANCE." Legal defeasance will not apply
to (1) our obligations relating to the defeasance trust or (2) our obligations
to register the transfer or exchange of the notes, to replace mutilated,
destroyed, lost or stolen notes and to maintain a register in respect of the
notes.
In addition, we may at any time terminate our obligations under the
covenants described under "-- Indenture Covenants" and "-- Operating Covenants"
and the note events of default described under "-- Note Event of Default" other
than those described in clauses (1), (2), (3), (6) (solely with respect to
Airplanes Limited and Airplanes Trust) and (7) (solely with respect to Airplanes
Limited and Airplanes Trust). This is known as "COVENANT DEFEASANCE."
We may exercise our legal defeasance option even if we have already
exercised our covenant defeasance option. If we exercise our legal defeasance
option, payment on the notes may not be accelerated because of any note event of
default. If we exercise our covenant defeasance option, payment on the notes may
not be accelerated because of any note event of default described under "-- Note
Event of Default" other than those described in clauses (1), (2), (3), (6)
(solely with respect to Airplanes Limited and Airplanes Trust) and (7) (solely
with respect to Airplanes Limited and Airplanes Trust).
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In order to exercise either defeasance option, we must irrevocably deposit
in trust with the indenture trustee any combination of cash or obligations of
the U.S. Government or corporate issuers (whose obligations are rated at least
AA+ or equivalent and which have a maturity of less than three years from the
date of defeasance) that will be sufficient for the payment of principal,
premium (if any), and interest on the notes to redemption or maturity. We also
must comply with other conditions, including delivering to the indenture trustee
an opinion of counsel to the effect that holders of the notes (1) will not
recognize income, gain or loss for United States federal income tax purposes as
a result of the deposit and defeasance and (2) 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 the deposit and defeasance had not
occurred. In the case of legal defeasance only, the opinion of counsel must be
based on a ruling of the Internal Revenue Service or other change in applicable
United States federal income tax law.
PRIORITY OF PAYMENTS
On each payment date, the cash manager on behalf of the security trustee
will distribute amounts on deposit in the collection account in the order of
priority set forth below, but will only pay an amount to the extent that all
amounts ranking senior to that amount are paid in full on the payment date.
(1) First, to the expense account, or directly to the relevant expense
payees, an amount equal to the required expense amount and then to the
relevant expense payees;
(2) Second, the following amounts, in no order of priority among
themselves, but in proportion to the amounts payable on that date:
(A) to the holders of each subclass of class A notes, all accrued but
unpaid interest excluding step-up interest, if applicable, on that
subclass of class A notes, proportionately according to the amount
of accrued but unpaid interest on that subclass of class A notes;
and
(B) proportionately, to any swap provider, an amount equal to any
payment due from Airplanes Limited or Airplanes Trust under any
swap agreement;
(3) Third, retain in the collection account, an amount, if positive,
equal to
(A) the sum of the maintenance reserve amount and the miscellaneous
reserve amount, less
(B) the amount then on deposit in the collection account that was
already allocated pursuant to this provision;
(4) Fourth, to any swap provider an amount not in excess of the minimum
hedge payment;
(5) Fifth, to the holders of relevant subclass of the class A notes, in
the order of priority by subclass set forth under "-- Principal
Amortization of Floating Rate Notes," an amount equal to the class A
Minimum Principal Payment Amount;
(6) Sixth, to the holders of the class B notes, all accrued but unpaid
interest on the class B notes;
(7) Seventh, to the holders of the class B notes, an amount equal to the
class B Minimum Principal Payment Amount;
(8) Eighth, to the holders of the class C notes, all accrued but unpaid
interest on the class C notes;
(9) Ninth, to the holders of the class D notes, all accrued but unpaid
interest on the class D notes;
(10) Tenth, retain in the collection account, an amount, if positive,
equal to
(A) the liquidity reserve amount, less
(B) the amount then on deposit in the collection account that was
retained pursuant to clause (3) above;
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(11) Eleventh, in the order of priority by subclass set forth under "--
Principal Amortization of Floating Rate Notes," to the holders of the
class A notes, an amount, if any, equal to the class A Principal
Adjustment Amount with respect to each subclass;
(12) Twelfth, to the holders of the class C notes, an amount equal to the
class C Scheduled Principal Payment Amount;
(13) Thirteenth, to the holders of the class D notes, an amount equal to
the class D Scheduled Principal Payment Amount;
(14) Fourteenth, to the expense account, an amount equal to permitted
accruals in respect of modification payments (or any part thereof);
(15) Fifteenth, to the holders of each subclass of the class A notes
entitled to that payment, an amount equal to all accrued but unpaid
step-up interest on those subclasses, if any, proportionately according
to the amount of accrued but unpaid step-up interest payable in respect
of each subclass;
(16) Sixteenth, to the holders of class E notes, an amount equal to the
class E note minimum interest amount for the current interest accrual
period, without accruals from prior interest accrual periods;
(17) Seventeenth, to any swap provider an amount not in excess of the
supplemental hedge payment;
(18) Eighteenth, to the holders of class B notes, an amount equal to the
class B Supplemental Principal Payment Amount;
(19) Nineteenth, in the order of priority by subclass set forth under "--
Principal Amortization of Floating Rate Notes," to the holders of the
class A notes, an amount equal to the class A Supplemental Principal
Payment Amount;
(20) Twentieth, to the holders of class D notes, an amount equal to the
redemption price, including premium, if any, of the outstanding
principal balance of the class D notes;
(21) Twenty-first, to the holders of class C notes, an amount equal to the
redemption price, including premium, if any, of the outstanding
principal balance of the class C notes;
(22) Twenty-second, to the holders of the class E notes, an amount equal
to the class E note supplemental interest amount for the current
interest accrual period, without accruals from prior interest accrual
periods;
(23) Twenty-third, to the holders of class B notes, an amount equal to the
outstanding principal balance of any class B notes;
(24) Twenty-fourth, in the order of priority by subclass set forth under
"-- Principal Amortization of Floating Rate Notes," to the holders of
the class A notes, an amount equal to the outstanding principal balance
of the class A notes;
(25) Twenty-fifth, payments to swap providers which are subordinated in
accordance with their terms;
(26) Twenty-sixth, to the holders of the class E notes, an amount equal to
all accrued but unpaid interest on the class E notes and any amount
equal to the liquidity reserve amount then on deposit in the collection
account; and
(27) Twenty-seventh, on a proportionate basis to the holders of the class
E notes, an amount equal to the outstanding principal balance of the
class E notes and to the trustees of the charitable trusts, an amount
equal to any arrears of the annual dividend amount not previously paid.
In addition to the above payments, Airplanes Limited will pay annually to
the trustees of the charitable trusts, to the extent that there are
distributable profits in any fiscal year, the annual dividend amount and any
arrears of the annual dividend amount to the extent not paid in respect of
previous fiscal years.
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PRIORITY OF PAYMENTS FOLLOWING A DEFAULT NOTICE
If a default notice is delivered to Airplanes Limited, Airplanes Trust or
the cash manager, the allocation of payments described above will not apply and
all amounts on deposit in the collection account will be applied in the
following order of priority:
(1) First, to the expense account, or directly to the relevant expense
payees, an amount equal to the required expense amount (other than any
amount in respect of permitted account investments);
(2) Second, the following amounts, in no order of priority among
themselves, but in proportion to the amounts payable on that date:
(A) to the holders of each subclass of class A notes, all accrued but
unpaid interest including step-up interest, if applicable, on, and
all outstanding principal of, that subclass of class A notes,
proportionately according to the amount of accrued but unpaid
interest and outstanding principal on that subclass of class A
notes; and
(B) proportionately, to any swap provider, an amount equal to any
payment due from Airplanes Limited or Airplanes Trust under any
swap agreement;
(3) Third, to the holders of the class B notes, all accrued but unpaid
interest on and all outstanding principal of the class B notes;
(4) Fourth, to the holders of the class C notes, all accrued but unpaid
interest on and all outstanding principal of the class C notes;
(5) Fifth, to the holders of the class D notes, all accrued but unpaid
interest on and all outstanding principal of the class D notes;
(6) Sixth, to the holders of the class E notes all accrued but unpaid
interest on and all outstanding principal of the class E notes; and
(7) Seventh, with respect to the Airplanes Limited only, to the
charitable trusts, all accrued but unpaid dividends payable to the
charitable trusts.
INDENTURE COVENANTS
No Release of Obligations. Airplanes Limited and Airplanes Trust will not
take, or knowingly (a) permit any subsidiary to take, any action which would
amend, terminate (other than any termination in connection with the replacement
of the relevant agreement with an agreement on substantially similar terms) or
discharge or prejudice the validity or effectiveness of the indentures (other
than as permitted therein), the security trust agreement, the cash management
agreement, the administrative agency agreement, or the servicing agreement, or
(b) 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 relevant agreement. We may, however, take or permit those actions and may
permit those releases if (x) we first obtain an authorizing resolution of the
directors in the case of Airplanes Limited, or of the controlling trustees in
the case of Airplanes Trust, determining that the action, permitted action or
release does not materially adversely affect the interests of the note holders
and (y) we have given notice to the rating agencies.
Despite the preceding paragraph:
(1) we will not take any action which would result in any amendment or
modification to any conflicts standard or duty of care in those
agreements, and
(2) there must be at all times an administrative agent, a cash manager
and a servicer (unless the servicer terminates the servicing agreement
prior to the appointment of a replacement servicer as a result of any
failure to pay amounts due by us and owing to it).
Limitation on Encumbrances. Airplanes Limited and Airplanes Trust will
not, and will not permit any subsidiary to, create, incur, assume or suffer to
exist any mortgage, pledge, lien, encumbrance, charge or security
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interest (including, without limitation, any conditional sale, or any sale with
recourse against the seller or any affiliate of the seller, or any agreement to
give any security interest) over or with respect to any of our or any of our
subsidiary's assets (excluding segregated funds but including, without
limitation, all ordinary shares and preferred shares, any options, warrants and
other rights to acquire shares of capital stock and any indebtedness of any
subsidiary held by us or a subsidiary).
However, we may create, incur, assume or suffer to exist:
(1) any permitted encumbrance, as described below;
(2) any security interest created or required to be created under the
security trust agreement;
(3) encumbrances over rights in or derived from leases, upon confirmation
from the rating agencies in advance that the proposed action or event
will not result in the lowering or withdrawal of any rating assigned
by that rating agency to any class or subclass of certificates, so
long as any transaction or series of transactions resulting in an
encumbrance, taken as a whole, does not materially adversely affect
the amount of collections that would have been received by us from
the relevant lease had that encumbrance not been created; or
(4) any other encumbrance the validity or applicability of which is being
contested in good faith in appropriate proceedings by us or any of
our subsidiaries (however, if these proceedings continue for more
than 12 months and the outstanding encumbrance or encumbrances relate
to more than 2% of the initial appraised value of our portfolio, we
will give notice to the rating agencies).
As used in the indentures, "AFFILIATE" means, with respect to any person,
any other person that, directly or indirectly, controls, is controlled by or is
under common control with, that person or is a director or officer of that
person, and "CONTROL" of a person means the possession, direct or indirect, of
the power to vote 5% or more of the voting stock of that person or to direct or
cause the direction of the management and policies of that person, whether
through the ownership of voting stock, by contract or otherwise.
For purposes of this covenant, "PERMITTED ENCUMBRANCE" means:
(1) any lien for taxes, assessments and governmental charges or levies
not yet due and payable or which are being contested in good faith by
appropriate proceedings;
(2) in respect of any aircraft, any liens of a repairer, carrier or
hanger keeper arising in the ordinary course of business by operation
of law or any engine or parts-pooling arrangements or other similar
lien;
(3) any permitted lien or encumbrance on any aircraft, engines or parts
as defined under any lease (other than liens or encumbrances created
by the relevant 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 that lease has
been terminated) or without the consent of the relevant lessor (as
long as if that lessor becomes aware of any lien of that type, that
lessor shall use commercially reasonable efforts to have the lien
lifted);
(5) any head lease, lease, conditional sale agreement or purchase option
existing on March 28, 1996 or any aircraft agreement meeting the
requirements of paragraph (2)(c) under the "Limitation on Aircraft
Sales" covenant;
(6) any lien for air navigation authority, airport tending, gate or
handling (or similar) charges or levies;
(7) any lien created in favor of Airplanes Limited or Airplanes Trust or
any of their subsidiaries or the security trustee;
(8) any lien not referred to in (1) through (7) above which would not
adversely affect the owner's rights and does not exceed the greater
of $2,000,000 in the aggregate for our portfolio or $250,000 per
aircraft.
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Limitation on Restricted Payments. Airplanes Limited and Airplanes Trust
will not, and will not permit any subsidiary to:
(1) declare or pay any dividend or make any distribution on its stock
held by persons other than Airplanes Limited or Airplanes Trust or
any subsidiary, except that, so long as no note event of default has
occurred and is continuing, Airplanes Limited may pay the annual
dividend amount to the extent permitted by the relevant indenture;
(2) purchase, redeem, retire or otherwise acquire for value any
beneficial interest in Airplanes Limited or Airplanes Trust or any
stock of any subsidiary held by and on behalf of persons other than
Airplanes Limited or Airplanes Trust, any subsidiary or other persons
permitted under the requirements of paragraph (2)(b) under the
"Limitation on the Issuance, Delivery and Sale of Capital Stock"
covenant;
(3) make any interest, principal or premium payment on the notes or make
any voluntary or optional repurchase, defeasance or other acquisition
or retirement for value of indebtedness of Airplanes Limited or
Airplanes Trust or any subsidiary that is not owed to Airplanes
Limited or Airplanes Trust or any subsidiary other than in accordance
with the notes and the indentures; or
(4) make any investments (other than permitted account investments,
investments permitted under the "Limitation on Engaging in Business
Activities" covenant, and allowed restructurings), except that no
investment by Airplanes Trust or any of its subsidiaries in Airplanes
Limited or any of its subsidiaries, and vice-versa, may be made if
the investment would materially adversely affect the note holders.
The term "INVESTMENT" for purposes of this covenant means any loan or
advance to a person or entity, any purchase or other acquisition of any capital
stock, warrants, rights, options, obligations or other securities of that person
or entity, any capital contribution to such person or entity and any other
investment in that person or entity.
Limitation on Dividends and Other Payment Restrictions. Airplanes Limited
and Airplanes Trust 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,
the stock of any member of Airplanes Group;
(2) pay any indebtedness owed to Airplanes Limited or Airplanes Trust or
any other subsidiary;
(3) make loans or advances to Airplanes Limited or Airplanes Trust or any
other subsidiary; or
(4) transfer any of its property or assets to Airplanes Limited or
Airplanes Trust or any other subsidiary.
These restrictions shall not apply to any consensual encumbrances or other
restrictions:
(1) that existed on March 28, 1996 under any related document, including
any amendments, extensions, refinancings, renewals or replacements of
those documents so long as the consensual encumbrances and
restrictions in those amendments, extensions, refinancings, renewals
or replacements are no less favorable in any material respect to the
holders of the notes than those previously in effect and being
amended, extended, refinanced, renewed or replaced; or
(2) in the case of clause (4) above:
(a) 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
(b) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or consensual encumbrance on, any
property or assets of Airplanes Limited or Airplanes Trust or any
subsidiary not otherwise prohibited by the indentures. This
covenant shall not prevent Airplanes Limited or Airplanes Trust or
any subsidiary from creating, incurring, assuming or suffering to
exist any encumbrances not otherwise prohibited under the
indentures.
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Limitation on Engaging in Business Activities. Airplanes Limited or
Airplanes Trust will not, and will not permit any subsidiary to, engage in any
business or activity other than:
(1) purchasing or otherwise acquiring from debis AirFinance Ireland and
its affiliates the stock of the aircraft-owning and aircraft-leasing
subsidiaries (including, in the case of Airplanes Limited and its
subsidiaries, the purchase of stock of affiliates of the companies
organized in the Isle of Man who were parties to aircraft sales
agreements in connection with the acquisition in 1996);
(2) owning, holding, converting, maintaining, modifying, managing,
operating, leasing, re-leasing and, subject to the limitations set
forth in the "Limitations on Aircraft Sales" covenant, selling or
otherwise disposing of the aircraft;
(3) entering into all contracts and engaging in all related activities
incidental to the activities in clause (2) above, including from time
to time accepting, exchanging, holding or permitting any of our
subsidiaries to accept, exchange or hold promissory notes, contingent
payment obligations or equity interests, of lessees or their
affiliates issued in connection with the bankruptcy, reorganization
or other similar process, or in settlement of delinquent obligations
or obligations anticipated to be delinquent, of those lessees or
their respective affiliates in the ordinary course of business;
(4) in the case of Airplanes Limited and its subsidiaries, acquiring from
an Isle of Man company any aircraft that was subject to an existing
sales agreement on March 28, 1996;
(5) providing loans to, and guaranteeing or otherwise supporting the
obligations and liabilities of Airplanes Limited or Airplanes Trust
or any subsidiary, in each case on the terms and in the manner that
the directors or controlling trustees, as the case may be, see fit
and (whether or not that member of Airplanes Group or its subsidiary
derives a benefit therefrom) so long as the loans, guarantees or
other supports are provided in connection with the purposes set forth
in clauses (1)-(4) above and so long as the loan, guarantee or other
support would not materially adversely affect the note holders;
(6) financing or refinancing the business activities described in clauses
(1)-(4) above through the offer, sale and issuance of any securities
of Airplanes Limited or Airplanes Trust, upon the terms and
conditions that the directors or controlling trustees, as the case
may be, see fit, for cash or in payment or in partial payment for any
property purchased or otherwise acquired by Airplanes Limited or
Airplanes Trust;
(7) 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 which 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 any of the property or assets of Airplanes Limited
or Airplanes Trust or any subsidiary within limits determined by the
directors or the controlling trustees, as the case may be, from time
to time and submitted to and agreed to by the rating agencies,
including but not limited to dealings, whether involving purchases,
sales or otherwise, in foreign currency, spot and forward interest
rate exchange contracts, forward interest rate agreements, caps,
floors and collars, futures, options, swaps, and any other currency,
interest rate and other similar hedging arrangements and other
similar instruments;
(8) establishing, promoting and aiding in promoting, constituting,
forming or organizing companies, syndicates, partnerships or other
entities of all kinds in any part of the world for the purposes set
forth in clauses (1)-(4) above (so long as the relevant
constitutional documents are substantially similar, to the extent
applicable under applicable local law, to those of the Airplanes
Group members);
(9) acquiring, holding and disposing of shares, securities and other
interests in any entity or partnership referred to in clause (8)
above;
(10) disposing of shares, securities and other interests in, or causing
the dissolution of, any existing subsidiary other than Airplanes
Holdings or AeroUSA so long as any disposition which results in the
disposition of an aircraft meets the requirements set forth under the
"Limitation on Aircraft Sales" covenant; and
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(11) taking out, acquiring, surrendering and assigning policies of
insurance and assurances with any insurance company or companies
which we may think fit and to pay the premiums.
Limitation on Indebtedness. Airplanes Limited and Airplanes Trust will
not, and will not permit any of their subsidiaries to, incur, create, issue,
assume, guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, whether present or
future, indebtedness, except as described below.
For the purposes of the indentures, "INDEBTEDNESS" means, with respect to
any person at any date of determination without duplication:
(1) all indebtedness of that person for borrowed money;
(2) all obligations of that person evidenced by bonds, debentures, notes
or other similar instruments;
(3) all obligations of that person in respect of letters of credit or
other similar instruments including reimbursement obligations with
respect thereto;
(4) all obligations of that person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of purchasing the property or service or
taking delivery and title thereto or the completion of the services, and
payment deferrals arranged primarily as a method of raising finance or
financing the acquisition of the property or service;
(5) all obligations of that person under a lease of (or other agreement
conveying the right to use) any property, whether real, personal or
mixed, 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 (as defined in clauses (1) through (5) of this
paragraph) of other persons secured by a lien on any asset of that
person, whether or not the indebtedness is assumed by that person; and
(7) all indebtedness (as defined in clauses (1) through (5) of this
paragraph) of other persons guaranteed by that person.
However, this restriction does not apply to:
(1) indebtedness under any note, class E note or guarantee;
(2) indebtedness under any refinancing notes so long as:
(a) the certificates corresponding to the refinancing notes or other
indebtedness receive ratings from the rating agencies at the close
of the refinancing equal to or higher than those of the class or
subclass being refinanced (determined at the date of incurrence);
(b) taking into account the refinancing, Airplanes Group receives
confirmation prior to the refinancing from the rating agencies that
the transaction will not result in the lowering or withdrawal of
any rating assigned by any rating agency to any outstanding class
or subclass of certificates;
(c) the refinancing does not extend the remaining weighted average
life of any other class or subclass of notes then outstanding by
more than three months;
(d) the net proceeds of the refinancing shall be used only to repay
the outstanding principal balance of the class or subclass of the
notes being refinanced; and
(e) in the case of any refinancing other than of the soft bullet
notes, the remaining weighted average life and expected final
payment date established at the time of initial issuance of the
refinancing notes, determined as of the date of incurrence, does
not exceed by more than three months:
- in the case of fixed rate notes, the remaining weighted average
life or expected final payment date established at the time of
initial issuance, as the case may be, of the class or subclass
of notes to be refinanced, or
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- in the case of floating rate notes, the expected final payment
date established at the time of initial issuance of the class or
subclass of notes to be refinanced;
(3) indebtedness under guarantees by Airplanes Limited and Airplanes
Trust or any subsidiary of any other member of Airplanes Group so long
as no indebtedness in respect of any member of Airplanes Group other
than Airplanes Limited or Airplanes Trust or any subsidiary shall be
incurred if it would materially adversely affect the note holders;
(4) obligations to each seller under the stock purchase agreement dated
March 28, 1996 and the related lease assignment and assumption
agreements and the related documents;
(5) indebtedness under any issuance of class E notes payable in
connection with any purchase price adjustment under the stock purchase
agreements;
(6) indebtedness to Airplanes Limited or Airplanes Trust or any of their
subsidiaries or any other member of Airplanes Group under intercompany
loans or any agreement between Airplanes Limited or Airplanes Trust or
any of their subsidiaries and any other members of Airplanes Group. Any
indebtedness of any member of Airplanes Group to Airplanes Limited or
Airplanes Trust shall not be incurred if it would materially adversely
affect the note holders; and
(7) any subordinated, non-interest paying indebtedness issued in
accordance with the terms of the tax sharing agreement.
As used in the indentures, "GUARANTEE" means any obligation, contingent or
otherwise, of any person directly or indirectly guaranteeing any indebtedness or
other obligation of any other person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of that
person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) the indebtedness or other obligation of any other person, or
(2) entered into for purposes of assuring in any other manner the obligee
of the indebtedness or other obligation of the payment thereof or to
protect the obligee against loss in respect of the indebtedness or other
obligation in whole or in part,
but 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. Airplanes Limited and Airplanes Trust will
not, and will not permit any subsidiary to, sell, transfer or otherwise dispose
of any aircraft or any interest therein, except:
(1) any engine or part; or
(2) one or more aircraft or an interest in aircraft:
(a) under a purchase option or other agreements of a similar character
existing on March 28, 1996;
(b) within or among Airplanes Limited or Airplanes Trust and any
subsidiary without limitation, and among Airplanes Limited or
Airplanes Trust or any subsidiary and any other member of Airplanes
Group if that sale, transfer or disposition, as the case may be,
would not materially adversely affect the note holders;
(c) under any aircraft agreement as long as that sale does not result
in a concentration default, and the net present value of the cash
net sale proceeds is not less than the note target price;
(d) pursuant to receipt of insurance proceeds in connection with an
event of loss; or
(e) having an aggregate initial appraised value of no more than $50
million per year and no more than $500 million in aggregate, in
each case for Airplanes Group taken as a whole, from March 28, 1996
until the termination of either indenture by its terms, so long as:
(1) the directors of Airplanes Limited or the controlling
trustees of Airplanes Trust, as applicable, unanimously confirm
that each sale is in the best interests of Airplanes Group and
the note holders,
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(2) all consideration for the sale shall be in cash, and
(3) the sale does not result in a concentration default.
This covenant will not apply to any sale, transfer or other disposition of
any aircraft or any interest therein effected as part of a single transaction
providing for the redemption or defeasance of the notes or the class E notes in
accordance with their terms as described under "-- Redemption" or "--
Defeasance."
For the purpose of this covenant, the net present value of the cash net
sale proceeds of any sale, transfer or other disposition of any aircraft shall
mean the present value of all payments received or to be received by Airplanes
Limited or Airplanes Trust from the date of execution or option granting date,
as the case may be, of the relevant aircraft agreement through and including the
date of transfer of title to that aircraft, discounted back to the date of
execution or option granting date, as the case may be, of the aircraft agreement
at the weighted average cost of funds of Airplanes Limited or Airplanes Trust
(based on the cost of funds represented by the notes on the payment date
immediately preceding that date and taking into account any swap agreements but
excluding any interest paid or accrued on the class E notes, other than class E
minimum interest amount).
The "NOTE TARGET PRICE" of an aircraft means 105% of the aggregate
outstanding principal balance of the class A, B, C and D notes allocable to the
aircraft on the date of the sale agreement or purchase option date, as the case
may be. On any date, the outstanding principal balance of class A, B, C and D
notes allocable to an aircraft will be calculated as follows:
ABV
Allocable Outstanding Principal Balance = OPB X ---
APV
where:
ABV = the Adjusted Base Value,
APV = the Adjusted Portfolio Value, and
OPB = the aggregate outstanding principal balance of all class A,
B, C and D notes of Airplanes Limited or Airplanes Trust on
the most recent payment date.
"AIRCRAFT AGREEMENT" means any lease, sub-lease, conditional sale
agreement, hire purchase agreement or other agreement (other than an agreement
for sale not providing for possession by the purchaser, or an agreement relating
to maintenance, modification or repairs) or any purchase option granted to a
person other than Airplanes Limited or Airplanes Trust or any subsidiary or any
other member of Airplanes Group to purchase an aircraft pursuant to a purchase
option agreement, in each case where a person acquires or is entitled to acquire
legal title or the economic benefits of ownership of that aircraft.
"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 transaction after deducting
(without duplication):
(1) reasonable and customary brokers' commissions and other similar fees
and commissions; and
(2) the amount of taxes payable in connection with or as a result of that
transaction, in each case to the extent, but only to the extent, that
the amounts so 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 that transaction or to the asset that is the
subject of that transaction.
"CONCENTRATION DEFAULT" means an event of default under "-- Operating
Covenants -- Concentration Limits," as that covenant may be adjusted from time
to time upon approval by the rating agencies, which would arise if effect were
given to any sale, transfer or other disposition or any purchase or other
acquisition as of the date of the binding sale or purchase agreement even if the
sale, transfer or other disposition or purchase or other acquisition is
scheduled or expected to occur after the date of the binding agreement.
Limitation on Modification Payments and Capital Expenditures. Airplanes
Limited and Airplanes Trust will not, and will not permit any subsidiary to,
make any capital expenditures for the purpose of effecting any
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optional improvement or modification of any aircraft, or for the optional
conversion of any aircraft from a passenger aircraft to a freighter or mixed-use
aircraft, or for the purpose of purchasing or otherwise acquiring any engines or
parts outside of the ordinary course of business except as described below.
Airplanes Limited and Airplanes Trust may, and may permit any subsidiary
to, make modification payments if:
(1) each modification payment, together with all other modification
payments made after March 28, 1996 with respect to any single aircraft,
do not exceed the aggregate amount of funds that would be necessary to
perform heavy maintenance (as described in the servicing agreement) on
that aircraft, including the airframe and the engines;
(2) any improvements made as a result of a modification payment do not
detract from the value of the affected aircraft;
(3) that modification payment is included in the annual operating budget
of Airplanes Limited and Airplanes Trust and approved by the directors
or the controlling trustees, as the case may be;
(4) the amount of funds necessary to make that modification payment shall
have been accrued in advance as a permitted accrual in the expense
account through transfers into the expense account pursuant to the
indentures or is otherwise allowed to be paid under permitted
indebtedness; and
(5) the aggregate amount of all modification payments made by members of
Airplanes Group, taken as a whole, pursuant to this covenant after March
28, 1996, including the modification payment in question, shall not
exceed $200,000,000.
Limitation on Consolidation, Merger and Transfer of Assets. Airplanes
Trust and Airplanes Limited 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 Airplanes Limited
or Airplanes Trust or any subsidiary, unless:
(1) the resulting entity is a special purpose entity, the constitutional
documents of which are substantially similar to the memorandum of
association of Airplanes Limited, the trust agreement under which
Airplanes Trust is organized, or the equivalent charter document of the
relevant subsidiary, as the case may be, and, after the consolidation,
merger, sale, conveyance, transfer, lease or other disposition, payments
from the resulting entity to the holders of the notes do not give rise
to any withholding tax payments less favorable to the holders of the
notes than the amount of any withholding tax payments which would have
been required had that event not occurred;
(2) in the case of consolidation, merger or transfer by Airplanes Limited
or Airplanes Trust, the surviving successor or transferee entity shall
expressly assume all of the obligations of Airplanes Limited or
Airplanes Trust in the relevant indenture, the notes and each other
related document;
(3) the directors or the controlling trustees as the case may be, shall
have obtained advance confirmation that the action or event will not
result in the lowering or withdrawal of any rating assigned by any
rating agency to any of the certificates;
(4) immediately after giving effect to the transaction, no event of
default shall have occurred and be continuing; and
(5) Airplanes Limited or Airplanes Trust delivers to the indenture
trustee an officer's certificate or trustee's certificate as the case
may be, and an opinion of counsel, in each case stating that the
consolidation, merger or transfer and the supplemental indenture comply
with the above criteria and, if applicable, the "Limitation on Aircraft
Sales" covenant and that all conditions precedent provided for in the
relevant indenture relating to the transaction have been complied with.
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This covenant shall not apply to any consolidation, merger, sale,
conveyance, transfer, lease or disposition:
(1) within and among Airplanes Limited or Airplanes Trust and any of our
subsidiaries if the consolidation, merger, sale, conveyance,
transfer, lease or disposition, as the case may be, would not
materially adversely affect the holders of the notes;
(2) complying with the terms of the "Limitation on Aircraft Sales"
covenant; or
(3) effected as part of a single transaction providing for the redemption
or defeasance of the notes in accordance with their terms as
described under "-- Redemption" or "-- Defeasance," respectively.
Limitation on Transactions with Affiliates. Airplanes Trust and Airplanes
Limited will not, and will not permit any subsidiary to, directly or indirectly,
enter into, renew or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service) with any affiliate of Airplanes Limited or Airplanes Trust or any
subsidiary, except upon fair and reasonable terms no less favorable to Airplanes
Limited or Airplanes Trust or that subsidiary than could be obtained, at the
time of that transaction or at the time of the execution of the relevant
agreement, in a comparable arm's-length transaction with a person that is not an
affiliate.
This limitation shall not apply to:
(1) any transaction pursuant to the terms of the administrative agency
agreement, Airplanes Trust Agreement, cash management agreement,
indentures, notes, reference agency agreement, secretarial services
agreement, security trust agreement and related security documents,
servicing agreement, stock purchase agreement dated March 28, 1996,
swap agreements, swap guarantees or trust agreement (the "RELEVANT
DOCUMENTS");
(2) any transaction within and among Airplanes Trust or Airplanes Limited
or any of its subsidiaries and any other member of Airplanes Group,
except that no transaction, other than between Airplanes Limited or
Airplanes Trust and any subsidiary, shall be consummated if it would
materially 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
directors of Airplanes Limited and the controlling trustees of
Airplanes Trust;
(4) any payments or other transactions under the tax sharing agreement;
(5) any payments of the types referred to in clauses (1) or (2) of the
"Limitation on Restricted Payments" covenant and not prohibited
thereunder;
(6) any payments under any contract for the re-acquisition of aircraft
from an Isle of Man company of a price not exceeding the amount paid
therefor by the Isle of Man company under a conditional sale
agreement existing on March 28, 1996; and
(7) entering into any sale of any aircraft owned by any subsidiary as
part of a single transaction providing for the redemption or
defeasance of the notes as described under "-- Redemption" and "--
Defeasance," respectively.
Limitation on the Issuance, Delivery and Sale of Capital Stock. Airplanes
Limited and Airplanes Trust will not:
(1) issue, deliver or sell any shares, interests, participations or other
equivalents (however designated, whether voting or non-voting) in
equity, including, without limitation, all ordinary shares of
Airplanes Limited and the Airplanes Trust residual interest, as the
case may be; or
(2) sell, or permit any subsidiary, directly or indirectly, to issue,
deliver or sell, any shares, interests, participations or other
equivalents (however designated, whether voting or non-voting) in
equity, except:
(a) to the trustees of the charitable trusts;
(b) issuances or sales of shares of stock of any foreign subsidiaries
to nationals in the jurisdiction of incorporation or organization
of that subsidiary, as the case may be, to the extent required by
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applicable law or necessary in the determination of the directors
or controlling trustees, as the case may be, to avoid adverse tax
consequences in that jurisdiction;
(c) the pledge of the shares in any member of Airplanes Group pursuant
to the security trust agreement;
(d) the sale, delivery or transfer of any stock of any member of
Airplanes Group as part of a single transaction providing for the
redemption or defeasance of the notes as described under "--
Redemption" and "-- Defeasance," respectively;
(e) the sale of any subsidiary of Airplanes Limited to Airplanes
Limited or its subsidiaries or the sale of any subsidiaries of
Airplanes Trust to Airplanes Trust or its subsidiaries; and
(f) the sale of any stock of any subsidiary in connection with any
sale of aircraft in compliance with the terms of the "Limitation
on Aircraft Sales" covenant.
In addition, under the terms of the shareholders' agreement, the trustees
of the charitable trusts have agreed that while the Airplanes Limited class A,
B, C and D notes are outstanding, they will not, without prior written approval
of the Airplanes Limited indenture trustee and all of the directors, take any
action in their capacity as shareholders of Airplanes Limited to alter the share
capital or issue any additional shares of Airplanes Limited.
Bankruptcy and Insolvency. Airplanes Limited and Airplanes Trust:
(1) will promptly provide the indenture trustee and the rating agencies
with notice of the institution of any proceeding by or against them
or any subsidiary seeking to adjudicate any of them a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of their
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking an entry of an order
for relief or the appointment of a receiver, trustee or other similar
official for either or for any substantial part of their property;
and
(2) will not take any action to waive, repeal, amend, vary, supplement or
otherwise modify their constitutional documents, without an
affirmative unanimous written resolution of the directors or the
controlling trustees, as applicable and confirmation from the rating
agencies in advance that the relevant action or event will not result
in the lowering or withdrawal of any rating assigned to the
certificates.
In addition, under the terms of the shareholders' agreement, the trustees
of the charitable trusts have agreed that while the Airplanes Limited class A,
B, C and D notes are outstanding they will not, without prior written approval
of the Airplanes Limited indenture trustee and all of the directors, take any
action in their capacity as shareholders of Airplanes Limited:
(1) to cause Airplanes Limited to institute any proceeding seeking
liquidation or insolvency (or similar proceeding);
(2) in the case of any proceeding instituted against Airplanes Limited,
to authorize or consent to that proceeding;
(3) to terminate Airplanes Limited's existence;
(4) to waive or amend the memorandum and articles of association of
Airplanes Limited; or
(5) to transfer any part of the capital stock of Airplanes Limited or any
interest therein unless the transferee:
(a) is a trustee of a trust formed for charitable purposes
substantially identical to those for which the charitable trusts
are established, and
(b) enters into an agreement substantially identical to the
shareholders agreement in favor of the Airplanes Limited indenture
trustee.
Maintenance of Taxation Status. Airplanes Limited and Airplanes Trust have
agreed that they will not, and will not permit any of their subsidiaries to,
take any action or omit to take any action which is inconsistent with the
preservation of the certification with respect to taxation of Airplanes Limited,
Airplanes Trust and their subsidiaries issued by the Irish Department of Finance
(or any similar treatment in other jurisdictions) in
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connection with business operations in Shannon, Ireland or similar certification
for other tax-advantaged zones in Ireland or other jurisdictions and the
taxation treatment awarded to them as a consequence thereof.
OPERATING COVENANTS
Concentration Limits. Unless the directors or controlling trustees obtain
prior written confirmation from each of the rating agencies that it will not
result in a lowering or withdrawal of the then current rating of any class or
subclass of certificates, Airplanes Limited and Airplanes Trust will not permit
any subsidiary to lease or re-lease any aircraft if entering into the proposed
lease would cause our portfolio to exceed any of the concentration limits set
forth below. The indentures permit renewal, extension or restructuring of any
lease irrespective of the effect of it on the concentration limits.
LESSEE COVENANTS
PERCENTAGE OF
MOST RECENT APPRAISED
LESSEE VALUE OF PORTFOLIO
- ------ ---------------------
Single lessee............................................... 10%
Five largest lessees........................................ 35%
COUNTRY COVENANTS
PERCENTAGE OF
MOST RECENT APPRAISED
COUNTRY RATING VALUE OF PORTFOLIO(2)
- -------------- ---------------------
A- (or the equivalent) or better(1)......................... 20%
Other....................................................... 15%
REGION COVENANTS
PERCENTAGE OF
MOST RECENT APPRAISED
REGION VALUE OF PORTFOLIO(3)
------ ---------------------
Africa...................................................... 5%
Asia........................................................ 45%
Australia................................................... 10%
Europe (including Turkey, but excluding CIS and Eastern
Europe)................................................... 45%
Middle East................................................. 15%
North America............................................... 45%
Latin America (including South America, the Caribbean and
Mexico)................................................... 35%
Other (including CIS and Eastern Europe).................... 10%
- ---------------
(1) Based on the sovereign foreign currency debt rating assigned by the
rating agencies to the country in which a lessee is habitually based
at the time the relevant lease is executed.
(2) Percentage to be obtained by dividing the aggregate most recent
appraised values of all aircraft operated or to be operated by lessees
habitually based in the applicable country by the aggregate most
recent appraised values of all aircraft then owned by Airplanes Group.
(3) Percentage to be obtained by dividing the aggregate most recent
appraised values of all aircraft operated or to be operated by lessees
habitually based in the applicable region by the aggregate most recent
appraised values of all aircraft then owned by Airplanes Group.
In addition, the indentures do not permit Airplanes Limited and Airplanes
Trust or any subsidiary to lease aircraft operated or to be operated by lessees
domiciled in some countries, and require political risk insurance for aircraft
subject to a lease and habitually based in a jurisdiction determined in
accordance with the political risk insurance guidelines set forth in the
indentures. Airplanes Limited and Airplanes Trust may amend the list of
prohibited countries and countries with respect to which political risk
insurance is required from time to time upon the approval of the directors of
Airplanes Limited or the controlling trustees of Airplanes Trust, as the case
may be.
The indentures contain no limitations with respect to the country or region
where any sublessees of aircraft operated or to be operated are domiciled if the
sublease is permitted under the relevant lease (including by reason of consent
or waiver, if applicable) or renewed lease (including by reason of consent or
waiver, if applicable) and the relevant lessee is either a signatory to a lease
or a renewed lease.
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Compliance with Law, Maintenance of Permits. Airplanes Limited and
Airplanes Trust will:
(1) comply, and cause each subsidiary to comply, in all material respects
with all applicable laws;
(2) obtain, and cause each subsidiary to obtain, all material
governmental (including regulatory) registrations, certificates,
licenses, permits and authorizations required for that person's use and
operation of the aircraft, including, without limitation, a current
certificate of airworthiness for each aircraft (issued by the applicable
aviation authority and in the appropriate category for the nature of
operations of that aircraft), except that:
(a) no certificate of airworthiness shall be required for any
aircraft:
- during any period when that aircraft is undergoing maintenance,
modification or repair; and
- following the withdrawal or suspension by the applicable
aviation authority of certificates of airworthiness in respect
of all aircraft of the same model or period of manufacture as
that aircraft (in which case Airplanes Limited and Airplanes
Trust will have to comply, and cause each subsidiary to comply,
with all directions of the applicable aviation authority in
connection with that withdrawal or suspension);
(b) no registrations, certificates, licenses, permits or
authorizations required for the use or operation of any aircraft
need be obtained with respect to any period when that aircraft is
not being operated; and
(c) no registrations, certificates, licenses, permits or
authorizations shall be required to be maintained for any aircraft
that is not the subject of a lease, except to the extent required
under applicable laws;
(3) not cause or knowingly permit, directly or indirectly, through any
subsidiary, any lessee to operate any aircraft under any lease in any
material respect contrary to any applicable law; and
(4) not knowingly permit, directly or indirectly, through any subsidiary,
any lessee not to obtain all material governmental (including
regulatory) registrations, certificates, licenses, permits and
authorizations required for that lessee's use and operation of any
aircraft under any operating lease except in the cases provided in
clauses (2)(a) and (2)(b) above.
This covenant shall not be breached by virtue of any "THIRD PARTY EVENTS,"
by which we mean any act or omission of a lessee or sub-lessee, or of any person
which 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 (other than seizure or confiscation arising from
a breach by Airplanes Limited or Airplanes Trust or any subsidiary of this
covenant) so long as:
(1) no member of Airplanes Group consents or has consented to that third
party event; and
(2) the member of Airplanes Group which is the lessor or owner of the
relevant aircraft promptly and diligently takes the commercially
reasonable actions that a leading international aircraft operating
lessor or owner would reasonably take in respect of that third party
event, including (taking into account, among other things, the laws of
the jurisdictions in which the aircraft are located) seeking to compel
that lessee or other relevant person to remedy that third party event or
seeking to repossess the relevant aircraft or engine.
Appraisal of Portfolio. We will, within 30 to 90 days before March 31 of
each year, deliver to the indenture trustee appraisals of the appraised value of
each of the aircraft, from at least three independent appraisers that are
members of the International Society of Transport Aircraft Trading or any
similar organization. Each appraisal shall be dated within 30 days prior to its
delivery to the indenture trustee.
Maintenance of Assets. We will:
(1) in the case of each aircraft and engine that is subject to a lease,
cause directly or indirectly through any subsidiary, that aircraft and
engine to be maintained in a state of repair and condition consistent
with
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the reasonable commercial practice of leading international aircraft
operating lessors with respect to similar aircraft under lease, taking
into consideration, among other things, the identity of the relevant
lessee (including the credit standing and operating experience thereof),
the age and condition of the aircraft and the jurisdiction in which the
aircraft will be operated or registered under that lease; and
(2) in the case of each aircraft that is not subject to a lease,
maintain, and cause each subsidiary to maintain, that aircraft in a
state of repair and condition consistent with the reasonable commercial
practice of leading international aircraft operating lessors with
respect to aircraft not under lease. A third party event will not cause
a breach of this covenant so long as:
(a) no member of Airplanes Group consents or has consented to the
third party event; and
(b) the member of Airplanes Group which is the lessor or owner of the
relevant aircraft promptly and diligently takes such commercially
reasonable actions as a leading international aircraft operating
lessor would reasonably take in respect of that third party event,
including seeking to compel the lessee or other relevant person to
remedy the third party event or seeking to repossess the relevant
aircraft or engine.
Notification of Indenture Trustee and Administrative Agent. Airplanes
Limited and Airplanes Trust will notify the indenture trustee, cash manager and
administrative agent as soon as they or any subsidiary become aware of any loss,
theft, damage or destruction to any aircraft or engine if the potential cost of
repair or replacement of that asset (without regard to any insurance claim
related thereto) may exceed $2,000,000.
Leases. Airplanes Limited and Airplanes Trust will adopt, and will cause
the servicer to use, the pro forma lease agreement or agreements then used by
the servicer in connection with its aircraft operating leasing services business
generally (as revised by the servicer) as the starting point in the negotiation
of future leases.
However, in the case of any future lease entered into in connection with:
(1) the renewal or extension of an existing lease;
(2) the leasing of an aircraft to a person that is or was a lessee under
a pre-existing lease; or
(3) the leasing of an aircraft to a person that is or was a lessee under
an operating lease of an aircraft that is being managed or serviced by
the servicer;
the servicer can use a form of lease substantially similar to the pre-existing
lease or operating lease, instead of the pro forma lease, as a starting point in
the negotiation of the future lease with third parties.
If the directors or controlling trustees determine, in an annual review of
the servicer's lease on or before each year after March 28, 1996, that any
revision to the servicer's pro forma lease made since the preceding review by
the directors or controlling trustees is substantially inconsistent with the
core lease provisions of Airplanes Limited or Airplanes Trust as set forth in
the indentures in such a way that it has a material adverse effect on the note
holders (taking into account the revision and any risk that the aircraft might
not be able to be leased on terms inconsistent with the servicer's pro forma
lease), then the directors or controlling trustees will direct the servicer to
exclude that revision in the servicer's pro forma lease to be used as the
starting point in the negotiation of any future lease. If the directors or
controlling trustees have determined that any revision to the servicer's pro
forma lease will not have a material adverse effect on the note holders, the
directors or controlling trustees will amend the applicable core lease
provisions. It will not be deemed to be a violation of this covenant if the
terms of any future lease deviate from the terms of the servicer's pro forma
lease or a precedent lease so long as the servicer's pro forma lease or the
applicable precedent lease was the starting point for the negotiation of the
future lease. This covenant does not apply to any negotiation with respect to,
or the execution of, any future lease of an aircraft where negotiation commenced
on or prior to March 28, 1996.
On the payment date occurring three months after each anniversary of March
28, 1996, Airplanes Limited and Airplanes Trust will certify to the indenture
trustee that the future leases executed by or on behalf of Airplanes Limited and
Airplanes Trust or any subsidiary during the preceding year ending on that
anniversary with persons who are not members of Airplanes Group, having regard
to deviations from the core lease provisions in effect as of that anniversary
(or, with respect to any renewal leases, having regard to deviations from the
provisions corresponding to the core lease provisions which had been previously
incorporated in the applicable precedent leases), taken as a whole, should not
be reasonably expected to have a material adverse effect on the note holders. If
Airplanes Limited and Airplanes Trust cannot make this certification, then
Airplanes
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Limited and Airplanes Trust will deliver to the indenture trustee a core lease
provision certificate which sets forth information specifying the nature of the
deviations from the core lease provisions or, with respect to the renewal
leases, the corresponding provisions of the future leases executed by or on
behalf of Airplanes Limited and Airplanes Trust during the preceding year which
should reasonably be expected to have a material adverse effect on the note
holders. In addition, Airplanes Limited and Airplanes Trust will furnish an
annual report to the rating agencies, with a copy to the indenture trustee,
setting forth the rationale (including, if applicable, trends in the
international operating leasing market) for any changes in the core lease
provisions during the preceding year.
Opinions. Airplanes Limited and Airplanes Trust will not enter into, and
will not permit any subsidiary to enter into, any future lease with any third
party or change the jurisdiction of registration of any aircraft that is subject
to a lease, unless, upon entering into the future lease or changing the
jurisdiction or registration of the aircraft or within a commercially reasonable
period thereafter, the servicer obtains legal opinions with regard to compliance
with the registration requirements of the relevant jurisdiction, enforceability
of the future lease and other matters customary for those transactions to the
extent that receiving those legal opinions is consistent with the reasonable
commercial practice of leading international aircraft operating lessors.
Insurance. Airplanes Limited and Airplanes Trust will maintain or cause,
directly or indirectly through their subsidiaries, to be maintained with
reputable and responsible insurers or with insurers that maintain relevant
reinsurance with reputable and responsible reinsurers:
(1) airline hull insurance for each aircraft in an amount at least equal
to the note target price for the aircraft or the equivalent thereof from
time to time if the insurance is denominated in a currency other than
U.S. dollars;
(2) airline liability insurance for each aircraft and occurrence in an
amount at least equal to the relevant amounts set forth in the
indentures for each model of aircraft; and
(3) airline political risk insurance for each aircraft subject to a lease
and habitually based in a jurisdiction determined in accordance with the
political risk insurance guidelines, as set forth in the indentures and
as amended from time to time, in an amount at least equal to the note
target price (or the equivalent thereof from time to time if the
insurance is denominated in a currency other than U.S. dollars) for that
aircraft. Any of this insurance may be subject to deductibles and
self-insurance not to exceed $10,000,000 in the aggregate in respect of
any one occurrence relating to the aircraft under a lease (or sale
agreement) with any lessee (or purchaser), whose long-term unsecured
debt obligations are rated not less than A, or its equivalent, by at
least one of the rating agencies, or commercially reasonable deductible
and self-insurance arrangements, taking into account, among other
things, the creditworthiness and experience of the lessee, if any, the
type of aircraft and market practices in the aircraft insurance industry
generally. The coverage and terms (including endorsements, deductibles
and self-insurance arrangements) of any insurance maintained with
respect to any aircraft not subject to a lease must be substantially
consistent with the commercial practices of leading international
aircraft operating lessors regarding similar aircraft and, with respect
to any aircraft subject to a lease, must be substantially consistent
with the relevant provisions of the lease.
In determining the amount of insurance required to be maintained, Airplanes
Limited and Airplanes Trust may take into account any indemnification from, or
insurance provided by, any governmental, supranational or inter-governmental
authority or agency (other than, with respect to political risk insurance, any
governmental authority or agency of any jurisdiction for which political risk
insurance must be obtained), the sovereign foreign currency debt rating of which
is rated AA, or the equivalent, by at least one of the rating agencies, against
any risk with respect to an aircraft. The amount of that indemnification or
insurance, when added to the amount of insurance against the same risk we
maintain or caused to be maintained, must be at least equal to the amount of
insurance against that risk otherwise required by this covenant taking into
account self-insurance permitted by this covenant. Any indemnification or
insurance provided by these government authorities or agencies must provide
substantially similar protection as the insurance required by this covenant.
Airplanes Limited and Airplanes Trust will not be required to maintain, or to
cause to be maintained, any insurance otherwise required under the indentures to
the extent that it is not generally available in the relevant insurance market
at commercially reasonable rates from time to time.
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Indemnity. Airplanes Limited and Airplanes Trust will, and will cause each
subsidiary to, include in each lease between a member of Airplanes Group and a
person who is not a member of Airplanes Group an indemnity in respect of the
lease in respect of any losses or liabilities arising from the use or operation
of the aircraft during the term of the lease, subject to exceptions, limitations
and qualifications that are consistent with the reasonable commercial practices
of leading international aircraft operating lessors.
NOTE EVENTS OF DEFAULT
Each of the following events will be a "NOTE EVENT OF DEFAULT" with respect
to any class of notes, except as specified below:
(1) failure to pay interest on any note of that class, other than step-up
interest, in each case when that amount becomes due, and this failure to
pay continues for a period of five or more business days;
(2) failure to pay principal or premium, if any, on any note of that
class or any subclass thereof either on or prior to the final maturity
date;
(3) failure to pay any amount other than interest when due and payable in
connection with any note, to the extent that there are available
collections for payment at that time, and this failure to pay continues
for a period of two or more business days;
(4) failure by Airplanes Limited or Airplanes Trust to comply with any of
the covenants, obligations, conditions or provisions binding on it under
the indentures or the notes (other than a payment default for which
provision is made in clause (1), (2) or (3) above) or any material
breach by Airplanes Limited, Airplanes Trust or any subsidiary of any of
the covenants, obligations, conditions or provisions under any relevant
documents or any breach of any representations given as of March 28,
1996 in these agreements, if that failure or breach materially adversely
affects the holders of that class of notes and continues for a period of
30 days or more after written notice of that failure or breach has been
given to Airplanes Limited or Airplanes Trust by the senior trustee or
by holders of at least 25% of the aggregate outstanding principal
balance of the most senior class of the notes outstanding;
(5) in the case of either indenture, an "event of default" under the
other indenture or failure in the case of either indenture, by
Airplanes Limited or Airplanes Trust, in their capacity as
guarantors, to pay any amount when deemed payable under the
applicable indenture;
(6) a court having jurisdiction in the premises enters a decree or order
for:
(a) relief in respect of Airplanes Limited, Airplanes Trust or any
"SIGNIFICANT SUBSIDIARY" (a subsidiary which owns or leases
aircraft having an aggregate appraised value of at least 2% of the
adjusted portfolio value at that time) under any applicable law
relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization, examination, relief of debtors or
other similar law now or hereafter in effect;
(b) appointment of a receiver, liquidator, examiner, assignee,
custodian, trustee, sequestrator or similar official of Airplanes
Limited or Airplanes Trust or any significant subsidiary; or
(c) the winding up or liquidation of the affairs of Airplanes Limited
or Airplanes Trust or any significant subsidiary
and, in each case, that decree or order shall remain unstayed or that
writ or other process shall not have been stayed or dismissed within 90
days from entry thereof.
(7) Airplanes Limited or Airplanes Trust or any significant subsidiary:
(a) commences a voluntary case under any applicable law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization, examination, relief of debtors or other similar
law now or hereafter in effect or consents to the entry of an
order for relief in any voluntary case under those laws;
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(b) consents to the appointment of or taking possession by a receiver,
liquidator, examiner, assignee, custodian, trustee, sequestrator
or similar official of Airplanes Limited or Airplanes Trust or any
significant subsidiary or for all or substantially all of the
property and assets of Airplanes Limited or Airplanes Trust or any
significant subsidiary; or
(c) effects any general assignment for the benefit of creditors;
(8) any judgment or order for the payment of money in excess of
$100,000,000 shall be rendered against Airplanes Limited or Airplanes
Trust or any subsidiary and either:
(a) enforcement proceedings shall have been commenced by any creditor
upon that judgment or order; or
(b) there shall be any period of 10 consecutive days during which a
stay of enforcement of that judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
However, any of these judgments or orders shall not be an event of
default under the indentures if and for so long as:
- the amount of that judgment or order is covered by a valid and
binding policy of insurance between the defendant and the insurer
covering payment thereof; and
- the insurer, which shall be rated at least A by A.M. Best Company
or any similar successor entity, has been notified of, and has not
disputed the claim made for payment of, the amount of that
judgment or order; or
(9) the constitutional documents of Airplanes Limited or Airplanes Trust
cease to be in full force and effect without replacement documents
having the same terms being in full force and effect.
If a note event of default (other than a note event of default under clause
(6) or (7) above) shall have occurred and is continuing, the senior trustee may,
and, when instructed by the holders of 25% of the aggregate outstanding
principal balance of the most senior class of notes, will, give a default notice
to Airplanes Limited, Airplanes Trust, the cash manager, each indenture trustee
and note holder declaring the outstanding principal balance of the notes and all
accrued but unpaid interest thereon to be due and payable. Other than class A
certificate holders and note holders, holders of a class of certificates or
notes may not deliver a default notice or exercise any remedy with respect to a
note event of default until all amounts for all senior ranking classes of notes
have been paid in full.
At any time after the senior trustee has declared the outstanding principal
balance of the notes to be due and payable and before the exercise of any other
remedies pursuant to the indentures, holders of a majority of the outstanding
principal balance of the senior class of notes, by written notice to Airplanes
Limited and Airplanes Trust, the senior trustee and the cash manager, may
rescind and annul any declaration and thereby annul its consequences if:
(1) there has been paid to or deposited with the senior trustee an amount
sufficient to pay all overdue installments of interest on the notes, and
the principal of and premium, if any, on the notes that would have
become due otherwise than by the relevant declaration of acceleration;
(2) the rescission would not conflict with any judgment or decree; and
(3) all other defaults and note events of default, other than nonpayment
of interest and principal on the notes that have become due solely
because of the acceleration, have been cured or waived.
If a note event of default under clause (6) or (7) above occurs, the
outstanding principal balance of the notes and all accrued but unpaid interest
thereon will automatically become due and payable without any further action by
any party.
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After the occurrence and during the continuation of a note event of
default:
(1) the class B note holders will not be permitted to give or direct the
giving of a default notice or to exercise any remedy in respect of that
note event of default until all interest and principal on the class A
notes have been paid in full,
(2) the class C note holders will not be permitted to give a default
notice or to exercise any remedy in respect of that note event of
default until all interest and principal on the class A notes and the
class B notes have been paid in full, and
(3) the class D note holders will not be permitted to give a default
notice or to exercise any remedy in respect of that note event of
default until all interest and principal on the class A notes, the class
B notes and the class C notes have been paid in full.
The indenture trustee will provide each rating agency with a copy of any
default notice it receives pursuant to the indentures.
The trust agreement contains a provision entitling 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 the certificates before proceeding to
exercise any right or power under the trust agreement at the request or
direction of those holders.
In addition, each indenture contains a provision entitling the indenture
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 the notes before
proceeding to exercise any right or power under the applicable indenture or the
cash management agreement at the request or direction of those holders. Except
in limited circumstances, no holder of the notes will have the right, other than
through the senior trustee acting in accordance with the trust agreement and the
indentures to sue for recovery or take any other actions to enforce the
obligations of Airplanes Limited or Airplanes Trust to pay any and all amounts
due and payable under the notes issued under either indenture, and no holder of
the notes will have the right to take any steps to cause the filing for
bankruptcy of Airplanes Limited or Airplanes Trust. The senior trustee, as sole
initial holder of the senior class of notes outstanding, is entitled to exercise
any and all remedies available under the indentures.
The term "DEFAULT" means the occurrence of any event which is, or after
notice or lapse of time, or both, would constitute a note event of default.
INTERCREDITOR RIGHTS
Subject to the terms of the indentures, the senior trustee will have sole
discretion as to whether to direct the cash manager to exercise and enforce any
and all remedies with respect to the notes. The senior trustee may take various
actions in respect of the notes, without regard to the interests of any other
creditors.
MODIFICATION AND WAIVER
Each indenture provides that, with the consent of the holders of a majority
of the outstanding principal balance of the notes (acting as a single class),
modifications may be made to the notes or the indentures except that without the
consent of the holder of each outstanding note affected, we may not make any
modification:
- of the provisions setting forth the frequency or the currency of payment
of, the maturity of, or the method of calculation of the amount of any
interest, principal and premium, if any, payable in respect of any class
or subclass of notes;
- reducing the percentage of the aggregate outstanding principal balance
of any class or subclass of notes required to approve any amendment or
waiver; or
- altering the manner or priority of payment of any class or subclass of
notes.
Any of these modifications approved by the required holders of any class or
subclass of notes will be binding on the holders of the relevant class or
subclass of notes and each party to the indenture. This provision will not
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prevent Airplanes Limited or Airplanes Trust or any subsidiary from amending any
lease if the amendment is otherwise permitted by the indenture. The senior
trustee may also waive any note event of default.
The subordination provisions contained in each indenture may not be amended
or modified without the consent of each swap provider, each holder of the class
or subclass of notes affected thereby and each holder of any class or subclass
of notes ranking senior to those notes.
Without the consent of each note holder, no amendment or modification of
the relevant indenture or the cash management agreement may:
(1) modify the provisions of the relevant indenture or the cash
management agreement with respect to account payment instructions and
the payment thereunder by the cash manager; or
(2) result in the sale of Airplanes Group's assets other than pursuant to
the provisions of "-- Indenture Covenants."
However, the provisions relating to the priority of the expenses, swap
payments or swap breakage costs in each indenture cannot be amended or modified
in any event.
GOVERNING LAW AND JURISDICTION
The indentures are governed by New York law. Airplanes Limited and
Airplanes Trust 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,
or in connection with, the indentures and the notes and have each designated a
person in the City of New York to accept service of any process on its behalf.
THE CLASS E NOTES
In connection with our acquisition of our portfolio from GPA Group (now
known as debis AirFinance Ireland) in 1996, Airplanes Limited and Airplanes
Trust issued $604 million in aggregate principal amount of class E notes to GPA
Group and its subsidiaries pursuant to the indentures. $13 million of the
aggregate principal amount of the class E notes was subsequently cancelled in
July 1996 as an adjustment to the purchase price of the aircraft pursuant to the
purchase agreement for the aircraft. On November 20, 1998, GPA Group (then known
as AerFi Group and now known as debis AirFinance Ireland) and its subsidiaries
transferred the class E notes held by them to GE Capital.
The class E notes accrue interest for each interest accrual period at a
rate of 20% per annum payable monthly in arrears on each payment date,
commencing May 15, 1996. The stated interest rate on the class E notes is
adjusted by reference to the U.S. consumer price index. Except for the "CLASS E
MINIMUM INTEREST AMOUNT" and the "CLASS E SUPPLEMENTAL INTEREST AMOUNT," which
are paid at a rate of 1% and 10% per annum, respectively, no interest is payable
on the class E notes until all of the interest, principal and premium, if any,
on the class A, B, C and D notes have been repaid in full. Interest accrued but
not paid on the class E notes on each payment date will accrue interest during
each interest accrual period until the principal of the class E notes shall have
been repaid. The class E minimum interest amount and the class E supplemental
interest amount will be paid on each payment date only to the extent that
Airplanes Group has available collections sufficient to make payment after
paying or providing for each of the items ranking prior to them in the order of
payment priority as described under "-- Priority of Payments."
Holders of the class E notes are not permitted to give a default notice
with respect to any note event of default or to exercise any remedy in respect
of any note event of default until all amounts owing under each other class of
the notes have been paid in full. The indentures also require that the class E
note holders pay over to the cash manager any money (including principal or
interest) paid to them in the event that the cash manager, acting in good faith,
determines subsequently that the money was not paid in accordance with the
priority of payment obligations described above under "-- Priority of Payments"
or as a result of any other mistake of fact or law on the part of the cash
manager in making that payment. Any amendment to or modification of the
subordination provisions contained in the indentures will require the consent of
each note holder if the amendment or modification would adversely affect the
rights of the note holders.
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The majority holder of the class E notes of Airplanes Limited has the right
to appoint one of the five directors of Airplanes Limited, and the majority
holder of the class E notes of Airplanes Trust has the right to appoint one of
the five controlling trustees of Airplanes Trust. GE Capital has, in its
capacity as the sole holder of the class E notes, appointed Brian T. Hayden as
the class E director of Airplanes Limited and the class E independent trustee of
Airplanes Trust, as further described in "Management of Airplanes Group --
Directors and Controlling Trustees."
THE SECURITY TRUST AGREEMENT
As security for various obligations of Airplanes Limited and Airplanes
Trust, including those under the notes and guarantees, Airplanes Limited and
Airplanes Trust and their subsidiaries have granted a security interest in the
following property under the security trust agreement to Bankers Trust Company,
as security trustee for the benefit of the holders of the notes:
- one-third of the ordinary share capital of AeroUSA, Airplanes Holdings
and their various subsidiaries;
- cash balances in the accounts as described under "Description of
Securities -- The Accounts;" and
- investments made with our balances.
You should note that you and the security trustee have no security
interest, mortgage, charge or similar interest in the aircraft in our portfolio
or the related leases.
THE ACCOUNTS
The indentures and the security trust agreement provide that substantially
all of Airplanes Group's cash inflows and outflows occur through the rental
accounts, collection account, lessee funded account and expense account which
the cash manager, acting on behalf of the security trustee, has established and
maintains at a bank having:
- a long-term unsecured debt rating of not less than AA, or the
equivalent, by the rating agencies, or
- a certificate of deposit rating of A-1+ by Standard & Poor's, P-1 by
Moody's and F1 by Fitch,
except that, where required by the terms of the relevant leases, some rental
accounts may be established at banks having ratings of less than AA, or the
equivalent, by the rating agencies or a certificate of deposit rating of less
than A-1+ by Standard & Poor's, P-1 by Moody's and F1 by Fitch.
Except where local legal or regulatory reasons do not permit, all of these
accounts are held in the names of the security trustee, who has sole dominion
and control over the accounts, including the sole power to direct withdrawals
from or transfers among the accounts. Subject to conditions set forth in the
cash management agreement, the security trustee has delegated its authority over
the accounts to the cash manager but the security trustee is not responsible for
the acts or omissions of the cash manager.
For so long as any notes remain outstanding, funds on deposit in the
accounts will be invested and reinvested at Airplanes Group's written direction
(which direction has been delegated to the cash manager pursuant to the cash
management agreement) in one or more permitted account investments, maturing, in
the case of the collection account and expense account, such that sufficient
funds shall be available to make required payments on the first succeeding
scheduled interest payment date on the notes after those investments are made.
Investment and reinvestment of funds in the lessee funded account must be made
in a manner and with maturities that conform to the requirements of the related
leases. Investment earnings on funds deposited in any account, net of losses and
investment expenses, will (to the extent permitted by the terms of the related
leases in the case of funds in the lessee funded account) be deposited in the
collection account and treated as collections.
RENTAL ACCOUNTS
The lessees make all payments under the leases directly into the applicable
rental accounts. Pursuant to the cash management agreement, the cash manager
transfers, or causes to be transferred, all funds deposited into the
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rental accounts into the collection account as collections within one business
day of receipt thereof (other than certain limited amounts, if any, required to
be left on deposit for local legal or regulatory reasons).
THE COLLECTION ACCOUNT
All of the following "COLLECTIONS" received by Airplanes Group have to be
deposited in the collection account:
- rental payments,
- 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,
- the liquidity reserve amount,
- amounts received in respect of claims for damages or in respect of any
breach of contract for any nonpayment (including any amounts received
from any Airplanes Group subsidiary, whether by way of distribution,
dividend, repayment of a loan or otherwise and any proceeds received in
connection with a lessee's restructuring),
- net proceeds of any aircraft sale or amounts received under purchase
options and other agreements,
- proceeds of any insurance payments in respect of any aircraft or any
indemnification proceeds,
- amounts transferred from the lessee funded account to the collection
account,
- net payments to Airplanes Group under any swap agreement,
- investment income on all amounts on deposit in the accounts (in each
case to the extent consistent with the terms of applicable related
leases), and
- any other amounts received by any member of Airplanes Group, except
specified funds required to be segregated from Airplanes Group's other
funds, applied in connection with a redemption, received in connection
with a refinancing issue of notes and required to be paid over to any
third party.
Collections on deposit in the collection account are calculated by the cash
manager on the fourth business day immediately preceding each interest payment
date. On each payment date, the cash manager will transfer from the collection
account to the expense account the portion of Airplanes Group expenses that are
due and payable or are anticipated to become due and payable over the next
interest accrual period on the notes (the "REQUIRED EXPENSE AMOUNT") and that
have not been paid directly by the cash manager to expense payees. The cash
manager may also transfer other amounts into the expense account for
unanticipated expenses falling due and payable within that interest accrual
period. If there are available funds in accordance with "-- The Notes and
Guarantees -- Priority of Payments" on any payment date, the cash manager will
also transfer amounts in respect of expenses and costs that are not regular,
monthly recurring expenses but are anticipated to become due and payable in any
future interest accrual period ("PERMITTED ACCRUALS") to the expense account.
Amounts received in respect of segregated security deposits and maintenance
reserves are transferred directly into the lessee funded account.
LIQUIDITY RESERVE AMOUNT
Airplanes Group is required to maintain a cash balance in the collection
account under the indentures in an amount equal to the sum of:
- the maintenance reserve amount (currently $80 million for purposes of
the "First Collection Account Top-up" and $60 million for purposes of
the "Second Account Top-up" as of March 15, 2001, as further described
below),
- a security deposit reserve amount (equal to approximately $36.9 million
as of March 15, 2001), and
- a miscellaneous reserve amount. (currently $Nil, as further described
below)
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The required maintenance reserve amount and miscellaneous reserve amount
may be increased or decreased from time to time by an action of the board of
directors of Airplanes Limited or the controlling trustees of Airplanes Trust in
light of significant changes in, among other things, the condition of the
aircraft, the terms and conditions of future leases, the financial condition of
the lessees or prevailing industry conditions. Any reduction is subject to
confirmation in advance in writing from the rating agencies that the proposed
reduction in the liquidity reserve amount will not result in a lowering or
withdrawal of their ratings of any class of certificates.
On February 20, 2001, the board of directors of Airplanes Limited and the
controlling trustees of Airplanes Trust approved a reduction of the
miscellaneous reserve amount required to be retained by Airplanes Group in the
collection account from $40 million to $Nil as of March 15, 2001. On March 8,
2001, the board of directors of Airplanes Limited and the controlling trustees
of Airplanes Trust further approved a reduction of the maintenance reserve
amount required to be retained by Airplanes Group in the collection account from
$80 million to $60 million as of March 15, 2001 for purposes of the "First
Collection Account Top-up" (but not for the "Second Collection Account Top-up")
as illustrated in "Summary -- Overview -- Priority of Payments" and further
described in "-- The Notes and Guarantees -- Priority of Payments".
The $40 million made available from the reduction of the miscellaneous
reserve amount [will be] [was] applied to reduce the outstanding class A
principal adjustment amount on the April 17, 2001 payment date. The reduction of
the maintenance reserve amount for purposes of the "First Collection Account
Top-up" will allow an additional amount of up to $20 million to be applied to
pay the minimum hedge payments, class A minimum principal, class B interest,
class B minimum principal, class C interest and class D interest. This
additional $20 million amount, however, will still be required to be retained by
Airplanes Group in the collection account for purposes of the "Second Collection
Account Top-up." The rating agencies have confirmed that this reduction of the
miscellaneous reserve amount and the maintenance reserve amount will not result
in a lowering or withdrawal of the ratings of any class or subclass of
certificates.
If the balance of funds on deposit in the collection account falls below
the liquidity reserve amount at any time (including as a result of Airplanes
Group's determination that the liquidity reserve amount should be increased, as
required by the applicable rating agencies or otherwise), Airplanes Group may
continue to make all payments, including required payments on the notes and the
guarantees, which rank prior to or equally with payments of accrued but unpaid
interest on the class D notes and any permitted accruals so long as the balance
of funds in the collection account does not fall below the sum of the
maintenance reserve amount and the miscellaneous reserve amount at their then
current levels. Even if the balance of funds in the collection account falls
below the sum of the maintenance reserve amount and the miscellaneous reserve
amount, Airplanes Group may continue to make all payments, including required
payments on the notes and the guarantees, of (a) all accrued but unpaid interest
and, on the final maturity date, principal of the class or subclass of the most
senior class of notes then outstanding to avoid a note event of default and (b)
payments under Airplanes Group's swap agreements.
If the aggregate outstanding principal balance of the notes is less than or
equal to the liquidity reserve amount, the balance of funds in the collection
account will be distributed in accordance with the priority of payments
established for the notes.
THE LESSEE FUNDED ACCOUNT
Some leases require that certain lessee security deposits and supplemental
rent payments to provide for maintenance reserves be segregated from other
Airplanes Group funds. These security deposits and maintenance reserves are held
in the "LESSEE FUNDED ACCOUNT" and are accounted for (and, if required by any
lease, segregated) on a per lease basis.
Funds on deposit in the lessee funded account are used to make specified
maintenance payments, security deposit repayments and other specified or
permitted payments and will not be used to make payments in respect of the notes
or the certificates at any time, including after a note event of default. In
some circumstances where lessees relinquish their rights to receive certain
maintenance and security deposit payments upon the expiration of a lease,
surplus funds may be transferred from the lessee funded account to the
collection account.
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THE EXPENSE ACCOUNT
On each payment date, the cash manager withdraws the required expense
amount from the collection account to pay the expenses. To the extent that the
required expense amount has not been paid directly to expense payees, it is
deposited into the expense account. Further withdrawals of cash from the
collection account by the cash manager to satisfy expenses due and payable prior
to the next payment date that were not previously anticipated are also deposited
in the expense account. If funds on deposit in the collection account are less
than the required expense amount on any payment date, Airplanes Group will be
unable to pay the required expense amount in full, which may lead to a default
under Airplanes Group's various service agreements or other contracts under
which the expenses arise.
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REPORTS TO CERTIFICATE HOLDERS
Two days before each payment date and any other date for distribution of
any payments with respect to each class or subclass of certificates, the trustee
will distribute to each certificateholder a statement with respect to the
distribution to be made on that payment date or other date, as the case may be,
setting forth the following information:
(1) With respect to 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,
collection account and lessee funded account on the calculation date
immediately preceding that payment date.
(2) Analysis of expense account activity
Balance on preceding calculation date
Payments during period between prior calculation date and
the relevant calculation date
(1) Payments on prior payment date
(2) Other payments
Balance on relevant calculation date
(3) Analysis of collection account activity
Balance on preceding calculation date
-- Required expense amount (including on preceding payment
date)
-- Net transfer to lessee funded accounts during period
-- Collections during period
-- Aggregate certificate payments
-- Swap payments
Balance on relevant calculation date (separately stating the
components of the liquidity reserve amount)
Analysis of current payment date distributions
(4) Payments on the certificates
(a) Floating rate certificates (by class or subclass)
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
Step-up interest
Opening outstanding principal balance
Minimum principal payment amount
Adjusted principal payment amount
Supplemental principal payment amount
Redemption amount
-- amount allocable to principal
-- amount allocable to premium
Closing outstanding principal balance
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(b) Fixed rate certificates (by class)
Applicable interest rate
Interest amount payable
Opening outstanding principal balance
Scheduled principal payment amount
Redemption amount
-- amount allocable to principal
-- amount allocable to premium
Closing outstanding principal balance
Pool Factors and scheduled payment amounts in the event of a
partial redemption
(5) Floating rate certificate information for next interest accrual
period (by class or subclass)
Applicable LIBOR
Applicable margin
Applicable interest rate
(6) Payments per $100,000 initial outstanding principal balance of
certificates (by class or subclass)
Opening outstanding principal balance
Total principal payments
Closing outstanding principal balance
Total interest
Total premium
We also file these monthly statements with the SEC as a current report on
Form 8-K. In addition, the trustee will include with each statement accompanying
a distribution of any payment as described in (1)-(6) above, a supplemental
statement setting forth the "Airplanes Group Portfolio Analysis" table in this
prospectus, updated and revised to reflect the current composition of our
portfolio. Each Airplanes Group report to the SEC on Form 10-Q or Form 10-K will
also include disclosure with respect to any material adverse effect of any
delinquency or loss in connection with the leases.
After the end of each calendar year, the trustee will furnish to each
person who was a holder of any subclass of certificates at any time during that
calendar year a statement containing the sum of the amounts determined under
subsection (4) (payment on the certificates) above for that year or portion of
the year for the relevant subclass, and any other items that are readily
available to the trustee and that the certificateholder reasonably requests as
necessary in preparing its United States federal tax returns. So long as any
subclass of certificates are registered in the name of DTC or its nominee, this
statement will be prepared on the basis of the information supplied to the
trustee by DTC and the DTC participants, and the trustee will deliver it to the
DTC participants to be available for forwarding by the DTC participants to the
applicable certificate holders as described above.
If the certificates of any class or subclass are issued in the form of
definitive certificates, the trustee will prepare and deliver the information
described above to each holder of record of a definitive certificate of that
class or subclass as the name and period of beneficial ownership of each holder
of record of a definitive certificate of that class or subclass appears on the
records of the trustee. The trustee maintains the records concerning the holders
of any definitive certificates.
NOTICES IN LUXEMBOURG AND ON BLOOMBERG(R)
Following each payment date, the trustee will publish or cause to be
published in the Luxemburger Wort, or another newspaper of general circulation
in Luxembourg approved by the trustee, a notice to the effect that the
information described above will be available for review at the main office of
the listing agent for the certificates in Luxembourg. Notices to certificate
holders regarding the certificates will be given in the same manner. The trustee
will notify the Luxembourg Stock Exchange promptly following each payment date.
In addition, promptly after each payment date, the trustee intends to provide
the same information to Bloomberg Financial Markets for publication on the
BLOOMBERG(R) Service.
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For so long as the subclass A-9 certificates are listed on the Luxembourg
Stock Exchange and so long as the rules of the Luxembourg Stock Exchange so
require, we will give notice specifying the interest rate and the amount of any
repayment of principal on any subclass A-9 certificate pursuant to any optional
redemption to the Luxembourg Stock Exchange and publish that information in a
newspaper of general circulation in Luxembourg. Notice shall be deemed to have
been given on the first day on which the requirements for notification of the
Luxembourg Stock Exchange shall have been met.
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BOOK-ENTRY REGISTRATION, GLOBAL CLEARANCE AND SETTLEMENT
BOOK-ENTRY REGISTRATION
You will hold the subclass A-9 certificates either directly through DTC in
the United States or directly or indirectly through Euroclear or Clearstream,
Luxembourg or their participants. Except in the limited circumstances described
below where definitive certificates may be issued to you, the subclass A-9
certificates will be issued in global form without interest coupons and will be
registered in the name of Cede & Co., as the nominee for DTC, and deposited with
Bankers Trust Company, as book-entry depositary.
Unless and until definitive certificates are issued, all references in this
prospectus to actions by certificate holders will refer to actions taken by DTC
upon instructions from the certificate holders and all references to
distributions, notices, reports and statements to certificate holders will refer
to distributions, notices, reports and statements, respectively, to DTC or Cede
& Co., as the registered holder of the global certificate, or to DTC
participants for distribution to certificate holders in accordance with DTC
procedures.
GLOBAL CLEARANCE AND SETTLEMENT
Transfers of book-entry interests between DTC participants will occur in
the ordinary way in accordance with DTC rules. Transfers between participating
organizations whose securities are held by Clearstream, Luxembourg and
participants in Euroclear will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Euroclear and Clearstream,
Luxembourg. Euroclear and Clearstream, Luxembourg will hold omnibus positions on
behalf of their participants through customers' securities accounts on the books
of the respective depositories for Euroclear and Clearstream, Luxembourg, which,
in turn, will hold these positions in customers' securities accounts in the
depositories' names on the books of DTC. The Chase Manhattan Bank in New York
will act as depositary for Euroclear and Citibank, N.A. will act as depositary
for Clearstream, Luxembourg.
Cross-market transfers between persons holding directly or indirectly
through DTC participants, on the one hand, and directly or indirectly through
Euroclear participants or Clearstream, Luxembourg participants, on the other
hand, will be effected by DTC in accordance with DTC rules and on behalf of
Euroclear or Clearstream, Luxembourg by its own depositary. However,
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, Luxembourg by the counterparty in that system in accordance with
its rules and procedures and within its established deadlines. If the
transaction meets its settlement requirements, Euroclear or Clearstream,
Luxembourg, as the case may be, will deliver instructions to its 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 procedures
for same-day funds settlement applicable to DTC. Euroclear participants and
Clearstream, Luxembourg participants may not deliver instructions directly to
Euroclear's or Clearstream, Luxembourg's depositories.
Because of time-zone differences, credits of interests in the subclass A-9
certificates received in Euroclear or Clearstream, Luxembourg as a result of a
transaction with a DTC participant will be made during the next business day
following the DTC settlement date on which securities settlement processing
takes place. The credits or other transaction in subclass A-9 certificates that
is settled during the processing will be reported to the relevant Euroclear
participant or Clearstream, Luxembourg participant on that business day. Cash
received in Euroclear or Clearstream, Luxembourg as a result of sales of
subclass A-9 certificates by or through a Euroclear participant or a
Clearstream, Luxembourg participant to a DTC participant will be received with
value on the DTC settlement date but will be available in the relevant Euroclear
or Clearstream, Luxembourg cash account only as of the business day following
settlement in DTC.
DTC
DTC is a limited purpose trust company organized under the laws of the
State of New York, 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 was created to hold securities for DTC participants and to
facilitate the clearance and settlement of securities
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transactions between DTC participants through electronic book-entry changes in
accounts of DTC participants, thereby eliminating 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 systems is also 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. Certificate holders who are not DTC participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
book-entry interests in the subclass A-9 certificates can only effect the
purchase, sale or transfer through DTC participants. Indirect participants are
required to effect transfers through a DTC participant.
The 2001 refinancing trust will make payments of interest, principal, and
premium, if any, on the subclass A-9 certificates to DTC. These payments are the
responsibility of the 2001 refinancing trust. Certificate holders will receive
any distribution of interest, principal and premium on the certificates from the
trustee or paying agent, through DTC participants and indirect participants.
Disbursement of payments to DTC participants will be the responsibility of DTC
and disbursement of payments to the certificate holders 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 the
holdings shown on DTC's records, unless DTC has reason to believe that it will
not receive payment on the payment date. Payments by DTC participants to
subclass A-9 certificate holders 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 the DTC participant. So long as the subclass A-9 certificates
are registered in the name of Cede & Co., the only certificateholder will be
Cede & Co., as nominee for DTC, and Cede & Co. will be considered the sole owner
of the subclass A-9 certificates for purposes of the indenture. You will be
permitted to exercise your rights as certificate holders only indirectly through
DTC, DTC participants and indirect participants.
Under the rules, regulations and procedures governing DTC and its
operations, DTC is required to make book-entry transfers of the subclass A-9
certificates among the DTC participants on whose behalf it acts with respect to
the subclass A-9 certificates and to receive and transmit any distributions of
interest, principal and premium on the certificates. DTC participants and
indirect participants are similarly required to make book-entry transfers and
receive and transmit these payments. DTC's procedures provide a mechanism by
which certificate holders will receive payments and will be able to transfer
their interests.
DTC has advised Airplanes Group that it will take any action permitted to
be taken by a holder of any subclass of certificates under the trust agreement
only at the direction of the DTC participants to whose accounts that subclass of
certificates is credited. Additionally, DTC has advised Airplanes Group that it
will take actions with respect to any percentage of the outstanding principal
amount of any subclass of certificates 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 subclasses of
certificates to the extent that those actions are taken on behalf of DTC
participants whose holdings include different subclasses of certificates.
EUROCLEAR
Securities clearance accounts and cash accounts with Euroclear are governed
by the Terms and Conditions Governing Use of Euroclear and the related Operating
Procedures of the Euroclear System and applicable Belgian law. The 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 subclass in Euroclear
are held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. Euroclear acts under the Terms and
Conditions only on behalf of Euroclear participants and has no record of or
relationship with persons holding through Euroclear participants.
Distributions with respect to certificates beneficially held through
Euroclear will be credited to the cash accounts of Euroclear participants in
accordance with the Terms and Conditions, to the extent the distributions are
received by its depositary. Euroclear will take any other action permitted to be
taken by a certificateholder under the trust agreement on behalf of Euroclear
participants in accordance with the Terms and Conditions and subject to its
depositary's ability to effect actions on its behalf through DTC.
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CLEARSTREAM, LUXEMBOURG
Distributions on certificates held beneficially through Clearstream,
Luxembourg will be credited to cash accounts of Clearstream, Luxembourg
participants in accordance with Clearstream, Luxembourg rules and procedures, to
the extent the distributions are received by its depositary. Clearstream,
Luxembourg will take any other action permitted to be taken by a
certificateholder under the trust agreement on behalf of Clearstream, Luxembourg
participants only in accordance with its rules and procedures and subject to its
depositary's ability to effect actions on its behalf through DTC.
Although DTC, Euroclear and Clearstream, Luxembourg have agreed to the
foregoing procedures in order to facilitate transfers of certificates among
participants of DTC, Euroclear and Clearstream, Luxembourg, they are under no
obligation to perform or continue to perform these procedures and these
procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
The subclass A-9 certificates may be issued in definitive, fully
registered, certificated form to individual owners of beneficial interests in
the subclass A-9 global certificates only if:
(1) we advise the trustee in writing that DTC is no longer willing or
able to act as depositary with respect to the subclass A-9
certificates and the trustee or we are unable to locate a qualified
successor;
(2) we elect to terminate the book-entry system through DTC; or
(3) after the occurrence of an event of default with respect to the
subclass A-9 certificates, holders of not less than a majority of the
aggregate outstanding principal amount of subclass A-9 certificates
advise us, the trustee and DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer
in the best interest of those certificate holders.
If any of these events occurs, the trustee will notify the holders of
subclass A-9 certificates through DTC and will arrange for definitive
certificates to be issued, authenticated and delivered to the holders in
accordance with the instructions of DTC in exchange for the holders' book-entry
interests.
You should be aware that, under current Irish tax law, the holder of a
definitive certificate may become subject to Irish income tax, currently
amounting to 20%, which will be withheld on any payments of interest on the
definitive certificates as set forth under "Tax Considerations -- Irish Tax
Considerations." If definitive certificates are issued, we will have no
obligation to pay to any holder any additional amounts for any Irish or other
tax.
The trustee will make distributions of interest, principal and any premium
on any definitive certificates directly to the holders in whose names the
definitive subclass A-9 certificates are registered at the close of business on
the last record date preceding the relevant payment date. These distributions
will be made by check mailed to the address of each holder as it appears on the
register maintained by the registrar. The final payment on any definitive
certificates, however, will be made only upon presentation and surrender of the
definitive certificates at the office or agency specified in the notice of final
distribution to holders, including the office or agency of a paying agent in
Luxembourg.
Definitive certificates will be freely transferable and exchangeable for
other definitive certificates of the same subclass at the offices of the
co-registrar in Luxembourg upon compliance with the procedures specified in the
indentures, including due completion of a transfer certificate obtainable from
the trustee or co-registrar. No service charge will be imposed for any
registration of transfer or exchange, but payment of a sum sufficient to cover
any tax or other governmental charge may be required.
You may exchange or replace a certificate that is mutilated, destroyed,
lost or stolen at the offices of the co-registrar in Luxembourg upon
presentation of the certificate or satisfactory evidence of destruction, loss or
theft. An indemnity satisfactory to the co-registrar may be required at the
expense of the certificateholder before a replacement certificate will be
issued. The certificateholder will have to pay any tax or other governmental
charge
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imposed in connection with such exchange or replacement and any other related
expenses, including the fees and expenses of the trustee and co-registrar.
CUSIP, ISIN AND COMMON CODE NUMBERS
The new certificates have been accepted for clearance through DTC,
Euroclear and Clearstream, Luxembourg. Their CUSIP number, International
Securities Identification Number (ISIN) and Common Code Number (CCN) are as set
forth in the table below.
CUSIP ISIN CCN
----------- ------------- ----------
Subclass A-9 Certificate...................... 009451 AP 0 US 009451 AP
06
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TAX CONSIDERATIONS
JERSEY TAX CONSIDERATIONS
The following summary is based upon the opinion of Mourant du Feu & Jeune,
Airplanes Group's Jersey tax counsel, as to the tax treatment under Jersey law
of Airplanes Limited and the trust and the tax treatment under Jersey law in
relation to the purchase, ownership and disposition of the Airplanes Limited
subclass A-9 notes and the new certificates. The discussion is based on an
interpretation of laws, regulations, rulings and decisions, including letters
from the Comptroller of Income Tax in Jersey and the Jersey Financial Services
Commission, all of which are currently in effect and are subject to change. Any
change in these laws, regulations, rulings and decisions may be applied
retroactively and may adversely affect the Jersey tax consequences described in
this prospectus. Unless otherwise specifically noted, the term "CERTIFICATE
HOLDERS" as used in the discussion below (including the discussion with respect
to U.S. federal tax consequences) refers to the beneficial owner of the new
certificates and the term "CERTIFICATE" refers both to the new certificates and
the interest in the new certificates held indirectly through DTC, Euroclear or
Clearstream, Luxembourg.
INCOME TAXES
Airplanes Limited will qualify as an "EXEMPT COMPANY" under Article 123A of
the Income Tax (Jersey) Law 1961, as amended, as long as it makes the returns of
information and pays the fees (currently L600 per annum) as required by that
Article and, subject to the concession referred to below, as long as no Jersey
resident has a beneficial interest (for purposes of the 1961 Law) in Airplanes
Limited. As an exempt company, Airplanes Limited will be treated for purposes of
the 1961 Law as not resident in Jersey and will pay no Jersey income tax other
than on income arising in Jersey (but, by long standing concession, excluding
bank deposit interest arising in Jersey) and on profits of its trade (if any)
carried on through an established place of business in Jersey. For purposes of
the 1961 Law, the Comptroller of Income Tax in Jersey has, among other things:
- granted a concession that the certificate holders and holders of
Airplanes Limited subclass A-9 notes will not be regarded as having a
beneficial interest (for the purposes of Article 123A of the 1961 Law)
in Airplanes Limited;
- confirmed that the holding of the shares in the capital of Airplanes
Limited by or on behalf of the trustees of the charitable trusts will
not prejudice the exempt company status of Airplanes Limited;
- confirmed that the income generated by the activities undertaken by
Airplanes Limited as described in this prospectus will not be treated as
income arising in Jersey; and
- confirmed that the administration in and from Jersey of the business
undertaken by Airplanes Limited as described in this prospectus will not
constitute the carrying on of a trade through an established place of
business in Jersey.
Accordingly, based upon the foregoing, in the opinion of Airplanes Group's
Jersey tax counsel, Airplanes Limited will not be subject to Jersey income tax.
In addition, in the opinion of Airplanes Group's Jersey tax counsel, there
will not be any Jersey income taxes imposed on the 2001 refinancing trust.
WITHHOLDING TAXES
In general, Jersey imposes a withholding tax at the rate of 20% on interest
and other amounts paid to non-residents of Jersey with respect to any debt
obligation of a company resident in Jersey. However, this withholding tax is not
imposed with respect to an exempt company (as defined above). Accordingly, based
upon Airplanes Limited's qualification as an exempt company, in the opinion of
Airplanes Group's Jersey tax counsel, no Jersey withholding tax will be deducted
from interest and other amounts paid on the Airplanes Limited subclass A-9 notes
on account of Jersey taxes.
In addition, in the opinion of Airplanes Group's Jersey tax counsel, no
withholding or deduction on account of Jersey taxes will be imposed with respect
to interest and other amounts paid on the new certificates, other than
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any deduction with respect to payments on the new subclass-A-9 certificates
attributable to withholding on the Airplanes Limited subclass A-9 notes, if any,
as described above.
In the event that any Jersey withholding tax is imposed, you should note
that there is no income tax treaty between the United States and Jersey that
would apply to reduce or eliminate that withholding. You should note further
that Airplanes Limited will not be obliged under the terms of the Airplanes
Limited subclass A-9 notes, and the trustee will not be obliged under the terms
of the new certificates, to make any additional payments in respect of any
withholding tax that may be imposed. Accordingly, in the event that withholding
were to be required on account of Jersey taxes, distributions to you may be less
than those which would be made on the new certificates in the absence of any
withholding tax.
OTHER TAXES
There is no taxation of capital gains (other than with respect to certain
tax avoidance transactions) in Jersey. As a result, capital gains of Airplanes
Limited on its investments and your capital gains, if any, on a sale or transfer
of the new certificates will not be subject to taxation in Jersey. There is no
value added tax or other relevant taxation in Jersey. No stamp duty, stamp duty
reserve tax or issue, documentary, registration or other similar tax imposed by
any governmental department or other taxing authority of or in Jersey is payable
in connection with the creation, initial issue, delivery or transfer inter vivos
of the Airplanes Limited subclass A-9 notes or the new certificates.
In the event that any such new certificates or corresponding Airplanes
Limited subclass A-9 notes are situated in Jersey on the death of a sole
individual holder of those new certificates or notes who is a non-resident of
Jersey (by virtue of their being held on a register in Jersey or in bearer form
and held in Jersey at the date of death or otherwise deemed to be so situated
under applicable rules of private international law), a grant of probate or
letters of administration would have to be obtained in Jersey and a duty of up
to 1% of the assets of the deceased situated in Jersey would be payable.
IRISH TAX CONSIDERATIONS
The following summary is based on the opinions of KPMG on principles of
Irish taxation law and McCann FitzGerald with regard to stamp duty. These
principles depend on interpretation of laws, regulations, rulings and decisions,
all of which are currently in effect but are subject to change. Any change in
these laws, regulations, rulings or decisions may be applied retroactively and
may adversely affect the principles of Irish tax on which the opinion is based.
This summary does not address all Irish tax principles that may apply to all
categories of potential investors, some of which may be subject to special
rules.
IRISH INCOME AND WITHHOLDING TAXES
A company that is resident in Ireland is subject to Irish tax on its
worldwide income and gains, and a company that is not resident in Ireland but
which carries on a trade in Ireland through a permanent establishment, branch or
agency is subject to Irish taxes on its income and capital gains arising in
Ireland. In addition, there generally is an Irish withholding tax imposed on
interest paid to non-residents of Ireland by a company resident in Ireland or by
a company that is not resident of Ireland to the extent that this interest is
attributable to a trade carried on in Ireland through a permanent establishment,
branch or agency or is Irish source interest.
In the opinion of KMPG (1) there will be no Irish taxation on the income
of, or any capital gain of, Airplanes Limited, Airplanes Trust or the 2001
refinancing trust, and (2) there will be no withholding or deduction on account
of Irish taxes with respect to interest and other amounts paid by Airplanes
Limited or Airplanes Trust on the subclass A-9 notes, or by the 2001 refinancing
trust on the subclass A-9 certificates. The foregoing opinion is based on the
assumptions that (1) none of Airplanes Limited, Airplanes Trust or the 2001
refinancing trust will (a) be Irish tax resident, (b) have a branch, agency or
permanent establishment in Ireland or (c) have any Irish source income or gain
other than interest paid by their direct and indirect Irish subsidiaries in the
course of carrying on relevant trading operations under their Shannon
certificates ("SHANNON CERTIFIED OPERATIONS"), and (2) the interest and other
amounts paid on the subclass A-9 notes and certificates will not be Irish source
income.
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Airplanes Limited and Airplanes Trust intend to continue to operate their
business in a way which will satisfy these criteria.
As regards Shannon certified operations and their termination in 2005, see
"Risk Factors -- Risks Relating to Tax."
You should note that neither Airplanes Limited nor Airplanes Trust will be
obliged under the terms of the subclass A-9 notes, and the trustee will not be
obliged under the terms of the subclass A-9 certificates, to make any additional
payments in respect of any Irish withholding tax that may be imposed.
Accordingly, distributions to you may be less than those which would be made on
the subclass A-9 certificates in the absence of any withholding tax.
IRISH VALUE ADDED TAX
Ireland generally imposes a value added tax on the supply of goods and
services. In the opinion of KPMG, (1) leases will not be subject to Irish value
added tax and (2) AeroUSA will be eligible to reclaim any Irish value added tax
that it may have to pay in connection with any management services performed by
GECAS or by subsidiaries of debis AirFinance Ireland. The foregoing opinion is
based upon certain covenants by each of Airplanes Limited, Airplanes Trust, and
AeroUSA regarding its place of business and the location of the aircraft and on
the assumptions that: (a) the aircraft are used or to be used by a transport
undertaking operating for reward chiefly on international routes; (b) none of
Airplanes Limited, Airplanes Trust or AeroUSA supply goods or services within
Ireland and (c) input credit would not be denied to an Irish person carrying on
the same activity as the payor, if that person were in receipt of the management
services specified.
In general, Irish value added tax will be payable, and may not be
reclaimable, in respect of certain management services performed by subsidiaries
of debis AirFinance Ireland for Airplanes Limited, Airplanes Trust or the trust.
OTHER IRISH TAXES
In the opinion of McCann FitzGerald, no stamp duty, stamp duty reserve tax
or issue, documentary, registration or other similar tax imposed by any
government department or other taxing authority of or in Ireland will be payable
in connection with the creation, initial issue or delivery of the subclass A-9
notes or certificates.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following description of the material U.S. federal income tax
consequences resulting from the ownership and disposition of the subclass A-9
certificates is the opinion of Davis Polk & Wardwell. This discussion does not
purport to consider all the possible tax consequences of the ownership or
disposition of subclass A-9 certificates, and it is not intended to reflect the
individual tax position of any holder. It deals only with subclass A-9
certificates held as capital assets by holders who purchased the old
certificates in the offering at their "ISSUE PRICE" (which is the price at which
a substantial amount of the old certificates were sold to persons other than
bond houses, brokers or similar persons acting in the capacity of underwriters,
placement agents or wholesalers), and not with special classes of holders,
including, without limitation, dealers in securities or currencies, banks,
tax-exempt organizations, life insurance companies, financial institutions,
broker-dealers, persons that hold securities that are a hedge or that are hedged
against currency or interest rate risks or that are part of a straddle or
conversion transaction, certain U.S. expatriates or persons whose functional
currency for U.S. federal income tax purposes is not the U.S. dollar. Holders
who purchased the old certificates at a price other than the issue price should
consult their tax advisors as to the possible applicability to them of the
amortizable bond premium or market discount rules. Further, this discussion does
not address the effect of any U.S. state or local tax laws on a holder of
subclass A-9 certificates. The discussion is based on the Internal Revenue Code
of 1986, as amended (the "CODE"), its legislative history, final, temporary and
proposed regulations thereunder, published rulings and court decisions, all as
currently in effect and all subject to change at any time, possibly with
retroactive effect.
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Holders and prospective purchasers of subclass A-9 certificates should
consult their own tax advisors concerning the consequences, in their particular
circumstances, under the U.S. federal income tax laws and the laws of any
relevant state, local or other foreign taxing jurisdiction, of the purchase,
ownership and disposition of subclass A-9 certificates.
A "U.S. HOLDER" means a beneficial owner of subclass A-9 certificates that
is, for U.S. federal income tax purposes, (i) a citizen or resident of the
United States, (ii) a U.S. corporation, or (iii) an estate or trust the income
of which is subject to U.S. federal income taxation regardless of its source.
A "NON-U.S. HOLDER" means a beneficial owner of subclass A-9 certificates
that is, for U.S. federal income tax purposes, (1) a nonresident alien
individual, (2) a foreign corporation, (3) a nonresident alien fiduciary of a
foreign estate or trust or (4) a foreign partnership one or more of the members
of which is, for U.S. federal income tax purposes, a nonresident alien
individual, a foreign corporation or a nonresident alien fiduciary of a foreign
estate or trust.
For U.S. federal income tax purposes, each holder of subclass A-9
certificates will be treated as owning directly the portion of subclass A-9
notes represented by those subclass A-9 certificates.
TAX CONSEQUENCES TO U.S. HOLDERS
PAYMENTS OF INTEREST. The portion of the stated interest with respect to
subclass A-9 notes, including Irish or Jersey withholding taxes, if any, that is
allocable to the subclass A-9 certificates held by a U.S. holder will be
includible in that holder's gross income as ordinary interest income at the time
it is received or accrued, depending on the holder's method of accounting for
U.S. federal income tax purposes. The subclass A-9 certificates will be issued
either at par, in which case there will be no original issue discount ("OID"),
or at less than par with a de minimis amount of OID. A holder of subclass A-9
certificates with de minimis OID must include that OID in income on a
proportionate basis as principal payments are made.
U.S. holders may be entitled to claim foreign tax credits, subject to
applicable limitations, with respect to any Irish or Jersey taxes withheld from
interest paid by Airplanes Limited. Holders should consult their tax advisors
about the treatment of any of these taxes.
SALE, RETIREMENT AND OTHER DISPOSITION OF THE SUBCLASS A-9
CERTIFICATES. Upon the sale, exchange or retirement of a subclass A-9
certificate, a U.S. holder will recognize taxable gain or loss equal to the
difference between the amount realized (not including any amounts received that
are attributable to accrued but unpaid interest not previously included in
income, which will be taxable as ordinary interest income in accordance with the
U.S. holder's method of accounting as described above) and the U.S. holder's tax
basis in that subclass A-9 certificate. A U.S. holder's tax basis in a subclass
A-9 certificate generally will be its cost, decreased by any principal
repayments. Such gain or loss recognized on the sale or retirement of a subclass
A-9 certificate will be capital gain or loss, and will generally be U.S. source.
Holders and prospective investors should consult their tax advisors regarding
the treatment of capital gains (which may be taxed at lower rates than ordinary
income for certain taxpayers who are individuals) and losses (the deductibility
of which is subject to limitations).
EXCHANGE OF OLD CERTIFICATES FOR NEW CERTIFICATES. An exchange of old
certificates for new certificates will not be treated as a taxable exchange for
U.S. federal income tax purposes. Accordingly, if a U.S. holder exchanges the
old certificates for new certificates, such holder will not recognize income,
gain or loss for U.S. federal income tax purposes. A U.S. holder's tax basis in
the new certificates will be equal to such holder's adjusted tax basis in the
old certificates, and the holder's holding period in the new certificates will
include such holder's holding period in the old certificates.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Information returns will be
filed with the Internal Revenue Service ("IRS") in connection with payments on
subclass A-9 certificates and the proceeds from a sale or other disposition of
subclass A-9 certificates. A U.S. holder will not be subject to a 31% U.S.
backup withholding tax on these payments if that holder provides its taxpayer
identification number to the paying agent and complies with certain
certification procedures. The amount of any backup withholding from a payment to
a U.S. holder will be allowed as a credit against that holder's U.S. federal
income tax liability and may entitle the holder to a refund, provided that the
required information is furnished to the IRS.
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TAX CONSEQUENCES TO NON-U.S. HOLDERS
To the extent that payments on subclass A-9 certificates are in respect of
underlying Airplanes Trust subclass A-9 notes, and subject to the "--
Information Reporting and Backup Withholding" discussion below:
- payments of principal and interest on the subclass A-9 notes to any
non-U.S. holder will not be subject to U.S. federal withholding tax,
provided that the holder is not a bank receiving interest described in
Section 881(c)(3)(A) of the code; and
- the statement requirement set forth in Section 871(h) or Section 881(c)
of the code has been fulfilled with respect to the beneficial owner, as
discussed below.
Sections 871(h) and 881(c) of the code require that, in order to obtain the
portfolio interest exemption from withholding tax described above, either the
beneficial owner of the subclass A-9 certificate, or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "FINANCIAL
INSTITUTION") and that is holding the subclass A-9 certificate on behalf of that
beneficial owner, must file a statement with the withholding agent to the effect
that the beneficial owner of the subclass A-9 certificate is not a U.S. holder.
Such requirement will be fulfilled if the beneficial owner of a note certifies
on IRS Form W-8BEN, under penalties of perjury, that it is not a U.S. holder and
provides its name and address, and any financial institution holding the
subclass A-9 certificate on behalf of the beneficial owner files a statement on
Form W-8IMY with the withholding agent to the effect that it has received that
statement from the beneficial owner (and furnishes the withholding agent with a
copy thereof). With respect to interest and disposition proceeds paid on
subclass A-9 certificates held by a foreign partnership, the foreign partnership
generally will be required to provide a Form W-8IMY and to attach an appropriate
certification by each partner thereto.
To the extent that payments on subclass A-9 certificates are in respect of
underlying Airplanes Limited subclass A-9 notes, and subject to the "--
Information Reporting and Backup Withholding" discussion below, payments of
principal and interest on the subclass A-9 certificates to any non-U.S. holder
will not be subject to U.S. federal income tax, including withholding tax,
unless the non-U.S. holder has an office or other fixed place of business in the
United States to which the interest is attributable, and either:
- the interest is derived in the active conduct of a banking, financing or
other similar business within the United States or is received by a
corporation the principal business of which is trading in stocks or
securities for its own account; or
- the non-U.S. holder is an insurance company carrying on a U.S. insurance
business to which the interest is attributable,
and in each case certain other conditions exist. In that event, the non-U.S.
holder will be taxed in the same manner as if it were a U.S. holder with respect
to those payments and the payments may also be subject to a branch profits tax
equal to 30% (or a lower treaty rate) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
A non-U.S. holder will generally not be subject to U.S. federal income tax
on gain realized on the sale, exchange or other disposition of subclass A-9
certificates, unless (1) the non-U.S. holder is an individual who is present in
the United States for 183 days or more in the taxable year of disposition, and
either the gain is attributable to an office or fixed place of business
maintained by that individual in the United States, or, generally, the
individual has a "tax home" in the United States, or (2) the gain is effectively
connected with the conduct by the non-U.S. holder of a trade or business in the
United States. In the event that clause (1) applies, the gain will generally be
subject to a 30% tax. In the event that clause (2) applies, the non-U.S. holder
will be taxed in the same manner as if it were a U.S. holder with respect to
that gain and that gain may also be subject to a branch profits tax equal to 30%
(or a lower treaty rate) of its effectively connected earnings and profits for
the taxable year, subject to certain adjustments.
A subclass A-9 certificate held by an individual who is not a citizen or
resident of the United States at the time of death will not be subject to U.S.
federal estate tax as a result of that individual's death, provided, to the
extent the subclass A-9 certificates represent the underlying Airplanes Trust
subclass A-9 notes, that at the time of
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that individual's death, payments with respect to that subclass A-9 certificate
would not have been effectively connected with the conduct by that individual of
a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Payments on the subclass A-9
certificates and the proceeds from a sale or other disposition of the subclass
A-9 certificates may be subject to information reporting and to a 31% U.S.
backup withholding tax. A non-U.S. holder may have to comply with certification
procedures to establish that the holder is not a U.S. person or otherwise
establish an exemption in order to avoid information reporting and backup
withholding tax requirements. The certification procedures required to claim the
portfolio interest exemption described above will generally satisfy the
certification requirements necessary to avoid the 31% backup withholding tax on
payments made by the trust or any agent of the trust. The amount of any backup
withholding from a payment to a non-U.S. holder will be allowed as a credit
against that holder's U.S. federal income tax liability and may entitle that
holder to a refund, provided that the required information is furnished to the
IRS.
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ERISA CONSIDERATIONS
Any plan that proposes to purchase subclass A-9 certificates should consult
with its counsel with respect to the potential consequences of the investment
under the fiduciary responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and the code.
ERISA and the code impose certain requirements on employee benefit plans
and certain other retirement plans and arrangements, including individual
retirement accounts and annuities, that are subject to ERISA and/or the code
(all of which are hereinafter referred to as "PLANS") and or persons who are
fiduciaries with respect to those plans. A person who exercises discretionary
authority or control with respect to the management or assets of a plan will be
considered a fiduciary of the plan under ERISA. In accordance with ERISA's
general fiduciary standards, before investing in a subclass A-9 certificate, a
plan fiduciary should determine whether such an investment is permitted under
the governing plan instruments and is appropriate for the plan in view of its
overall investment policy and the composition and diversification of its
portfolio, taking into account the limited liquidity of the subclass A-9
certificates. Other provisions of ERISA and the code prohibit certain
transactions involving the assets of a plan and persons who have certain
specified relationships to the plan ("PARTIES IN INTEREST" within the meaning of
ERISA or "DISQUALIFIED PERSONS" within the meaning of the code). Thus, a plan
fiduciary considering an investment in subclass A-9 certificates should also
consider whether that investment might constitute or give rise to a prohibited
transaction under ERISA or the code and whether an administrative exemption
might be applicable to that investment.
An investment in subclass A-9 certificates by a plan might also result in
the assets of the trust being deemed to constitute plan assets, which in turn
might mean that certain aspects of that investment, or actions involving the
assets of the trust, would involve assets of a plan, which transactions might be
or become prohibited transactions under ERISA and/or the code. Further, in that
case the plan fiduciary might be deemed to have engaged in an improper
delegation to the trustee of its investment management responsibilities with
respect to those assets of the trust deemed plan assets. Neither ERISA nor the
code defines the term "plan assets." Under Section 2510.3-101 of the United
States Department of Labor (the "DOL") regulations (the "REGULATIONS"), a plan's
assets may include an interest in the underlying assets of an entity (such as a
trust) for certain purposes, including the fiduciary responsibility provisions
of ERISA and the prohibited transaction provisions of ERISA and the code, if the
plan acquires an "equity interest" in that entity. Thus, if a plan acquired a
subclass A-9 certificate, for certain purposes (including those fiduciary
responsibility and prohibited transaction provisions) the plan would be
considered to own its share of the underlying assets of the trust allocable to
that subclass A-9 certificate unless equity participation by benefit plan
investors in the trust is not "significant." In the event that at any time
investment by benefit plan investors in the trust is "significant," as discussed
below, investment by a plan in a subclass A-9 certificate of any class or
subclass would, in effect, be considered, for purposes of the fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and the code, to be an investment in the corresponding pair of subclass
A-9 notes and an ongoing loan to Airplanes Limited and Airplanes Trust.
Participation by benefit plan investors in subclass A-9 certificates would
not be significant if at all times less than 25% of the value of the subclass
A-9 certificates was held by benefit plan investors, which are defined to
include both plans and employee benefit plans not subject to ERISA (for example,
governmental plans, foreign plans and individual retirement accounts and
entities whose assets are treated as "plan assets" under the regulation).
Investment in and transfer of the subclass A-9 certificates will not be
restricted or monitored with respect to this 25% limit. Accordingly, it is
possible that during the term of the subclass A-9 certificates 25% or more of
the subclass A-9 certificates will be held by plans and other benefit plan
investors so that, under the regulation, an investment by a plan in subclass A-9
certificates during that period would, in effect, be considered, for purposes of
the fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and the code, to be an investment in the corresponding
subclass A-9 notes and an ongoing loan to Airplanes Limited and Airplanes Trust.
Accordingly, if assets of the trust are considered plan assets, investment
by a plan or plans in subclass A-9 certificates could result in a prohibited
transaction or impermissible delegation of authority. The acquisition of
subclass A-9 certificates by a plan could be a prohibited transaction if the
trustee, Airplanes Limited, Airplanes
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Trust, GE Capital, GECAS, the lessees or any of their affiliates are parties in
interest or disqualified persons with respect to the plan. The duties of the
trustee under the trust, however, are essentially custodial and ministerial in
nature and it is not expected that the trustee will be required to exercise
discretionary authority or control in the discharge of its responsibilities
under the trust other than in limited circumstances such as upon a default on
the subclass A-9 notes. Moreover, since Airplanes Limited and Airplanes Trust
are special-purpose entities whose principal assets are the aircraft and the
intercompany loans and since GE Capital owns the class E notes and GECAS is
engaged primarily in the business of providing aircraft management services, it
is possible that many plans will be able to determine that Airplanes Limited,
Airplanes Trust, GE Capital and GECAS or any of their other affiliates are not
disqualified persons or parties in interest with respect to those plans.
Any prohibited transaction could be treated as exempt under ERISA and the
code if the subclass A-9 certificates were acquired pursuant to and in
accordance with one or more "class exemptions" issued by the DOL, such as
prohibited transaction class exemption ("PTCE") 75-1 (an exemption for certain
transactions involving employee benefit plans and broker dealers (such as an
underwriter), reporting dealers and banks), PTCE 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
certain transactions involving insurance company general accounts), or PTCE
96-23 (an exemption for certain transactions determined by a qualified in-house
asset manager).
ERISA also prohibits a fiduciary of a plan from maintaining the indicia of
ownership of any assets of the plan outside the jurisdiction of the district
courts of the United States except under certain circumstances. Before investing
in a subclass A-9 certificate, a plan fiduciary should consider whether its
acquisition and holding of a subclass A-9 certificate would satisfy such indicia
of ownership rules.
A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF SUBCLASS A-9 CERTIFICATES
SHOULD CONSULT ITS TAX AND/OR LEGAL ADVISORS REGARDING UNDER WHAT CIRCUMSTANCES
THE ASSETS OF THE 2001 REFINANCING TRUST WOULD BE CONSIDERED PLAN ASSETS, THE
AVAILABILITY, IF ANY, OF EXEMPTIVE RELIEF FROM ANY POTENTIAL PROHIBITED
TRANSACTION AND OTHER FIDUCIARY ISSUES AND THEIR POTENTIAL CONSEQUENCES.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new certificates for its own account under
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new certificates. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
resales of new certificates received in exchange for old certificates where the
old certificates were acquired as a result of market-making activities or other
trading activities. We have agreed that, starting on the expiration date and
ending on the close of business on the 180th day following the expiration date,
we will make this prospectus, as amended or supplemented, available to any
broker-dealer for use with any resale of new certificates.
We will not receive any proceeds from any sale of new certificates by
broker-dealers. New certificates received by broker-dealers for their own
account under the exchange offer may be sold in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the new certificates or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such 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 such
broker-dealer and/or the purchasers of any such new certificates. Any
broker-dealer that resells new certificates 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 such new certificates may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of new certificates and any commissions 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.
For a period of 180 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer
including the expenses of one counsel for the holders of the old certificates,
but other than commissions or concessions of any brokers or dealers, and we will
indemnify the holders of the old certificates including any broker-dealers
against certain liabilities, including liabilities under the Securities Act.
162
164
LEGAL MATTERS
Certain matters relating to the new certificates and the subclass A-9 notes
will be passed upon for Airplanes Limited and Airplanes Trust by Davis Polk &
Wardwell, special counsel to Airplanes Limited and Airplanes Trust, Mourant du
Feu & Jeune, Jersey counsel to Airplanes Limited, and Richards, Layton & Finger,
P.A., special Delaware counsel to Airplanes Trust.
You should consider the applicability of statutes, rules, regulations,
orders, guidelines or agreements generally governing investments made by a
particular investor, including but not limited to "prudent investor" provisions
and percentage-of-assets limitations. You should consult your own legal advisors
in determining whether and to what extent the subclass A-9 certificates
constitute a legal investment for your purposes.
Airplanes Group and the trustee make no representation as to the proper
characterization of the subclass A-9 certificates for legal investment or
financial institution regulatory purposes or as to the ability of particular
investors to purchase subclass A-9 certificates under applicable legal
investment restrictions. These uncertainties (and any unfavorable future
determinations concerning legal investment or financial institutions regulatory
characteristics of the subclass A-9 certificates) may adversely affect the
liquidity of the subclass A-9 certificates.
163
165
ENFORCEMENT OF CIVIL LIABILITIES
Airplanes Limited is a public limited company incorporated and registered
in Jersey, Channel Islands. All but one of the directors of Airplanes Limited
and the controlling trustees of Airplanes Trust, and some of the experts named
in this prospectus, are non-residents of the United States. Their assets, in
whole or in part, are located outside the United States. As a result, it may be
difficult or impossible for investors to serve process on these people or on
Airplanes Limited in the United States. It may also be difficult or impossible
to enforce on these people any judgments of United States courts based upon the
civil liability provisions of the federal securities laws of the United States.
Airplanes Limited has been advised that it is unlikely that the courts of Jersey
would adjudge civil liability in an action based only on United States federal
securities laws. There is no arrangement in place between Jersey and the United
States for each country to enforce judgments of the other. There are no
limitations on the right of non-residents of Jersey to hold or vote the
certificates under Jersey law or under the Memorandum and Articles of
Association of Airplanes Limited.
LISTING AND GENERAL INFORMATION
The old certificates were listed on the Luxembourg Stock Exchange on March
15, 2001. Application has been made to list the new certificates on the
Luxembourg Stock Exchange in accordance with its rules. Once the new
certificates have been listed, you will be able to trade them on the Luxembourg
Stock Exchange. We have deposited the constitutive documents of Airplanes Pass
Through Trust, Airplanes Limited and Airplanes Trust, as well as the legal
notice relating to the issue of the new certificates, with the Chief 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 copying.
The new certificates have been accepted for clearance through DTC,
Euroclear and Clearstream, Luxembourg. Their CUSIP number, International
Securities Identification Number (ISIN) and Common Code Number (CCN) are as set
forth in the table below.
CUSIP ISIN CCN
----------- ------------- ----------
Subclass A-9 Certificate...................... 009451 AP 0 US 009451 AP
06
We have obtained all necessary consents, approvals and authorizations in
connection with the issue and performance of the new certificates.
The directors of Airplanes Limited and the controlling trustees of
Airplanes Trust authorized the exchange offer and the issuance of the new
certificates on , 2001.
In accordance with the rules of the Luxembourg Stock Exchange, we state
that, except as disclosed in this prospectus, there has been no material adverse
change in the financial position of Airplanes Limited and Airplanes Trust since
they were formed. Although Airplanes Limited and Airplanes Trust and their
respective subsidiaries are party to litigation in the ordinary course of their
businesses, none of them is party to any material legal proceedings.
We are offering to exchange new certificates for old certificates only in
jurisdictions where these offers are permitted. Neither the delivery of this
prospectus nor any sale made under this prospectus implies that there has been
no change in our affairs since the date of this prospectus or that information
contained in this prospectus is correct as of any date after its date.
We have taken all reasonable care to confirm that the information contained
in this prospectus in relation to Airplanes Group and the new certificates is
true and accurate in all material respects and that, in relation to Airplanes
Group and the new certificates, there are no material facts the omission of
which would make any statement contained in this prospectus, whether of fact or
opinion, misleading. We accept responsibility accordingly.
We have obtained the consent of the Jersey Financial Services Commission
under the Control of Borrowing (Jersey) Order 1958 (as amended) to the issue by
Airplanes Limited of the Airplanes Limited subclass A-9 notes,
164
166
and to the issue by the 2001 refinancing trust of the new certificates to the
extent that consent under the 1958 Order is required. When we circulate this
prospectus, we will have delivered a copy of it to the Registrar of Companies in
Jersey in accordance with Article 6 of the Companies (General Provisions)
(Jersey) Order 1992 and we will have received his consent to its circulation and
that consent will not have been withdrawn. You should understand that, in giving
their consents, neither the Jersey Financial Services Commission nor the
Registrar of Companies takes any responsibility for the financial soundness of
Airplanes Limited or for the correctness of any statements made or opinions
expressed with regard to Airplanes Limited.
The registered office of the 2001 refinancing trust is c/o Bankers Trust
Company, Four Albany Street, Mail Stop 5091, New York, NY 10006, Attention:
Corporate Trust and Agency Group and its telephone number is +1-212-250-2601.
We file annual reports on Form 10-K (which include information relating to
the annual appraisal of our portfolio) and quarterly reports on Form 10-Q with,
and we submit special reports and other information on Form 8-K to, the SEC. You
may read and copy any document we have filed or submitted at the SEC's public
reference facilities at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at their regional offices at 7 World Trade Center, Suite 1300, New
York, New York 10048 and at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60611. You may obtain information on the operation
of the public reference room by calling the SEC at +1-800-SEC-0330
(+1-800-732-0330). The SEC maintains a website at www.sec.gov that contains
reports, proxy and information statements and other information regarding
issuers that file materials electronically, including Airplanes Group. You may
also obtain copies of these documents and other agreements referred to in this
prospectus (including the trust agreement, indentures, security trust agreement,
servicing agreement, administrative agency agreement and cash management
agreement), free of charge, from the office of the listing agent in Luxembourg:
Banque Internationale a Luxembourg, 69, route d'Esch, L-1470 Luxembourg.
Airplanes Group has filed with the SEC a Registration Statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the new certificates to be issued in connection with this exchange
offer. This prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, parts of which were omitted as
permitted by the rules and regulations of the SEC. This additional information
may be obtained from the SEC's principal office in Washington, D.C. Statements
contained in this prospectus pertaining to the content of any contract or other
document are not necessarily complete, and in each instance where the contract
or other document has been filed as an exhibit to the Registration Statement,
reference is made to the copy of that contract or other document filed as an
exhibit; each such statement being qualified in all respects by such reference.
Copies of the exhibits are available without charge to certificate holders
upon written or oral request to Patrick Blaney, Pat Dalton or Paul Farrell,
debis AirFinance House, Shannon, Ireland, telephone +353 61 360 000. IN ORDER TO
OBTAIN TIMELY DELIVERY OF THE EXHIBITS, CERTIFICATE HOLDERS MUST REQUEST THIS
INFORMATION NO MORE THAN FIVE BUSINESS DAYS BEFORE THE DATE ON WHICH THE
DECISION TO ACCEPT THE EXCHANGE OFFER MUST BE TAKEN, THAT IS [FIVE BUSINESS DAYS
BEFORE THE EXPIRATION DATE].
165
167
EXPERTS
The financial statements of Airplanes Limited and Airplanes Trust at March
31, 1998, 1999 and 2000 and for each of the fiscal years in the three-year
period ending March 31, 2000 have been audited by KPMG, independent public
accountants, 5 George's Dock, IFSC, Dublin 1, Ireland, as stated in their report
appearing elsewhere in this prospectus. These financial statements are included
in this prospectus in reliance upon the authority of these accountants as
experts in accounting and auditing.
Some of the legal and other professionals, appraisers and experts who
perform services for us have also performed services for GECAS and debis
AirFinance Ireland or their affiliates in the past and may do so again in the
future.
Valuations of the aircraft as of January 31, 2001 were made by three expert
aircraft appraisers: Airclaims Limited, Aircraft Information Services, Inc. and
BK Associates, Inc. These valuations are discussed in detail elsewhere in this
prospectus and are included in this prospectus in reliance upon the authority of
these firms as experts in giving appraisals of this kind.
166
168
INDEX TO FINANCIAL STATEMENTS
HISTORIC CONSOLIDATED FINANCIAL STATEMENTS FOR AIRPLANES
LIMITED AND AIRPLANES TRUST FOR THE THREE YEARS ENDED MARCH
31, 1998, MARCH 31, 1999 AND MARCH 31, 2000
Independent Auditors' Report................................ F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Changes in Shareholders' Deficit/Net
Liabilities............................................... F-5
Statements of Cash Flows.................................... F-6
Notes to the Financial Statements........................... F-7
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR
AIRPLANES LIMITED AND AIRPLANES TRUST FOR THE NINE MONTH
PERIODS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 2000
Balance Sheets.............................................. F-25
Statements of Operations.................................... F-26
Statements of Changes in Shareholders' Deficit/Net
Liabilities............................................... F-27
Statements of Cash Flows.................................... F-28
Notes to the Interim Consolidated Financial Statements...... F-29
F-1
169
AIRPLANES GROUP
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF AIRPLANES LIMITED
AND THE CONTROLLING TRUSTEES OF AIRPLANES U.S. TRUST
We have audited the accompanying balance sheets of Airplanes Limited and
Airplanes U.S. Trust as of March 31, 2000 and 1999, and the related statements
of operations, changes in shareholders' deficit/net liabilities and cashflows
for each of the years in the three year period ended March 31, 2000. These
financial statements represent certain specified leasing operations of debis
AirFinance Ireland (as defined in Notes 1 and 2) up to March 28, 1996 and the
leasing operations of Airplanes Limited and Airplanes U.S. Trust in the period
from March 28, 1996 to March 31, 2000. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. These standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Airplanes Limited and
Airplanes U.S. Trust as of March 31, 2000 and 1999, and the results of their
operations and cash flows for each of the years in the three year period ended
March 31, 2000, in conformity with generally accepted accounting principles in
the United States.
KPMG
Chartered Accountants
Dublin, Ireland
June 15, 2000
F-2
170
AIRPLANES GROUP
BALANCE SHEETS
YEARS ENDED MARCH 31,
-------------------------------------------------------------------
1999 2000
-------------------------------- --------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
NOTES LIMITED TRUST COMBINED LIMITED TRUST COMBINED
----- --------- --------- -------- --------- --------- --------
($ MILLIONS) ($ MILLIONS)
ASSETS
Cash.......................................... 5 218 6 224 197 6 203
Accounts receivable........................... 6
Trade receivables........................... 38 5 43 24 8 32
Allowance for doubtful debts................ (14) (3) (17) (10) (5) (15)
Amounts due to Airplanes Trust.............. 7 -- 35 35 -- 28 28
Intercompany capital lease.................. 8 36 -- 36 -- -- --
Net investment in capital and sales type
leases.................................... 9 20 36 56 15 -- 15
Aircraft, net............................... 10 2,820 252 3,072 2,697 235 2,932
Other assets................................ 4 -- 4 3 8 11
------ ---- ------ ------ ---- ------
Total assets.................................. 3,122 331 3,453 2,926 280 3,206
====== ==== ====== ====== ==== ======
LIABILITIES
Accrued expenses and other liabilities........ 11 581 51 632 807 74 881
Amounts due from Airplanes Limited............ 7 35 -- 35 28 -- 28
Intercompany capital lease.................... 8 -- 36 36 -- -- --
Indebtedness.................................. 12 3,500 342 3,842 3,313 323 3,636
Provision for maintenance..................... 13 266 17 283 258 16 274
Deferred income taxes......................... 19 51 48 99 66 48 114
------ ---- ------ ------ ---- ------
Total liabilities............................. 4,433 494 4,927 4,472 461 4,933
------ ---- ------ ------ ---- ------
Net liabilities............................... (1,311) (163) (1,474) (1,546) (181) (1,727)
------ ---- ------ ------ ---- ------
3,122 331 3,453 2,926 280 3,206
====== ==== ====== ====== ==== ======
Commitments and Contingent Liabilities (Notes 20 and 21)
The accompanying notes are an integral part of the financial statements.
F-3
171
AIRPLANES GROUP
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31,
-------------------------------------------------------------------
1998 1999
-------------------------------- --------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
NOTES LIMITED TRUST COMBINED LIMITED TRUST COMBINED
----- --------- --------- -------- --------- --------- --------
($ MILLIONS) ($ MILLIONS)
REVENUES
Aircraft leasing................... 15 512 73 585 484 42 526
Aircraft sales..................... 15 37 57 94 37 95 132
Other income....................... 15 -- -- -- -- -- --
EXPENSES
Cost of aircraft sold.............. (32) (58) (90) (32) (86) (118)
Depreciation and amortization...... (170) (22) (192) (159) (17) (176)
Net interest expense............... 16 (373) (38) (411) (388) (40) (428)
Provision for maintenance.......... (68) (20) (88) (67) (2) (69)
Bad and doubtful debts............. -- -- -- (9) (2) (11)
Provision for loss making leases,
net.............................. 17 14 3 17 11 1 12
Other lease costs.................. (29) (1) (30) (13) (1) (14)
Selling, general and administrative
expenses......................... 18 35 3 38 32 3 35
---- --- ---- ---- --- ----
Operating loss before income
taxes............................ (144) (9) (153) (168) (13) (181)
Income tax benefit/(charge)........ 19 3 -- 3 3 -- 3
---- --- ---- ---- --- ----
Net loss........................... (141) (9) (150) (165) (13) (178)
==== === ==== ==== === ====
YEARS ENDED MARCH 31,
--------------------------------
2000
--------------------------------
AIRPLANES AIRPLANES
LIMITED TRUST COMBINED
--------- --------- --------
($ MILLIONS)
REVENUES
Aircraft leasing................... 460 41 501
Aircraft sales..................... 3 -- 3
Other income....................... 1 -- 1
EXPENSES
Cost of aircraft sold.............. (1) -- (1)
Depreciation and amortization...... (157) (17) (174)
Net interest expense............... (425) (43) (468)
Provision for maintenance.......... (62) (2) (64)
Bad and doubtful debts............. (2) (2) (4)
Provision for loss making leases,
net.............................. 3 1 4
Other lease costs.................. (9) (1) (10)
Selling, general and administrative
expenses......................... 31 3 34
---- --- ----
Operating loss before income
taxes............................ (220) (26) (246)
Income tax benefit/(charge)........ (15) 8 (7)
---- --- ----
Net loss........................... (235) (18) (253)
==== === ====
The accompanying notes are an integral part of the financial statements.
F-4
172
AIRPLANES GROUP
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT/NET LIABILITIES
AIRPLANES LIMITED AIRPLANES TRUST COMBINED
---------------------------------------------- --------------- ------------
SHAREHOLDERS
SHARE CAPITAL SHAREHOLDERS DEFICIT/NET
(NOTE 14) NET LIABILITIES DEFICIT NET LIABILITIES LIABILITIES
------------- --------------- ------------ --------------- ------------
($ MILLIONS) ($ MILLIONS) ($ MILLIONS) ($ MILLIONS) ($ MILLIONS)
BALANCE AT MARCH 31, 1998......... -- 1,146 1,146 150 1,296
----- ----- ----- ----- -----
Net loss for the fiscal year...... -- 165 165 13 178
----- ----- ----- ----- -----
BALANCE AT MARCH 31, 1999......... -- 1,311 1,311 163 1,474
----- ----- ----- ----- -----
Net loss for the fiscal year...... -- 235 235 18 253
----- ----- ----- ----- -----
BALANCE AT MARCH 31, 2000......... -- 1,546 1,546 181 1,727
----- ----- ----- ----- -----
The accompanying notes are an integral part of the financial statements.
F-5
173
AIRPLANES GROUP
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
-------------------------------------------------------------------
1998 1999
-------------------------------- --------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST COMBINED LIMITED TRUST COMBINED
--------- --------- -------- --------- --------- --------
($ MILLIONS) ($ MILLIONS)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss...................... (141) (9) (150) (165) (13) (178)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and
amortization................ 170 22 192 159 17 176
Aircraft maintenance, net..... 9 1 10 (21) (1) (22)
(Profit)/loss on disposal of
aircraft.................... (5) 1 (4) (5) (9) (14)
Deferred income taxes......... (3) -- (3) (3) -- (3)
Provision for loss making
leases...................... (14) (3) (17) (11) (1) (12)
Accrued and deferred interest
expense..................... 147 16 163 187 18 205
Changes in operating assets
and liabilities:
Accounts receivable, net...... 17 (2) 15 (12) (1) (13)
Other accruals and
liabilities................. 3 6 9 (39) 11 (28)
Other assets.................. -- (1) (1) -- -- --
------ ------ ------ ------ ------ ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES.................. 183 31 214 90 21 111
====== ====== ====== ====== ====== ======
CASH FLOWS FROM INVESTING
ACTIVITIES
Sale/(Purchase) of aircraft... 63 21 84 48 79 127
Intercompany account
movements................... -- -- -- 79 (79) --
Capital and sales type
leases...................... 17 -- 17 8 -- 8
------ ------ ------ ------ ------ ------
NET CASH PROVIDED BY/INVESTING
ACTIVITIES.................. 80 21 101 135 -- 135
====== ====== ====== ====== ====== ======
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of notes............ (2,494) (247) (2,741) (219) (21) (240)
Issue of refinanced notes (net
of costs)................... 2,201 218 2,419 -- -- --
Amounts due from Airplanes
Trust to Airplanes
Limited..................... 23 (23) -- -- -- --
------ ------ ------ ------ ------ ------
NET CASH (USED IN) FINANCING
ACTIVITIES.................. (270) (52) (322) (219) (21) (240)
====== ====== ====== ====== ====== ======
NET INCREASE/(DECREASE) IN
CASH........................ (7) -- (7) 6 -- 6
Cash at beginning of year..... 219 6 225 212 6 218
------ ------ ------ ------ ------ ------
Cash at end of year........... 212 6 218 218 6 224
====== ====== ====== ====== ====== ======
CASH PAID IN RESPECT OF:
INTEREST.................... 245 22 267 219 23 241
====== ====== ====== ====== ====== ======
YEARS ENDED MARCH 31,
--------------------------------
2000
--------------------------------
AIRPLANES AIRPLANES
LIMITED TRUST COMBINED
--------- --------- --------
($ MILLIONS)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss...................... (235) (18) (253)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and
amortization................ 157 17 174
Aircraft maintenance, net..... (6) (1) (7)
(Profit)/loss on disposal of
aircraft.................... (2) -- (2)
Deferred income taxes......... 15 (8) 7
Provision for loss making
leases...................... (3) (1) (4)
Accrued and deferred interest
expense..................... 249 23 272
Changes in operating assets
and liabilities:
Accounts receivable, net...... 4 5 9
Other accruals and
liabilities................. (16) 1 (15)
Other assets.................. -- -- --
------ ------ ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES.................. 163 18 181
====== ====== ======
CASH FLOWS FROM INVESTING
ACTIVITIES
Sale/(Purchase) of aircraft... -- -- --
Intercompany account
movements................... -- -- --
Capital and sales type
leases...................... 8 -- 8
------ ------ ------
NET CASH PROVIDED BY/INVESTING
ACTIVITIES.................. 8 -- 8
====== ====== ======
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of notes............ (192) (18) (210)
Issue of refinanced notes (net
of costs)................... -- -- --
Amounts due from Airplanes
Trust to Airplanes
Limited..................... -- -- --
------ ------ ------
NET CASH (USED IN) FINANCING
ACTIVITIES.................. (192) (18) (210)
====== ====== ======
NET INCREASE/(DECREASE) IN
CASH........................ (21) -- (21)
Cash at beginning of year..... 218 6 224
------ ------ ------
Cash at end of year........... 197 6 203
====== ====== ======
CASH PAID IN RESPECT OF:
INTEREST.................... 193 21 214
====== ====== ======
The accompanying notes are an integral part of the financial statements.
F-6
174
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS
1. SECURITIZATION TRANSACTION
On March 28, 1996 (the "CLOSING DATE") debis AirFinance Ireland plc (then
named GPA Group plc) ("DEBIS AIRFINANCE IRELAND") and its subsidiary
undertakings re-financed on a long term basis certain indebtedness due to
commercial banks and other senior secured debt. The re-financing was effected
through a major aircraft securitization transaction (the "TRANSACTION").
Under the terms of the Transaction, a combination ("AIRPLANES GROUP")
comprising Airplanes Limited, a special purpose company formed under the laws of
Jersey, Channel Islands ("AIRPLANES LIMITED") and Airplanes U.S. Trust, a trust
formed under the laws of Delaware ("AIRPLANES TRUST") together acquired directly
or indirectly from debis AirFinance Ireland a portfolio of 229 commercial
aircraft (collectively the "AIRCRAFT") and related leases (the "LEASES"). The
Transaction was effected by transferring existing subsidiaries of debis
AirFinance Ireland that owned the Aircraft to Airplanes Limited and Airplanes
Trust, respectively. References to Airplanes Group in these notes to the
financial statements may relate to Airplanes Limited and Airplanes Trust on a
combined or individual basis as applicable.
Simultaneously with such transfers, Airplanes Group issued notes of $4,048
million in aggregate principal amount in four classes: Class A, Class B, Class C
and Class D (the "NOTES") with approximately 91% of the principal amount of
notes in each class being issued by Airplanes Limited and approximately 9% by
Airplanes Trust. Airplanes Group also issued Class E Notes ranking after the
Notes and these were taken up by debis AirFinance Ireland and its subsidiaries
as part consideration for the transfer of the Aircraft and certain related lease
receivables. Airplanes Limited and Airplanes Trust have each fully and
unconditionally guaranteed each others' obligations under the relevant notes.
On March 16, 1998 Airplanes Group successfully completed a refinancing of
$2,437 million related to Class A and Class B Notes.
On November 20, 1998 debis AirFinance Ireland and its subsidiaries
transferred their holding of Class E Notes to General Electric Capital
Corporation ("GE CAPITAL"). However, this transfer does not require any change
to the accounting treatment adopted.
2. BASIS OF PREPARATION
The accompanying financial statements of Airplanes Limited, Airplanes Trust
and the combined balance sheets, statements of operations, statements of changes
in shareholders' deficit/net liabilities and cash flows of Airplanes Group
(together the "FINANCIAL STATEMENTS") have been prepared on a going concern
basis and on the bases and using the assumptions set out below and in accordance
with the accounting policies set out in Note 4 and in conformity with United
States generally accepted accounting principles:
The financial statements are presented on an historical cost basis as if
Airplanes Limited and Airplanes Trust had been organised as single economic
entities for all periods presented.
Accordingly, the financial statements reflect the results of operations,
assets and liabilities relating to the aircraft transferred to Airplanes Limited
and Airplanes Trust, from the date of original acquisition of controlling
interest by debis AirFinance Ireland and its subsidiaries of each aircraft. For
all periods prior to the Closing Date, the financial statements have been
prepared on the bases and assumptions set out below. For the period subsequent
to the Closing Date the financial statements reflect the actual results of
Airplanes Limited and Airplanes Trust.
Bases and Assumptions
(i) Prior to the Closing Date, an allocation of certain costs such as
selling, general and administrative expenses of debis AirFinance Ireland to
Airplanes Limited and Airplanes Trust was made. The most significant
F-7
175
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
2. BASIS OF PREPARATION -- (CONTINUED)
element of these costs related to aircraft management fees, substantially all of
which were asset based fees calculated as an annual percentage of a reference
net book value of aircraft under management. Management believes that the bases
for these allocations are reasonable.
Airplanes Group has entered into a Servicing Agreement with GE Capital
Aviation Services, Limited ("GECAS") under which GECAS provides, inter alia,
lease management and aircraft asset management services in return for a fee.
Airplanes Group has also entered into an Administration Agency Agreement and a
Cash Management Agreement with subsidiaries of debis AirFinance Ireland. In the
year to March 31, 2000, fees of $21.8 million and $9.4 million (1999: $23.5
million and $9.2 million) were paid to GECAS and debis AirFinance Ireland
respectively.
(ii) In the period prior to the Closing Date it was assumed that Airplanes
Group was financed with indebtedness to debis AirFinance Ireland in an amount
equivalent to the aggregate amount of all classes of notes (A, B, C, D and E)
originally expected to be issued by Airplanes Group pursuant to the Transaction
of $4,602 million. It was also assumed that such indebtedness built up as and
when Airplanes Group acquired aircraft, at an amount equal to the appraised
value (based on the value of each Aircraft given a stable market with a
reasonable balance of supply and demand and a reasonable period of time
available for marketing) of the aircraft at October 31, 1995. In addition, it
was assumed that no repayment of debt was made prior to the Closing Date.
At the Closing Date the actual aggregate amount of all classes of notes
issued was $4,652 million. Of the $604 million Class E Notes issued,
approximately $13 million were surrendered and cancelled under the terms of the
Transaction (after giving effect to certain purchase price adjustments). It was
assumed that the indebtedness to debis AirFinance Ireland (explained above) was
repaid from the proceeds of the Notes and the Class E Notes. Details of the
terms of the various classes of Notes issued by Airplanes Group are set out in
Note 12.
Indebtedness at March 31, 2000 represents the aggregate of the Class A-E
Notes in issue. The $992 million decrease since the Closing Date represents
actual cash repayments.
(iii) The interest charged on Airplanes Group's indebtedness to debis
AirFinance Ireland in the periods prior to the Closing Date is based on debis
AirFinance Ireland's average cost of debt of 7.83% and 8.25% for the years ended
March 31, 1995 and 1996, respectively. In the period subsequent to the Closing
Date interest expense is based on the terms of the notes issued. Details of the
interest rates applicable to the various classes of Notes are set out in Note
12.
In respect of the portion of the indebtedness to debis AirFinance Ireland
which is represented by the Class E Notes (assumed in these financial statements
to be approximately 15% of total indebtedness up until the Closing Date), the
Statements of Cash Flows in the periods prior to the Closing Date give effect to
cash payments for interest of only 1% per annum and the balance is deferred and
reflected as a movement in net liabilities.
(iv) Airplanes Group's cash balances were maintained throughout the period
to the Closing Date at the amount originally assumed to be retained by Airplanes
Group on completion of the securitization transaction of $135 million. Cash
generated from or absorbed by the activities of Airplanes Group during the
period up to the Closing Date is reflected as distributions to or transfers from
debis AirFinance Ireland. The cash balances as at March 31, 2000, and March 31,
1999, represent the actual cash balances held by Airplanes Group at those dates.
(v) In the period prior to the Closing Date, Airplanes Group's tax
provisions and deferred income tax assets and liabilities have been determined
as if the underlying taxable entities of Airplanes Limited and Airplanes Trust
were separate taxable entities from debis AirFinance Ireland.
At March 31, 2000 and March 31, 1999 the deferred income tax assets and
liabilities represent the assets and liabilities of Airplanes Limited and
Airplanes Trust at that date.
F-8
176
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
3. RELATIONSHIP WITH DEBIS AIRFINANCE IRELAND (FORMERLY KNOWN AS AERFI GROUP
PLC) AND MANAGEMENT ARRANGEMENTS
Airplanes Group's portfolio has been acquired entirely from debis
AirFinance Ireland pursuant to the Transaction.
With effect from the Closing Date, GECAS provides, in consideration for
management fees, certain management services to Airplanes Group pursuant to a
servicing agreement entered into by GECAS with certain members of Airplanes
Group and their subsidiaries. Under certain circumstances GECAS may resign from
the performance of its duties in relation to the management of all the aircraft
generally or, the management of one or more aircraft individually, provided in
either case that a replacement has been appointed to manage the aircraft. In
addition, Airplanes Group will, under certain circumstances, have the right to
terminate the servicing agreement.
As a holder of the majority of the Class E Notes, GE Capital has the right
to appoint one director to the board of Airplanes Limited and one of the
controlling trustees of Airplanes Trust. Airplanes Limited has a board of
directors of five directors, including the director appointed by the holders of
the Class E Notes. The controlling trustees of Airplanes Trust are the same
individuals. During the year to March 31, 2000, GE Capital, GECAS' indirect
parent, exercised its option to acquire 18.36% of the fully diluted ordinary
shares of debis AirFinance Ireland.
Certain cash management and administrative services are being provided by
subsidiaries of debis AirFinance Ireland to Airplanes Group, pursuant to a cash
management agreement and administrative agency agreement entered into by such
subsidiaries with Airplanes Group.
Although Airplanes Group's portfolio will at all times be held in two
different entities, Airplanes Limited and Airplanes Trust, Airplanes Group is
managed and the note covenants structured on the basis of a single economic
entity owning a single aircraft portfolio.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Airplanes Group's accounting policies conform with United States generally
accepted accounting principles. The following paragraphs describe the main
accounting policies followed in these financial statements.
(a) Revenue Recognition
Revenue from aircraft on operating leases is recognized as income as it
accrues over the period of the leases. Unearned revenue from capital and sales
type leases is amortised and included in income.
(b) Aircraft
Aircraft, including engines, are stated at cost less accumulated
depreciation.
Airplanes Group considers the need, and accounts for Aircraft impairments
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" ("FAS 121"). The statement requires the recognition of an
impairment loss for an asset held for use when the estimate of un-discounted
future cashflows expected to be generated by the asset is less than its carrying
amount. Measurement of impairment loss is to be recognized based on the fair
value of the asset. Fair market values 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
F-9
177
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
dispose of aircraft quickly. The fair market value of the assets is based on
independent valuations of the aircraft in the fleet and estimates of discounted
future cash flows.
FAS 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.
Cost comprises the invoiced cost net of manufacturers' discounts.
Depreciation is calculated on a straight line basis. The estimates of useful
lives and residual values are reviewed periodically. The current estimates for
residual values are generally 15% of cost, and for useful lives are as follows:
YEARS FROM
----- ----------------
Stage 2 aircraft............................................ 20-25 Manufacture date
Refurbished and upgraded aircraft -- converted to
freighters................................................ 20 Conversion date
Turboprop aircraft.......................................... 23 Manufacture date
All other aircraft.......................................... 25 Manufacture date
(c) Net Investment in Capital and Sales Type Leases
The amounts due from lessees under capital leases, where the entire cost of
the asset is recovered, are shown in the balance sheet at the net amount
receivable under these leases. The related finance revenue is recognized as
income over the period of the lease in proportion to the amounts outstanding.
(d) Provision for Maintenance
In most lease contracts the lessee has the obligation for maintenance costs
on airframes and engines and in many lease contracts the lessee makes a full or
partial prepayment, calculated at an hourly rate, from which maintenance
expenditures for major checks are disbursed. The undisbursed portion of these
prepayments are included in the provision for maintenance which may from time to
time include prepayments made by current lessees and prior lessees. At the time
an aircraft is re-leased to a new lessee, an assessment is made of the expected
maintenance revenue requirements, any excess reserve is then released through
the Statement of Operations.
Maintenance provisions also include the directors' estimate of maintenance
costs which are Airplanes Group's primary responsibility and certain amounts in
respect of the risk of lessees defaulting on obligations, which could result in
Airplanes Group incurring maintenance costs which are the lessee's primary
responsibility.
(e) Allowance for Doubtful Debts
Allowances are made for doubtful debts where it is considered that there is
a significant risk of non recovery.
The assessment of risk of non recovery is primarily based on the extent to
which amounts outstanding exceed the expected value of security held, together
with an assessment of the financial strength and condition of a lessee and the
economic conditions existing in the lessee's operating environment.
(f) Provision for Loss Making Leases
A lease agreement is deemed to be "Loss Making" in circumstances where the
contracted rental payments are insufficient to cover the depreciation and
allocated interest cost attributable to the relevant Aircraft, together with
direct costs such as legal fees and other costs attributable to the lease over
its term. The attributable allocated interest cost excludes the element of the
interest on the Class E Notes, 9% per annum, which is payable only in
F-10
178
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
the event that the principal amount on all the Notes is repaid. Provision is
made for the expected losses on such leases.
(g) Taxation
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred income tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in the period that includes
the enactment date.
Income tax is provided based on the results for the year. Airplanes
Limited's underlying taxable entities in Ireland are subject to Irish Corporate
Income Tax on approved trading operations at a rate of 10% until December 31,
2005. Airplanes Trust's underlying taxable entities in the US are subject to US
Federal and State taxes on their trading operations.
(h) Concentrations of Credit Risk
Financial instruments which potentially subject Airplanes Group to
significant concentrations of credit risk consist primarily of trade accounts
receivable and interest rates swaps and similar hedging instruments. Details of
Airplanes Group's interest rate swaps and similar hedging instruments are set
out at (i) below.
Credit risk with respect to trade accounts receivable is generally
diversified due to the number of lessees comprising Airplanes Group's customer
base and the different geographic areas in which they operate. At March 31, 2000
Airplanes Group owned 199 aircraft which it leased to 72 lessees in 39
countries. The geographic concentrations of leasing revenues is set out in Note
15.
Many of Airplanes Group's lessees are in a relatively weak financial
position because of the difficult economic conditions in the civil aviation
industry as a whole and because, in general, weakly capitalised airlines are
more likely to seek operating leases.
The exposure of Airplanes Group's aircraft to particular countries and
customers is managed partly through concentration limits provided for under the
terms of the notes and through obtaining security from lessees by way of
deposits, letters of credit and guarantees. Airplanes Group will continue to
manage its exposure to particular countries, regions and lessees through
concentration limits. In the normal course of its business Airplanes Group (and
in the past debis AirFinance Ireland) has reached agreements with certain of its
lessees to restructure their leases and defer certain receivable balances.
Details of accounts receivable, deferred balances and provision for bad and
doubtful debts are set out in Note 6.
Airplanes Group's Brazilian lessees also continue to experience significant
difficulties due to over-capacity and adverse market conditions. At March 31,
2000, 15 of Airplanes Group's aircraft were being operated by 4 Brazilian
lessees. Restructuring arrangements have been agreed with certain of the
Brazilian lessees allowing for rescheduling of balances owing to Airplanes
Group. Receivable balances with Brazilian lessees in total were $8.2 million at
March 31, 2000. During the year a rescheduling agreement was signed with a
Brazilian lessee. Its debts of $1.7m will be repaid over the 36 month period to
December 2003.
Canadian Airlines, Airplanes Group's second largest lessee at March 31,
2000 by appraised value, approached its creditors including Airplanes Group,
with proposals to reschedule its obligations. A rescheduling plan granted
Canadian Airlines a deferral of operating lease rentals for a three month period
and a deferral of
F-11
179
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
finance lease principal payments for the six month period commencing from
December 1997. The deferred payments are to be repaid with interest over a two
and a half year period commencing October 1998. Receivable balances at March 31,
2000 were $0.9 million which is fully covered by available security.
Trading conditions in the civil aviation industry in Asia have been
adversely affected by the severe economic and financial difficulties experienced
in the region where at March 31, 2000 six of Airplanes Group's aircraft were
being operated by five lessees. During the year to March 31, 2000 a rescheduling
agreement was signed with a Philippine lessee, whose balance of $2.7m was
deferred and will be repaid over 36 months to September 2002.
(i) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 "Disclosures about Fair
Value of Financial Instruments" defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Fair values of financial instruments have been determined with reference to
available market information and the valuation methodologies discussed below.
However, considerable management judgement is required in interpreting market
data to arrive at estimates of fair values. Accordingly, the estimates presented
herein may not be indicative of the amounts that Airplanes Group could realise
in a current market exchange.
(i) The fair value of cash, trade receivables and trade payables
approximates the carrying amount because of the nature and short maturity of
these instruments.
(ii) The fair value of the A, B, C and D Notes issued by Airplanes Group
outstanding at March 31, 2000 and 1999 was $2,965 million and $3,261 million
respectively. While the amount subscribed for the E Notes was based on the
appraised value of the aircraft at the Closing Date, the fair value of these
Notes at March 31, 2000 cannot be determined, as it represents the holders'
residual interest in the aircraft owned by Airplanes Group.
(iii) Airplanes Group manages its interest rate exposure through the use
of interest rate swaps and options to enter into interest rate swaps
("SWAPTIONS"). At March 31, 2000 and 1999 Airplanes Group had entered into
interest rate swaps with an aggregate notional principal amount of $2.09 billion
and $2.32 billion respectively. Under these swap arrangements Airplanes Group
will pay fixed and receive floating amounts on a monthly basis. The objective of
Airplanes Group's interest rate risk management policy is to correlate the
contracted fixed and floating rental payments in its portfolio to the fixed and
floating interest payments on the bonds, taking into account the expected
amortization of Class A and Class B Notes. The fair value of these Swaps at
March 31, 2000 and 1999 was an unrealized profit of $15.8 million and an
unrealized loss of $7.77 million respectively.
Interest rate exposures which may arise in the event that lessees paying
fixed rate rentals default is managed in part through the purchase of Swaptions.
At March 31, 2000 and 1999 Airplanes Group had entered into swaptions with a
notional value of $289 million and $306 million respectively. The fair value of
the swaptions at March 31, 2000 and 1999 was $0.1 million and $1.2 million
respectively.
Airplanes Group is exposed to losses in the event of non-performance by
counterparties to interest rate swap agreements or in the event of defaults by
lessees. However, Airplanes Group does not anticipate non-performance by the
counterparties and other parties and accounts for hedging losses resulting from
lessee defaults as they are incurred.
Counterparty risk is monitored on an ongoing basis. Counterparties are
subject to the prior approval of the Directors of Airplanes Limited and the
Controlling Trustees of Airplanes Trust. Airplanes Group's counterparties at
March 31, 2000 comprise three major U.S./European financial institutions.
F-12
180
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(j) Foreign Currency Transactions
Airplanes Group's foreign currency transactions are not significant as
virtually all revenues and most costs are denominated in US dollars.
5. CASH
MARCH 31,
------------------------------------------------
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS)
Cash............................................. 218 6 197 6
=== === === ===
Substantially all of the cash balances at March 31, 2000 and 1999 are held
for specific purposes under the terms of the Transaction. Included in the cash
balances at March 31, 2000 and 1999 is restricted cash of $6 million.
6. ACCOUNTS RECEIVABLE
MARCH 31,
------------------------------------------------
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS)
Trade receivables................................ 38 5 24 8
Allowance for doubtful debts..................... (14) (3) (10) (5)
--- --- --- ---
24 2 14 3
=== === === ===
Included in trade receivables are deferred
amounts as follows:-
Gross deferred lease receivables............... 7 1 5 --
Allowance for doubtful debts................... -- (1) (1) --
--- --- --- ---
7 -- 4 --
=== === === ===
Deferred lease receivables at March 31, 2000 represent deferrals of rent,
maintenance and miscellaneous payments due from lessees. The most significant of
these lessees are located in Brazil and the Philippines where the air transport
sector is suffering from substantial over capacity and the effects of difficult
economic conditions (see Note 4(h)).
Receivables include amounts classified as due after one year of $2.3
million (Airplanes Limited $2.3 million and Airplanes Trust $Nil) at March 31,
2000 and $1 million (Airplanes Limited $1 million and Airplanes Trust $Nil) at
March 31, 1999.
F-13
181
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
7. AMOUNTS DUE FROM AIRPLANES LIMITED TO AIRPLANES TRUST
MARCH 31,
------------------------------------------------
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS)
Amount due from Airplanes Limited (to Airplanes
Trust)......................................... (35) 35 (28) 28
=== === === ===
Included in the balance at March 31, 1999 and March 31, 2000 was $80
million payable from Airplanes Trust to Airplanes Limited in respect of aircraft
sales and purchases, offset by the amount (1999: $115 million and 2000: $108
million) due from Airplanes Limited to Airplanes Trust in respect of Airplanes
Trust's trading activities, including servicing of its debt obligations.
8. INTERCOMPANY CAPITAL LEASE
During the year ended March 31, 1999 an aircraft owned by Airplanes Limited
was leased to Airplanes Trust for onward lease to a third party, both of these
leases were capital leases. During the year ended March 31, 2000, the aircraft
was returned from the lessee who was experiencing financial difficulties. A
summary of the net components (payable by Airplanes Trust to Airplanes Limited)
of the investment in this lease as at March 31, 2000 is as follows:-
MARCH 31,
------------
1999 2000
---- ----
($ MILLIONS)
Total minimum lease payments receivable..................... 56 --
Less unearned revenue....................................... (20) --
--- ---
36 --
=== ===
The capital lease with the third party as at March 31, 1999 is included in
Note 9.
9. NET INVESTMENT IN CAPITAL AND SALES TYPE LEASES
The following are the components of the net investment in capital and sales
type leases:
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS)
Total minimum lease payments receivable.......... 13 56 16 --
Estimated residual values of leased assets....... 11 -- 10 --
Less unearned revenue............................ (4) (20) (11) --
--- --- --- ---
Net investment in capital and sales type
leases......................................... 20 36 15 --
=== === === ===
Aggregate lease rentals in respect of such capital and sales type leases
for the years ended March 31, 1998, 1999 and 2000 amounted to $26 million
(Airplanes Limited $25 million, Airplanes Trust $1 million), $20 million
(Airplanes Limited $15 million, Airplanes Trust $5 million) and $10 million
(Airplanes Limited $5 million, Airplanes Trust $5 million) respectively.
F-14
182
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
9. NET INVESTMENT IN CAPITAL AND SALES TYPE LEASES -- (CONTINUED)
Unearned revenue of $9 million (Airplanes Limited $9 million, Airplanes
Trust $Nil), $8 million (Airplanes Limited $5 million, Airplanes Trust $3
million) and $4 million (Airplanes Limited $1 million, Airplanes Trust $3
million) for the years ended March 31, 1998, 1999 and 2000, respectively, was
amortised and included in revenue.
Minimum future payments to be received on such capital leases for aircraft
at March 31, 2000 are as follows:
MINIMUM LEASE
PAYABLES RECEIVABLE
-------------------
AIRPLANES LIMITED
-------------------
($ MILLIONS)
Years ending March 31,
2001...................................................... 9
2002...................................................... 7
---
Thereafter................................................ 16
===
10. AIRCRAFT
MARCH 31,
------------------------------------------------
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLION) ($ MILLION)
AIRCRAFT
Cost............................................. 4,096 386 4,137 386
Less accumulated depreciation.................... (1,276) (134) (1,440) (151)
------ ---- ------ ----
2,820 252 2,697 235
====== ==== ====== ====
FLEET ANALYSIS
On operating lease for a further period of:
More than five years........................... 252 -- 310 --
From one to five years......................... 2,109 206 1,992 220
Less than one year............................. 445 46 276 15
Non revenue earning aircraft:
Available for lease............................ -- -- 94 --
Available for lease, subject to letters of
intent...................................... 14 -- 25 --
------ ---- ------ ----
2,820 252 2,697 235
====== ==== ====== ====
Certain aircraft are subject to purchase options granted to existing
lessees.
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
1998 1999 2000
--------------------- --------------------- ---------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST LIMITED TRUST
--------- --------- --------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS) ($ MILLIONS)
Depreciation expense.............. 168 22 158 17 156 17
=== == === == === ==
F-15
183
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
10. AIRCRAFT -- (CONTINUED)
Depreciation expense for 1998 includes $2.1m of additional depreciation
charged during the year in relation to the write down of the carrying values of
three A300 aircraft, in accordance with FAS 121.
At March 31, 2000 Airplanes Group owned 199 (1999: 202) aircraft.
11. ACCRUED EXPENSES AND OTHER LIABILITIES
MARCH 31,
------------------------------------------------
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLION) ($ MILLION)
Accrued expenses and other liabilities include:
Unearned revenue................................. 15 1 14 2
Provisions for loss making leases (Note 18)...... 34 1 31 --
Interest accrued................................. 453 45 685 69
Other accruals................................... 31 1 38 --
Trade payables................................... -- -- 3 --
Deposits received................................ 48 3 36 3
--- --- --- ---
581 51 807 74
Of which:
Payable within one year.......................... 99 3 77 4
Payable after one year........................... 482 48 730 70
--- --- --- ---
581 51 807 74
=== === === ===
12. INDEBTEDNESS
The components of the debt are as follows:
MARCH 31,
------------------------------------------------
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLION) ($ MILLION)
Indebtedness in respect of Notes issued:
Subclass A-4..................................... 182 18 182 18
Subclass A-6..................................... 671 65 518 50
Subclass A-7..................................... 501 49 501 49
Subclass A-8..................................... 638 62 638 62
Class B.......................................... 286 27 265 26
Class C.......................................... 334 33 321 30
Class D.......................................... 364 36 360 36
Class E.......................................... 538 53 538 53
----- ----- ----- -----
3,514 343 3,323 324
Discounts/costs arising on issue of Notes........ (14) (1) (10) (1)
----- ----- ----- -----
3,500 342 3,313 323
===== ===== ===== =====
F-16
184
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
12. INDEBTEDNESS -- (CONTINUED)
Debt maturity
The repayment terms of the A, B, C and D Notes are such that certain
principal amounts are expected to be repaid based on certain assumptions set at
the time of original issuance of these notes (the "EXPECTED FINAL PAYMENT DATE")
or refinanced through the issue of new Notes by specified Expected Final Payment
Dates 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, Principal Amount and interest rates applicable to each
class of note are set out below:
PRINCIPAL AMOUNT EXPECTED FINAL FINAL
CLASS/ SUBCLASS OF NOTES INTEREST RATES AT YEAR END PAYMENT DATE MATURITY DATE
- ------------------------ -------------- ---------------- ---------------- --------------
($M)
Subclass A-4.............. (LIBOR+.62%) 200 March 15, 2003 March 15, 2019
Subclass A-6.............. (LIBOR+.34%) 568 January 15, 2004 March 15, 2019
Subclass A-7.............. (LIBOR+.26%) 550 March 15, 2001 March 15, 2019
Subclass A-8.............. (LIBOR+.375%) 700 March 15, 2003 March 15, 2019
Class B................... (LIBOR+.75%) 291 March 15, 2009 March 15, 2019
Class C................... (8.15%) 351 March 15, 2011 March 15, 2019
Class D................... (10.875%) 396 March 15, 2012 March 15, 2019
Class E................... See below 591 See below See below
-----
3,647
=====
Discounts on Notes issues and costs arising on refinanced Notes are netted
against debt on the balance sheet. These amounts are accreted to the income
statement over the expected life of the refinanced Notes.
The dates on which principal repayments on the Notes will actually occur
will depend on the cash generated by Airplanes Group and in the event that the
subclass A-4, A-7 and A-8 are not repaid or refinanced by their Expected Final
Payment Date, additional interest will arise.
LIBOR on the Class A and Class B Notes equates to the London interbank
offered rate for one month U.S. dollar deposits.
Interest on the Class C and Class D fixed rate Notes is calculated on the
basis of a 360-day year, consisting of twelve 30-day months.
The Class E Notes accrue interest for each Interest Accrual Period at a
rate of 20% per annum. The stated interest rate on the Class E Notes is adjusted
by reference to the U.S. Consumer Price Index. Except for the Class E Note
Minimum Interest Amount plus the Class E Note Supplemental Interest Amount, each
of which are paid at a rate of 1% and 10% multiplied by the Outstanding
Principal Balance of the Class E Note, respectively, no interest will be payable
on the Class E Notes until all of the interest, principal and premium, if any,
on the Notes have been repaid in full. The principal on the Class E Notes will
be repaid, subject to adequate funds being available, after the interest on the
Class E Notes.
In general the priority of the principal payments on the Notes is as set
out below:
1. Specified minimum principal amounts on the A and the B Notes in that
order.
2. Additional amounts on the A Notes in the event that the value of the
fleet falls below specified amounts.
3. Scheduled principal repayments on the C and D Notes in that order.
4. Specified additional amounts on the B Notes and the A Notes in that
order.
F-17
185
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
12. INDEBTEDNESS -- (CONTINUED)
5. Thereafter cash available to repay the principal on the Notes is applied
on each payment date to repay the outstanding principal on the D Notes,
the C Notes, the B Notes and the A Notes in that order.
On each payment date the priority of the principal amounts outstanding in
respect of the various subclasses of A Notes is A-4, A-6, A-7 and A-8 in that
order.
13. PROVISION FOR MAINTENANCE
MARCH 31,
------------------------------------------------
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS)
Balance at April, 1.............................. 292 23 266 17
Receivable during year........................... 67 2 62 2
Expenditure/transfers............................ (93) (8) (70) (3)
--- --- --- ---
Balance at March, 31............................. 266 17 258 16
=== === === ===
The reserve for maintenance includes maintenance reserve funds received
from lessees and provisions to cover the directors' estimate of maintenance
costs where Airplanes Group has the primary obligation for maintenance.
14. SHARE CAPITAL
AIRPLANES LIMITED
MARCH 31,
------------------
1999 2000
-------- ------
($)
Ordinary shares, par value $1
Authorised 10,000........................................... 10,000 10,000
------ ------
Issued 30................................................... 30 30
====== ======
The holders of the issued ordinary shares are entitled to an annual
cumulative preferential dividend of $4,500. As Airplanes Limited does not have
distributable profits, this dividend has not been paid. As at March 31, 2000 the
total unpaid cumulative preferential dividend amounted to $18,000.
F-18
186
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
15. REVENUES
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
1998 1999 2000
--------------------- --------------------- ---------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST LIMITED TRUST
--------- --------- --------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS) ($ MILLIONS)
The distribution of revenues by
geographic area is as follows:
Europe........................... 192 1 203 1 181 1
North America.................... 57 118 41 126 49 36
South America.................... 222 9 215 8 177 2
Asia/rest of world............... 78 2 63 1 57 2
--- --- --- --- --- ---
549 130 521 137 464 41
=== === === === === ===
Of which: Aircraft sales to third
parties represents............... (37) (57) (37) (95) (3) --
Sale of Shares to third parties
represents....................... -- -- -- -- (1) --
--- --- --- --- --- ---
Leasing revenue.................... 512 73 484 42 460 41
--- --- --- --- --- ---
Of which, maintenance revenue
represents....................... 68 20 67 2 62 2
=== === === === === ===
At March 31, 2000, Airplanes Group had contracted to receive the following
minimum rentals under operating leases:
2000
----------------------
AIRPLANES AIRPLANES
LIMITED TRUST
--------- ---------
($ MILLIONS)
Year ending March 31,
2001...................................................... 375 37
2002...................................................... 308 31
2003...................................................... 192 20
2004...................................................... 104 4
2005...................................................... 56 --
Thereafter................................................ 72 --
----- -----
1,107 92
===== =====
Contracted rentals are based on actual rates up to the first recalculation
date, and thereafter are based on a budget LIBOR of 6.2%, and include aircraft
subject to Letters of Intent to lease.
Each of Airplanes Limited and Airplanes Trust operates in one business
segment, the leasing of aircraft.
For Airplanes Limited no customer accounted for more than 10% of revenue in
fiscal 1998, 1999 or 2000. For Airplanes Trust: (a) two lessees each accounted
for more than 10% of leasing revenue for the year ended March 31, 1998, and
individually these lessees accounted for 38% and 29% of leasing revenue,
respectively, (b) two lessees each accounted for more than 10% of leasing
revenue for the year ended March 31, 1999, and individually these lessees
accounted for 39% and 14% of leasing revenue respectively and (c) two lessees
each accounted for more than 10% of leasing revenue in the year ended March 31,
2000 and individually these lessees accounted for 34% and 13% of leasing revenue
respectively.
F-19
187
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
16. NET INTEREST EXPENSE
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
1998 1999 2000
--------------------- --------------------- ---------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST LIMITED TRUST
--------- --------- --------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS) ($ MILLIONS)
Interest on Notes issued.......... 389 38 402 40 438 43
Interest income................... (16) -- (14) -- (13)
--- --- --- --- --- ---
373 38 388 40 425 43
=== === === === === ===
Cash paid in respect of
interest........................ 245 22 201 22 193 21
=== === === === === ===
17. LOSS MAKING LEASES
YEARS ENDED MARCH 31,
------------------------------------------------
1999 2000
---------------------- ----------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST
--------- --------- --------- ---------
($ MILLIONS) ($ MILLIONS)
Provision........................................ 7 -- 8 --
Utilization...................................... (18) (1) (11) (1)
--- --- --- ---
Net utilization.................................. (11) (1) (3) (1)
=== === === ===
Provision is made for the expected losses where a lease agreement is deemed
to be loss making. The charge in respect of the loss making lease provisions and
the utilization of these provisions are reflected on a net basis in the
Statement of Operations. These provisions are utilized as the corresponding
actual losses arise over the period of the lease. The actual losses are
reflected within the depreciation expense, interest expense or other costs
within the Statement of Operations.
18. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
YEAR ENDED MARCH 31,
---------------------------------------------------------------------
1998 1999 2000
--------------------- --------------------- ---------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST LIMITED TRUST LIMITED TRUST
--------- --------- --------- --------- --------- ---------
GECAS Management fees............. 24 2 22 2 20 2
Other selling, general and
administrative expenses......... 11 1 10 1 11 1
--- --- --- --- --- ---
35 3 32 3 31 3
=== === === === === ===
In the years ended March 31, 2000 and 1999 other selling, general and
administrative expenses included an amount of $9 million (Airplanes Limited $8
million, Airplanes Trust $1 million) payable to subsidiaries of debis AirFinance
Ireland in respect of Administration and Cash Management fees.
F-20
188
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
19. PROVISION FOR INCOME TAXES
References to Airplanes Limited and Airplanes Trust in the context of this
footnote refer to the underlying taxable entities of Airplanes Limited
(primarily Irish entities) and Airplanes Trust (primarily U.S. entities).
(a) Airplanes Limited
Income tax benefit of Airplanes Limited consists of the following:
YEARS ENDED MARCH 31,
-----------------------
1998 1999 2000
----- ----- -----
($ MILLIONS)
Current income tax.......................................... -- -- --
Deferred income tax......................................... 3 3 (15)
--- --- ---
3 3 (15)
=== === ===
Airplanes Limited's income from approved activities in Ireland is taxable
at a rate of 10% until December 31, 2005. Thereafter, income from trading
activities will be taxable at a rate of 12.5%.
A reconciliation of differences between actual income tax benefit of
Airplanes Limited for 1998, 1999 and 2000 and the expected tax benefit based on
a tax rate of 10%, 10% and 12.5% is shown below:
YEARS ENDED MARCH 31,
-----------------------
1998 1999 2000
----- ----- -----
($ MILLIONS)
Tax benefit at 10%.......................................... 16 17 22
Non deductible E Note interest.............................. (13) (17) (23)
Increase in deferred income tax due to change in Irish tax
rates..................................................... -- -- (14)
Release of over provision in respect of prior year.......... -- 3 --
--- --- ---
Actual deferred tax benefit/(charge)........................ 3 3 (15)
=== === ===
E Note interest is not deductible for tax purposes in Ireland.
The deferred tax provision at March 31, 1998 was based on calculations of
losses forward and capital allowances of Airplanes Limited at December 31, 1996
adjusted on an estimated basis to March 31, 1998. The release of the over
provision in respect of the prior year primarily relates to the finalization of
these estimates.
Airplanes Limited has net operating loss carryforward of approximately
$1,517 million as of March 31, 2000, which are available for offset against
future taxable income with no restrictions to expiration.
The deferred tax assets and liabilities of Airplanes Limited are summarized
below:
MARCH 31,
------------
1999 2000
---- ----
($ MILLIONS)
Deferred tax assets relating to:
Net operating loss carryforwards.......................... 132 190
Deferred tax liability relating to:
Aircraft.................................................. 183 256
--- ---
Net deferred tax liability.................................. 51 66
=== ===
F-21
189
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
19. PROVISION FOR INCOME TAXES -- (CONTINUED)
(b) Airplanes Trust
Income tax benefit of Airplanes Trust consists of the following:
YEARS ENDED MARCH 31,
-----------------------
1998 1999 2000
----- ----- -----
($ MILLIONS)
Current income tax:
Federal................................................... -- -- 8
State..................................................... -- -- --
--- --- ---
Total current............................................... -- -- 8
=== === ===
Deferred income tax:
Federal................................................... -- -- --
State..................................................... -- -- --
--- --- ---
Total deferred.............................................. -- -- --
--- --- ---
-- -- 8
=== === ===
A reconciliation of differences between actual income tax benefit of
Airplanes Trust for 1998, 1999, and 2000 and the expected tax benefit based on
the U.S. Federal statutory tax rate of 35% in 1998, 1999, and 2000 is shown
below:
YEARS ENDED MARCH 31,
-----------------------
1998 1999 2000
----- ----- -----
($ MILLIONS)
Tax benefit at statutory rate............................... 3 5 9
Post acquisition net operating losses -- not utilized....... -- 4 --
State taxes not based on income............................. -- (1) --
Non deductible E-Note interest.............................. (6) (6) (8)
Increase in valuation allowance/other....................... 3 (2) 7
--- --- ---
-- -- 8
=== === ===
Airplanes Trust has Federal tax net operating loss carryforwards of
approximately $75 million as of March 31, 2000, which expire beginning in 2007
through 2020.
F-22
190
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
19. PROVISION FOR INCOME TAXES -- (CONTINUED)
Deferred tax assets and liabilities of Airplanes Trust are summarised
below:
YEARS ENDED
MARCH 31,
------------
1999 2000
---- ----
($ MILLIONS)
Deferred tax assets relating to:
Net operating loss carryforwards.......................... 38 38
Other..................................................... 4 3
Valuation allowance....................................... (17) (10)
--- ---
25 31
--- ---
Deferred tax liabilities relating to:
Aircraft.................................................. 73 79
--- ---
Net deferred tax liability.................................. 48 48
=== ===
Although all of the aircraft are owned by Airplanes Trust, for tax
purposes, certain of the aircraft are treated as being leased from third parties
under US "safe-harbor lease" tax rules. Under existing tax laws, certain events
could reverse the cumulative effect of this tax treatment, in which case
Airplanes Trust would be required to make payments to the third parties under
the tax indemnification clauses included in the lease agreements. As of March
31, 1998, 1999 and 2000 the maximum potential exposure under these provisions is
$4 million, $1.3 million and $0.7 million, respectively. Airplanes Trust
believes that no events have taken place which could cause such payments to
become due.
Pursuant to a tax sharing agreement between Airplanes Trust and debis
AirFinance Ireland, Airplanes Trust was liable to debis AirFinance Ireland for
its share of the consolidated tax liability in years subsequent to the
completion of the Transaction, in which Airplanes Trust generated taxable
income. However, Airplanes Trust was obliged to satisfy this liability in cash
only to the extent that cash payments due to tax authorities from debis
AirFinance Ireland were attributable to Airplanes Trust's share of the
consolidated tax liability; the remainder was to be paid in the form of
subordinated notes. Conversely, Airplanes Trust was entitled to be reimbursed by
debis AirFinance Ireland for any tax benefits provided subsequent to the
completion of the Transaction, to debis AirFinance Ireland from Airplanes
Trust's tax losses. debis AirFinance Ireland also indemnified Airplanes Trust
for any tax liabilities of AeroUSA, Inc. (a subsidiary of Airplanes Trust) that
relate to tax years prior to the completion of the Transaction.
Subsequent to November 20, 1998, AeroUSA, Inc. and AeroUSA 3, Inc. now file
consolidated United States federal tax returns and certain state and local tax
returns with General Electric Company ("GE"), such returns being filed on a
calendar basis. In addition, on November 20, 1998, Airplanes Trust entered into
a Tax Sharing Agreement with GE which is substantially similar to the Tax
Sharing Agreement between Airplanes Trust and debis AirFinance Ireland which was
in place prior to that date, and which terminated on November 20, 1998, except
with respect to those provisions relating to the position prior to the date on
which AeroUSA, Inc. and AeroUSA 3, Inc. were deconsolidated from AerFi, Inc.
In relation to the tax year ended December 31, 1999 GE utilised $38.8
million of current year losses. As GE is an Alternative Minimum Tax (AMT) payer
the benefit realized will be $7.8 million and this amount will be paid to
Airplanes Group. The receivable for this amount has been included in other
assets at year end.
F-23
191
AIRPLANES GROUP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
20. COMMITMENTS
Capital Commitments
Airplanes Group did not have any material contractual commitments for
capital expenditures at March 31, 2000.
21. CONTINGENT LIABILITIES
Guarantees
Airplanes Limited and Airplanes Trust have unconditionally guaranteed each
others' obligations under all classes of notes issued by Airplanes Limited and
Airplanes Trust, respectively, pursuant to the Transaction details of which are
set out in Note 1.
Foreign Taxation
The international character of the Group's operations gives rise to some
uncertainties with regard to the impact of taxation in certain countries. The
position is kept under continuous review and the Group provides for all known
liabilities.
22. PRIOR YEAR FIGURES
Amounts in the prior years' financial statements have been reclassified to
confirm to the current year presentation.
F-24
192
AIRPLANES GROUP
INTERIM CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, 2000 DECEMBER 31, 2000
---------------------------------- ----------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST COMBINED LIMITED TRUST COMBINED
--------- --------- -------- --------- --------- --------
($ MILLIONS) ($ MILLIONS)
ASSETS
Cash.......................................... 197 6 203 184 6 190
Accounts receivable
Trade receivables........................... 24 8 32 25 13 38
Allowance for doubtful debts................ (10) (5) (15) (16) (8) (24)
Amounts due from Airplanes Limited............ -- 28 28 -- 39 39
Net investment in capital and sales type
leases...................................... 15 -- 15 11 -- 11
Aircraft, net................................. 2,697 235 2,932 2,579 218 2,797
Other assets.................................. 3 8 11 5 -- 5
------ ------ ------ ------ ------ ------
Total assets.................................. 2,926 280 3,206 2,788 268 3,056
====== ====== ====== ====== ====== ======
LIABILITIES
Accrued expenses and other liabilities........ 807 74 881 1,019 95 1,114
Amounts due from Airplanes Trust.............. 28 -- 28 39 -- 39
Indebtedness.................................. 3,313 323 3,636 3,212 313 3,525
Provision for maintenance..................... 258 16 274 245 14 259
Deferred income taxes......................... 66 48 114 62 48 110
------ ------ ------ ------ ------ ------
Total liabilities............................. 4,472 461 4,933 4,577 470 5,047
------ ------ ------ ------ ------ ------
Net liabilities............................... (1,546) (181) (1,727) (1,789) (202) (1,991)
------ ------ ------ ------ ------ ------
2,926 280 3,206 2,788 268 3,056
====== ====== ====== ====== ====== ======
The accompanying notes are an integral part of the interim consolidated
financial statements.
F-25
193
AIRPLANES GROUP
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 2000
---------------------------------- ----------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST COMBINED LIMITED TRUST COMBINED
--------- --------- -------- --------- --------- --------
($ MILLIONS) ($ MILLIONS)
REVENUES
Aircraft leasing.............................. 352 31 383 324 32 356
Aircraft sales................................ 2 -- 2 8 6 14
Other income.................................. 1 -- 1 -- -- --
EXPENSES
Cost of Aircraft sold......................... (1) -- (1) (4) (5) (9)
Depreciation and amortisation................. (119) (12) (131) (116) (12) (128)
Net interest expense.......................... (313) (32) (345) (360) (36) (396)
Provision for maintenance..................... (49) (3) (52) (38) (1) (39)
Bad and doubtful debts........................ -- 1 1 (5) (3) (8)
Provision for loss making leases, net......... 5 1 6 (11) -- (11)
Other lease costs............................. (13) (1) (14) (20) (1) (21)
Selling, general and administrative
expenses.................................... (25) (2) (27) (24) (2) (26)
----- ----- ----- ----- ----- -----
OPERATING (LOSS) BEFORE PROVISION FOR INCOME
TAXES....................................... (160) (17) (177) (246) (22) (268)
Income tax benefit/(charge)................... -- -- -- 3 1 4
----- ----- ----- ----- ----- -----
NET (LOSS).................................... (160) (17) (177) (243) (21) (264)
===== ===== ===== ===== ===== =====
The accompanying notes are an integral part of the interim consolidated
financial statements.
F-26
194
AIRPLANES GROUP
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT/NET
LIABILITIES
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 2000
--------------------------------------------------------------------------------
AIRPLANES LIMITED AIRPLANES TRUST COMBINED
--------------------------------------------- --------------- ------------
SHAREHOLDERS
SHARE NET SHAREHOLDERS' NET DEFICIT/NET
CAPITAL LIABILITIES DEFICIT LIABILITIES LIABILITIES
------------ ------------ ------------- --------------- ------------
($ MILLIONS) ($ MILLIONS) ($ MILLIONS) ($ MILLIONS) ($ MILLIONS)
BALANCE AT MARCH 31, 1999.................... -- 1,311 1,311 163 1,474
Net loss for the period...................... 160 160 17 177
----- ----- ----- ----- -----
BALANCE AT DECEMBER 31, 1999................. -- 1,471 1,471 180 1,651
===== ===== ===== ===== =====
BALANCE AT MARCH 31, 2000.................... -- 1,546 1,546 181 1,727
Net loss for the period...................... 243 243 21 264
----- ----- ----- ----- -----
BALANCE AT DECEMBER 31, 2000................. -- 1,789 1,789 202 1,991
===== ===== ===== ===== =====
The accompanying notes are an integral part of the interim consolidated
financial statements.
F-27
195
AIRPLANES GROUP
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 2000
---------------------------------- ----------------------------------
AIRPLANES AIRPLANES AIRPLANES AIRPLANES
LIMITED TRUST COMBINED LIMITED TRUST COMBINED
--------- --------- -------- --------- --------- --------
($ MILLIONS) ($ MILLIONS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss...................................... (160) (17) (177) (243) (21) (264)
Adjustment to reconcile (net loss) to net cash
provided by operating activities:
Depreciation and amortization................. 119 12 131 116 12 128
Aircraft maintenance, net..................... 7 1 8 (14) (2) (16)
Profit on disposal of aircraft................ (1) -- (1) (4) (1) (5)
Deferred income taxes......................... -- -- -- (3) (1) (4)
Provision for loss making leases.............. (5) (1) (6) 11 -- 11
Provision for bad debts....................... -- (1) (1) 5 3 8
Accrued and deferred interest expense......... 173 17 190 212 21 233
CHANGES IN OPERATING ASSETS & LIABILITIES:
Accounts receivable........................... 5 1 6 -- (6) (6)
Intercompany account movements................ (2) 2 -- 11 (11) --
Other accruals and liabilities................ (2) 1 (1) (9) 1 (8)
Other assets.................................. (2) -- (2) -- 8 8
---- --- ---- ---- --- ----
NET CASH PROVIDED BY OPERATING ACTIVITIES..... 132 15 147 82 3 85
==== === ==== ==== === ====
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase/Sale of aircraft..................... -- -- -- 4 7 11
Intercompany movements -- Airplanes Group
Capital and sales type leases............... 6 -- 6 4 -- 4
---- --- ---- ---- --- ----
NET CASH PROVIDED BY INVESTING ACTIVITIES..... 6 -- 6 8 7 15
==== === ==== ==== === ====
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in indebtedness...................... (151) (15) (166) (103) (10) (113)
---- --- ---- ---- --- ----
NET CASH USED IN FINANCING ACTIVITIES......... (151) (15) (166) (103) (10) (113)
==== === ==== ==== === ====
NET DECREASE IN CASH.......................... (13) -- (13) (13) -- (13)
CASH AT BEGINNING OF PERIOD................... 218 6 224 197 6 203
---- --- ---- ---- --- ----
CASH AT END OF PERIOD......................... 205 6 211 184 6 190
==== === ==== ==== === ====
CASH PAID IN RESPECT OF:
Interest...................................... 143 15 158 151 15 166
==== === ==== ==== === ====
The accompanying notes are an integral part of the interim consolidated
financial statements.
F-28
196
AIRPLANES GROUP
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PREPARATION
The accompanying unaudited interim consolidated financial statements of
Airplanes Limited, Airplanes Trust and the combined unaudited interim
consolidated balance sheets, statements of operations, statement of changes in
shareholders deficit/net liabilities and statements of cash flows of Airplanes
Group (together the "FINANCIAL STATEMENTS") have been prepared on a going
concern basis in conformity with United States generally accepted accounting
principles. The financial statements are presented on a historical cost basis.
The accompanying financial statements for Airplanes Limited and Airplanes
Trust reflect all adjustments which in the opinion of management are necessary
to present a fair statement of the information presented as of December 31, 2000
and for the nine month periods ending December 31, 2000 and December 31, 1999.
Such adjustments are of a normal, recurring nature. The results of operations
for the nine months ended December 31, 2000 are not necessarily indicative of
the results to be expected for the full year.
The accompanying unaudited interim consolidated financial statements of
Airplanes Limited and Airplanes Trust have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Consequently, they do not include all the disclosure normally required by
generally accepted accounting principles. For further information regarding
Airplanes Group and its financial condition, results of operations and cash
flows, refer to the audited financial statements and notes thereto included in
this prospectus.
NEW ACCOUNTING PRONOUNCEMENT
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities." In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative instruments and Certain
Hedging Activity, an Amendment of SFAS No. 133." SFAS No. 133 and SFAS No. 138
require that all derivative instruments be recorded on the balance sheet at
their respective fair values. SFAS No. 133 and SFAS No. 138 are effective for
all fiscal quarters of all fiscal years beginning after June 30, 2000. Airplanes
Group is planning to adopt SFAS No. 133 and SFAS No. 138 on April 1, 2001.
Upon adoption of the standards, all derivatives will be recognized on the
balance sheet at their fair value. All derivatives will be designated as either
a hedge of the fair value of a recognized asset or liability or of an
unrecognized firm commitment ("FAIR VALUE HEDGE"), a hedge of a forecasted
transaction or of the variability of cash flows to be received or paid related
to a recognized asset or liability ("CASH FLOW HEDGE"), a foreign-currency
fair-value or cash-flow hedge ("FOREIGN CURRENCY HEDGE") or a "HELD FOR TRADING
INSTRUMENT." Airplanes Group expects that all of its interest rate swaps will be
designated as cash flow hedges while its swaptions will be designated as trading
instruments.
Airplanes Group has a detailed hedging policy, which has been approved by
the Board of Directors and Controlling Trustees and the Rating Agencies. This
policy has been employed by the Administrative Agent since the inception of
Airplanes Group in 1996. As part of this hedging policy, Airplanes Group is in
the process of formally documenting all relationships between hedging
instruments and hedged items in the context of the requirements of SFAS No. 133
and SFAS No. 138.
This process includes linking all derivatives that are designated as
cash-flow hedges to specific liabilities on the balance sheet. Prior to April 1,
2001, and in the future, Airplanes Group will formally assess, both at the
hedge's inception and on an ongoing basis, whether the derivatives that are used
in hedging transactions are highly effective in offsetting changes in cash flows
of hedged items.
F-29
197
AIRPLANES GROUP
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
1. BASIS OF PREPARATION -- (CONTINUED)
Changes in the fair value of a derivative that is highly effective and that
is designated and qualifies as a cash-flow hedge will be recorded in other
comprehensive income, until earnings are affected by the variability in cash
flows of the designated hedged item.
Airplanes Group will discontinue hedge accounting prospectively when it is
determined that the derivative is no longer highly effective in offsetting
changes in the cash flows of the hedged item, the derivative expires or is sold,
terminated or exercised, or it is determined that designation of the derivative
as a hedging instrument is no longer appropriate.
In all situations in which hedge accounting is discontinued, Airplanes
Group will continue to carry the derivative at its fair value on the balance
sheet, and will recognize any changes in its fair value in earnings.
In all situations where derivatives are designated as trading instruments,
they will be carried at fair value on the balance sheet and any changes in fair
value will be recognized in earnings.
F-30
[THIS PAGE INTENTIONALLY LEFT BLANK]
198
APPENDIX 1
AIRPLANES GROUP PORTFOLIO ANALYSIS
DATE OF
MANUFACTURE/
REGION COUNTRY LESSEE TYPE ENGINE MSN NOTES CONVERSION
- ------ ------- ------ ----------- -------------- ----- -------- ------------
AFRICA...... Tunisia Nouvelair Tunisie MD-83 JT8D-219 49672 1-Jul-88
Tunisia Societe des Lignes
Aeriennes Interieures
(Tuninter) S.A. B737-300 CFM56-3C1 24905 1-Feb-91
ASIA & FAR
EAST...... Bangladesh GMG Airlines Limited DHC8-300 PW123 307 1-Dec-91
China China Southern B737-500 CFM56-3C1 24897 26-Feb-91
China China Southern B737-500 CFM56-3C1 25182 3-Feb-92
China China Southern B737-500 CFM56-3C1 25183 14-Feb-92
China China Southern B737-500 CFM56-3C1 25188 12-Mar-92
China China Xinjiang B757-200 RB211-535E4-37 26156 25-Nov-92
Indonesia PT Garuda Indonesia B737-400 CFM56-3C1 24683 7-Aug-90
Indonesia Merpati Nusantara Airlines B737-200A JT8D-15 22368 (1) 1-Sep-80
Indonesia PT Mandala Airlines B737-200A JT8D-17 21685 1-Jan-79
Indonesia PT Mandala Airlines B737-200A JT8D-15 22278 19-Mar-80
Indonesia PT Mandala Airlines B737-200A JT8D-17A 22803 14-Feb-83
Indonesia PT Mandala Airlines B737-200A JT8D-17A 22804 1-Feb-83
Indonesia PT Mandala Airlines B737-200A JT8D-17A 23023 30-Mar-83
Malaysia Air Asia Sdn. Bhd B737-300 CFM56-3C1 24907 1-Mar-91
Pakistan Pakistan International
Airlines Corporation A300-B4-200 CF6-50C2 269 11-Aug-83
Philippines Philippine Airlines Inc. B737-300 CFM56-3B1 24770 1-Oct-90
Philippines Philippine Airlines Inc. B737-400 CFM56-3C1 24684 1-Apr-90
South Korea Asiana Airlines Inc. B737-400 CFM56-3C1 24493 14-Jul-89
South Korea Asiana Airlines Inc. B737-400 CFM56-3C1 24520 21-Dec-89
Taiwan Far Eastern Air Transport
Corporation MD-83 JT8D-219 49950 1-Nov-91
AUSTRALIA &
NEW
ZEALAND..... Australia National Jet Systems Pty.
Limited DHC8-100 PW121 229 1-Sep-90
New Zealand New Zealand International
Airlines Limited METRO-III TPE331-11 705 1-Aug-88
New Zealand New Zealand International
Airlines Limited METRO-III TPE331-11 711 1-Mar-88
New Zealand New Zealand International
Airlines Limited METRO-III TPE331-11 712 1-Jun-88
EUROPE...... Bulgaria Balkan Bulgarian Airlines B737-300 CFM56-3B2 23749 (2) 1-May-87
Bulgaria Balkan Bulgarian Airlines B737-300 CFM56-3B2 23923 (2) 1-Apr-88
Czech Travel Servis a.s. B737-400 CFM56-3C1 24911 1-Apr-91
Republic
France Air France A320-200 CFM56-5A3 203 1-Sep-91
France Air France A320-200 CFM56-5A3 220 1-Sep-91
France Air Liberte S.A. MD-83 JT8D-219 49943 1-Jul-91
Hungary Malev B737-400 CFM56-3C1 25190 7-Apr-92
APPRAISED VALUE AS OF JANUARY 31, 2001
-------------------------------------------------
(IN THOUSANDS) % OF PORTFOLIO
BY APPRAISED
VALUES AS OF
REGION AIRCLAIMS AISI BK ASSOC. AVERAGE 31-JAN-01
- ------ ---------- ---------- ---------- ---------- --------------
AFRICA...... $ 15,260 $ 18,560 $ 19,100 $ 17,640 0.56%
20,460 22,690 22,850 22,000 0.70
ASIA & FAR
EAST...... 7,080 6,740 7,600 7,140 0.23
20,190 19,260 18,700 19,383 0.62
18,410 18,990 18,150 18,517 0.59
20,910 20,220 20,500 20,543 0.66
19,300 18,820 18,500 18,873 0.60
33,940 39,560 39,050 37,517 1.20
20,980 23,730 24,350 23,020 0.73
4,200 4,240 6,200 4,880 0.16
3,950 4,740 5,000 4,563 0.15
4,690 5,130 6,950 5,590 0.18
3,260 5,460 6,000 4,907 0.16
4,910 6,320 7,000 6,077 0.19
3,610 5,120 7,100 5,277 0.17
21,030 21,910 22,850 21,930 0.70
6,390 8,140 12,350 8,960 0.29
18,930 20,880 19,000 19,603 0.63
21,320 23,660 23,500 22,827 0.73
20,800 22,740 22,150 21,897 0.70
21,170 22,630 22,350 22,050 0.70
18,110 20,640 23,250 20,667 0.66
AUSTRALIA &
NEW
ZEALAND.....
5,260 5,110 7,750 6,040 0.19
420 950 1,550 973 0.03
500 940 1,550 997 0.03
460 940 1,550 983 0.03
EUROPE...... 16,550 19,110 17,600 17,753 0.57
16,590 18,760 17,650 17,667 0.56
22,570 25,080 24,000 23,883 0.76
26,320 26,920 28,200 27,147 0.87
26,820 26,300 27,100 26,740 0.85
18,600 20,650 22,300 20,517 0.65
21,850 24,910 25,100 23,953 0.76
A-1-1
199
APPENDIX 1
AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
DATE OF
MANUFACTURE/
REGION COUNTRY LESSEE TYPE ENGINE MSN NOTES CONVERSION
- ------ ------- ------ ----------- -------------- ----- -------- ------------
EUROPE...... Hungary Malev B737-400 CFM56-3C1 26069 2-Nov-92
(CONTINUED) Hungary Malev B737-400 CFM56-3C1 26071 13-Nov-92
Italy Air One SpA B737-300 CFM56-3C1 25179 12-Feb-92
Italy Air One SpA B737-300 CFM56-3C1 25187 14-Mar-92
Italy Eurofly SpA MD-83 JT8D-219 49390 1-Apr-86
Italy Eurofly SpA MD-83 JT8D-219 49631 14-Jun-89
Italy Meridiana SpA MD-83 JT8D-219 49792 1-Nov-89
Italy Meridiana SpA MD-83 JT8D-219 49935 26-Sep-90
Italy Meridiana SpA MD-83 JT8D-219 49951 25-Aug-91
Macedonia Interimpex-Avioimpex A.D. MD-83 JT8D-219 49442 29-Apr-87
Netherlands Schreiner Airways DHC8-300 PW123 232 20-Oct-90
Netherlands Schreiner Airways DHC8-300 PW123 244 1-Dec-90
Netherlands Schreiner Airways DHC8-300 PW123 266 20-Mar-91
Netherlands Schreiner Airways DHC8-300 PW123 276 13-May-91
Netherlands Schreiner Airways DHC8-300 PW123 283 1-Sep-91
Netherlands Schreiner Airways DHC8-300 PW123 298 1-Apr-92
Netherlands Schreiner Airways DHC8-300 PW123 300 1-Apr-92
Norway Wideroe's Flyveselskap a/s DHC8-300 PW123 293 1-Oct-91
Norway Wideroe's Flyveselskap a/s DHC8-300 PW123 342 1-Dec-92
Spain Air Europa B737-400 CFM56-3C1 24906 24-Feb-91
Spain Air Europa B737-400 CFM56-3C1 24912 14-Jun-91
Spain Futura B737-400 CFM56-3C1 24689 3-Jul-90
Spain Futura B737-400 CFM56-3C1 24690 1-Jul-90
Spain Futura B737-400 CFM56-3C1 25180 21-Jan-92
Spain Spanair MD-83 JT8D-219 49620 1-Jul-88
Spain Spanair MD-83 JT8D-219 49624 1-Aug-88
Spain Spanair MD-83 JT8D-219 49626 22-Oct-88
Spain Spanair MD-83 JT8D-219 49709 1-Dec-88
Spain Spanair MD-83 JT8D-219 49936 6-Oct-90
Spain Spanair MD-83 JT8D-219 49938 1-Dec-90
Sweden Transwede Leisure AB B757-200 RB211-535E4-37 26151 23-Jul-92
Turkey MNG Havayollari
Ve Tasimaciligi A.S.
(MNG Airlines Cargo) A300C4-200 CF6-50C2 83 1-May-79
Turkey Pegasus B737-400 CFM56-3C1 24345 1-Jun-89
Turkey Pegasus B737-400 CFM56-3C1 24687 25-May-90
Turkey Turk Hava Yollari B737-400 CFM56-3C1 24917 24-Jun-91
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25181 3-Feb-92
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25184 2-Mar-92
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25261 9-Apr-92
Turkey Turk Hava Yollari B737-400 CFM56-3C1 26065 1-May-92
APPENDIX 1
AIRPLANES GR AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
APPRAISED VALUE AS OF JANUARY 31, 2001
-------------------------------------------------
(IN THOUSANDS) % OF PORTFOLIO
BY APPRAISED
VALUES AS OF
REGION AIRCLAIMS AISI BK ASSOC. AVERAGE 31-JAN-01
- ------ ---------- ---------- ---------- ---------- --------------
EUROPE...... $ 23,240 $ 26,300 $ 27,750 $ 25,763 0.82%
(CONTINUED) 23,640 26,300 27,750 25,897 0.83
21,430 22,560 23,700 22,563 0.72
21,800 22,560 23,800 22,720 0.72
14,410 16,830 16,000 15,747 0.50
15,810 19,590 19,700 18,367 0.59
16,410 18,490 19,000 17,967 0.57
17,910 20,550 22,500 20,320 0.65
18,540 21,580 23,100 21,073 0.67
13,390 17,450 17,050 15,963 0.51
6,330 6,010 7,100 6,480 0.21
6,570 6,060 7,700 6,777 0.22
6,990 6,700 7,650 7,113 0.23
7,130 6,700 7,700 7,177 0.23
6,790 6,780 7,800 7,123 0.23
7,060 7,320 8,000 7,460 0.24
6,840 7,330 8,200 7,457 0.24
6,800 6,700 7,850 7,117 0.23
7,680 7,370 8,750 7,933 0.25
23,010 24,450 24,300 23,920 0.76
23,600 24,270 25,000 24,290 0.77
21,030 23,920 23,700 22,883 0.73
21,480 23,990 23,750 23,073 0.74
22,650 25,920 26,000 24,857 0.79
15,960 18,890 19,450 18,100 0.58
14,950 18,800 18,450 17,400 0.55
15,190 18,930 19,100 17,740 0.57
14,920 18,690 19,000 17,537 0.56
18,120 19,930 21,750 19,933 0.64
16,300 19,360 21,050 18,903 0.60
32,430 39,470 38,900 36,933 1.18
15,410 12,880 15,750 14,680 0.47
20,430 22,090 22,800 21,773 0.69
21,440 23,220 23,500 22,720 0.72
23,720 24,800 25,300 24,607 0.78
23,040 26,220 26,200 25,153 0.80
23,020 26,230 27,100 25,450 0.81
23,010 26,100 26,550 25,220 0.80
23,030 25,920 26,850 25,267 0.81
A-1-2
200
APPENDIX 1
AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
DATE OF
MANUFACTURE/
REGION COUNTRY LESSEE TYPE ENGINE MSN NOTES CONVERSION
- ------ ------- ------ ----------- -------------- ----- -------- ------------
Turkey Turk Hava Yollari B737-500 CFM56-3C1 25288 16-Jun-92
EUROPE...... Turkey Turk Hava Yollari B737-500 CFM56-3C1 25289 12-Jun-92
(CONTINUED) United Airtours International A320-200 CFM56-5A3 294 2-Apr-92
Kingdom
United Airtours International A320-200 CFM56-5A3 301 22-Apr-92
Kingdom
United Airtours International A320-200 CFM56-5A3 348 17-Jun-92
Kingdom
United Airtours International A320-200 CFM56-5A3 349 30-Oct-92
Kingdom
United Brymon Airways Limited DHC8-300 PW123 296 1-Oct-91
Kingdom
United Brymon Airways Limited DHC8-300 PW123 334 8-Oct-92
Kingdom
United Titan Airways Limited ATR42-300 PW120 109 14-Oct-88
Kingdom
United Titan Airways Limited ATR42-300 PW120 113 18-Nov-88
Kingdom
LATIN
AMERICA.... Antigua Liat 1974 Limited DHC8-100 PW120-A 113 1-Sep-88
Antigua Liat 1974 Limited DHC8-100 PW120-A 140 1-Mar-89
Antigua Liat 1974 Limited DHC8-100 PW120-A 144 1-Mar-89
Antigua Liat 1974 Limited DHC8-100 PW120-A 270 1-May-91
Argentina Aerolineas Argentinas S.A. B737-200A JT8D-17 21192 1-Mar-76
Argentina Lineas Aereas Privadas
Argentinas (L.A.P.A.) S.A. B737-200A JT8D-17 21193 1-Jul-76
Argentina Lineas Aereas Privadas
Argentinas (L.A.P.A.) S.A. B737-200A JT8D-15 22633 1-Mar-81
Brazil Rio-Sul B737-500 CFM56-3C1 25185 18-Feb-92
Brazil Rio-Sul B737-500 CFM56-3C1 25186 11-Mar-92
Brazil Rio-Sul B737-500 CFM56-3C1 25191 10-Apr-92
Brazil Rio-Sul B737-500 CFM56-3C1 25192 14-Apr-92
Brazil Rio-Sul B737-500 CFM56-3C1 26075 23-Oct-92
Brazil TAM F-100 TAY650-15 11284 31-Jul-90
Brazil TAM F-100 TAY650-15 11285 1-Aug-90
Brazil TAM F-100 TAY650-15 11304 27-Feb-91
Brazil TAM F-100 TAY650-15 11305 19-Apr-91
Brazil TAM F-100 TAY650-15 11336 5-Jun-91
Brazil TAM F-100 TAY650-15 11347 1-Oct-91
Brazil TAM F-100 TAY650-15 11348 6-Aug-91
Brazil TAM Express S.A. F-100 TAY650-15 11371 19-Dec-91
Brazil VARIG MD-11 CF6-80C2-D1F 48499 31-Dec-91
Brazil VARIG MD-11 CF6-80C2-D1F 48500 1-Mar-92
Brazil VARIG MD-11 CF6-80C2-D1F 48501 1-Sep-92
Chile A.I.L.L. DC8-71F CFM56-2C1 45810 (3)(4) 9-Apr-92
Chile A.I.L.L. DC8-71F CFM56-2C1 45970 (3)(4) 15-Oct-92
Chile A.I.L.L. DC8-71F CFM56-2C1 45976 (3)(4) 10-Aug-91
Chile Lan Chile B737-200A JT8D-15 22397 1-Feb-81
Chile Lan Chile B737-200A JT8D-17A 22407 1-Sep-80
Chile Lan Chile B737-200A JT8D-17A 23024 1-May-83
Chile Lan Chile B767-300ER PW4060 26204 1-Oct-92
APPENDIX 1
AIRPLANES GR AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
APPRAISED VALUE AS OF JANUARY 31, 2001
-------------------------------------------------
(IN THOUSANDS) % OF PORTFOLIO
BY APPRAISED
VALUES AS OF
REGION AIRCLAIMS AISI BK ASSOC. AVERAGE 31-JAN-01
- ------ ---------- ---------- ---------- ---------- --------------
$ 19,750 $ 19,710 $ 20,500 $ 19,987 0.64%
EUROPE...... 20,000 19,700 20,250 19,983 0.64
(CONTINUED) 26,460 27,490 27,950 27,300 0.87
26,720 27,470 29,450 27,880 0.89
27,330 27,280 28,400 27,670 0.88
27,240 27,380 30,000 28,207 0.90
7,780 6,700 7,950 7,477 0.24
7,400 7,340 8,500 7,747 0.25
4,450 4,490 5,000 4,647 0.15
4,720 4,490 4,950 4,720 0.15
LATIN
AMERICA.... 4,020 4,330 4,950 4,433 0.14
4,220 4,730 4,550 4,500 0.14
4,410 4,600 5,400 4,803 0.15
4,960 5,550 5,750 5,420 0.17
4,250 3,950 4,400 4,200 0.13
3,110 3,300 4,350 3,587 0.11
4,680 5,140 6,550 5,457 0.17
21,360 20,020 19,650 20,343 0.65
20,240 20,070 19,550 19,953 0.64
18,860 20,190 19,850 19,633 0.63
21,200 19,940 19,600 20,247 0.65
21,800 19,990 21,250 21,013 0.67
11,610 10,630 11,450 11,230 0.36
11,590 10,730 11,400 11,240 0.36
11,780 10,850 12,150 11,593 0.37
12,790 11,420 12,150 12,120 0.39
12,110 11,020 12,750 11,960 0.38
12,000 11,100 13,250 12,117 0.39
12,060 10,820 14,100 12,327 0.39
13,320 11,390 13,450 12,720 0.41
49,220 61,040 70,300 60,187 1.92
52,330 64,870 71,450 62,883 2.01
51,030 64,710 73,500 63,080 2.01
13,080 13,210 12,450 12,913 0.41
14,500 13,950 12,450 13,633 0.43
13,270 14,090 12,450 13,270 0.42
3,770 4,690 6,150 4,870 0.16
4,040 4,890 6,200 5,043 0.16
4,850 5,870 7,800 6,173 0.20
55,340 60,350 56,500 57,397 1.83
A-1-3
201
APPENDIX 1
AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
DATE OF
MANUFACTURE/
REGION COUNTRY LESSEE TYPE ENGINE MSN NOTES CONVERSION
- ------ ------- ------ ----------- -------------- ----- -------- ------------
LATIN
AMERICA.... Colombia AeroLineas Centrales de
Colombia S.A. ATR42-300 PW121-5A1 284 1-Jan-92
(CONTINUED)
Colombia Avianca B757-200 RB211-535E4-37 26154 22-Sep-92
Colombia Avianca B767-200ER PW4060 25421 14-Jan-92
Colombia Avianca MD-83 JT8D-219 49939 26-Oct-90
Colombia Avianca MD-83 JT8D-219 49946 18-Jul-91
Colombia Avianca MD-83 JT8D-219 53120 29-Jul-92
Colombia Avianca MD-83 JT8D-219 53125 2-Apr-92
Colombia Tampa DC8-71F CFM56-2C1 45849 (4) 9-Mar-91
Colombia Tampa DC8-71F CFM56-2C1 45945 (4) 19-May-92
Colombia Tampa DC8-71F CFM56-2C1 46066 (4) 24-Apr-91
Mexico Aeromexico DC9-32 JT8D-17 48125 1-Apr-80
Mexico Aeromexico DC9-32 JT8D-17 48126 1-Apr-80
Mexico Aeromexico DC9-32 JT8D-17 48127 1-Jul-80
Mexico Aeromexico DC9-32 JT8D-17 48128 1-Aug-80
Mexico Aeromexico DC9-32 JT8D-17 48129 1-Nov-80
Mexico Aeromexico DC9-32 JT8D-17 48130 1-Dec-80
Mexico Aeromexico MD-82 JT8D-217 49660 1-Mar-88
Mexico Aeromexico MD-82 JT8D-217A 49667 21-Jan-88
Mexico Aeromexico MD-87 JT8D-219 49673 1-Dec-88
Mexico Mexicana B727-200A JT8D-17R 21346 1-Oct-80
Mexico Mexicana B727-200A JT8D-17R 21600 1-Nov-80
Mexico Mexicana F-100 TAY650-15 11266 17-Aug-90
Mexico Mexicana F-100 TAY650-15 11309 16-May-91
Mexico Mexicana F-100 TAY650-15 11319 5-Apr-91
Mexico Mexicana F-100 TAY650-15 11339 1-Jul-91
Mexico Mexicana F-100 TAY650-15 11374 20-Jan-92
Mexico Mexicana F-100 TAY650-15 11375 1-Dec-92
Mexico Mexicana F-100 TAY650-15 11382 1-Jan-93
Mexico Mexicana F-100 TAY650-15 11384 1-Jan-93
Netherlands ALM 1997 Airline N.V. DHC8-300C PW123 230 1-Feb-91
Antilles
Netherlands ALM 1997 Airline N.V. DHC8-300C PW123 242 1-Nov-90
Antilles
Trinidad & Trinidad & Tobago
Tobago (BWIA International)
Airways Corporation MD-83 JT8D-219 49789 23-Sep-89
NORTH
AMERICA.... Canada Air Canada A320-200 CFM56-5A1 174 1-Apr-91
Canada Air Canada A320-200 CFM56-5A1 175 1-Apr-91
Canada Air Canada A320-200 CFM56-5A1 232 1-Oct-91
Canada Air Canada A320-200 CFM56-5A1 284 9-Mar-92
APPENDIX 1
AIRPLANES GR AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
APPRAISED VALUE AS OF JANUARY 31, 2001
-------------------------------------------------
(IN THOUSANDS) % OF PORTFOLIO
BY APPRAISED
VALUES AS OF
REGION AIRCLAIMS AISI BK ASSOC. AVERAGE 31-JAN-01
- ------ ---------- ---------- ---------- ---------- --------------
LATIN
AMERICA....
$ 5,670 $ 6,430 $ 6,350 $ 6,150 0.20%
(CONTINUED)
33,070 38,280 37,300 36,217 1.16
35,800 48,460 44,750 43,003 1.37
17,290 19,960 20,500 19,250 0.61
16,980 20,730 20,950 19,553 0.62
18,330 21,920 22,100 20,783 0.66
18,150 21,640 21,850 20,547 0.66
12,740 13,590 12,450 12,927 0.41
14,250 14,130 12,350 13,577 0.43
13,710 13,660 12,450 13,273 0.42
2,370 4,390 3,300 3,353 0.11
3,310 5,340 4,250 4,300 0.14
2,260 4,620 3,100 3,327 0.11
2,930 4,540 4,050 3,840 0.12
2,460 4,580 3,700 3,580 0.11
2,710 4,700 3,750 3,720 0.12
15,390 17,640 17,000 16,677 0.53
15,980 17,720 15,950 16,550 0.53
9,330 12,820 14,300 12,150 0.39
3,550 4,260 3,700 3,837 0.12
2,730 3,970 3,050 3,250 0.10
12,180 10,600 11,800 11,527 0.37
12,640 10,910 12,000 11,850 0.38
12,100 10,990 12,000 11,697 0.37
12,800 11,310 13,150 12,420 0.40
11,800 11,590 13,200 12,197 0.39
12,600 11,640 13,850 12,697 0.40
12,630 11,540 13,900 12,690 0.40
11,900 11,650 13,950 12,500 0.40
6,540 7,060 7,650 7,083 0.23
6,420 7,040 7,700 7,053 0.22
15,180 18,620 19,950 17,917 0.57
NORTH
AMERICA.... 25,140 25,450 25,150 25,247 0.81
25,030 25,500 24,250 24,927 0.80
27,030 25,630 25,550 26,070 0.83
27,420 26,730 28,350 27,500 0.88
A-1-4
202
APPENDIX 1
AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
DATE OF
MANUFACTURE/
REGION COUNTRY LESSEE TYPE ENGINE MSN NOTES CONVERSION
- ------ ------- ------ ----------- -------------- ----- -------- ------------
NORTH
AMERICA.... Canada Air Canada A320-200 CFM56-5A1 309 13-May-92
(CONTINUED) Canada Air Canada A320-200 CFM56-5A1 404 1-Jan-94
Canada Air Canada B737-200A JT8D-9A 21639 (1)(5) 1-Nov-78
Canada Air Canada B737-200A JT8D-9A 21712 (1)(5) 1-Feb-79
Canada Air Canada B737-200A JT8D-9A 22873 (1)(5) 1-Jul-82
Canada Air Canada B767-300ER PW4060 24948 19-Jul-91
Canada Air Canada B767-300ER PW4060 26200 1-Sep-92
U.S.A. Allegheny Airlines Inc. DHC8-100 PW121 258 1-Jan-91
U.S.A. America West B737-300QC CFM56-3B1 23499 1-Jun-86
U.S.A. America West B737-300QC CFM56-3B1 23500 1-Jun-86
U.S.A. American Airlines MD-83 JT8D-219 49941 1-Dec-90
U.S.A. American Airlines MD-83 JT8D-219 49949 5-Aug-91
U.S.A. BAX Global DC8-71F CFM56-2C1 45811 (4) 30-May-91
U.S.A. BAX Global DC8-71F CFM56-2C1 45813 (4) 28-Apr-92
U.S.A. BAX Global DC8-71F CFM56-2C1 45946 (4) 23-Apr-92
U.S.A. BAX Global DC8-71F CFM56-2C1 45971 (4) 13-Feb-92
U.S.A. BAX Global DC8-71F CFM56-2C1 45973 (4) 27-Feb-92
U.S.A. BAX Global DC8-71F CFM56-2C1 45978 (4) 23-Apr-93
U.S.A. BAX Global DC8-71F CFM56-2C1 45993 (4) 23-Jun-93
U.S.A. BAX Global DC8-71F CFM56-2C1 45994 (4) 1-Sep-94
U.S.A. BAX Global DC8-71F CFM56-2C1 45998 (4) 21-May-93
U.S.A. BAX Global DC8-71F CFM56-2C1 46065 (4) 12-Jan-92
U.S.A. Emery Worldwide DC8-71F CFM56-2C1 45996 (4) 29-Oct-92
U.S.A. Emery Worldwide DC8-71F CFM56-2C1 45997 (4) 7-Dec-93
U.S.A. Emery Worldwide DC8-73CF CFM56-2C1 46091 (4) 1-Dec-89
U.S.A. Frontier Airlines, Inc. B737-300 CFM56-3B1 23177 1-Apr-86
U.S.A. Hawaiian Airlines, Inc. DC9-51 JT8D-17 47742 1-Jun-77
U.S.A. Hawaiian Airlines, Inc. DC9-51 JT8D-17 47784 1-May-79
U.S.A. Hawaiian Airlines, Inc. DC9-51 JT8D-17 47796 1-Apr-79
U.S.A. Hawaiian Airlines, Inc. DC9-51 JT8D-17 48122 26-Jan-81
U.S.A. Idefix Leasing Corporation ATR42-300 PW120 249 1-Jun-91
U.S.A. Polar Air Cargo, Inc. B747-200SF JT9D-7Q 21730 (4) 27-Mar-98
U.S.A. TWA B767-300ER PW4060 25411 15-Jan-92
U.S.A. TWA MD-83 JT8D-219 49575 1-Oct-87
U.S.A. Vanguard Airlines B737-200A JT8D-15 21735 (1) 1-Jun-79
U.S.A. Vanguard Airlines B737-200A JT8D-15 22979 (1) 1-Mar-83
OTHER....... Kazakstan Air Kazakstan B737-200A JT8D-15 22090 1-May-80
Kazakstan Air Kazakstan B737-200A JT8D-15 22453 1-Mar-81
Ukraine Ukraine International
Airlines B737-200A JT8D-17A 22802 1-Feb-83
OFF-LEASE... Off-lease Off-lease A300-B4-200 CF6-50C2 131 (6) 7-Feb-81
APPENDIX 1
AIRPLANES GR AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
APPRAISED VALUE AS OF JANUARY 31, 2001
-------------------------------------------------
(IN THOUSANDS) % OF PORTFOLIO
BY APPRAISED
VALUES AS OF
REGION AIRCLAIMS AISI BK ASSOC. AVERAGE 31-JAN-01
- ------ ---------- ---------- ---------- ---------- --------------
NORTH
AMERICA.... $ 27,990 $ 26,840 $ 28,050 $ 27,627 0.88%
(CONTINUED) 28,670 30,490 31,450 30,203 0.96
1,279 1,279 1,279 1,279 0.04
1,397 1,397 1,397 1,397 0.04
4,848 4,848 4,848 4,848 0.15
50,780 57,210 50,500 52,830 1.68
55,190 60,700 59,850 58,580 1.87
4,920 5,460 6,100 5,493 0.18
18,310 19,060 15,950 17,773 0.57
18,480 18,890 16,150 17,840 0.57
17,500 20,070 22,050 19,873 0.63
17,250 21,190 22,650 20,363 0.65
15,140 14,090 12,050 13,760 0.44
14,380 13,880 11,800 13,353 0.43
12,540 14,320 12,600 13,153 0.42
13,080 13,150 12,450 12,893 0.41
12,770 14,160 12,450 13,127 0.42
13,600 13,490 12,450 13,180 0.42
13,910 13,380 12,450 13,247 0.42
13,840 13,540 12,450 13,277 0.42
12,730 14,230 12,450 13,137 0.42
14,600 13,940 12,450 13,663 0.44
14,740 13,790 13,100 13,877 0.44
13,370 13,960 12,450 13,260 0.42
16,690 16,100 17,600 16,797 0.54
13,700 16,860 13,450 14,670 0.47
2,700 3,880 3,200 3,260 0.10
1,910 4,000 3,700 3,203 0.10
2,240 4,490 3,250 3,327 0.11
2,870 4,640 3,900 3,803 0.12
5,280 6,000 6,250 5,843 0.19
27,070 30,550 33,050 30,223 0.96
53,700 61,300 58,200 57,733 1.84
14,800 17,820 18,650 17,090 0.55
4,950 5,860 6,150 5,653 0.18
5,880 7,040 7,350 6,757 0.22
OTHER....... 3,910 4,620 6,450 4,993 0.16
4,610 5,200 6,600 5,470 0.17
5,540 6,220 7,800 6,520 0.21
OFF-LEASE... 7,430 7,510 11,450 8,797 0.28
A-1-5
203
APPENDIX 1
AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
DATE OF
MANUFACTURE/
REGION COUNTRY LESSEE TYPE ENGINE MSN NOTES CONVERSION
- ------ ------- ------ ----------- -------------- ----- -------- ------------
Off-lease Off-lease B737-200A JT8D-17 21196 (6) 1-Jul-76
Off-lease Off-lease B737-200A JT8D-15 22369 (6) 1-Sep-80
OFF-LEASE... Off-lease Off-lease B737-400 CFM56-3C1 24691 (6) 9-Aug-90
(CONTINUED) Off-lease Off-lease B737-400 CFM56-3C1 26081 (6) 10-Mar-93
Off-lease Off-lease DHC8-300 PW123 267 (6) 4-Apr-91
APPENDIX 1
AIRPLANES GR AIRPLANES GROUP PORTFOLIO ANALYSIS -- (CONTINUED)
APPRAISED VALUE AS OF JANUARY 31, 2001
-------------------------------------------------
(IN THOUSANDS) % OF PORTFOLIO
BY APPRAISED
VALUES AS OF
REGION AIRCLAIMS AISI BK ASSOC. AVERAGE 31-JAN-01
- ------ ---------- ---------- ---------- ---------- --------------
$ 2,730 $ 3,400 $ 3,850 $ 3,327 0.11%
4,240 4,110 6,200 4,850 0.15
OFF-LEASE... 21,040 24,130 24,500 23,223 0.74
(CONTINUED) 23,560 25,910 27,200 25,557 0.82
6,930 6,670 7,600 7,067 0.23
---------- ---------- ---------- ---------- ------
$2,933,514 $3,195,914 $3,276,674 $3,135,367 100.00%
========== ========== ========== ========== ======
- ---------------
(1) These aircraft are Stage 3 hushkitted aircraft.
(2) On February 15, 2001 the servicer issued notices terminating these leases
and it is currently seeking repossession of the aircraft.
(3) A.I.L.L. is an indirect 100% subsidiary of Lan Chile.
(4) The following table sets forth the date of original manufacture for the
aircraft that were converted to freighter aircraft:
DATE OF
SERIAL NUMBER MANUFACTURE
- ------------- -----------
45810....................... May-67
45811....................... Aug-67
45813....................... Jan-67
45849....................... Apr-67
45945....................... Mar-68
45946....................... Mar-68
45970....................... Mar-68
45971....................... May-68
45973....................... May-68
45976....................... Jul-68
45978....................... Jul-68
45993....................... Aug-68
45994....................... Aug-68
45996....................... Oct-68
45997....................... Oct-68
45998....................... Oct-68
46065....................... Jun-69
46066....................... Jun-69
46091....................... Apr-70
21730....................... Jun-79
(5) Aircraft lease receivable book values are used for the aircraft subject to
finance leases rather than appraised values.
A-1-6
204
(6) Of the six off-lease aircraft at January 31, 2001, three were subject to
lease agreements (MSN 22369 -- Merpati Nusantara Airlines; MSN 24691 -- PT
Garuda Indonesia; and MSN 26081 -- Philippine Airlines), one was subject to
a letter of intent (MSN 131 -- Heavylift Aviation Holdings Limited) and two
aircraft were available for marketing. As of the date of this prospectus,
one of the unplaced off-lease aircraft (MSN 267) had become subject to a
letter of intent for lease to Bahamasair, three of the off-lease aircraft
subject to lease agreements (MSN 22369, 26081 and MSN 24691), have been
delivered to Merpati Nusantara Airlines, Philippine Airlines and PT Garuda
Indonesia, respectively, and three additional aircraft, representing 1.23%
of our portfolio by appraised value as of January 31, 2001, have become
available for lease.
A-1-7
205
APPENDIX 2
MONTHLY LEASE RENTALS BASED ON THE AIRPLANES GROUP PERFORMANCE ASSUMPTIONS
LEASE
MONTH RENTALS
----- ------------
($ MILLIONS)
April 2001................. 37.310
May 2001................... 34.488
June 2001.................. 44.406
July 2001.................. 36.833
August 2001................ 35.815
September 2001............. 39.337
October 2001............... 32.442
November 2001.............. 34.713
December 2001.............. 38.341
January 2002............... 32.314
February 2002.............. 36.969
March 2002................. 35.606
April 2002................. 33.051
May 2002................... 35.081
June 2002.................. 41.586
July 2002.................. 32.920
August 2002................ 35.006
September 2002............. 37.294
October 2002............... 33.852
November 2002.............. 36.092
December 2002.............. 42.819
January 2003............... 36.443
February 2003.............. 38.868
March 2003................. 35.320
April 2003................. 36.126
May 2003................... 36.845
June 2003.................. 36.235
July 2003.................. 33.600
August 2003................ 35.195
September 2003............. 34.439
October 2003............... 34.162
November 2003.............. 35.095
December 2003.............. 34.231
January 2004............... 33.890
February 2004.............. 33.929
March 2004................. 34.941
April 2004................. 35.778
May 2004................... 44.833
June 2004.................. 37.450
July 2004.................. 33.457
August 2004................ 33.531
September 2004............. 34.661
October 2004............... 34.056
November 2004.............. 32.978
December 2004.............. 34.705
January 2005............... 33.888
February 2005.............. 32.823
March 2005................. 33.732
April 2005................. 34.229
May 2005................... 35.513
June 2005.................. 36.028
July 2005.................. 34.031
August 2005................ 32.976
September 2005............. 37.315
October 2005............... 33.961
November 2005.............. 34.368
December 2005.............. 36.785
January 2006............... 33.192
February 2006.............. 41.698
March 2006................. 38.799
April 2006................. 32.819
LEASE
MONTH RENTALS
----- ------------
($ MILLIONS)
May 2006................... 31.915
June 2006.................. 32.342
July 2006.................. 32.745
August 2006................ 31.810
September 2006............. 32.740
October 2006............... 31.819
November 2006.............. 32.169
December 2006.............. 32.041
January 2007............... 31.882
February 2007.............. 31.867
March 2007................. 31.776
April 2007................. 31.660
May 2007................... 31.627
June 2007.................. 31.505
July 2007.................. 31.409
August 2007................ 31.350
September 2007............. 31.351
October 2007............... 31.250
November 2007.............. 31.110
December 2007.............. 30.990
January 2008............... 30.944
February 2008.............. 35.877
March 2008................. 32.363
April 2008................. 31.704
May 2008................... 31.852
June 2008.................. 30.055
July 2008.................. 29.947
August 2008................ 32.366
September 2008............. 29.724
October 2008............... 29.691
November 2008.............. 29.493
December 2008.............. 29.453
January 2009............... 29.435
February 2009.............. 29.345
March 2009................. 29.315
April 2009................. 29.175
May 2009................... 29.175
June 2009.................. 29.175
July 2009.................. 29.158
August 2009................ 29.113
September 2009............. 29.069
October 2009............... 28.995
November 2009.............. 28.961
December 2009.............. 32.465
January 2010............... 28.754
February 2010.............. 28.709
March 2010................. 28.656
April 2010................. 28.656
May 2010................... 28.656
June 2010.................. 28.614
July 2010.................. 28.578
August 2010................ 28.578
September 2010............. 28.784
October 2010............... 28.566
November 2010.............. 28.566
December 2010.............. 28.764
January 2011............... 28.480
February 2011.............. 28.606
March 2011................. 31.504
April 2011................. 35.294
May 2011................... 29.957
LEASE
MONTH RENTALS
----- ------------
($ MILLIONS)
June 2011.................. 38.127
July 2011.................. 26.703
August 2011................ 28.992
September 2011............. 28.113
October 2011............... 26.137
November 2011.............. 25.841
December 2011.............. 25.709
January 2012............... 27.900
February 2012.............. 27.525
March 2012................. 27.307
April 2012................. 26.755
May 2012................... 35.335
June 2012.................. 25.633
July 2012.................. 23.145
August 2012................ 23.047
September 2012............. 23.027
October 2012............... 28.248
November 2012.............. 24.531
December 2012.............. 21.960
January 2013............... 21.877
February 2013.............. 24.786
March 2013................. 25.461
April 2013................. 24.195
May 2013................... 25.137
June 2013.................. 23.671
July 2013.................. 29.655
August 2013................ 24.018
September 2013............. 19.393
October 2013............... 21.708
November 2013.............. 24.136
December 2013.............. 26.776
January 2014............... 18.141
February 2014.............. 17.989
March 2014................. 19.097
April 2014................. 20.189
May 2014................... 17.701
June 2014.................. 25.765
July 2014.................. 22.078
August 2014................ 17.160
September 2014............. 19.067
October 2014............... 22.314
November 2014.............. 19.641
December 2014. 16.504
January 2015............... 20.139
February 2015.............. 16.317
March 2015................. 16.226
April 2015................. 21.158
May 2015................... 16.007
June 2015.................. 20.864
July 2015.................. 23.154
August 2015................ 26.470
September 2015............. 16.762
October 2015............... 24.413
November 2015.............. 17.462
December 2015.............. 20.400
January 2016............... 13.930
February 2016.............. 17.357
March 2016................. 25.817
April 2016................. 26.620
May 2016................... 14.446
A-2-1
206
APPENDIX 2
MONTHLY LEASE RENTALS BASED ON THE AIRPLANES GROUP PERFORMANCE ASSUMPTIONS --
(CONTINUED)
LEASE
MONTH RENTALS
----- ------------
($ MILLIONS)
June 2016.................. 19.823
July 2016.................. 20.865
August 2016................ 27.790
September 2016............. 22.289
October 2016............... 15.999
November 2016.............. 12.763
December 2016.............. 9.423
January 2017............... 35.496
February 2017.............. 26.742
March 2017................. 36.684
April 2017................. 26.126
May 2017................... 16.807
LEASE
MONTH RENTALS
----- ------------
($ MILLIONS)
June 2017.................. 7.131
July 2017.................. 11.108
August 2017................ 12.249
September 2017............. 21.092
October 2017............... 16.117
November 2017.............. 16.561
December 2017.............. 8.464
January 2018............... 4.405
February 2018.............. 0.598
March 2018................. 4.307
April 2018................. 4.131
LEASE
MONTH RENTALS
----- ------------
($ MILLIONS)
May 2018................... 0.136
June 2018.................. 0.136
July 2018.................. 0.136
August 2018................ 0.136
September 2018............. 0.136
October 2018............... 0.136
November 2018.............. 0.136
December 2018.............. 0.136
January 2019............... 4.395
February 2019.............. 0.000
March 2019................. 0.000
A-2-2
207
APPENDIX 3
EXPECTED PORTFOLIO VALUE BASED ON THE DEPRECIATION FACTORS AND
THE AIRCRAFT IN THE PORTFOLIO AS OF JANUARY 31, 2001
EXPECTED
MONTH PORTFOLIO VALUE
----- ---------------
($ MILLIONS)
March 2001.............. 3,108.632
April 2001.............. 3,093.162
May 2001................ 3,077.596
June 2001............... 3,057.318
July 2001............... 3,042.267
August 2001............. 3,025.663
September 2001.......... 3,011.253
October 2001............ 2,996.753
November 2001........... 2,982.163
December 2001........... 2,967.484
January 2002............ 2,952.713
February 2002........... 2,937.852
March 2002.............. 2,922.899
April 2002.............. 2,907.855
May 2002................ 2,892.719
June 2002............... 2,877.590
July 2002............... 2,862.482
August 2002............. 2,847.281
September 2002.......... 2,831.989
October 2002............ 2,816.603
November 2002........... 2,801.125
December 2002........... 2,785.553
January 2003............ 2,769.887
February 2003........... 2,754.127
March 2003.............. 2,738.272
April 2003.............. 2,722.323
May 2003................ 2,706.278
June 2003............... 2,690.137
July 2003............... 2,673.900
August 2003............. 2,657.567
September 2003.......... 2,641.137
October 2003............ 2,624.610
November 2003........... 2,607.985
December 2003........... 2,591.263
January 2004............ 2,574.508
February 2004........... 2,557.731
March 2004.............. 2,540.856
April 2004.............. 2,523.926
May 2004................ 2,507.185
June 2004............... 2,490.689
July 2004............... 2,474.180
August 2004............. 2,457.575
September 2004.......... 2,440.872
October 2004............ 2,424.073
November 2004........... 2,407.175
December 2004........... 2,390.370
January 2005............ 2,373.687
February 2005........... 2,356.907
March 2005.............. 2,340.030
April 2005.............. 2,323.247
May 2005................ 2,306.528
June 2005............... 2,289.772
July 2005............... 2,272.953
August 2005............. 2,256.113
September 2005.......... 2,239.363
October 2005............ 2,222.719
November 2005........... 2,206.085
December 2005........... 2,189.464
January 2006............ 2,172.787
February 2006........... 2,156.151
March 2006.............. 2,139.768
EXPECTED
MONTH PORTFOLIO VALUE
----- ---------------
($ MILLIONS)
April 2006.............. 2,123.599
May 2006................ 2,107.510
June 2006............... 2,091.530
July 2006............... 2,075.584
August 2006............. 2,059.587
September 2006.......... 2,043.694
October 2006............ 2,027.711
November 2006........... 2,011.636
December 2006........... 1,995.470
January 2007............ 1,979.235
February 2007........... 1,963.127
March 2007.............. 1,947.257
April 2007.............. 1,931.425
May 2007................ 1,915.948
June 2007............... 1,900.720
July 2007............... 1,885.435
August 2007............. 1,870.062
September 2007.......... 1,854.603
October 2007............ 1,839.056
November 2007........... 1,823.739
December 2007........... 1,808.434
January 2008............ 1,793.042
February 2008........... 1,777.652
March 2008.............. 1,762.389
April 2008.............. 1,747.131
May 2008................ 1,732.003
June 2008............... 1,717.037
July 2008............... 1,702.161
August 2008............. 1,687.267
September 2008.......... 1,672.396
October 2008............ 1,657.442
November 2008........... 1,642.405
December 2008........... 1,627.330
January 2009............ 1,612.302
February 2009........... 1,597.189
March 2009.............. 1,581.992
April 2009.............. 1,566.711
May 2009................ 1,551.344
June 2009............... 1,535.892
July 2009............... 1,520.355
August 2009............. 1,504.732
September 2009.......... 1,489.099
October 2009............ 1,473.470
November 2009........... 1,457.754
December 2009........... 1,441.952
January 2010............ 1,426.063
February 2010........... 1,410.087
March 2010.............. 1,394.024
April 2010.............. 1,377.872
May 2010................ 1,361.633
June 2010............... 1,345.305
July 2010............... 1,328.888
August 2010............. 1,312.382
September 2010.......... 1,295.787
October 2010............ 1,279.101
November 2010........... 1,262.326
December 2010........... 1,245.460
January 2011............ 1,228.503
February 2011........... 1,211.455
March 2011.............. 1,194.315
April 2011.............. 1,177.241
EXPECTED
MONTH PORTFOLIO VALUE
----- ---------------
($ MILLIONS)
May 2011................ 1,160.255
June 2011............... 1,143.361
July 2011............... 1,126.585
August 2011............. 1,109.719
September 2011.......... 1,092.763
October 2011............ 1,075.717
November 2011........... 1,058.580
December 2011........... 1,041.352
January 2012............ 1,024.033
February 2012........... 1,006.622
March 2012.............. 989.118
April 2012.............. 971.523
May 2012................ 954.008
June 2012............... 936.576
July 2012............... 919.053
August 2012............. 901.437
September 2012.......... 883.729
October 2012............ 866.009
November 2012........... 848.288
December 2012........... 830.474
January 2013............ 812.567
February 2013........... 794.699
March 2013.............. 776.852
April 2013.............. 759.225
May 2013................ 741.757
June 2013............... 724.204
July 2013............... 706.726
August 2013............. 689.426
September 2013.......... 672.150
October 2013............ 654.810
November 2013........... 637.553
December 2013........... 620.419
January 2014............ 603.351
February 2014........... 586.196
March 2014.............. 568.993
April 2014.............. 551.748
May 2014................ 534.415
June 2014............... 517.093
July 2014............... 499.962
August 2014............. 482.939
September 2014.......... 465.828
October 2014............ 448.751
November 2014........... 431.707
December 2014........... 414.664
January 2015............ 397.693
February 2015........... 380.677
March 2015.............. 363.574
April 2015.............. 346.480
May 2015................ 329.409
June 2015............... 312.386
July 2015............... 295.521
August 2015............. 278.994
September 2015.......... 262.919
October 2015............ 247.045
November 2015........... 231.553
December 2015........... 216.274
January 2016............ 201.152
February 2016........... 186.097
March 2016.............. 171.502
April 2016.............. 157.503
May 2016................ 144.007
A-3-1
208
APPENDIX 3
EXPECTED PORTFOLIO VALUE BASED ON THE DEPRECIATION FACTORS AND
THE AIRCRAFT IN THE PORTFOLIO AS OF JANUARY 31, 2001 -- (CONTINUED)
EXPECTED
MONTH PORTFOLIO VALUE
----- ---------------
($ MILLIONS)
June 2016............... 130.703
July 2016............... 117.910
August 2016............. 105.897
September 2016.......... 94.451
October 2016............ 83.493
November 2016........... 72.801
December 2016........... 62.176
January 2017............ 51.912
February 2017........... 43.148
March 2017.............. 35.536
April 2017.............. 29.315
May 2017................ 24.260
EXPECTED
MONTH PORTFOLIO VALUE
----- ---------------
($ MILLIONS)
June 2017............... 19.578
July 2017............... 15.394
August 2017............. 11.525
September 2017.......... 8.265
October 2017............ 5.985
November 2017........... 4.410
December 2017........... 3.589
January 2018............ 3.051
February 2018........... 2.620
March 2018.............. 2.222
April 2018.............. 1.993
EXPECTED
MONTH PORTFOLIO VALUE
----- ---------------
($ MILLIONS)
May 2018................ 1.764
June 2018............... 1.534
July 2018............... 1.302
August 2018............. 1.070
September 2018.......... 0.836
October 2018............ 0.601
November 2018........... 0.364
December 2018........... 0.127
January 2019............ 0.000
February 2019........... 0.000
March 2019.............. 0.000
A-3-2
209
APPENDIX 4
TARGET LOAN TO VALUE RATIOS OF THE CLASS A AND B CERTIFICATES
TARGET LOAN TO
VALUE RATIO
----------------------
AGGREGATE
CLASS A
INCLUDING
PAYMENT DATE OCCURRING IN REFINANCINGS CLASS B
------------------------- ------------ -------
(%) (%)
March 2001...................... 59.46 8.16
April 2001...................... 59.34 8.15
May 2001........................ 59.23 8.14
June 2001....................... 59.11 8.14
July 2001....................... 58.99 8.13
August 2001..................... 58.87 8.12
September 2001.................. 58.75 8.11
October 2001.................... 58.63 8.11
November 2001................... 58.50 8.10
December 2001................... 58.38 8.09
January 2002.................... 58.25 8.08
February 2002................... 58.12 8.07
March 2002...................... 57.99 8.06
April 2002...................... 57.86 8.06
May 2002........................ 57.72 8.05
June 2002....................... 57.59 8.04
July 2002....................... 57.45 8.03
August 2002..................... 57.32 8.02
September 2002.................. 57.18 8.01
October 2002.................... 57.04 8.00
November 2002................... 56.89 7.99
December 2002................... 56.75 7.97
January 2003.................... 56.61 7.96
February 2003................... 56.46 7.95
March 2003...................... 56.31 7.94
April 2003...................... 56.16 7.93
May 2003........................ 56.01 7.92
June 2003....................... 55.86 7.91
July 2003....................... 55.70 7.89
August 2003..................... 55.54 7.88
September 2003.................. 55.39 7.87
October 2003.................... 55.23 7.85
November 2003................... 55.07 7.84
December 2003................... 54.90 7.83
January 2004.................... 54.74 7.81
February 2004................... 54.57 7.80
March 2004...................... 54.40 7.79
April 2004...................... 54.23 7.77
May 2004........................ 54.06 7.76
June 2004....................... 53.89 7.74
July 2004....................... 53.72 7.73
August 2004..................... 53.54 7.71
September 2004.................. 53.36 7.69
October 2004.................... 53.18 7.68
November 2004................... 53.00 7.66
December 2004................... 52.82 7.65
January 2005.................... 52.63 7.63
February 2005................... 52.44 7.61
March 2005...................... 52.26 7.59
April 2005...................... 52.07 7.58
May 2005........................ 51.87 7.56
June 2005....................... 51.68 7.54
July 2005....................... 51.48 7.52
August 2005..................... 51.29 7.50
September 2005.................. 51.09 7.48
October 2005.................... 50.88 7.46
November 2005................... 50.68 7.45
TARGET LOAN TO
VALUE RATIO
----------------------
AGGREGATE
CLASS A
INCLUDING
PAYMENT DATE OCCURRING IN REFINANCINGS CLASS B
------------------------- ------------ -------
(%) (%)
December 2005................... 50.48 7.43
January 2006.................... 50.27 7.41
February 2006................... 50.06 7.38
March 2006...................... 49.85 7.36
April 2006...................... 49.64 7.34
May 2006........................ 49.42 7.32
June 2006....................... 49.20 7.30
July 2006....................... 48.99 7.28
August 2006..................... 48.77 7.26
September 2006.................. 48.54 7.23
October 2006.................... 48.32 7.21
November 2006................... 48.09 7.19
December 2006................... 47.86 7.16
January 2007.................... 47.63 7.14
February 2007................... 47.40 7.12
March 2007...................... 47.17 7.09
April 2007...................... 46.93 7.07
May 2007........................ 46.69 7.04
June 2007....................... 46.45 7.02
July 2007....................... 46.21 6.99
August 2007..................... 45.96 6.97
September 2007.................. 45.71 6.94
October 2007.................... 45.46 6.91
November 2007................... 45.21 6.89
December 2007................... 44.96 6.86
January 2008.................... 44.70 6.83
February 2008................... 44.45 6.80
March 2008...................... 44.19 6.78
April 2008...................... 43.92 6.75
May 2008........................ 43.66 6.72
June 2008....................... 43.39 6.69
July 2008....................... 43.13 6.66
August 2008..................... 42.85 6.63
September 2008.................. 42.58 6.60
October 2008.................... 42.31 6.57
November 2008................... 42.03 6.54
December 2008................... 41.75 6.50
January 2009.................... 41.47 6.47
February 2009................... 41.18 6.44
March 2009...................... 40.90 6.41
April 2009...................... 40.61 6.38
May 2009........................ 40.31 6.34
June 2009....................... 40.02 6.31
July 2009....................... 39.72 6.27
August 2009..................... 39.43 6.24
September 2009.................. 39.13 6.21
October 2009.................... 38.82 6.17
November 2009................... 38.52 6.13
December 2009................... 38.21 6.10
January 2010.................... 37.90 6.06
February 2010................... 37.58 6.03
March 2010...................... 37.27 5.99
April 2010...................... 36.95 5.95
May 2010........................ 36.63 5.91
June 2010....................... 36.31 5.87
July 2010....................... 35.98 5.84
August 2010..................... 35.66 5.80
A-4-1
210
APPENDIX 4
TARGET LOAN TO VALUE RATIOS OF THE CLASS A AND B CERTIFICATES -- (CONTINUED)
TARGET LOAN TO
VALUE RATIO
----------------------
AGGREGATE
CLASS A
INCLUDING
PAYMENT DATE OCCURRING IN REFINANCINGS CLASS B
------------------------- ------------ -------
(%) (%)
September 2010.................. 35.32 5.76
October 2010.................... 34.99 5.72
November 2010................... 34.66 5.68
December 2010................... 34.32 5.63
January 2011.................... 33.98 5.59
February 2011................... 33.63 5.55
March 2011...................... 33.29 5.51
April 2011...................... 32.94 5.47
May 2011........................ 32.59 5.42
June 2011....................... 32.23 5.38
July 2011....................... 31.88 5.34
August 2011..................... 31.52 5.29
September 2011.................. 31.16 5.25
October 2011.................... 30.79 5.20
November 2011................... 30.43 5.16
December 2011................... 30.06 5.11
January 2012.................... 29.68 5.06
February 2012................... 29.31 5.02
March 2012...................... 28.93 4.97
April 2012...................... 28.55 4.92
May 2012........................ 28.16 4.87
June 2012....................... 27.78 4.82
July 2012....................... 27.39 4.77
August 2012..................... 27.00 4.72
September 2012.................. 26.60 4.67
October 2012.................... 26.20 4.62
November 2012................... 25.80 4.57
December 2012................... 25.40 4.52
January 2013.................... 24.99 4.47
February 2013................... 24.58 4.41
March 2013...................... 24.17 4.36
April 2013...................... 23.75 4.31
May 2013........................ 23.33 4.25
June 2013....................... 22.91 4.20
July 2013....................... 22.49 4.14
August 2013..................... 22.06 4.08
September 2013.................. 21.63 4.03
October 2013.................... 21.19 3.97
November 2013................... 20.76 3.91
December 2013................... 20.32 3.85
January 2014.................... 19.87 3.80
February 2014................... 19.43 3.74
March 2014...................... 18.98 3.68
April 2014...................... 18.53 3.62
May 2014........................ 18.07 3.56
June 2014....................... 17.61 3.49
TARGET LOAN TO
VALUE RATIO
----------------------
AGGREGATE
CLASS A
INCLUDING
PAYMENT DATE OCCURRING IN REFINANCINGS CLASS B
------------------------- ------------ -------
(%) (%)
July 2014....................... 17.15 3.43
August 2014..................... 16.68 3.37
September 2014.................. 16.22 3.31
October 2014.................... 15.74 3.24
November 2014................... 15.27 3.18
December 2014................... 14.79 3.11
January 2015.................... 14.31 3.05
February 2015................... 13.82 2.98
March 2015...................... 13.34 2.92
April 2015...................... 12.84 2.85
May 2015........................ 12.35 2.78
June 2015....................... 11.85 2.71
July 2015....................... 11.35 2.64
August 2015..................... 10.84 2.57
September 2015.................. 10.34 2.50
October 2015.................... 9.82 2.43
November 2015................... 9.31 2.36
December 2015................... 8.79 2.29
January 2016.................... 8.27 2.22
February 2016................... 7.74 2.14
March 2016...................... 7.21 2.07
April 2016...................... 6.68 1.99
May 2016........................ 6.14 1.92
June 2016....................... 5.60 1.84
July 2016....................... 5.06 1.77
August 2016..................... 4.51 1.69
September 2016.................. 3.96 1.61
October 2016.................... 3.41 1.53
November 2016................... 2.85 1.45
December 2016................... 2.29 1.37
January 2017.................... 1.72 1.29
February 2017................... 1.15 1.21
March 2017...................... 0.58 1.13
April 2017...................... 0.00 1.05
May 2017........................ 0.00 0.96
June 2017....................... 0.00 0.88
July 2017....................... 0.00 0.79
August 2017..................... 0.00 0.71
September 2017.................. 0.00 0.62
October 2017.................... 0.00 0.54
November 2017................... 0.00 0.45
December 2017................... 0.00 0.36
January 2018.................... 0.00 0.27
February 2018................... 0.00 0.18
March 2018...................... 0.00 0.09
April 2018...................... 0.00 0.00
A-4-2
211
APPENDIX 5
SUPPLEMENTAL LOAN TO VALUE RATIOS OF THE CLASS A AND B CERTIFICATES
SUPPLEMENTAL LOAN
TO VALUE RATIO
----------------------
AGGREGATE
CLASS A
INCLUDING
PAYMENT DATE OCCURRING IN REFINANCINGS CLASS B
------------------------- ------------ -------
(%) (%)
March 2001....................... 45.82 7.71
April 2001....................... 45.43 7.68
May 2001......................... 45.04 7.66
June 2001........................ 44.64 7.63
July 2001........................ 44.24 7.60
August 2001...................... 43.84 7.57
September 2001................... 43.43 7.55
October 2001..................... 43.02 7.52
November 2001.................... 42.61 7.49
December 2001.................... 42.20 7.48
January 2002..................... 41.78 7.47
February 2002.................... 41.35 7.46
March 2002....................... 40.93 7.45
April 2002....................... 40.50 7.41
May 2002......................... 40.07 7.38
June 2002........................ 39.63 7.34
July 2002........................ 39.20 7.30
August 2002...................... 38.75 7.26
September 2002................... 38.31 7.22
October 2002..................... 37.86 7.18
November 2002.................... 37.41 7.13
December 2002.................... 36.95 7.10
January 2003..................... 36.50 7.04
February 2003.................... 36.03 7.01
March 2003....................... 35.57 6.97
April 2003....................... 35.10 6.91
May 2003......................... 34.63 6.90
June 2003........................ 34.15 6.86
July 2003........................ 33.67 6.81
August 2003...................... 33.19 6.76
September 2003................... 32.71 6.71
October 2003..................... 32.22 6.65
November 2003.................... 31.72 6.60
December 2003.................... 31.23 6.55
January 2004..................... 30.73 6.49
February 2004.................... 30.22 6.43
March 2004....................... 29.71 6.37
April 2004....................... 29.20 6.25
May 2004......................... 28.69 6.21
June 2004........................ 28.17 6.19
July 2004........................ 27.65 6.13
August 2004...................... 27.12 6.07
September 2004................... 26.59 6.00
October 2004..................... 26.06 5.93
November 2004.................... 25.52 5.87
December 2004.................... 24.98 5.80
January 2005..................... 24.44 5.73
February 2005.................... 23.89 5.65
March 2005....................... 23.33 5.52
SUPPLEMENTAL LOAN
TO VALUE RATIO
----------------------
AGGREGATE
CLASS A
INCLUDING
PAYMENT DATE OCCURRING IN REFINANCINGS CLASS B
------------------------- ------------ -------
(%) (%)
April 2005....................... 22.78 5.45
May 2005......................... 22.22 5.43
June 2005........................ 21.65 5.35
July 2005........................ 21.09 5.27
August 2005...................... 20.51 5.19
September 2005................... 19.94 5.11
October 2005..................... 19.36 5.03
November 2005.................... 18.77 4.95
December 2005.................... 18.19 4.86
January 2006..................... 17.59 4.77
February 2006.................... 17.00 4.60
March 2006....................... 16.40 4.59
April 2006....................... 15.79 4.50
May 2006......................... 15.18 4.41
June 2006........................ 14.57 4.31
July 2006........................ 13.96 4.22
August 2006...................... 13.33 4.12
September 2006................... 12.71 4.02
October 2006..................... 12.08 3.92
November 2006.................... 11.45 3.81
December 2006.................... 10.81 3.71
January 2007..................... 10.17 3.60
February 2007.................... 9.52 3.49
March 2007....................... 8.87 3.38
April 2007....................... 8.21 3.27
May 2007......................... 7.55 3.04
June 2007........................ 6.89 2.90
July 2007........................ 6.22 2.84
August 2007...................... 5.55 2.73
September 2007................... 4.87 2.68
October 2007..................... 4.19 2.56
November 2007.................... 3.50 2.44
December 2007.................... 2.81 2.31
January 2008..................... 2.11 2.18
February 2008.................... 1.41 2.05
March 2008....................... 0.71 1.92
April 2008....................... 0.00 1.78
May 2008......................... 0.00 1.65
June 2008........................ 0.00 1.51
July 2008........................ 0.00 1.37
August 2008...................... 0.00 1.22
September 2008................... 0.00 1.08
October 2008..................... 0.00 0.93
November 2008.................... 0.00 0.78
December 2008.................... 0.00 0.63
January 2009..................... 0.00 0.48
February 2009.................... 0.00 0.32
March 2009....................... 0.00 0.00
A-5-1
212
APPENDIX 6
TARGET POOL FACTORS FOR THE CLASS C AND D CERTIFICATES
TARGET POOL FACTORS
--------------------
PAYMENT DATE OCCURRING IN CLASS C CLASS D
------------------------- -------- --------
(%) (%)
March 2001............................. 89.43 97.06
April 2001............................. 89.05 96.88
May 2001............................... 88.67 96.69
June 2001.............................. 88.28 96.49
July 2001.............................. 87.89 96.29
August 2001............................ 87.49 96.08
September 2001......................... 87.09 95.87
October 2001........................... 86.68 95.65
November 2001.......................... 86.27 95.43
December 2001.......................... 85.86 95.20
January 2002........................... 85.44 94.97
February 2002.......................... 85.01 94.73
March 2002............................. 84.58 94.49
April 2002............................. 84.15 94.23
May 2002............................... 83.71 93.98
June 2002.............................. 83.27 93.71
July 2002.............................. 82.82 93.45
August 2002............................ 82.36 93.17
September 2002......................... 81.90 92.89
October 2002........................... 81.44 92.60
November 2002.......................... 80.97 92.31
December 2002.......................... 80.49 92.01
January 2003........................... 80.01 91.70
February 2003.......................... 79.53 91.39
March 2003............................. 79.04 91.07
April 2003............................. 78.54 90.75
May 2003............................... 78.04 90.42
June 2003.............................. 77.53 90.08
July 2003.............................. 77.02 89.73
August 2003............................ 76.50 89.38
September 2003......................... 75.98 89.02
October 2003........................... 75.45 88.65
November 2003.......................... 74.92 88.28
December 2003.......................... 74.38 87.90
January 2004........................... 73.83 87.52
February 2004.......................... 73.28 87.12
March 2004............................. 72.72 86.72
April 2004............................. 72.16 86.31
May 2004............................... 71.59 85.89
June 2004.............................. 71.02 85.47
July 2004.............................. 70.44 85.04
August 2004............................ 69.85 84.60
September 2004......................... 69.26 84.15
October 2004........................... 68.66 83.70
November 2004.......................... 68.06 83.24
December 2004.......................... 67.45 82.77
January 2005........................... 66.83 82.29
February 2005.......................... 66.21 81.80
March 2005............................. 65.58 81.31
April 2005............................. 64.94 80.81
May 2005............................... 64.30 80.30
June 2005.............................. 63.65 79.78
July 2005.............................. 63.00 79.25
August 2005............................ 62.34 78.72
September 2005......................... 61.67 78.17
October 2005........................... 61.00 77.62
November 2005.......................... 60.32 77.06
December 2005.......................... 59.64 76.49
January 2006........................... 58.94 75.91
February 2006.......................... 58.24 75.32
March 2006............................. 57.54 74.72
April 2006............................. 56.83 74.11
TARGET POOL FACTORS
--------------------
PAYMENT DATE OCCURRING IN CLASS C CLASS D
------------------------- -------- --------
(%) (%)
May 2006............................... 56.11 73.50
June 2006.............................. 55.38 72.87
July 2006.............................. 54.65 72.24
August 2006............................ 53.91 71.59
September 2006......................... 53.16 70.94
October 2006........................... 52.41 70.27
November 2006.......................... 51.64 69.60
December 2006.......................... 50.88 68.92
January 2007........................... 50.10 68.22
February 2007.......................... 49.32 67.52
March 2007............................. 48.53 66.81
April 2007............................. 47.73 66.08
May 2007............................... 46.93 65.35
June 2007.............................. 46.12 64.61
July 2007.............................. 45.30 63.85
August 2007............................ 44.47 63.09
September 2007......................... 43.64 62.31
October 2007........................... 42.80 61.52
November 2007.......................... 41.95 60.72
December 2007.......................... 41.09 59.92
January 2008........................... 40.23 59.10
February 2008.......................... 39.36 58.26
March 2008............................. 38.48 57.42
April 2008............................. 37.59 56.57
May 2008............................... 36.69 55.70
June 2008.............................. 35.79 54.83
July 2008.............................. 34.88 53.94
August 2008............................ 33.96 53.04
September 2008......................... 33.03 52.12
October 2008........................... 32.10 51.20
November 2008.......................... 31.15 50.26
December 2008.......................... 30.20 49.31
January 2009........................... 29.24 48.35
February 2009.......................... 28.27 47.38
March 2009............................. 27.30 46.39
April 2009............................. 26.31 45.40
May 2009............................... 25.32 44.38
June 2009.............................. 24.32 43.36
July 2009.............................. 23.31 42.32
August 2009............................ 22.29 41.27
September 2009......................... 21.26 40.21
October 2009........................... 20.22 39.13
November 2009.......................... 19.18 38.04
December 2009.......................... 18.12 36.94
January 2010........................... 17.06 35.82
February 2010.......................... 15.99 34.69
March 2010............................. 14.90 33.54
April 2010............................. 13.81 32.38
May 2010............................... 12.71 31.21
June 2010.............................. 11.61 30.02
July 2010.............................. 10.49 28.82
August 2010............................ 9.36 27.60
September 2010......................... 8.22 26.37
October 2010........................... 7.08 25.12
November 2010.......................... 5.92 23.86
December 2010.......................... 4.76 22.58
January 2011........................... 3.58 21.29
February 2011.......................... 2.40 19.99
March 2011............................. 0.00 18.66
April 2011............................. 0.00 17.32
May 2011............................... 0.00 15.97
June 2011.............................. 0.00 14.60
A-6-1
213
APPENDIX 6
TARGET POOL FACTORS FOR THE CLASS C AND D CERTIFICATES -- (CONTINUED)
TARGET POOL FACTORS
-------------------
PAYMENT DATE OCCURRING IN CLASS C CLASS D
------------------------- ------- -------
(%) (%)
July 2011............................ 0.00 13.22
August 2011.......................... 0.00 11.81
September 2011....................... 0.00 10.39
October 2011......................... 0.00 8.96
November 2011........................ 0.00 7.51
December 2011........................ 0.00 6.04
January 2012......................... 0.00 4.56
February 2012........................ 0.00 3.05
March 2012........................... 0.00 0.00
A-6-2
214
APPENDIX 7
PERCENTAGE OF INITIAL OUTSTANDING PRINCIPAL BALANCE
OF THE CLASS A CERTIFICATES BASED ON THE
AIRPLANES GROUP PERFORMANCE ASSUMPTIONS
AGGREGATE
CLASS A
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS INCLUDING
OCCURRING IN A-6 A-8 A-9 REFINANCINGS
- ------------ -------- -------- -------- ------------
March 2001........... 52.40% 100.00% 100.00% 82.41%
April 2001........... 46.23% 100.00% 100.00% 80.13%
May 2001............. 45.09% 100.00% 100.00% 79.71%
June 2001............ 42.96% 100.00% 100.00% 78.92%
July 2001............ 41.57% 100.00% 100.00% 78.41%
August 2001.......... 40.33% 100.00% 100.00% 77.95%
September 2001....... 38.67% 100.00% 100.00% 77.34%
October 2001......... 37.67% 100.00% 100.00% 76.96%
November 2001........ 36.47% 100.00% 100.00% 76.52%
December 2001........ 35.09% 100.00% 100.00% 76.01%
January 2002......... 34.13% 100.00% 100.00% 75.66%
February 2002........ 32.67% 100.00% 100.00% 75.12%
March 2002........... 31.29% 100.00% 100.00% 74.61%
April 2002........... 30.19% 100.00% 100.00% 74.20%
May 2002............. 28.88% 100.00% 100.00% 73.72%
June 2002............ 26.89% 100.00% 100.00% 72.98%
July 2002............ 25.79% 100.00% 100.00% 72.57%
August 2002.......... 24.47% 100.00% 100.00% 72.09%
September 2002....... 22.91% 100.00% 100.00% 71.51%
October 2002......... 21.67% 100.00% 100.00% 71.05%
November 2002........ 20.21% 100.00% 100.00% 70.51%
December 2002........ 18.04% 100.00% 100.00% 69.71%
January 2003......... 16.51% 100.00% 100.00% 69.14%
February 2003........ 14.71% 100.00% 100.00% 68.48%
March 2003........... 13.76% 100.00% 100.00% 68.13%
April 2003........... 12.21% 0.00% 100.00% 67.56%
May 2003............. 10.55% 0.00% 100.00% 66.94%
June 2003............ 8.97% 0.00% 100.00% 66.36%
July 2003............ 7.67% 0.00% 100.00% 65.88%
August 2003.......... 6.19% 0.00% 100.00% 65.33%
September 2003....... 4.77% 0.00% 100.00% 64.81%
October 2003......... 3.38% 0.00% 100.00% 64.29%
November 2003........ 1.88% 0.00% 100.00% 63.74%
December 2003........ 0.42% 0.00% 100.00% 63.20%
January 2004......... 0.00% 0.00% 98.92% 62.69%
February 2004........ 0.00% 0.00% 97.30% 62.16%
March 2004........... 0.00% 0.00% 95.49% 61.57%
April 2004........... 0.00% 0.00% 93.67% 60.98%
May 2004............. 0.00% 0.00% 90.68% 60.01%
June 2004............ 0.00% 0.00% 88.62% 59.33%
July 2004............ 0.00% 0.00% 86.96% 58.79%
August 2004.......... 0.00% 0.00% 85.34% 58.26%
September 2004....... 0.00% 0.00% 83.58% 57.69%
October 2004......... 0.00% 0.00% 81.82% 57.11%
November 2004........ 0.00% 0.00% 80.24% 56.60%
December 2004........ 0.00% 0.00% 78.37% 55.99%
January 2005......... 0.00% 0.00% 76.66% 55.43%
February 2005........ 0.00% 0.00% 75.07% 54.91%
March 2005........... 0.00% 0.00% 73.27% 54.33%
April 2005........... 0.00% 0.00% 71.46% 53.74%
May 2005............. 0.00% 0.00% 69.49% 53.09%
June 2005............ 0.00% 0.00% 67.47% 52.43%
July 2005............ 0.00% 0.00% 65.65% 51.84%
August 2005.......... 0.00% 0.00% 63.97% 51.29%
September 2005....... 0.00% 0.00% 61.76% 50.58%
October 2005......... 0.00% 0.00% 59.92% 49.97%
November 2005........ 0.00% 0.00% 58.00% 49.35%
December 2005........ 0.00% 0.00% 55.80% 48.63%
January 2006......... 0.00% 0.00% 54.03% 48.05%
February 2006........ 0.00% 0.00% 51.28% 47.16%
March 2006........... 0.00% 0.00% 48.89% 46.38%
April 2006........... 0.00% 0.00% 47.22% 45.83%
May 2006............. 0.00% 0.00% 45.54% 45.28%
June 2006............ 0.00% 0.00% 43.87% 44.74%
AGGREGATE
CLASS A
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS INCLUDING
OCCURRING IN A-6 A-8 A-9 REFINANCINGS
- ------------ -------- -------- -------- ------------
July 2006............ 0.00% 0.00% 42.24% 44.21%
August 2006.......... 0.00% 0.00% 40.59% 43.67%
September 2006....... 0.00% 0.00% 38.93% 43.13%
October 2006......... 0.00% 0.00% 37.31% 42.60%
November 2006........ 0.00% 0.00% 35.65% 42.06%
December 2006........ 0.00% 0.00% 34.00% 41.52%
January 2007......... 0.00% 0.00% 32.36% 40.99%
February 2007........ 0.00% 0.00% 30.74% 40.46%
March 2007........... 0.00% 0.00% 29.14% 39.94%
April 2007........... 0.00% 0.00% 27.52% 39.41%
May 2007............. 0.00% 0.00% 25.94% 38.89%
June 2007............ 0.00% 0.00% 24.38% 38.39%
July 2007............ 0.00% 0.00% 22.83% 37.88%
August 2007.......... 0.00% 0.00% 21.26% 37.37%
September 2007....... 0.00% 0.00% 19.70% 36.86%
October 2007......... 0.00% 0.00% 18.14% 36.35%
November 2007........ 0.00% 0.00% 16.60% 35.85%
December 2007........ 0.00% 0.00% 15.08% 35.35%
January 2008......... 0.00% 0.00% 13.53% 34.85%
February 2008........ 0.00% 0.00% 12.02% 34.36%
March 2008........... 0.00% 0.00% 10.51% 33.86%
April 2008........... 0.00% 0.00% 8.98% 33.36%
May 2008............. 0.00% 0.00% 7.49% 32.88%
June 2008............ 0.00% 0.00% 6.00% 32.39%
July 2008............ 0.00% 0.00% 4.55% 31.92%
August 2008.......... 0.00% 0.00% 3.07% 31.43%
September 2008....... 0.00% 0.00% 1.61% 30.96%
October 2008......... 0.00% 0.00% 0.17% 30.49%
November 2008........ 0.00% 0.00% 0.00% 30.01%
December 2008........ 0.00% 0.00% 0.00% 29.54%
January 2009......... 0.00% 0.00% 0.00% 29.07%
February 2009........ 0.00% 0.00% 0.00% 28.60%
March 2009........... 0.00% 0.00% 0.00% 28.13%
April 2009........... 0.00% 0.00% 0.00% 27.66%
May 2009............. 0.00% 0.00% 0.00% 27.19%
June 2009............ 0.00% 0.00% 0.00% 26.72%
July 2009............ 0.00% 0.00% 0.00% 26.26%
August 2009.......... 0.00% 0.00% 0.00% 25.80%
September 2009....... 0.00% 0.00% 0.00% 25.33%
October 2009......... 0.00% 0.00% 0.00% 24.87%
November 2009........ 0.00% 0.00% 0.00% 24.41%
December 2009........ 0.00% 0.00% 0.00% 23.96%
January 2010......... 0.00% 0.00% 0.00% 23.50%
February 2010........ 0.00% 0.00% 0.00% 23.04%
March 2010........... 0.00% 0.00% 0.00% 22.59%
April 2010........... 0.00% 0.00% 0.00% 22.14%
May 2010............. 0.00% 0.00% 0.00% 21.69%
June 2010............ 0.00% 0.00% 0.00% 21.24%
July 2010............ 0.00% 0.00% 0.00% 20.79%
August 2010.......... 0.00% 0.00% 0.00% 20.35%
September 2010....... 0.00% 0.00% 0.00% 19.90%
October 2010......... 0.00% 0.00% 0.00% 19.46%
November 2010........ 0.00% 0.00% 0.00% 19.02%
December 2010........ 0.00% 0.00% 0.00% 18.58%
January 2011......... 0.00% 0.00% 0.00% 18.15%
February 2011........ 0.00% 0.00% 0.00% 17.71%
March 2011........... 0.00% 0.00% 0.00% 17.29%
April 2011........... 0.00% 0.00% 0.00% 16.86%
May 2011............. 0.00% 0.00% 0.00% 16.44%
June 2011............ 0.00% 0.00% 0.00% 16.02%
July 2011............ 0.00% 0.00% 0.00% 15.62%
August 2011.......... 0.00% 0.00% 0.00% 15.21%
September 2011....... 0.00% 0.00% 0.00% 14.80%
October 2011......... 0.00% 0.00% 0.00% 14.40%
A-7-1
215
APPENDIX 7
PERCENTAGE OF INITIAL OUTSTANDING PRINCIPAL BALANCE
OF THE CLASS A CERTIFICATES BASED ON THE
AIRPLANES GROUP PERFORMANCE ASSUMPTIONS -- (CONTINUED)
AGGREGATE
CLASS A
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS INCLUDING
OCCURRING IN A-6 A-8 A-9 REFINANCINGS
- ------------ -------- -------- -------- ------------
November 2011........ 0.00% 0.00% 0.00% 14.01%
December 2011........ 0.00% 0.00% 0.00% 13.61%
January 2012......... 0.00% 0.00% 0.00% 13.21%
February 2012........ 0.00% 0.00% 0.00% 12.83%
March 2012........... 0.00% 0.00% 0.00% 12.44%
April 2012........... 0.00% 0.00% 0.00% 12.06%
May 2012............. 0.00% 0.00% 0.00% 11.68%
June 2012............ 0.00% 0.00% 0.00% 11.31%
July 2012............ 0.00% 0.00% 0.00% 10.94%
August 2012.......... 0.00% 0.00% 0.00% 10.58%
September 2012....... 0.00% 0.00% 0.00% 10.22%
October 2012......... 0.00% 0.00% 0.00% 9.86%
November 2012........ 0.00% 0.00% 0.00% 9.52%
December 2012........ 0.00% 0.00% 0.00% 9.17%
January 2013......... 0.00% 0.00% 0.00% 8.83%
February 2013........ 0.00% 0.00% 0.00% 8.49%
March 2013........... 0.00% 0.00% 0.00% 8.16%
April 2013........... 0.00% 0.00% 0.00% 7.84%
May 2013............. 0.00% 0.00% 0.00% 7.52%
June 2013............ 0.00% 0.00% 0.00% 7.21%
July 2013............ 0.00% 0.00% 0.00% 6.91%
August 2013.......... 0.00% 0.00% 0.00% 6.61%
September 2013....... 0.00% 0.00% 0.00% 6.32%
October 2013......... 0.00% 0.00% 0.00% 6.03%
November 2013........ 0.00% 0.00% 0.00% 5.75%
December 2013........ 0.00% 0.00% 0.00% 5.48%
January 2014......... 0.00% 0.00% 0.00% 5.21%
February 2014........ 0.00% 0.00% 0.00% 4.95%
March 2014........... 0.00% 0.00% 0.00% 4.70%
April 2014........... 0.00% 0.00% 0.00% 4.45%
May 2014............. 0.00% 0.00% 0.00% 4.20%
June 2014............ 0.00% 0.00% 0.00% 3.96%
AGGREGATE
CLASS A
PAYMENT DATE SUBCLASS SUBCLASS SUBCLASS INCLUDING
OCCURRING IN A-6 A-8 A-9 REFINANCINGS
- ------------ -------- -------- -------- ------------
July 2014............ 0.00% 0.00% 0.00% 3.73%
August 2014.......... 0.00% 0.00% 0.00% 3.50%
September 2014....... 0.00% 0.00% 0.00% 3.29%
October 2014......... 0.00% 0.00% 0.00% 3.07%
November 2014........ 0.00% 0.00% 0.00% 2.87%
December 2014........ 0.00% 0.00% 0.00% 2.67%
January 2015......... 0.00% 0.00% 0.00% 2.47%
February 2015........ 0.00% 0.00% 0.00% 2.29%
March 2015........... 0.00% 0.00% 0.00% 2.11%
April 2015........... 0.00% 0.00% 0.00% 1.93%
May 2015............. 0.00% 0.00% 0.00% 1.77%
June 2015............ 0.00% 0.00% 0.00% 1.61%
July 2015............ 0.00% 0.00% 0.00% 1.46%
August 2015.......... 0.00% 0.00% 0.00% 1.31%
September 2015....... 0.00% 0.00% 0.00% 1.18%
October 2015......... 0.00% 0.00% 0.00% 1.05%
November 2015........ 0.00% 0.00% 0.00% 0.94%
December 2015........ 0.00% 0.00% 0.00% 0.83%
January 2016......... 0.00% 0.00% 0.00% 0.72%
February 2016........ 0.00% 0.00% 0.00% 0.63%
March 2016........... 0.00% 0.00% 0.00% 0.54%
April 2016........... 0.00% 0.00% 0.00% 0.46%
May 2016............. 0.00% 0.00% 0.00% 0.38%
June 2016............ 0.00% 0.00% 0.00% 0.32%
July 2016............ 0.00% 0.00% 0.00% 0.26%
August 2016.......... 0.00% 0.00% 0.00% 0.21%
September 2016....... 0.00% 0.00% 0.00% 0.16%
October 2016......... 0.00% 0.00% 0.00% 0.12%
November 2016........ 0.00% 0.00% 0.00% 0.09%
December 2016........ 0.00% 0.00% 0.00% 0.06%
January 2017......... 0.00% 0.00% 0.00% 0.04%
February 2017........ 0.00% 0.00% 0.00% 0.00%
A-7-2
216
INDEX OF DEFINED TERMS
PAGE
----
1998 Base Case........................ 7
2001 refinancing trust................ 2
Actual Pool Factor.................... 118
Adjusted Balance...................... 117
Adjusted 1998 Base Case............... 7
Adjusted Base Value................... 116
adjusted portfolio value.............. 7
Adjusted Portfolio Value.............. 68
Adjusted Value........................ 116
ADs................................... 25
AeroUSA group......................... 30
AerFi U.S. tax group.................. 30
affiliate............................. 124
aircraft agreement.................... 129
aircraft operating expenses........... 54
Aircraft Operating Expenses........... 62
Aircraft Servicer Fees................ 63
Airplanes Group....................... 2
Airplanes Pass Through Trust.......... 2
Airplanes Trust....................... 2
amortization commencement date........ 114
amortizing notes...................... 114
annual dividend amount................ 34
AOG................................... 61
appraised value....................... 37
Assumed First Year's Interest......... 10
Assumed First Year's Interest and
Minimum Principal................... 10
Assumed First Year's Interest, Minimum
Principal and Principal Adjustment
Amount.............................. 10
Assumed Debt Service Coverage Ratio... 10
Assumed Adjusted Debt Service Coverage
Ratio............................... 10
Assumed First Year's Net Revenue...... 10
Assumed Interest Coverage Ratio....... 10
Bad Debts............................. 61
Base Case............................. 10
business day.......................... 11
calculation date...................... 11
certificate........................... 153
certificate holders................... 153
charitable trusts..................... 34
class A principal adjustment amount... 7
class E minimum interest amount....... 140
class E supplemental interest
amount.............................. 140
clearing agency....................... 149
clearing corporation.................. 149
code.................................. 155
PAGE
----
collateralization..................... 114
collections........................... 142
concentration default................. 129
Contracted Lease Rentals.............. 60
control............................... 124
covenant defeasance................... 120
Current Arrears....................... 61
Debt Service Ratio.................... 68
default............................... 139
Deferred Arrears Balance.............. 61
Depreciation Curve.................... 116
Depreciation Factor................... 115
disqualified persons.................. 159
DOL................................... 159
event of default...................... 108
exempt company........................ 153
expected final payment date........... 10
expected maturity..................... 57
Expected Value........................ 115
Expected Portfolio Value.............. 68
Expected Weighted Average Life........ 10
FAA................................... 26
final maturity date................... 107
financial institution................. 157
foreign purchasers.................... 164
GE.................................... 30
GE Capital............................ 5
GECAS conflicts standard.............. 78
GECAS services standard............... 78
GECAS................................. 5
GE U.S. tax group..................... 30
guarantee............................. 128
indebtedness.......................... 127
indentures............................ 5
indenture trustee..................... 5
Initial Appraised Value............... 115
Initial Loan to Value................. 10
Initial Loan.......................... 10
interest accrual period............... 11
Interest Coverage Ratio............... 67
interest earned....................... 53
Interest Earned....................... 62
investment............................ 125
IRS................................... 156
issue price........................... 155
lease rentals......................... 53
legal defeasance...................... 120
lessee funded account................. 143
liquidity reserve amount.............. 97
I-1
217
PAGE
----
minimum hedge payment................. 102
Minimum Principal Payment Amount...... 116
Net Cash Collections.................. 63
net maintenance....................... 54
Net Maintenance....................... 62
Net Lease Rentals..................... 62
net sale proceeds..................... 129
net stress-related costs.............. 53
Net Stress-Related Costs.............. 61
non-U.S. holder....................... 156
note event of default................. 137
note target price..................... 129
OID................................... 156
Other Leasing Income.................. 61
Other Receipts........................ 62
Other Servicer Fees and Other
Overheads........................... 63
our................................... 2
participating broker-dealer........... 144
parties in interest................... 159
payment date.......................... 11
permitted account investments......... 83
permitted accruals.................... 142
permitted encumbrance................. 124
plans................................. 159
predecessor cost basis................ 17
Principal Adjustment Amount........... 117
Principal Distribution Amount......... 115
PTCE.................................. 160
record date........................... 11
reference agent....................... 11
reference date........................ 113
regulations........................... 159
Re-leasing and Other Overhead Costs... 63
relevant documents.................... 131
Renegotiated Leases................... 60
Rental Resets......................... 60
Repossession Costs.................... 61
PAGE
----
required expense amount............... 142
RPMs.................................. 69
Scheduled Principal Payment Amount.... 117
SG&A.................................. 62
SG&A expenses......................... 54
Shannon certified operations.......... 154
significant subsidiary................ 137
Singapore Companies Act............... 163
soft bullet notes..................... 114
Stage 2............................... 38
Stage 3............................... 38
Stage 2 aircraft...................... 38
Stage 3 aircraft...................... 38
Stage 3hk............................. 38
Stage 4............................... 46
supplemental hedge payment............ 102
Supplemental Principal Balance........ 117
Supplemental Principal Payment
Amount.............................. 117
swaptions............................. 89
target hedge.......................... 102
Target Pool Factor.................... 117
Target Principal Balance.............. 116
third party events.................... 134
Thirty-Five Month Period.............. 60
Total Asset Value..................... 68
Total Cash Collections................ 60
Total Cash Expenses................... 62
treaty................................ 31
trust................................. 2
trust agreement....................... 2
trustee............................... 2
us.................................... 2
U.S. holder........................... 156
we.................................... 2
weighted average life................. 56
wet lease............................. 46
I-2
218
AIRPLANES PASS
THROUGH TRUST AIRPLANES LIMITED AIRPLANES U.S. TRUST
c/o Bankers Trust Company 22 Grenville Street c/o Wilmington Trust Company
Four Albany Street St. Helier 1100 North Market Street
Mail Stop 5091 Jersey JE4 8PX Rodney Square North
New York, New York 10006 Channel Islands Wilmington, Delaware 19890
U.S.A. U.S.A.
TRUSTEE,
INDENTURE TRUSTEE,
SECURITY TRUSTEE AND PAYMENT AGENT AND
REFERENCE AGENT CASH MANAGER REGISTRAR
BANKERS TRUST COMPANY AERFI CASH BANKERS TRUST COMPANY
MANAGER LIMITED
Four Albany Street Four Albany Street
Mail Stop 5091 debis AirFinance House Mail Stop 5091
New York, New York 10006 Shannon New York, New York 10006
U.S.A. Co. Clare U.S.A.
Ireland
ADMINISTRATIVE AGENT SERVICER
AERFI FINANCIAL SERVICES (IRELAND) LIMITED GE CAPITAL AVIATION SERVICES, LIMITED
debis AirFinance House Aviation House
Shannon Shannon
Co. Clare Co. Clare
Ireland Ireland
LUXEMBOURG PAYING AGENT,
AND CO-REGISTRAR
BANQUE INTERNATIONALE A LUXEMBOURG, S.A.
69, route d'Esch
L-1470 Luxembourg
LEGAL ADVISORS
To Airplanes Group To Airplanes Group To Airplanes Group To Airplanes Group
as to as special as special as special
United States Law Jersey counsel Irish counsel Delaware counsel
DAVIS POLK & WARDWELL MOURANT DU FEU & MCCANN FITZGERALD RICHARDS, LAYTON &
99 Gresham Street JEUNE 2 Harbourmaster FINGER, P.A.
London EC2V 7NG 22 Grenville Street Place One Rodney Square
England St. Helier Custom House Dock Wilmington,
Jersey JE4 8PX Dublin 1 Delaware 19899
Channel Islands Ireland U.S.A.
LISTING AGENT
BANQUE INTERNATIONALE A LUXEMBOURG, S.A.
69, route d'Esch
L-1470 Luxembourg
(LOGO)
U43862
219
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as hereinafter set forth, there is no provision of Airplanes
Limited's Memorandum and Articles of Association or Airplanes Trust's Trust
Agreement, or of any contract, arrangement or statute under which any director,
trustee or officer of Airplanes Limited or Airplanes Trust is insured or
indemnified in any manner against any liability that he may incur in his
capacity as such.
Airplanes Limited's Articles of Association provide that Airplanes Limited
shall indemnify every present and former director of Airplanes Limited against
any loss or liability incurred by reason of being or having been a director of
Airplanes Limited to the fullest extent permitted by Jersey law. Article 77 of
the Companies (Jersey) Law 1991 ("ARTICLE 77") permits a Jersey company to
indemnify each director of that company against, among others, any liabilities
incurred in defending any proceedings (whether civil or criminal) (i) in which
judgment is given in his favor or he is acquitted, or (ii) which are
discontinued otherwise than for some benefit conferred by him (or on his behalf)
or for some detriment suffered by him, or (iii) which are settled on terms which
include such benefit or detriment and, in the opinion of a majority of the
directors of the company (excluding any director who conferred such benefit or
on whose behalf such benefit was conferred or who suffered such detriment), the
director was substantially successful on the merits in his resistance to the
proceedings.
Airplanes Limited may purchase and maintain, in the name of and at the
expense of Airplanes Limited, insurance for the benefit of any person who is or
was a director or officer of Airplanes Limited or is or was serving at the
request of Airplanes Limited as a director or officer in another corporation,
partnership, joint venture, trust or other enterprise against any liability
incurred by him in any such capacity, or arising out of such person's status as
such, whether or not Airplanes Limited would have the power to indemnify him
against such liability under Article 77.
The Airplanes Trust Agreement provides that Airplanes Trust shall indemnify
every present and former trustee for any and all liabilities, losses or expenses
arising out of the administration of Airplanes Trust, except in the case of a
trustee's gross negligence or willful misconduct in the performance of its
duties as trustee. Under Delaware law, a business trust has the power to
indemnify and hold harmless any trustee for and against all claims and demands
whatsoever. Airplanes Trust shall ensure that for the term of the Airplanes
Trust Agreement, the trustees are named insureds on liability insurance policies
with respect to the Aircraft on terms required by the related Lease or mortgage
then in effect with respect to such Aircraft or if there is no such lease or
mortgage, on terms customary in the industry for similar Aircraft.
ITEM 21. EXHIBITS
3.1 Certificate of Incorporation of Atlanta Holdings Limited
dated November 3, 1995 and Certificate of Incorporation on
change of name to Airplanes Limited dated November 29, 1995*
3.2 Memorandum and Articles of Association of Airplanes Limited
dated March 11, 1996**
3.3 Memorandum and Articles of Association of Airplanes Limited
reprinted with amendments to June 29, 2000****
3.4 Airplanes U.S. Trust Amended and Restated Trust Agreement
among GPA, Inc., as Settlor, Wilmington Trust Company, as
the Delaware Trustee, and the Controlling Trustees referred
to therein dated March 11, 1996**
3.5 Amendment to Airplanes U.S. Trust Amended and Restated Trust
Agreement dated June 29, 2000****
4.1 Pass Through Trust Agreement dated as of March 28, 1996
among Airplanes Limited, Airplanes U.S. Trust and Bankers
Trust Company, as Trustee**
II-1
220
4.2 Trust Supplement No. 7 dated as of March 28, 1996 to the
Pass Through Trust Agreement**
4.3 Trust Supplement No. 8 dated as of March 28, 1996 to the
Pass Through Trust Agreement**
4.4 Trust Supplement No. 9 dated as of March 16, 1998 to the
Pass Through Trust Agreement***
4.5 Trust Supplement No. 11 dated as of March 16, 1998 to the
Pass Through Trust Agreement***
4.6 Trust Supplement No. 12 dated as of March 16, 1998 to the
Pass Through Trust Agreement***
4.7 Trust Supplement No. 13 dated as of March 15, 2001 to the
Pass Through Trust Agreement
4.8 Trust Supplement A dated as of March 16, 1998 to the Pass
Through Trust Agreement***
4.9 Form of Subclass A-6 Pass Through Certificate***
4.10 Form of Subclass A-8 Pass Through Certificate***
4.11 Form of Subclass A-9 Pass Through Certificate (included in
Exhibit 4.7)
4.12 Form of Class B Pass Through Certificate***
4.13 Form of Class C Pass Through Certificate**
4.14 Form of Class D Pass Through Certificate**
4.15 Airplanes Limited Indenture dated March 28, 1996 between
Airplanes Limited, Airplanes U.S. Trust and Bankers Trust
Company, as Trustee**
4.16 Supplement No. 1 to the Airplanes Limited Indenture***
4.17 Supplement No. 2 to the Airplanes Limited Indenture
4.18 Airplanes U.S. Trust Indenture dated March 28, 1996 between
Airplanes U.S. Trust, Airplanes Limited and Bankers Trust
Company, as Trustee**
4.19 Supplement No. 1 to the Airplanes U.S. Trust Indenture***
4.20 Supplement No. 2 to the Airplanes U.S. Trust Indenture
4.21 Form of Floating Rate Subclass A-6 Note***
4.22 Form of Floating Rate Subclass A-8 Note***
4.23 Form of Floating Rate Subclass A-9 Note (included in
Exhibits 4.17 and 4.20)
4.24 Form of Floating Rate Class B Note***
4.25 Form of Floating Rate Class C Note**
4.26 Form of Floating Rate Class D Note**
5.1 Opinion of Davis Polk & Wardwell, U.S. counsel for the 2001
Refinancing Trust, Airplanes Limited and Airplanes U.S.
Trust, as to the legality of the New Certificates and the
Subclass A-9 Notes*****
5.2 Opinion of Mourant du Feu & Jeune, Jersey Counsel for
Airplanes Limited as to the legality of the Airplanes
Limited Subclass A-9 Notes*****
5.3 Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel to Airplanes Trust as to the legality of the
Airplanes Trust Subclass A-9 Notes*****
8.1 Opinion of Davis Polk & Wardwell, U.S. counsel for the 2001
Refinancing Trust, as to certain tax matters (included in
Exhibit 5.1)*****
8.2 Opinion of McCann FitzGerald, Irish counsel for Airplanes
Limited, as to certain tax matters*****
8.3 Opinion of KPMG as to certain Irish tax matters*****
8.4 Opinion of Mourant du Feu & Jeune, Jersey counsel for
Airplanes Limited, as to certain tax matters*****
9.1 Shareholders Agreement among the Note Indenture Trustee,
Mourant & Co. Trustees Limited, as trustees of the
Charitable Trusts, and Juris Limited and Lively Limited*
9.2 Voting Trust Agreement among AeroUSA, Airplanes Trust and
First Security Bank of Utah, National Association*
II-2
221
9.3 Voting Trust Agreement among AeroUSA 3, AeroUSA and First
Security Bank of Utah, National Association*
10.1 Stock Purchase Agreement dated as of March 28, 1996 among
GPA, Inc., GPA Group plc and Airplanes U.S. Trust**
10.2 Stock Purchase Agreement dated as of March 28, 1996 among
GPA Group plc, Skyscape Limited and Airplanes Limited**
10.3 Administrative Agency Agreement dated as of March 28, 1996,
among GPA Financial Services (Ireland) Limited, GPA Group
plc, Airplanes Limited, GPA II Limited, Airplanes U.S. Trust
and AeroUSA, Inc.**
10.4 Servicing Agreement dated as of March 28, 1996, among GE
Capital Aviation Services, Limited, Airplanes Limited,
AeroUSA, Inc., GPA II Limited, Airplanes U.S. Trust and GPA
Cash Manager Limited**
10.5 Reference Agency Agreement dated as of March 28, 1996, among
Airplanes Limited, Airplanes U.S. Trust Bankers Trust
Company, as Airplanes Limited Indenture Trustee and
Airplanes U.S. Trust Indenture Trustee, Bankers Trust
Company, as Reference Agent and GPA Cash Manager Limited, as
Cash Manager**
10.6 Secretarial Services Agreement dated as of March 28, 1996,
between Airplanes Limited and Mourant & Co. Secretaries
Limited, as Company Secretary**
10.7 Cash Management Agreement dated March 28, 1996, between GPA
Cash Manager Limited as Cash Manager, GPA Group plc,
Airplanes Limited, Airplanes U.S. Trust and Bankers Trust
Company, as Trustee under each of the Airplanes Limited
Indenture, the Airplanes U.S. Trust Indenture and the
Security Trust Agreement**
10.8 Form of Swap Agreement**
10.9 Security Trust Agreement dated as of March 28, 1996 among
Airplanes Limited, Airplanes U.S. Trust, Mourant & Co.
Secretaries Limited, the Issuer Subsidiaries listed therein,
GPA Financial Services (Ireland) Limited, GPA Cash Manager
Limited, GPA Group plc, GE Capital Aviation Services,
Limited, Bankers Trust Company, as Airplanes U.S. Trust
Indenture Trustee and Airplanes Limited Indenture Trustee,
Bankers Trust Company, as Reference Agent, and Bankers Trust
Company, as Security Trustee**
12 Statement re: Computation of Ratios*****
21 Subsidiaries of Airplanes Group
23.1 Consent of Davis Polk & Wardwell (included in Exhibits 5.1
and 8.1)*****
23.2 Consent of Mourant du Feu & Jeune (included in Exhibits 5.2
and 8.4)*****
23.3 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.3)*****
23.4 Consent of McCann FitzGerald (included in Exhibit 8.2)*****
23.5 Consent of KPMG
23.6 Consent of Aircraft Information Services, Inc.
23.7 Consent of BK Associates, Inc.
23.8 Consent of Airclaims Limited
24.1 Directors' Power of Attorney (with the Resolution of the
Board of Directors attached thereto) (included in signature
pages)
II-3
222
25 Statement of Eligibility of Bankers Trust Company, as
Trustee, under the Trust Agreement to be qualified under the
Trust Indenture Act of 1939*
99.1 Appraisal of Aircraft Information Services, Inc. relating to
the Aircraft*****
99.2 Appraisal of BK Associates, Inc. relating to the
Aircraft*****
99.3 Appraisal of Airclaims Limited relating to the Aircraft*****
99.4 Form of Letter of Transmittal
99.5 Form of Notice of Guaranteed Delivery
99.6 Form of Letter to DTC Participants
99.7 Form of Letter to Clients
99.8 Exchange Agent Agreement between Airplanes Group and Bankers
Trust Company
- ---------------
* Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-99978), previously filed with the Commission on December 1, 1995,
and Amendments No. 1 through 5 thereto.
** Incorporated by reference to the Report on Form 10-Q for the quarterly
period ended December 31, 1996, previously filed with the Commission.
*** Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-99978), previously filed with the Commission on December 30, 1997,
and Amendments No. 1 through 3, thereto.
**** Incorporated by reference to the Report on Form 10-Q for the quarterly
period ended June 30, 2000, previously filed with the Commission.
***** To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each of the
registrants' annual reports pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of
any employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The undersigned registrant hereby undertake to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and finished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is
not set forth in the prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrants pursuant to the provisions described under
Item 20 above, or otherwise, the registrants have 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 registrants 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 registrants will, unless in the opinion of their counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether 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.
II-4
223
(d) The undersigned registrants hereby undertake as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offerings thereof.
(e) The undersigned registrants hereby undertake 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 equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement throughout the date responding to the request.
(f) The undersigned registrants hereby undertake 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.
II-5
224
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, the Registrant, Airplanes
Limited has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in
on ,
2001.
AIRPLANES LIMITED
As Originator of Airplanes Pass
Through Trust
(2001 Refinancing Trust)
By:
--------------------------------------
Name:
Title: Independent Director of
Airplanes Limited
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Hugh R. Jenkins, Roy M. Dantzic, William
M. McCann, Richard E. Cavanagh and Brian T. Hayden true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments including post-effective amendments) to this Registration
Statement (including any registration statement in connection herewith that is
to be effective upon filing pursuant to Rule 462(b) of the Securities Act of
1933) and to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents Hugh R. Jenkins, Roy M. Dantzic, William M.
McCann, Richard E. Cavanagh and Brian T. Hayden full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, this Registration Statement
has been signed by the following persons in the following capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Independent Director of
- --------------------------------------------- Airplanes Limited
Hugh R. Jenkins (principal executive officer)
Independent Director of
- --------------------------------------------- Airplanes Limited
Roy M. Dantzic (principal financial officer)
Independent Director of
- --------------------------------------------- Airplanes Limited
William M. McCann (principal accounting officer)
II-6
225
SIGNATURE TITLE DATE
--------- ----- ----
Independent Director of
- --------------------------------------------- Airplanes Limited
Richard E. Cavanagh
Director of Airplanes Limited
- ---------------------------------------------
Brian T. Hayden
Authorized Representative of Airplanes
Limited In the United States
- ---------------------------------------------
Richard E. Cavanagh
II-7
226
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, the Registrant, Airplanes U.S.
Trust has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized,
in on ,
2001.
AIRPLANES U.S. TRUST
As Originator of Airplanes Pass
Through Trust
(2001 Refinancing Trust)
By:
--------------------------------------
Name:
Title: Independent Controlling
Trustee of
Airplanes U.S. Trust
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Hugh R. Jenkins, Roy M. Dantzic, William
M. McCann, Richard E. Cavanagh and Brian T. Hayden true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments including post-effective amendments) to this Registration
Statement (including any registration statement in connection herewith that is
to be effective upon filing pursuant to Rule 462(b) of the Securities Act of
1933) and to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, Hugh R. Jenkins, Roy M. Dantzic, William M.
McCann, Richard E. Cavanagh and Brian T. Hayden full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, this Registration Statement
has been signed by the following persons in the following capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Independent Controlling Trustee of
- --------------------------------------------- Airplanes U.S. Trust
Hugh R. Jenkins (principal executive officer)
Independent Controlling Trustee of
- --------------------------------------------- Airplanes U.S. Trust
Roy M. Dantzic (principal financial officer)
Independent Controlling Trustee of
- --------------------------------------------- Airplanes U.S. Trust
William M. McCann (principal accounting officer)
II-8
227
SIGNATURE TITLE DATE
--------- ----- ----
Independent Controlling Trustee of
- --------------------------------------------- Airplanes U.S. Trust
Richard E. Cavanagh
Controlling Trustee of Airplanes
- --------------------------------------------- U.S. Trust
Brian T. Hayden
II-9
228
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation of Atlanta Holdings Limited
dated November 3, 1995 and Certificate of Incorporation on
change of name to Airplanes Limited dated November 29,
1995*.......................................................
3.2 Memorandum and Articles of Association of Airplanes Limited
dated March 11, 1996**......................................
3.3 Memorandum and Articles of Association of Airplanes Limited
reprinted with amendments to June 29, 2000****..............
3.4 Airplanes U.S. Trust Amended and Restated Trust Agreement
among GPA, Inc., as Settlor, Wilmington Trust Company, as
the Delaware Trustee, and the Controlling Trustees referred
to therein dated March 11, 1996**...........................
3.5 Amendment to Airplanes U.S. Trust Amended and Restated Trust
Agreement dated June 29, 2000****...........................
4.1 Pass Through Trust Agreement dated as of March 28, 1996
among Airplanes Limited, Airplanes U.S. Trust and Bankers
Trust Company, as Trustee**.................................
4.2 Trust Supplement No. 7 dated as of March 28, 1996 to the
Pass Through Trust Agreement**..............................
4.3 Trust Supplement No. 8 dated as of March 28, 1996 to the
Pass Through Trust Agreement**..............................
4.4 Trust Supplement No. 9 dated as of March 16, 1998 to the
Pass Through Trust Agreement***.............................
4.5 Trust Supplement No. 11 dated as of March 16, 1998 to the
Pass Through Trust Agreement***.............................
4.6 Trust Supplement No. 12 dated as of March 16, 1998 to the
Pass Through Trust Agreement***.............................
4.7 Trust Supplement No. 13 dated as of March 15, 2001 to the
Pass Through Trust Agreement................................
4.8 Trust Supplement A dated as of March 16, 1998 to the Pass
Through Trust Agreement***..................................
4.9 Form of Subclass A-6 Pass Through Certificate***............
4.10 Form of Subclass A-8 Pass Through Certificate***............
4.11 Form of Subclass A-9 Pass Through Certificate (included in
Exhibit 4.7)................................................
4.12 Form of Class B Pass Through Certificate***.................
4.13 Form of Class C Pass Through Certificate**..................
4.14 Form of Class D Pass Through Certificate**..................
4.15 Airplanes Limited Indenture dated March 28, 1996 between
Airplanes Limited, Airplanes U.S. Trust and Bankers Trust
Company, as Trustee**.......................................
4.16 Supplement No. 1 to the Airplanes Limited Indenture***......
4.17 Supplement No. 2 to the Airplanes Limited Indenture.........
4.18 Airplanes U.S. Trust Indenture dated March 28, 1996 between
Airplanes U.S. Trust, Airplanes Limited and Bankers Trust
Company, as Trustee**.......................................
4.19 Supplement No. 1 to the Airplanes U.S. Trust Indenture***...
4.20 Supplement No. 2 to the Airplanes U.S. Trust Indenture......
4.21 Form of Floating Rate Subclass A-6 Note***..................
4.22 Form of Floating Rate Subclass A-8 Note***..................
4.23 Form of Floating Rate Subclass A-9 Note (included in
Exhibits 4.17 and 4.20).....................................
4.24 Form of Floating Rate Class B Note***.......................
4.25 Form of Floating Rate Class C Note**........................
4.26 Form of Floating Rate Class D Note**........................
5.1 Opinion of Davis Polk & Wardwell, U.S. counsel for the 2001
Refinancing Trust, Airplanes Limited and Airplanes U.S.
Trust, as to the legality of the New Certificates and the
Subclass A-9 Notes*****.....................................
229
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
5.2 Opinion of Mourant du Feu & Jeune, Jersey Counsel for
Airplanes Limited as to the legality of the Airplanes
Limited Subclass A-9 Notes*****.............................
5.3 Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel to Airplanes Trust as to the legality of the
Airplanes Trust Subclass A-9 Notes*****.....................
8.1 Opinion of Davis Polk & Wardwell, U.S. counsel for the 2001
Refinancing Trust, as to certain tax matters (included in
Exhibit 5.1)*****...........................................
8.2 Opinion of McCann FitzGerald, Irish counsel for Airplanes
Limited, as to certain tax matters*****.....................
8.3 Opinion of KPMG as to certain Irish tax matters*****........
8.4 Opinion of Mourant du Feu & Jeune, Jersey counsel for
Airplanes Limited, as to certain tax matters*****...........
9.1 Shareholders Agreement among the Note Indenture Trustee,
Mourant & Co. Trustees Limited, as trustees of the
Charitable Trusts, and Juris Limited and Lively Limited*....
9.2 Voting Trust Agreement among AeroUSA, Airplanes Trust and
First Security Bank of Utah, National Association*..........
9.3 Voting Trust Agreement among AeroUSA 3, AeroUSA and First
Security Bank of Utah, National Association*................
10.1 Stock Purchase Agreement dated as of March 28, 1996 among
GPA, Inc., GPA Group plc and Airplanes U.S. Trust**.........
10.2 Stock Purchase Agreement dated as of March 28, 1996 among
GPA Group plc, Skyscape Limited and Airplanes Limited**.....
10.3 Administrative Agency Agreement dated as of March 28, 1996,
among GPA Financial Services (Ireland) Limited, GPA Group
plc, Airplanes Limited, GPA II Limited, Airplanes U.S. Trust
and AeroUSA, Inc.**.........................................
10.4 Servicing Agreement dated as of March 28, 1996, among GE
Capital Aviation Services, Limited, Airplanes Limited,
AeroUSA, Inc., GPA II Limited, Airplanes U.S. Trust and GPA
Cash Manager Limited**......................................
10.5 Reference Agency Agreement dated as of March 28, 1996, among
Airplanes Limited, Airplanes U.S. Trust Bankers Trust
Company, as Airplanes Limited Indenture Trustee and
Airplanes U.S. Trust Indenture Trustee, Bankers Trust
Company, as Reference Agent and GPA Cash Manager Limited, as
Cash Manager**..............................................
10.6 Secretarial Services Agreement dated as of March 28, 1996,
between Airplanes Limited and Mourant & Co. Secretaries
Limited, as Company Secretary**.............................
10.7 Cash Management Agreement dated March 28, 1996, between GPA
Cash Manager Limited as Cash Manager, GPA Group plc,
Airplanes Limited, Airplanes U.S. Trust and Bankers Trust
Company, as Trustee under each of the Airplanes Limited
Indenture, the Airplanes U.S. Trust Indenture and the
Security Trust Agreement**..................................
10.8 Form of Swap Agreement**....................................
10.9 Security Trust Agreement dated as of March 28, 1996 among
Airplanes Limited, Airplanes U.S. Trust, Mourant & Co.
Secretaries Limited, the Issuer Subsidiaries listed therein,
GPA Financial Services (Ireland) Limited, GPA Cash Manager
Limited, GPA Group plc, GE Capital Aviation Services,
Limited, Bankers Trust Company, as Airplanes U.S. Trust
Indenture Trustee and Airplanes Limited Indenture Trustee,
Bankers Trust Company, as Reference Agent, and Bankers Trust
Company, as Security Trustee**..............................
12 Statement re: Computation of Ratios*****....................
21 Subsidiaries of Airplanes Group.............................
23.1 Consent of Davis Polk & Wardwell (included in Exhibits 5.1
and 8.1)*****...............................................
23.2 Consent of Mourant du Feu & Jeune (included in Exhibits 5.2
and 8.4)*****...............................................
23.3 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.3)*****...........................................
23.4 Consent of McCann FitzGerald (included in Exhibit
8.2)*****...................................................
23.5 Consent of KPMG.............................................
230
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
23.6 Consent of Aircraft Information Services, Inc...............
23.7 Consent of BK Associates, Inc...............................
23.8 Consent of Airclaims Limited................................
24.1 Directors' Power of Attorney (with the Resolution of the
Board of Directors attached thereto) (included in signature
pages)......................................................
25 Statement of Eligibility of Bankers Trust Company, as
Trustee, under the Trust Agreement to be qualified under the
Trust Indenture Act of 1939*................................
99.1 Appraisal of Aircraft Information Services, Inc. relating to
the Aircraft*****...........................................
99.2 Appraisal of BK Associates, Inc. relating to the
Aircraft*****...............................................
99.3 Appraisal of Airclaims Limited relating to the
Aircraft*****...............................................
99.4 Form of Letter of Transmittal...............................
99.5 Form of Notice of Guaranteed Delivery.......................
99.6 Form of Letter to DTC Participants..........................
99.7 Form of Letter to Clients...................................
99.8 Exchange Agent Agreement between Airplanes Group and Bankers
Trust Company...............................................
- ---------------
* Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-99978), previously filed with the Commission on December 1, 1995,
and Amendments No. 1 through 5 thereto.
** Incorporated by reference to the Report on Form 10-Q for the quarterly
period ended December 31, 1996, previously filed with the Commission.
*** Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-99978), previously filed with the Commission on December 30, 1997,
and Amendments No. 1 through 3, thereto.
**** Incorporated by reference to the Report on Form 10-Q for the quarterly
period ended June 30, 2000, previously filed with the Commission.
***** To be filed by amendment.