ABS structures ‘holding up’ amid crisis: AFJ North America 2020
Aircraft asset-backed securities (ABS) are “holding up” amid the Covid-19 crisis thanks to the way they are structured to deal with industry stress events, delegates at the Airfinance Journal North America virtual event have been told.
Carla Schriver, vice president, Goldman Sachs says that despite the market seeing a lot of “stress” in terms of deferral, non-payment and bankruptcy events, at a high level "ABS structures are performing as expected”.
She ascribes this to the way that ABS structures are designed to be flexible and resilient in order to deal with the cyclical nature of the aviation industry.
This is despite no one but the rating agencies stress testing the structures to anything approaching the level of disruption created by the global pandemic.
“I think the deals are holding and why I say that is evidenced by you are not seeing deals in default, for example, so even when you are looking at lease cash flows 50% of what we predicted them to be, maintenance reserves cash flows also down,” she says.
Scriver notes that the industry was not seeing a lot of ABS structures having to draw on their liquidity facilities amid the crisis.
While rating agencies have downgraded a number of these vehicles since the onset of the virus, there was still a lot of evident that the “deals are working as expected” rather than seeing a “break” in these structures.