MRO providers represent a growing source of competition for established engine lessors, a fact underlined by Total Engine Asset Management’s move to grow its portfolio of spare engines for rent.

The joint venture of ST Engineering and Marubeni is pursuing an asset-backed securitization (ABS) to raise $257 million for the acquisition of 30 engines: eight CFM56-5Bs and 11 -7bs; four LEAP-1As; one PW1100; five IAE V2500-A5s; and one GE90-115B.

The initial value of the portfolio has been put at $306 million and all engines are either on lease, or are subject of letters of intent to lease, to 13 customers.

The transaction was notable as the latest example of  an engine lessor tapping the ABS market to raise funds, but also because it encompassed five new-technology narrowbody engines – a signal of intent, perhaps, of TEAM’s long-term aspirations in the market.

That said, ratings agency Kroll warned that TEAM’s relatively short operating history – it was established in 2011 – added risk to the financing, although it was also encouraged by several mitigating factors, including the quality of the engine portfolio and the weighted average remaining lease term of roughly six years.

Furthermore, it viewed TEAM’s ties to maintenance giant ST Engineering as a significant positive.

“TEAM is able to gain a significant advantage by leveraging ST Engineering’s MRO facilities and large base of airline relationships all over the world which help support engine leasing origination and engine maintenance.

ST Engineering is also an option for engine leasing in order to support their MRO customers need for spare engines when maintenance is being performed,” stated Kroll.
Kroll rated the bulk of the three-tranche securitization at A grade.