Presale:

Apollo Aviation Securitization Equity Trust 2016-1 Primary Credit Analyst: Jing Xie, CFA, New York (1) 212-438-7101; [email protected] Secondary Contact: Tracy Xie, New York (1) 212-438-0302; [email protected] Corporate And Government Credit Analyst: Betsy R Snyder, CFA, New York (1) 212-438-7811; [email protected] Analytical Manager, U.S. Commercial Credit: Weili Chen, New York (1) 212-438-6587; [email protected]

Table Of Contents $510 Million Fixed-Rate Notes Series 2016-1 Transaction Overview Rationale Transaction Strengths Transaction Weaknesses Mitigating Factors Legal Structure Transaction Comparison Portfolio Overview Initial Asset Values

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Table Of Contents (cont.) Aircraft/Engine Asset Analysis Lessee Analysis Aircraft Leasing Business Outlook Servicer Review Other Service Providers Aircraft Or Engine Acquisition Payment Priority--AOE Issuer Level Events Of Default--AOE Issuer Level Payment Priority--Issuer Level Events of Default--Issuer Level Cash Flow Analysis Assumptions Aircraft Maintenance Maintenance Cash Flow Assumptions Cash Flow Analysis Results Sensitivity Analysis Surveillance Related Criteria And Research

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Presale:

Apollo Aviation Securitization Equity Trust 2016-1 $510 Million Fixed-Rate Notes Series 2016-1 This presale report is based on information as of March 22, 2016. The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.

Preliminary Ratings As Of March 22, 2016 Class

Preliminary rating(i)

A

A (sf)

Preliminary amount (mil. $)

Size (%)

395

77.45

B C

LTV (%)(ii) Legal final maturity date 63.62 March 2036

BBB (sf)

80

15.69

76.50 March 2036

BB (sf)

35

6.86

82.14 March 2036

(i)The ratings are preliminary and subject to change at any time. (ii)Note amount divided by the lower of the mean and median of three appraisers' half-life base values and half-life current market values. LTV--Loan-to-value ratio.

Transaction Overview Apollo Aviation Securitization Equity Trust 2016-1 (AASET) is a newly established Delaware statutory trust. AASET will issue the class A, B, and C fixed-rate notes and use the proceeds of the issuance to acquire all of the series A, B, and C notes (AOE notes) issued by AASET 2016-1 U.S. Ltd. and AASET 2016-1 International Ltd. (AOE issuers). The two AOE issuers will indirectly own 32 aircraft. The two AOE issuers have cross-default provisions and provide guarantees to each other and the issuer. The portfolio comprises 27 narrow-body passenger planes (17 from the A320 family [A319-100, A320-200, A321-100, and A321-200] and 10 B737-800) and five wide-body passenger planes (one A330-200, three A330-300s, and one B777-200ER). The 32 aircraft have a weighted average age of approximately 14.8 years. Currently, all the aircraft are leased to 20 airlines worldwide with a 3.5-year weighted average remaining lease maturity. Of the 32 aircraft, only one aircraft (B777-200ER) is out of production. The aircraft sellers are funds managed by Apollo Aviation Management Ltd. (AAML) and Apollo Aviation Fund Management LLC (AAFM). AAML will be the transaction's servicer. The class A and B notes follow a 12.4-years-to-zero amortization profile (straight-line amortization on 120 months in the first two years and straight-line amortization on 156 months thereafter); and the class C notes follow a 6.3-years-to-zero amortization profile (straight-line amortization on 60 months for the first two years and straight-line amortization on 84 months thereafter). Similar to the majority of the recently rated aircraft securitization transactions, this transaction has an expected final payment date (seven years after closing) after which the class A and B notes' amortization will be full turbo. In addition, the class A and B notes have a partial cash sweep of 25% from four to six years after closing and 50% from six to seven years after closing. The class C notes have a partial cash sweep of 75% 18 months after closing and have a full cash sweep after month 42.

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This transaction is collateralized primarily by mid-life and older aircraft. Unlike the Castlelake Aircraft Securitization Trust 2015-1 (Castlelake) transaction, the most recent mid-life and older aircraft-backed deal we rated, this transaction's aircraft portfolio is made mostly of in-production models. In-production older aircraft tend to retain value better than out-of-production older aircraft and also are easier to re-lease. We believe AAML, as the servicer, has demonstrated core competences in managing such a portfolio. Similar to the Castlelake transaction, this transaction has several positive features that are not seen in most other aircraft asset-backed securities (ABS) deals, which help mitigate the risk of monetization of an aircraft's green time, a risk that we note. Specifically, the risk is if the servicer decides not to use maintenance rent to restore an aircraft/engine but rather pay such rents through the rental waterfall, the value of the portfolio over time will fall below the half-life as we model, and note principal is not protected by a commensurate additional amortization. The new features include the following: • A pro rata portion of the end-of-lease payments will be used to pay down the class A, B, and C notes, and the future payment periods' allocable series balances of the class A, B, and C notes are reduced accordingly; and • If no rapid amortization event has occurred or is continuing, the class A, B, and C noteholders will be compensated for the disposition deficit (but up to the debt repayment amount needed to satisfy the LTV test) as a result of a below-value sale if there are remaining collection amounts (see details in the Transaction Strengths section). This transaction also has some features that we believe add more risk to the rated notes. For example, the sellers will not transfer the security deposits (except for the $2 million initially funded in the security deposit account) received from lessees to the issuer at closing; however, the issuer is responsible for returning the security deposits at lease maturity if lessees do not default (see details in the Transaction Weaknesses section). Profile Expected closing date

March 2016.

Issuer

Apollo Aviation Securitization Equity Trust 2016-1.

AOE issuers

AASET 2016-1 U.S. Ltd. and AASET 2016-1 International Ltd.

Collateral

The two AOE issuers' series A, B, and C notes, which are in turn backed by aircraft in the portfolio, aircraft-related leases, and shares or beneficial interests in entities that directly and indirectly receive aircraft portfolio leases and residual cash flows, among others.

Sellers

Funds managed by Apollo Aviation Management Ltd. and Apollo Aviation Fund Management LLC.

Servicer

Apollo Aviation Management Ltd.

Liquidity facility provider

DVB BANK SE.

Managing agent

Phoenix American Financial Services Inc.

Trustee, security trustee, paying agent, registrar, and operating bank

Wells Fargo Bank N.A.

Sole structuring agent and lead bookrunner

Goldman, Sachs, & Co.

Initial purchasers

Goldman, Sachs & Co., DVB Capital Markets LLC, Deutsche Bank Securities Inc., and Wells Fargo Securities LLC.

Rationale The preliminary ratings assigned to AASET's class A, B, and C notes reflect:

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Presale: Apollo Aviation Securitization Equity Trust 2016-1 • The likelihood of timely interest on the class A notes (excluding the step-up amount) on each payment date, the timely interest on the class B notes (excluding the step-up amount) when they are the senior-most notes outstanding on each payment date, and the ultimate interest and principal payment on the class A, B, and C notes on the legal final maturity at the respective rating stress. • The 63.62% loan-to-value (LTV) ratio (based on the lower of the mean and median [LMM] of the half-life base values and the half-life current market values) on the class A notes; the 76.50% LTV ratio on the class B notes; and the 82.14% LTV ratio on the class C notes. • The initial asset portfolio comprises 27 narrow-body passenger planes (17 from the A320 family and 10 B737-800) and five wide-body passenger planes (one A330-200, three A330-300, and one B777-200ER). Only one of the 32 aircraft (B777-200ER; 7% of the portfolio value) is out of production. • The aircraft in the portfolio are in mid-life with a weighted average age (by value) of 14.8 years. Currently, all the 32 aircraft are on lease with weighted average remaining maturity of 3.5 years. • Some of the lessees are in emerging markets where the commercial aviation market is growing. • The class A and B notes follow a 12.4-years-to-zero amortization profile (straight-line amortization on 120 months in the first two years and straight-line amortization on 156 months thereafter); and the class C notes follow a 6.3-years-to-zero amortization profile (straight-line amortization on 60 months for the first two years and straight-line amortization on 84 months thereafter). Similar to the majority of the recently rated aircraft securitization transactions, this transaction has an expected final payment date (seven years after closing) after which the class A and B notes' amortization will be full turbo. • The class A and B notes have a partial cash sweep of 25% from four to six years after closing and 50% from six to seven years after closing. The class C notes have a partial cash sweep of 75% 18 months after closing and have a full cash sweep after month 42. • If a rapid amortization event (the debt service coverage ratio [DSCR] or utilization triggers have been breached or seven years after the initial closing date) has occurred and is continuing, the class A notes' outstanding principal balance will be paid from all available monthly cash flow. If no rapid amortization event has occurred and is continuing but a disposition deficit has occurred, the class A notes will receive a disposition deficit amount. A similar arrangement applies to the class B notes after the class A notes. • A portion of the end-of-lease payments will be paid to the class A, B, and C notes according to a percentage equaling the aggregate then-current LTV ratio. • There is a revolving credit facility that equals nine months of interest on the class A and B notes. • There is a series C reserve account (initially funded with $0.853 million) to cover the series C notes' interest in the first three months. The remaining amount at the end of month three will be transferred to the collection account. • ICF International will provide a maintenance analysis at closing. After closing, AAML will perform the maintenance analysis, which will be confirmed for reasonableness and achievability in an opinion letter from ICF International. • The senior maintenance reserve account, the junior reserve account, and the engine reserve account in aggregate must keep a balance of the higher of the lower of $1 million and the rated notes' outstanding notional amount and the sum of forward-looking maintenance expenses and engine reserve account payments (up to 12 months; for more details see the Maintenance Cash Flow Assumptions section). Any excess maintenance amounts over the required amount will be transferred to the collection account. • The senior indemnification (capped at $10 million) is modeled to occur in the first 12 months. • The junior indemnification (uncapped) is subordinated to the rated classes' principal payment. • AAML, an affiliate of Apollo Aviation Group LLC (AAG, a multi-strategy alternative investment firm specializing in commercial aviation investing), is the servicer for this transaction. AAML is experienced in managing mid-life and older aircraft assets.

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Transaction Strengths The transaction's strengths include: • A portion (based on the then-current aggregate LTV ratio) of the end-of-lease payments will be allocated to the class A, B, and C notes according to their pro rata percentage (unpaid amounts will accrue to subsequent payment periods). The scheduled principal payments of the class A, B, and C notes in the following periods will not be adjusted down to reflect end-of-lease payments received in this period, therefore the scheduled principal payments are maintained. The application of a portion of end-of-lease payments to pay principal on the rated notes, which was also in the Castlelake aircraft ABS transaction, benefits the noteholders, particularly in transactions backed by mid-life and older aircraft/engine assets. When a mid-life or older aircraft returns from a lease, it is common for the lessor to not spend the end-of-lease adjustment for maintenance to restore aircraft value because the increase in the aircraft value following the maintenance is unlikely to surpass the maintenance expense spent. In other transactions, the end-of-lease payments will flow through the collection account payment priority without adjusting down the scheduled target principal balance of the notes in the future payment periods; therefore, in those transactions, such end-of-lease payment is often paid to the equity investors while the noteholders suffer from aircraft value decline without being compensated by getting the end-of-lease payment. • If no rapid amortization has occurred or is continuing, in case of a below-value sale, the disposition deficit amount on the class A and B notes will be paid by the available collections, up to the amount of debt that needs to be repaid in order to satisfy an LTV test, following the collection account payment priority. This feature benefits noteholders so that they can still be paid up to 105% (up to the amount of debt to be repaid in order to satisfy an LTV test) of the allocable note balance to the extent there are available amounts in the payment priority when the asset was sold below 105% of the allocable note balance. • In addition to a full cash sweep (full turbo) starting from the seventh anniversary after the closing, the class A and B notes also benefit from a 25% partial cash sweep from the 4th anniversary to the sixth anniversary, and a 50% partial cash sweep from the sixth anniversary to the seventh anniversary). • The class C notes have a partial cash sweep of 75% after month 18 and a full cash sweep after month 42. • The transaction has performance triggers, including the aircraft utilization rate (75%) and DSCRs (1.15x for the cash sweep and 1.20x for the cash trap), to speed up the class A and B notes' principal amortization or retain available cash if the trigger tests fail. • The transaction has a maintenance reserve mechanism that has a forward-looking feature and is funded at closing. • The transaction has a liquidity facility that has the size of nine months of scheduled interest on the class A and B notes. • Many lessees in the portfolio are domiciled in regions where the commercial aviation market has evolved rapidly during the past few years and has good long-term growth prospects.

Transaction Weaknesses The transaction's weaknesses are: • Cyclical demand, aircraft lease rates, and customer airlines' frequent weak credit quality are inherent risks in the aircraft leasing business. • The aircraft in this transaction, though predominantly in-production models, are significantly older than most of the other recent aircraft-backed securitizations we rate. Some of the aircraft in this portfolio are approaching the end of

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

•

•

•

•

•

•

•

•

their economic useful lives and are expected to be sold or parted-out rather than re-leased after the existing lease expires. Older in-production aircraft typically require heavier maintenance than younger in-production aircraft. Although the aircraft portfolio is 14.8 years old on a weighted average basis, the class A notes still follow a 12.4-year amortization, which we think is slow because the portfolio would be 27.2 years old (beyond the typical 25-year useful life assumption) at the end of the 12.4-year amortization. This transaction's expected final payment date (or refinance date) is in seven years, which is the same as recently rated transactions backed by younger aircraft. At closing, instead of transferring to the issuer, the sellers (AAML and AAFM's managed funds) will keep the majority of security deposits that the lessees have paid under the initial leases (only $2 million is initially funded in the security deposit account). However, the issuer (or its subsidiaries) is liable to repay the security deposit (which the issuer or its subsidiaries didn't pay at closing [except for the $2 million]) to non-defaulted lessees at the initial lease maturity. In case of a lessee default, the issuer does not have any security deposit (except for the $2 million) to mitigate the loss from the defaulted lease payment. This arrangement increases the issuer's payment obligations. The lease rate factor (1.19% based on the LMM of half-life values), as measured by the portfolio's weighted average lease rate factor based on aircraft half-life value, are lower than our lease rate factor [LRF] assumption (i.e. at 0.25% LIBOR, a 15-year-old aircraft's LRF is 1.26%). Many of the lessees have low credit quality, which is not uncommon in aircraft securitizations. Many airlines do not have access to capital, so they turn to aircraft lessors as a means of acquiring aircraft. It is common that older and out-of-favor aircraft are more likely to be leased to weaker airlines. This transaction can sell aircraft at a price lower than the note target price at up to 25% of the adjusted portfolio value cumulatively if a rapid amortization event has occurred and is continuing, or more than 25%, subject to the senior trustee's approval. Unlike most other recently rated aircraft securitizations where the maintenance projection after closing is performed by an independent evaluator, this transaction allows the servicer, instead of an independent maintenance cash flow evaluator, to project maintenance expenses, which will be used in sizing the required maintenance reserve amount. All the aircraft in the portfolio are owned by pre-existing entities and are subject to prior financings. The issuer has no arrangement to create new aircraft-owning entities nor for the related lessee to issue an officer's certificate stating no claims against these pre-existing aircraft-owning entities or the issuer. A potential liability claim arising from their prior activities could have a negative impact on this transaction. There is one Luxembourg holding company subject to taxes ($200,000 in the first year and can reduce thereafter).

Mitigating Factors The following factors partially mitigate the transaction's weaknesses: • Our cash flow assumptions consider the lessee portfolio concentration, the lessees' credit quality, and the aircraft/engine model concentration. • In addition to our standard cash flow stress assumptions we published in August 2010, we incorporated additional sensitivity analysis focused on end-of-useful life assumptions with shorter life and longer-lasting value decline on selected models (see "Revised Cash Flow Assumptions And Stresses For Global Aircraft And Aircraft Engine Lease Securitizations," published Aug. 26, 2010). • Our lease rate model is continuously calibrated to reflect up-to-date lease yield levels. LRFs are lower today than they have been in recent years. • ICF International will review the servicer's maintenance projection for reasonability and achievability and provide an opinion letter. • The pre-existing aircraft-owning entities have been limited to owning, acquiring, and leasing aircraft. All prior

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financings on the aircraft/engines in the portfolio will be paid off by this transaction. To the extent possible under local law, local counsel will perform lien searches to confirm that no liens exist on the aircraft other than those that will be discharged on the date the aircraft are contributed into the structure. In addition, each transferor provides representations and warranties that there is no litigation, proceedings, or claims against the aircraft. Therefore, we view the risk from their past activities as insignificant. Nevertheless, we applied an additional transition cost ($100,000 for each aircraft) when the related lease under the pre-existing aircraft-owning entity defaults in our projection. • To cover the security deposit refund obligation the issuer has, the transaction has a security deposit reserve top-up mechanism, which allows for security deposit reserve top-up in the collection account payment priority (though junior in the payment priority). We modeled both the security deposit refund obligations, as well as the security deposit top-up mechanism in our rating analysis. • We modeled the Luxembourg tax on the Luxembourg entity, which in turns owns eight Irish aircraft owning entities in our stress scenarios.

Legal Structure AASET, a Delaware statutory trust, will issue the class A, B, and C fixed-rate notes series 2016-1. AASET expects to use the proceeds of the initial class A, B, and C notes to acquire all of the series A, B, and C notes (AOE notes) issued by the two AOE issuers (AASET 2016-1 US Ltd. and AASET 2016-1 International Ltd.). The beneficial interests in AASET are held by a Delaware charitable trust. AASET will not have any directors, managers, officers, or employees. AASET 2016-1 US Ltd. and AASET 2016-1 International Ltd. are both exempted companies incorporated with limited liability under the laws of the Cayman Islands. In addition to the AOE notes, each of the AOE issuers will also issue one or more E certificates. Each of the AOE issuers will have a board of three directors, one of whom shall be an independent director. Payments on the initial AOE notes will be used to make payments to the holders of the corresponding class of initial class A, B, and C notes. Each of the AOE issuers jointly and severally guarantees the obligations of each other AOE issuer under the AOE notes and the obligations of AASET under the class A, B, and C notes. There is a cross-default provision among the two AOE issuers and AASET. On the closing date, each AOE issuer will pay the purchase price and issue E certificates to the related AAML funds in exchange for the aircraft in the portfolio. After the transaction closes, AASET 2016-1 US Ltd. will own two aircraft and AASET 2016-1 International Ltd. will own 30 aircraft. After the transaction closes, the issuer will rely on the cash flow it receives as the holder of the AOE notes to pay interest and principal to the holders of its class A, B, and C notes.

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As security for its obligations under the initial class A, B, and C notes, AASET will pledge its interests in the AOE notes to the security trustee. As security for their obligations under the AOE notes and the guarantees, the AOE issuers and their subsidiaries will pledge the following to the security trustee: • The interests in the aircraft and engines; • The beneficial interests in the AOEs and in certain other wholly owned subsidiaries;

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Presale: Apollo Aviation Securitization Equity Trust 2016-1 • • • • • •

The leases and associated payments; The accounts; The cash on hand and invested cash; The interests under any hedge agreements and the liquidity facility; Certain other collateral; and The collateral proceeds.

The transaction features the registration of interests under the Cape Town Convention and its related aircraft equipment protocol (the Convention), to the extent applicable. The Convention is an international treaty that creates a centralized, electronic registry for interests, referred to as international interests, in "aircraft objects" like those in the portfolio. When international interests are created and assigned, they must be registered under the Convention to ensure that the interests and their relative priorities are effective against other subsequently registered international interests. Each aircraft owner is located in a contracting state under the Convention and is expected to pledge interest in its aircraft and engines to the security trustee, which is expected to be registered as an international interest under the Convention. Other interests in the aircraft that may be registered under the Convention include certain lease agreements and international interest assignments. Similar to other aircraft securitizations, local law mortgages generally will not be filed in the aircraft registries where the aircraft are registered even though security interests will be granted under the security agreement and, in some cases, registered under the Convention. If the security granted under the security agreement is not effective in a local jurisdiction because a mortgage has not been filed, then a registration under the Convention would not necessarily enable creditors to exercise certain direct rights and remedies regarding the aircraft. However, if an international interest under the Convention is created but not registered, then the unfiled interest could be primed by a subsequently filed international interest in terms of the international registry priority scheme.

Pre-existing aircraft-owning entities All aircraft/engines in this portfolio are owned by pre-existing entities and are subject to prior financings. There is risk associated with potential liabilities arising from a pre-existing aircraft-owning entity's previous leasing activities. All prior financings on the aircraft in the portfolio will be paid off by this transaction. To the extent possible under local law, local counsel will perform lien searches to confirm that no liens exist on the aircraft other than those that will be discharged on the date the aircraft are contributed into the structure. In addition, each transferor provides representations and warranties that there is no litigation, proceedings, or claims against the aircraft. Therefore, we view the risk from their past activities as insignificant. To address this potential risk, we added $100,000 to the repossession cost for each aircraft if the lease defaults in our rating run.

Transaction Comparison

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Table 1

Transaction Comparison(i) Apollo Aviation Securitization Equity Trust 2016-1

Castlelake Aircraft Securitization Trust 2015-1

Shenton Aircraft Investment I Ltd.

Diamond Head Aviation 2015 Ltd. (ii)

ECAF I Ltd.

AIM Aviation Finance Ltd.

Servicer

Apollo Aviation Management Ltd.

Castlelake L.P.

BOC Aviation

AWAS

BBAM

DVB

LMM of aircraft half-life base values and half-life current market values (Mil. $)

621

801

1009

375

1,491

763

Class A-1 initial LTV (%) (iii)

64

66

74

53

70

71

Class A-1 initial rating

A (sf) (preliminary)

A- (sf) (preliminary)

A (sf)

A (sf)

A (sf)

A (sf)

Class B-1 initial LTV (%) (iii)

77

79

80

70

81

82

Class B-1 initial rating

BBB (sf) (preliminary)

BBB (sf) (preliminary)

BBB (sf)

BBB (sf)

BBB (sf)

BBB (sf)

Class A and B's Scheduled amortization (years)

12.4

12.4-year-to-zero amortization for class A, 12.7-year-to-zero amortization for Class B

Minimum: about 20 for series 2015-1A and 19 for series 2015-1B; expected: about 12

9.8

16

14

Expected maturity (years)

7

7

N/A

7

7

7

No. of aircraft

32

54 aircraft and 6 stand-alone engines)

24

30

49

20

Weighted avg. age (years)

14.8

14.8

4.7

16.5

6.7

5.7

Weighted avg. remaining lease term (years)

3.5

4.7

5.6

3.6

5.7

6.2

Developing market exposure (%)

46.8

11.82

53.83

39.81

58.96

38.25

Narrow-bodies/ 72.35/27.65/0/0 48.19/32.12/4.00/8.99/2.62/4.09 60.31/25.68/8.34/5.67 59.73/37.46/2.81/0 65.52/34.48/0 0/0/0/100 wide-bodies/ cargo/regional jet (%) Largest initial country concentration (%)

UK (18.19)

Italy (22.08)

Spain (13.52)

U.S. (16.61)

Singapore (16.17)

Brazil (17.13)

Largest initial lessees (%)

EasyJet (12.51)

Alitalia (22.08)

American Airline (7.52)

Air Canada(10.63)

Air Canada (11.86)

Azul Linhas Aéreas Brasileiras S/A (17.13)

Eagle I Ltd.

CIT Aviation Finance III Ltd.

RISE Ltd.

Emerald Aviation Finance Ltd.

AABS Ltd.

Jetscape

CIT Aviation

GECAS

Avolon

GECAS

Servicer

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Table 1

Transaction Comparison(i) (cont.) LMM of aircraft half-life base values and half-life current market values (Mil. $)

497

928

927

779

881

Class A-1 initial LTV (%) (iii)

54

69

62

70

63

Class A-1 initial rating

A (sf)

A (sf)

A+ (sf)

A (sf)

A+ (sf)

Class B-1 initial LTV (%) (iii)

67

N/A

72

81

74

Class B-1 initial rating

BBB (sf)

BBB+ (sf)

BBB (sf)

BBB (sf)

Class A and B's Scheduled amortization (years)

4 and 13 for series 2015-1A-1 and A-2; 16 for series 2015-1B

16

16

16

16

Expected maturity (years)

7

7

7

7

7

No. of aircraft

21

28

26

20

26

Weighted avg. age (years)

4.4

6.1

4.8

3.1

4.6

Weighted avg. remaining lease term (years)

4.6

7.1

5.9

7.3

6.6

Developing market exposure (%)

68

51.76

73.08

43.17

64.99

Narrow-bodies/ 58.6/32.2/0/9.2 wide-bodies/ cargo/regional jet (%)

91.3/8.7/0/0

72.7/20.8/0/6.5

100/0.0/0.0/0.0

Largest initial country concentration (%)

Canada (23.66)

China (17.21)

U.S. (19.02)

U.S. (16.54)

Largest initial lessees (%)

Sunwing Airlines (13.01)

Avianca (12.63)

Virgin Atlantic (11.70)

Royal Air Maroc (15.64)

(i)All percentages and averages are weighted by the aircraft initial appraised values. (ii)Expected. (iii)Based on LMM of half-life base values and half-life current market values. LMM--Lower of the mean and median.N/A--Not applicable.

Portfolio Overview The 32 initial aircraft in the portfolio include 27 narrow-body passenger planes (17 from the A320 family [A319-100, A320-200, A321-100, and A321-200], and 10 B737-800) and five wide-body passenger planes (one A330-200, three A330-300s, and one B777-200ER). These aircraft are currently leased to 20 lessees in 19 countries.

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Table 2

Apollo Aviation Securitization Equity Trust 2016-1 Closing Aircraft Portfolio

Aircraft model

Date of manufacture

Engine type

Lessee

LMM of HLBV and HLMV ($) (December 2015)

1

B737-800

11/23/1999

CFM56-7B

Nok Air

16,169,831

801,242

16,964,406

2

B737-800

5/12/2000

CFM56-7B

Norwegian Air Shuttle

17,319,964

(440,493)

16,866,138

3

A330-300

5/18/2000

PW4000-100

US Airways

38,085,000

363,952

41,051,770

4

A330-300

6/27/2000

PW4000-100

US Airways

38,290,000

(3,033,141)

37,724,677

5

B737-800

4/20/2000

CFM56-7B

Corendon Airlines

17,350,000

(3,742,410)

13,609,220

6

B737-800

4/21/2000

CFM56-7B

Corendon Airlines

17,350,000

(2,035,503)

15,316,127

7

A320-200

6/17/1999

CFM56-5B

Croatia Airlines

13,465,036

(1,897,302)

12,466,055

8

A330-200

12/10/1999

RR Trent 700

SriLankan Airlines

32,180,000

4,083,409

37,509,203

9

A321-200

3/31/1999

V2500-A5

Monarch Airlines

17,523,664

(3,831,716)

13,934,060

10

B737-800

8/7/1999

CFM56-7B

AirExplore

16,359,685

2,978,766

19,331,784

11

B737-800

2/4/2000

CFM56-7B

Ukraine International

16,560,000

2,580,674

19,325,599

12

A319-100

2/15/1999

CFM56-5B

Iberia

10,697,413

(938,963)

10,512,646

13

A319-100

4/12/1999

CFM56-5B

Iberia

10,870,251

(2,017,721)

9,625,779

14

A319-100

4/14/1999

CFM56-5B

Adria Airways

10,870,251

(1,615,165)

10,028,336

15

A321-200

8/6/1999

V2500-A5

Air VIA

18,237,521

1,950,278

20,419,466

16

A321-200

8/14/2000

V2500-A5

Sky Angkor

19,454,038

(2,417,570)

17,358,455

17

A320-200

11/17/1997

V2500-A5

Small Planet

11,997,138

1,180,410

13,921,835

18

A320-200

4/30/1999

CFM56-5B

Smartlynx

12,995,824

1,308,485

15,359,035

19

A319-100

10/10/2006

CFM56-5B

Iberia

19,347,670

(4,341,000)

15,471,868

20

A319-100

4/2/2007

CFM56-5B

Iberia

19,944,972

(989,178)

19,437,980

21

A319-100

9/25/2003

CFM56-5B

easyJet

15,343,269

1,042,621

16,958,133

22

A319-100

10/1/2003

CFM56-5B

easyJet

15,577,670

1,841,274

17,993,053

23

A319-100

10/6/2003

CFM56-5B

easyJet

15,577,670

1,970,136

18,121,916

24

A319-100

10/9/2003

CFM56-5B

easyJet

15,577,670

2,067,451

18,219,231

25

A319-100

10/31/2003

CFM56-5B

easyJet

15,577,670

2,188,490

18,340,270

26

B737-800

6/10/1998

CFM56-7B

AirExplore

14,837,126

(1,074,668)

13,762,457

27

A321-200

5/14/1999

V2500-A5

Monarch Airlines

17,776,647

(3,372,982)

14,630,331

28

B737-800

3/26/2001

CFM56-7B

Travel Service

18,309,252

(1,968,949)

16,316,970

29

A330-300

4/1/1995

PW4000-100

HiFly

20,053,314

(964,613)

23,254,264

30

B777-200ER

3/21/2001

GE90

Air France

43,072,460

1,373,485

47,612,899

31

B737-800

11/20/2006

CFM56-7B

VRG

26,694,147

309,582

26,960,396

32

B737-800

4/19/2007

CFM56-7B

VRG

27,454,247

(3,572,099)

23,837,147

620,919,398

(12,213,220)

632,241,508

Total

ICF maintenance adjustment ($) (February 2016)

Initial appraised value reported in transaction document ($)

LMM--Lower of the mean and median. HLBV--Half-life base value. HL MV--Half-life current market value.

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Initial Asset Values We have received aircraft appraisals as of December 2015, from BK Associates, Morten Beyer & Agnew, and Avitas Inc. Each appraiser provided us with the half-life base value, half-life current market value, maintenance-adjusted base value, and maintenance-adjusted current market value of each aircraft in the portfolio. Unlike the maintenance-adjusted value, which reflects an aircraft's actual technical status and maintenance condition, the half-life value assumes that an aircraft is halfway between major maintenance overhauls. We use the half-life value in our analysis to project future lease rentals because it is more stable than using the maintenance-adjusted value, which is volatile because it depends on an aircraft's actual maintenance status. To project the initial aircraft portfolio' cash flow, the half-life value we use is the LMM of the three appraisers' half-life base values and half-life current market values, which total $620,919,398 for this portfolio as of December 2015. We use this half-life value in both our cash flow modeling and portfolio statistics. The initial appraised value reported in the transaction documents is $632,241,508, which equals the sum of the average of the three appraisers' half-life base values and ICF International's maintenance adjustments. Table 3

Initial Asset Portfolio Values As Of December 2015 Appraisals

Half-life base value ($)

Half-life current market value ($)

BK Associates

697,890,000

685,257,400

Morten Beyer & Agnew

630,700,000

586,240,000

Avitas Inc.

604,774,181

587,710,732

LMM of half-life base values and half-life current market values ($)

620,919,398

Average of half-life base values ($)

644,454,727

ICF International's maintenance adjustment ($)(February 2016)

(12,213,220)

Initial appraised value reported in the transaction documents ($)

632,241,508

LMM--Lower of the mean and median.

Aircraft/Engine Asset Analysis Aircraft/engine type

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Chart 2

Table 4

Initial Asset Portfolio Composition By Type Asset A319-100

Asset value (%) No. of assets

Average age (years) Airframe still in production?

24.06

10

13.09

Yes

A320-200

6.19

3

17.26

Yes

A321-200

11.76

4

16.44

Yes

A330-200

5.18

1

16.20

Yes

A330-300

15.53

3

17.44

Yes

B737-800

30.34

10

14.70

Yes

6.94

1

14.92

No

B777-200ER Total

Approximately 42.01% of the portfolio's value consists of Airbus' A320 family aircraft: 10 A319-100s (24.06%), three A320-200s (6.19%), and four A321-200s (11.76%). The A320-200, a medium-sized, narrow-body jet introduced in 1989, remains one of the most widely used and marketable aircraft. The A319-100, introduced in 1994, is a similar but slightly smaller model than the A320-200. The A321-200, introduced in 1996, has the same size as A321-100, but is an enhanced version of the A321-100 with longer range. Until recently, the A321-200 had not been as successful as the

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A320-200 or the smaller A319-100 but has become more popular lately as airlines seek to fly aircraft with more seat capacity. Seventy-seven airlines worldwide operate it; far fewer operate Boeing's competing B737-900ER. The A319-100, A320-200, and A321-200 models have broad airline-user bases that would likely attract many potential lessees if an aircraft in the portfolio is repossessed from its original lessee. Airbus delivers its first new fuel-efficient engine option (NEO) version of these planes in January, but replacing all of the current A320 family will take many years. Some leasing companies and investors of aircraft-backed debt are concerned that Airbus' plans to increase production rates on the current version of the A320 family will hurt resale values. We see both of these developments as moderate threats to aircraft values and incorporated them into our collateral evaluation. However, although lease rates for these aircraft had been under more pressure than the comparable but slightly larger B737-800 since 2009, they have recently recovered somewhat. We believe some of the differential in lease rates is also because of Airbus' higher production rates (adding to global supply) and the substantial number of A320-200s that leasing companies own. Having a high proportion of the global fleet owned by leasing companies means there are more re-pricing opportunities and potentially a more competitive market. Leasing companies tend to re-lease aircraft they own every three to seven years in contrast with airlines that typically own their planes for a much longer period, which can hurt aircraft values and lease rates. Approximately 30.34% of the portfolio's value consists of 10 Boeing 737-800 narrow-body aircraft: The B737-800 is the most successful of Boeing's family of current technology narrow-body planes with more than 4,700 orders. Its direct competitor is Airbus' A320 (see above). We consider the B737-800 to be the best aircraft collateral currently available given its extensive user base and strong residual value performance, which are narrowly ahead of the A320. However, as is the case for the Airbus narrow-bodies, a successor technology will be introduced in 2017--the MAX versions of the B737-800 that feature new, more fuel-efficient engines and other changes. Also, Airbus began to deliver the NEO version of the A320 in January 2016,before the MAX will be available. Still, given the size of the existing B737-800 fleet and long backlog for both this model and its successor MAX version, we do not expect material downward pressure on values until the next decade. Approximately 15.53% of the portfolio's value consists of the A330-300. The A330-300 aircraft are popular Airbus wide-bodies operated globally. The A330-300, which is a larger version of the A330-200, has become popular in Asian markets. Airbus has launched a NEO version of the aircraft, which is scheduled to enter service in late 2017. However, we expect it will take many years for the NEO version to become more prevalent. Approximately 6.94% of the portfolio's value consists of one B777-200ER aircraft. The B777-200ER has been a successful midsize, long-range, wide-body plane. Demand and values for certain versions of this aircraft type have recently come under pressure, specifically due to those that operate with certain engine types and a large number of aircraft on the market due to airlines, which operated these aircraft and have recently ceased operations. We also believe larger versions of the B787 and A350 will provide an alternative, which could occur before these certificates are fully repaid. We believe this could put added pressure on the B777-200ER's long-term values. In our analysis, we judged this plane to be slightly less liquid in the resale market than recently delivered B777-200ERs. Almost all of the B777 aircraft that Boeing is delivering currently are the larger B777-300ER. Approximately 5.18% of the portfolio's value consists of one A330-200 aircraft, a small, long-range, wide-body plane.

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This model, which incorporates newer technology than Boeing's competing B767-300ER, has been successful; however, it will face more serious competition when large numbers of Boeing B787s are delivered. Still, it will take a while for this to occur. Airbus has launched a NEO version of the aircraft, which is scheduled to enter service in late 2017. However, we expect it will take many years for the NEO version to become more prevalent.

Aircraft depreciation and useful life For aircraft that employ older technology or have other adverse asset risk factors, assumed depreciation would be more rapid and vice-versa. We applied an annual compounding depreciation rate (see table 5) on the preceding year's value. Our depreciation rates generally correlate with our views on the aircraft models' resale liquidity and technological risk. We typically assume 25 years of useful life for the Airbus and Boeing aircraft in this portfolio (see table 5). If an asset's contracted initial lease maturity is beyond the end of its useful life and if the asset's contracted initial lease is not projected to default in our stress run, we then assume this asset will be disposed at the contracted initial lease maturity rather than at the end of its useful life. Table 5

Aircraft/Engine Depreciation And Useful Life Aircraft

Annual compounding depreciation (%) Airframe useful life (years)

A319-100

93.0

25

A320-200

93.0

25

A321-200

92.5

25

A330-200

92.0

25

A330-300

92.0

25

B737-800

94.0

25

B777-200ER

91.0

25

Initial asset age With a weighted average age of 14.8 years, the portfolio is viewed as a mid-life aircraft portfolio. Mid-life and older aircraft tend to have higher volatility in value retention. When there is surplus capacity, the most technologically efficient aircraft will stay in use.

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Chart 3

Lessee Analysis The top three lessees represent 34.6% of the portfolio by the portfolio value (see tables 6 and 7). Our CDO Evaluator considered the lessee concentration and correlations; therefore, our projected default rates at various rating stresses reflect this portfolio's lessee concentration. The initial airline lessees' overall credit quality is estimated to be well into speculative-grade (rated 'BB+' or below by Standard & Poor's), which is typical for aircraft operating lease portfolio securitizations. Eight of the 32 aircraft are leased to flag carriers internationally. Approximately 46.8% of the lessees (by aircraft value) are in emerging markets with growing commercial aviation industries. Our airline default modeling assumptions were similar to those we have used for most aircraft operating lease securitizations. Table 6

Lessee Country Distribution Country

Asset value (%) No. of assets

U.K.

18.19

7

U.S.

12.30

2

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Table 6

Lessee Country Distribution (cont.) Country

Asset value (%) No. of assets

Spain

9.80

4

Brazil

8.72

2

France

6.94

1

Turkey

5.59

2

Sri Lanka

5.18

1

Slovakia

5.02

2

Portugal

3.23

1

Cambodia

3.13

1

Czech Republic

2.95

1

Bulgaria

2.94

1

Norway

2.79

1

Ukraine

2.67

1

Thailand

2.60

1

Croatia

2.17

1

Latvia

2.09

1

Poland

1.93

1

Slovenia

1.75

1

100.00

32

Total

Table 7

Lessee Distribution Lessee

Asset value (%) No. of assets

easyJet

12.51

5

US Airways

12.30

2

Iberia

9.80

4

VRG

8.72

2

Air France

6.94

1

Monarch Airlines

5.69

2

Corendon Airlines

5.59

2

SriLankan Airlines

5.18

1

AirExplore

5.02

2

HiFly

3.23

1

Sky Angkor

3.13

1

Travel Service

2.95

1

Air VIA

2.94

1

Norwegian Air Shuttle

2.79

1

Ukraine International

2.67

1

Nok Air

2.60

1

Croatia Airlines

2.17

1

Smartlynx

2.09

1

Small Planet

1.93

1

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Table 7

Lessee Distribution (cont.) Lessee Adria Airways Total

Asset value (%) No. of assets 1.75

1

100.00

32

Chart 4 shows the initial asset portfolio distribution by initial lease remaining maturity. Chart 4

Aircraft Leasing Business Outlook According to the most recent Airbus and Boeing forecasts, airline passenger traffic is expected to grow by about 5% per year through 2034 (Airbus predicts 4.6% per year between 2015 and 2034; Boeing forecasts 4.9% per year between 2015 and 2034). Airbus forecasts 32,585 new passenger aircraft deliveries, and Boeing forecasts 38,050 during that period. Most of the aircraft will either be delivered to Asia-Pacific and emerging markets to meet demand or to replace aging aircraft in North America and Europe. The number of lessor-owned aircraft has been steadily growing. Operating leases account for over 40% of the global

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

commercial fleet and could grow to approximately 50% in the next five to 10 years. Aircraft leasing is attractive to airlines because of lower capital outlay requirements, fleet planning flexibility, delivery position availability, and residual value risk avoidance. In addition, the lessors generally are more creditworthy, which gives them better access to capital at more attractive pricing than many airlines. Also, on Jan. 1, 2013, export credit financing costs increased for aircraft because of higher pricing and equity contributions, which led more airlines to lease aircraft because it became more cost-efficient. We also expect lessors to continue to assume some airline orders for new aircraft through sale/leaseback transactions because of this development. Many European banks curtailed their lending to the aviation sector during the 2008-2009 financial crisis. Beginning in 2010, the capital markets stepped up their involvement in the aviation sector, raising secured and unsecured financing to fund new aircraft deliveries and refinance debt maturities. Not only has this trend continued, but European banks have returned to the market, and banks in other regions, particularly Asia, have either increased their lending or entered this market for the first time. In addition, some aircraft lessors have accessed other types of capital, including equity infusions from their parent companies (many are owned by financial institutions) or IPOs. Both Aviation Capital Group Corp. and Bank of China Aviation Pte. have announced potential IPOs. In January 2016, Avolon Holdings Ltd. was acquired by Bohai Leasing Co. Ltd. for approximately $7.6 billion, and will be combined with Bohai's aviation lessor Hong Kong Aviation Corp. In October 2015, CIT Aerospace's parent announced it was exploring strategic alternatives for this operation.

Servicer Review Apollo Aviation Management Ltd. (AAML) is the servicer for the transaction. It will provide the transaction with re-lease remarketing, aircraft sales, third-party aircraft maintenance monitoring, technical inspections, and other professional services. AAML is part of AAG, a multi-strategy alternative investment firm founded in 2002 specializing in commercial aviation investing. AAG has focused on mid-life and end-of-life commercial aircraft and engines with a 14-year track record. It primarily manages the last lease before an aircraft or engine is retired. As of Dec. 31, 2015, AAG had $2.5 billion of assets under management, which includes invested capital, indebtedness, and available capital, and it employs over 60 employees. As of Feb. 29, 2016, AAG managed 90 aircraft (including the initial aircraft then owned by the sellers) leased to 38 lessees in 28 countries and 55 engines leased to 13 lessees in 13 countries. The major competitor of AAG in the mid-life aircraft asset segment is Castlelake L.P., which is a global private investment firm specializing in mid-life and older commercial aircraft and engines, European and U.S. distressed assets and nonperforming loans. While Castlelake L.P. focuses on both in-production and out-of-production aircraft, AAG focuses primarily on in-production aircraft. AAG exits its aviation investments through a variety of options, including selling parts, selling aircraft outright, removing engines for release or resale, selling airframes for scrap, and selling aircraft to part out companies. We believe AAML's capability to service this transaction's aircraft portfolio as adequate.

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Other Service Providers Managing agent As managing agent, Phoenix American Financial Services Inc., provides corporate administrative services, appraisal arrangements, cash management, and other services.

Maintenance appraiser The issuer contracted ICF International to forecast the transaction's life-time maintenance-related cash flows before the transaction closes. After the transaction closes, AAML, instead of ICF International, will provide the maintenance expense projection, and such projection result, after being confirmed for reasonableness and achievability in an opinion letter from ICF International, will be used to calculate the maintenance account required amount.

Initial liquidity facility provider DVB Bank SE ('A+/Stable/A-1') will provide a liquidity facility that may be drawn on to pay expenses, any senior hedge amounts due, and interest on the series A and B notes issued by the two AOE issuers. The rating on DVB Bank SE is consistent with our counterparty criteria to support the preliminary ratings we assigned to the class A and B notes. The transaction's threshold rating requires a long-term unsecured credit rating of 'BBB' or better when the class A notes are outstanding. When the class B notes are the senior most outstanding notes, the threhold rating is 'BBB-'.

Aircraft Or Engine Acquisition The transaction may not purchase aircraft or aircraft interests after the initial closing date (other than aircraft replacements due to that the initial aircraft fail to transfer to the transaction before the delivery end date). The transaction may sell, exchange, part out, substitute, or dispose of all or part of an engine or a part in exchange for or to acquire a replacement engine or part.

Payment Priority--AOE Issuer Level Priority of payments before an event of default (AOE issuer) The amount the collection account is payable on each payment date in the following priority if there is no event of default (see table 8). Amounts paid to the guarantee account are used to pay like obligations for the AOE issuer at the same level of priority. Table 8

Collection Account Payment Priority (Before An Event Of Default) Priority

Payment

1

First, expenses including senior service provider fee and indemnification amounts capped at $10 million; second, to the guarantee account the guaranteed required expense amount shortfall.

2

First, pro rata to pay series A note interest amount and hedge payment; second, to the guaranteed account, an amount equal to the issuer's pro rata allocation of the guaranteed series A interest shortfall and an amount equal to the guaranteed senior hedge payments shortfall.

3

First, to pay series B note interest amount; second, to the guaranteed account, an amount equal to the guaranteed series B interest shortfall.

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Table 8

Collection Account Payment Priority (Before An Event Of Default) (cont.) Priority

Payment

4

First, pro rata to top up liquidity facility reserve account and to pay liquidity facility advance obligations; second, to the guarantee account, the guaranteed amount shortfall and the guaranteed liquidity facility advance obligations shortfall.

5

First, pro-rata, additional senior maintenance reserve amount and the engine senior reserve top-up amount; second, pro-rata, guaranteed additional senior maintenance reserve amount shortfall and the guaranteed engine senior reserve top-up amount shortfall amount and second to the guaranteed additional maintenance support amount shortfall.

6

First, to pay series A notes scheduled principal payment amount; second, to the guarantee account an amount, the guaranteed series A scheduled principal payment amount shortfall.

7

First, to pay series B notes scheduled principal payment amount; second, to the guarantee account an amount, the guaranteed series B scheduled principal payment amount shortfall.

8

To replenish the junior reserve account up to the junior required maintenance amount.

9

Pay the amount equal to the lesser of the outstanding principal balance of the series A notes and an amount equal to the pro rata percentage of the series A notes multiplied by the excess proceeds payments paid during the related collection period.

10

Pay the amount equal to the lesser of the outstanding principal balance of the series B notes and an amount equal to the pro rata percentage of the series B notes multiplied by the excess proceeds payments paid during the related collection period.

11

On and after the fourth anniversary of the initial closing date, if no rapid amortization event has occurred and is continuing, pay an amount equal to the applicable partial rapid amortization percentage multiplied by the remaining amounts after giving effect to clauses 1-10 above: first, to the series A notes' outstanding principal balance; second, to the outstanding principal balance of the series A notes issued by the other AOE issuer; third, the outstanding principal balance of the applicable series B AOE notes; and fourth, to the outstanding principal balance of the series B AOE notes issued by the other AOE issuer.

12

If a DSCR cash trap event has occurred and is continuing, but no rapid amortization event has occurred and is continuing, to the DSCR cash trap account, all remaining amounts.

13

If a rapid amortization event has occurred and is continuing, first, to pay series A notes' outstanding principal balance and second, to the guarantee account the guaranteed rapid amortization series A amount shortfall; if no rapid amortization event has occurred and is continuing but a disposition deficit (series A) has occurred, first, to pay the disposition deficit amount (series A) and second, to the guaranteed disposition deficit amount (series A) shortfall.

14

If a rapid amortization event has occurred and is continuing, first, to pay series B notes' outstanding principal balance and second, to the guarantee account the guaranteed rapid amortization series B amount shortfall; if no rapid amortization event has occurred and is continuing but a disposition deficit (series B) has occurred, first, to pay the disposition deficit amount (series B) and second, to the guaranteed disposition deficit amount (series B) shortfall.

15

First, series C notes' interest amount less the amount drawn from series C reserve account and second, to the guarantee account the guaranteed series C interest shortfall.

16

First, series C notes' scheduled principal payment amount and second, to the guarantee account the guaranteed series C scheduled principal payment amount shortfall.

17

To the series C notes, an amount equal to the pro rata percentages of the series C notes multiplied by the excess proceeds payment.

18

On any payment date falling on or after the 18-month anniversary of the closing date, an amount equal to the series C partial rapid amortization amount as such payment date will be applied as follows: first, to the outstanding principal balance of the series C notes issued by such AOE issuer and second, to the outstanding principal balance of the series C notes issued by the other AOE issuer.

19

Subordinated indemnification amounts and subordinated hedge payments, if any.

20

Accrued but unpaid disposition premium first, to the series A notes and second, to the series B notes.

21

Senior disposition fees.

22

From and after the seventh anniversary of the closing date, step-up amount to series A notes.

23

From and after the seventh anniversary of the closing date, step-up amount to series B notes.

24

From and after the seventh anniversary of the closing date, step-up amount to series C notes.

25

To the servicer, first, the MR incentive fee and second, the rent incentive fee.

26

To the servicer, the subordinated disposition fees and subordinated end-of-lease compensation fees, pro rata.

27

Required amount to security deposit account; provided that in year one, the amount transferred to the security deposit account shall not exceed 50% of remaining amounts.

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Table 8

Collection Account Payment Priority (Before An Event Of Default) (cont.) Priority

Payment

28

Up to $5,000,000 (or such larger amount as shall be agreed by the applicable board) for additional anticipated asset expenses, including expenses related to modifications, remarketing, and freighter conversions.

29

To fund the disposition contribution account up to an amount determined by the servicer based on any applicable projected disposition amount deficit, if applicable.

30

Discharge of the inter-issuer loans.

31

All remaining amounts, to the E certificate holders.

DSCR--Debt service coverage ratio. MR--Maintenance reserve.

The series A and B notes follow a 12.4-years-to-zero amortization profile (straight-line amortization on 120 months in the first two years and straight-line amortization on 156 months thereafter); and the series C notes follow a 6.3-years-to-zero amortization profile (straight-line amortization on 60 months for the first two years and straight-line amortization on 84 months thereafter). Similar to the majority of the recently rated aircraft securitization transactions, this transaction has an expected final payment date (seven years after closing) after which the class A and B notes' amortization will be full turbo. A DSCR cash trap event occurs on a payment date occurring on or after the sixth payment date after the initial closing date when the DSCR for that payment date or either of the two immediately preceding payment dates is less than 1.20x. A DSCR amortization event occurs on a payment date occurring on or after the sixth payment date after the initial closing date when the DSC for that payment date or either of the two immediately preceding payment dates is less than 1.15x. A utilization event occurs on any payment date if less than 75% of the adjusted portfolio value of the aircraft is utilized as of that payment date or either of the two immediately prior payment dates. A rapid amortization event occurs on a payment date when the DSCR amortization event occurs, the utilization event occurs, seven years after the initial closing date, or the issuers have delivered a rapid amortization election notice. The series A and B notes' amortizations are subject to a rapid amortization described above. The series C notes do not have turbo amortization based on performance triggers (DSCR or utilization rate). The series A and B notes have a partial cash sweep of 25% from four to six years after closing and 50% from six to seven years after closing. The series C notes have a partial cash sweep of 75% 18 months after closing and have a full cash sweep after month 42. Excess proceeds include the following (unless it is used or reasonably expected to be used by servicer for maintenance expenses): • • • •

End-of-lease payments; Proceeds or fees associated with a lease restructuring or lease termination; Lease payments under a green-time lease; Payments relating to the re-leasing of an asset when at the time of such re-leasing, the adjusted base value of the

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asset is less than 75% of the product of the outstanding principal balance of all notes, and the asset allocable debt percentage (at closing) of the aircraft; and • Other payments by a lessee in lieu of maintenance, future lease payments, or other obligations under a lease. The target portfolio LTV (for the purpose of determining the disposition paydown amount paid to the noteholders in the LTV test) is 81% in year one, 77% in year two, 72% in year three, 68% in year four, 62% in year five, 47% in year six, 16% in year seven, and 5% in year eight. Following any additional note amortization in addition to the scheduled principal payment amount (including in the event of sale of an aircraft, excess proceeds payment, any partial cash sweep, or cash sweep due to rapid amortization), the scheduled principal payment amount in the subsequent payment periods will be reduced by the additional note amortization amount. We assumed a $10 million senior indemnity payment in the transaction's first year in the cash flow stress tests we applied to the transaction.

Priority of payments following an event of default (AOE issuer) The lease rent collection in the collection account is payable on each payment date in the following priority after an event of default (see table 9). Amounts paid to the guarantee account are used to pay like obligations for the AOE issuer at the same level of priority. Table 9

Collection Account Payment Priority (Following An Event Of Default) Priority

Payment

1

First, expenses including senior service provider fee and indemnification amounts and second, to the guarantee account the issuer's pro rata allocation of the guaranteed required expense amount shortfall.

2

Liquidity facility advance obligations and second, to the guarantee account, the issuer's pro rata allocation of the guaranteed liquidity facility advance obligations shortfall.

3

First, pro rata to pay series A note interest amount and hedge payment and second, to the guaranteed account, an amount equal to the guaranteed series A interest shortfall and an amount equal to the guaranteed senior hedge payments shortfall.

4

First, pro rata, series A notes' outstanding principal balance and second, to the guarantee account the guaranteed series A outstanding principal balance shortfall.

5

First, to pay series B note interest amount and second, to the guaranteed account, an amount equal to the guaranteed series B interest shortfall.

6

First, pro rata, series B notes' outstanding principal balance and second, to the guarantee account the guaranteed series B outstanding principal balance shortfall.

7

First, series C notes' interest amount and second, to the guarantee account the issuer's pro rata allocation of the guaranteed series C interest shortfall.

8

First, pro rata, series C notes' outstanding principal balance and second, to the guarantee account the guaranteed series C outstanding principal balance shortfall.

9

First, series A notes' outstanding disposition premium, second, series B notes' outstanding disposition premium, and third, to the guarantee account, the guaranteed disposition premium shortfall.

10

First, to the payment of any outstanding issuer, one senior sales fee and second, to the guarantee account, an amount, if any, equal to the guaranteed senior sales fee shortfall.

11

From and after the seventh anniversary of the initial closing date, first, pro rata, series A notes' step-up amount and second, to the guarantee account the guaranteed A step-up amount shortfall.

12

From and after the seventh anniversary of the initial closing date, first, pro rata, series B notes' step-up amount and second, to the guarantee account the guaranteed B step-up amount shortfall.

13

From and after the seventh anniversary of the initial closing date, first, pro rata, series C notes' step-up amount and second, to the guarantee account the guaranteed C step-up amount shortfall.

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Table 9

Collection Account Payment Priority (Following An Event Of Default) (cont.) Priority

Payment

14

First, to replenish the senior maintenance reserve account up to the senior required maintenance amount and the engine reserve account up to the required engine amount, pro rata, based on the proportion of the senior required maintenance amount to the required engine amount; second, to replenish the junior reserve account up to the junior required maintenance amount; third to the guarantee account, the guaranteed additional senior maintenance support amount shortfall; and fourth to the guarantee account, the guaranteed additional required engine amount.

15

First, special indemnity payments and subordinated judgment amounts and second, to the guarantee account the guaranteed special indemnity payments shortfall and the guaranteed subordinated judgment amounts shortfall.

16

First, pay subordinated hedge payments and second, to the guarantee account, the guaranteed subordinated hedge payments shortfall.

17

First, servicer incentive fee and second, the guaranteed servicer incentive fee shortfall.

18

To the servicer, the subordinated disposition fees and subordinated end-of-lease compensation fees, pro rata.

19

Pro rata, pay net intercompany obligations owed by the issuer to the other issuers.

20

All remaining amounts to the E certificate account.

Aircraft disposition distribution (AOE issuer) If an event of default has occurred and is continuing, the distributable balance in the aircraft disposition account will instead be applied per the payment priority after an event of default (table 9). Amounts paid to the guarantee account are used to pay like obligations for the AOE issuer at the same level of priority. If no event of default has occurred or is continuing, the distributable balance in the aircraft disposition account will be distributed according to the following payment priority (table 10). Table 10

Aircraft Disposition Distribution (No Event Of Default Has Occurred Nor Continues) Priority

Payment

1

First, pro rata, top-up liquidity facility reserve account and repay liquidity facility advance obligations and second, to the guarantee account, the issuer's pro rata allocation of the guaranteed required amount shortfall and the issuer's guaranteed pro rata allocation of the guaranteed liquidity facility advance obligations shortfall.

2

Interest due on the senior series and not otherwise paid under the payment priority on such payment date.

3

Pay specified amount (105% of the aggregate allocable series amount for such aircraft dispositions to the series A notes, minus any excess proceeds applied amounts applied to the series A notes in respect of such aircraft); if the relevant subject dispositions include a disposition of portfolio assets owned by the other issuer, to the guarantee account the guaranteed disposition paydown series A shortfall.

4

From and after the ninth anniversary of the closing date, to replenish the senior maintenance reserve account up to the senior required maintenance amount, the junior reserve account up to the junior required maintenance amount, and the engine reserve account up to the required engine amount, pro rata, based on the relative proportions of the senior required maintenance amount, the junior required maintenance amount, and the required engine amount, in each case to the extent not otherwise paid under the priority of payments on such payment date.

5

Pay specified amount (105% of the aggregate allocable series amount for such aircraft dispositions to the series B notes, minus any excess proceeds applied amounts applied to the series B notes in respect of such aircraft); if the relevant subject dispositions include a disposition of portfolio assets owned by the other issuer, to the guarantee account the guaranteed disposition paydown series B shortfall.

6

First, disposition hedge termination payments and second, if the relevant disposition included disposition of assets owned by the other issuer, to the guarantee account, the guaranteed disposition hedge termination payment shortfall.

7

First, sales fee and second to the guarantee account, an amount, if any, equal to the guaranteed senior sales fee shortfall.

8

First, the series A notes' disposition premium and second, if the relevant disposition included disposition of assets owned by the other issuer, to the guarantee account, the guaranteed series A disposition premium shortfall.

9

First, the series B notes' disposition premium second, if the relevant disposition included disposition of assets owned by the other issuer, to the guarantee account, the guaranteed series B disposition premium shortfall.

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Table 10

Aircraft Disposition Distribution (No Event Of Default Has Occurred Nor Continues) (cont.) Priority

Payment

10

From and after the fourth anniversary of the closing date, if no rapid amortization event shall have occurred and be continuing, the partial rapid amortization amount as of such payment date will be applied as follows: first, to the applicable series A notes; second, to the series A notes of the other issuer; third, to the applicable series B notes; and fourth, to the series B notes of the other issuer.

11

If a DSCR cash trap event has occurred and is continuing, but no rapid amortization event has occurred and is continuing, to the DSCR cash trap account, all remaining amounts.

12

If a rapid amortization event has occurred and is continuing, first, to the series account for the series A notes, an amount equal to the outstanding principal balance of such series and, second, to the guarantee account an amount, if any, equal to the guaranteed rapid amortization series A amount shortfall.

13

If a rapid amortization event has occurred and is continuing, first, to the series account for the series B notes, an amount equal to the outstanding principal balance of such series and second, to the guarantee account an amount, if any, equal to the guaranteed rapid amortization series B amount shortfall.

14

Pay the specified amount (105% of the aggregate allocable series amount for such aircraft dispositions to the series C notes, minus any excess proceeds applied amounts applied to the series C notes in respect of such aircraft); if the relevant subject dispositions include a disposition of portfolio assets owned by the other issuer, to the guarantee account the guaranteed disposition paydown series C shortfall;

15

From and after the 18 month anniversary of the closing date, the series C partial rapid amortization amount as of such payment date will be applied as follows: first, to the applicable series C notes; second, to the series C notes of the other issuer;

16

First, the series C notes' disposition premium and second, if the relevant disposition included disposition of assets owned by any of the two other issuers, to the guarantee account, the issuer's pro rata allocation of the guaranteed series C disposition premium shortfall.

17

First, the issuer servicer incentive fee and second, if the relevant subject disposition include a disposition of assets owned by the other issuer, to the guarantee account the guaranteed servicer incentive fee shortfall.

18

First, pro-rata, subordinated sales fee, senior end-of-lease compensation fee, and subordinated end of lease compensation fee and second, pro rata, to the guarantee account the guaranteed subordinated sales fee shortfall and the guaranteed subordinated end of lease compensation fee shortfall.

19

First, to the series account for the series A notes, the amount, if any, by which the scheduled principal payment amount of the series A notes exceeds the available collections amount for such payment date remaining after payment in full of all amounts senior thereto in the rental waterfall and second, to the guarantee account, the guaranteed series A scheduled principal payment amount shortfall exceeds the available collections amount for such payment date remaining after payment in full of all amounts senior thereto in the rental waterfall.

20

First, to the series account for the series B notes, the amount, if any, by which the scheduled principal payment amount of the series B notes exceeds the available collections amount for such payment date remaining after payment in full of all amounts senior thereto in the rental waterfall and second, to the guarantee account an amount, if any, by which the guaranteed series B scheduled principal payment amount shortfall exceeds the available collections amount for such payment date remaining after payment in full of all amounts senior thereto in the rental waterfall.

21

From and after the seventh anniversary of the initial closing date, first to pay series A notes' step-up amount and second, if the relevant disposition included disposition of assets owned by the other issuer, to the guarantee account, the guaranteed series A step-up shortfall.

22

From and after the seventh anniversary of the initial closing date, first to pay series B notes' step-up amount and second, if the relevant disposition included disposition of assets owned by the other issuer, to the guarantee account, the guaranteed series B step-up shortfall.

23

From and after the seventh anniversary of the initial closing date, first to pay the series C notes' step-up amount and second, if the relevant disposition included disposition of assets owned by the other issuer, to the guarantee account, the guaranteed series C step-up shortfall.

24

If no rapid amortization event has occurred and is continuing but a disposition deficit (series A) exists and the disposition deficit amount (series A) is greater than zero, first, to the series account for the series A notes, an amount necessary to cause such disposition deficit amount (series A) to equal zero and second, to the guarantee account an amount, if any, equal to the guaranteed disposition deficit amount series a shortfall, in each case after giving effect to the application of the available collections amount pursuant to the rental waterfall for such payment date.

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Table 10

Aircraft Disposition Distribution (No Event Of Default Has Occurred Nor Continues) (cont.) Priority

Payment

25

If no rapid amortization event has occurred and is continuing but a disposition deficit (series B) exists and the disposition deficit amount (series B) is greater than zero, first, to the series account for the series B notes, an amount necessary to cause such disposition deficit amount (series B) to equal zero and second, to the guarantee account an amount, if any, equal to the guaranteed disposition deficit amount series b shortfall, in each case after giving effect to the application of the available collections amount pursuant to the rental waterfall for such payment date.

26

Pro rata, pay net intercompany obligations owed by the issuer to the other two issuers.

27

All remaining amounts to the E certificate account.

DSCR--Debt service coverage ratio.

The disposition paydown amount equals the lessor of the specified amount for an asset and an amount that would cause the LTV test to be satisfied.

Events Of Default--AOE Issuer Level Each of the following constitutes an event of default for an AOE issuer (subject to certain cure periods and grace periods) under the AOE issuer's document: • Failure to pay when interest is due (excluding any step-up amount) on the series A notes or failure to pay when due the interest on the series B notes when they are the senior-most class outstanding, and the failure is not cured in five business days; • Failure to pay the series A, B, or C notes' outstanding principal or failure to pay all accrued and unpaid interest amounts (excluding step-up amounts) on the series A, B, or C notes on the legal final maturity date; • Failure to pay any other amount when due and payable in connection with any notes to the extent that there are available amounts in the collection accounts or under the liquidity facility, and the failure is not cured in five business days; • Failure to comply with any of the representations, warranties, covenants, or obligations under the transaction documents; • The AOE issuer's voluntary or involuntary bankruptcy; • A judgment or order for the payment of money exceeding 5% of the aggregate adjusted portfolio value; • The lien of the security trust agreement ceases to be effective; • The occurrence of the other AOE issuer's event of default; and • The occurrence of an event of default as defined in the master indenture at the issuer level.

Payment Priority--Issuer Level On each payment date, the issuer, as the holder of the series A, B, and C notes, shall receive the aggregate amounts paid by the AOE issuers on the series A, B, and C notes. In each case, a payment applied to pay interest, principal, premium or otherwise under an AOE indenture will be applied to pay a like obligation hereunder (including the amount paid in respect of interest amount or step-up interest under each AOE indenture shall be applied to pay interest amount or step-up interest, and any amount applied to reduce the outstanding principal of a class of AOE notes shall be applied to reduce the outstanding principal balance of

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the corresponding class of notes). Any fee/expense/indemnity payable by the issuer will be paid by the AOE issuers on its behalf.

Events of Default--Issuer Level Each of the following constitutes an event of default for the issuer (AASET), subject to certain cure periods and grace periods, under the issuer's documents: • Failure to pay when interest is due (excluding any step-up amount) on the class A notes or failure to pay when due the interest on the class B notes when they are the senior-most outstanding notes, and the failure is not cured in five business days; • Failure to pay the class A, B, or C notes' outstanding principal, or failure to pay all accrued and unpaid interest amounts (excluding step-up amounts) on the class A, B, or C notes on the legal final maturity date; • Failure to pay any other amount when due and payable in connection with any notes, to the extent that there are available amounts, and the failure is not cured in five business days; • Failure to comply with any of the representations, warranties, covenants, or obligations under transaction documents; • The issuer's voluntary or involuntary bankruptcy; • A judgment or order for the payment of money exceeding 5% of the aggregate adjusted portfolio value; • The lien of the security trust agreement ceases to be effective; and • The occurrence of any of the two AOE issuers' events of default.

Cash Flow Analysis Assumptions To assess the portfolio's ability to service the rated class A, B, and C notes issued by AASET, we conducted our own stress tests built around a few deterministic scenarios. The stress test assumptions include: • • • • • • • •

Lessee defaults; Reduced rental rates on leases during a recession; Diminished residual value for aircraft during a recession; The repossessed aircraft's off-lease time period; New leases' shortened terms; Remarketing/reconfiguration/repossession costs; Deferred maintenance; and Reduced security deposit requirements.

Recession assumptions In general, we assume one recession will occur in every seven- to 10-year commercial aviation industry cycle, which reflects the industry's historical averages. For aircraft with 25-year useful lives, we typically model three four-year-long recessions. During the first two modeled recessions, we usually stress both the lease rates and residual values. For the third recession, when we believe most of the planes in the portfolio would have reached the end of their useful lives, we usually stress only the residual values because the aircraft's sale will likely generate the majority of the cash flow during this recession. Although the transaction's cash flow lasts for 16 years under our useful life assumption, we still

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model a third recession to address the concentrated residual value risk of the aircraft portfolio. Table 11

Recession Timing Rating A BBB Recession 1 start (mos.)

1

BB

1

1

Recession 2 start (mos.)

97

97

97

Recession 3 start (mos.)

170

170

170

Length of the first and second recessions (years)

4

4

4

Length of the third recession (years)

2

2

2

Lessee defaults assumptions We use our CDO Evaluator to generate the aircraft portfolio-level default rate. The simulation model inputs include lessee name, lessee credit quality, aircraft value, correlation within the airline industry, lessee country, country rating, and correlations among countries and regions. For airline lessees in the portfolio that Standard & Poor's does not rate, we will provide a credit assessment based on public information. In general, we view the airline industry as high risk. Our assessment reflects our view of the sector's high-risk cyclicality based on observed cyclicality in revenue and profit margins and its moderately high-risk competitive risk and growth. This model enables us to address lessee industry, country, and region by running 500,000 correlated simulation scenarios to address the lease portfolio's concentration risk instead of setting a hard percentage limit on lessee, country, and region concentration. Under our default simulation model, a concentrated portfolio will have a higher portfolio default rate and less generated cash flow. Once the portfolio default rate is determined, we run a few deterministic default patterns such as defaulting by highest to lowest aircraft value, defaulting by lowest to highest credit quality lessee, and defaulting by highest to lowest lease rental. In all of the runs, defaulting by highest to lowest aircraft value usually provides the most onerous result, and we use this as a rating run. Table 12

Lessee Default Rate Rating A

BBB

BB

Lessee default rate (recession 1) (%)

62.75 54.50 44.30

Lessee default rate (recessions 2 and 3) (%)

72.75 64.50 54.30

Lease rates assumptions in and outside recessions The lease rates outside recessions are based on the interest rate environment and aircraft age. During recessions, we apply additional reductions to a projected base-case depreciated value to stress lease rates and values. The decline magnitude is generally determined by the aircraft model's liquidity and technology level, the servicer's remarketing and disposition capability, the aircraft diversification, and the transaction's rating level. Such lease rate/sale-to-value declines reflect our view of a particular portfolio's ability to maintain cash flow consistent with the ratings on

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obligations that are backed by the portfolio during recessions. This stress is intended to result in lower residual values of the aircraft or the aircraft engines sold or lower rental rates on planes or aircraft engines re-leased during recessions. We model the lease rate decline in full during the second and third years of a recession, but we apply 50% of the decline of the lease rate in the first and last years of the recession. This assumption reflects our view that aviation industry recessions, particularly the aircraft values' and rental rates' decline and recovery, typically take time. Table 13

Lease Rate/Value Decline Rating A

BBB

BB

Value decline (recession 1) (%)

49.72

37.69

26.41

Value decline (recessions 2 and 3) (%)

69.14

54.83

40.69

Repossession and remarketing period assumptions The repossession period is the time it takes for the lessor to repossess an aircraft or an aircraft engine if the defaulting lessee has not agreed to a voluntary return of the equipment. The remarketing period is the time necessary to find a new lessee once the aircraft or engine has been returned to the lessor. In summary, we assume three months aircraft-on-ground time outside a recession and six to 12 months during a recession. Within a recession, we assume a longer remarketing period. Table 14

Repossession/Remarketing Time Rating

Repossession/remarketing time (in recession) (mos.) Repossession/remarketing time (outside recession) (mos.)

AA

BBB

BB

10

9

8

3

3

3

Repossession/remarketing/refurbishment (RRR) cost assumptions If a lessor has to repossess an aircraft or aircraft engine, it will typically incur various costs related to legal work, insurance, pilot expenses, fuel, storage, technical check, and deregistration documents. These costs are in addition to the refurbishment or modifications necessary to re-lease the aircraft or the aircraft engine. We generally assume a wide-body plane has higher RRR costs than a narrow-body plane, a passenger plane has higher RRR costs than a freighter, and higher RRR costs can occur during a recession. Table 15

Repossession/Remarketing/Refurbishment Costs Rating AA

BBB

BB

Repossession costs (narrow-body passenger and regional) ($)

500,000 in recession; 350,000 outside recession

500,000 in recession; 350,000 outside recession

500,000 in recession; 350,000 outside recession

Repossession costs (wide-body passenger)($)

1,500,000 in recession; 1,000,000 outside recession

1,500,000 in recession; 1,000,000 outside recession

1,500,000 in recession; 1,000,000 outside recession

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Lease terms assumptions For re-leasing events, we typically assume lease terms of three years during each recession. We also assume five-year lease terms for re-leasing events outside of a recession. Table 16

New Lease Term Rating A BBB

BB

Lease term (in recession) (years)

3

3

3

Lease term (outside recession) (years)

5

5

5

Security deposit assumptions In all the aircraft securitization transactions previously rated by Standard & Poor's, the seller normally transfers the security deposits under the initial leases to the issuer when the related aircraft is delivered into the transaction. Security deposits held by the issuer can help to partially offset the defaulted rent and RRR costs if a lessee defaults. We typically incorporate the security deposits into our modeling after reducing the amount by a percentage up to 40% of the security deposits for initial leases (the higher percentage reductions correspond to the higher rating levels). For modeling purposes, we assume no security deposits for subsequent leases. However, in this transaction, the security deposits under the initial leases are not retained by the issuer or its subsidiaries, though the issuer or its subsidiaries need to pay back such security deposits if the related lessees do not default. Therefore, in our analysis, we model that the issuer is required to pay 100% of the security deposits back to the non-defaulted lessees at the initial lease maturity and a percentage of security deposits back to the defaulted lessees at the time of default. Such percentage is listed in table 20 below. Table 17

Security Deposit Haircut Rating

Security deposit haircut (%)

A

BBB

BB

30

20

10

Aircraft Maintenance Aircraft maintenance, which is heavily regulated, is essential in aircraft operation to keep them in serviceable and reliable condition. An aircraft's maintenance status is also important in determining its value, especially for older aircraft. Depending on the type of work, such as airframe maintenance, airframe component maintenance, and engine maintenance (including engine performance restorations and limited life part replacements), aircraft maintenance can be costly. Lessors typically manage the maintenance expense exposure by either requiring lessees to pay maintenance reserves (also referred to as maintenance or utilization rent) during the lease or requiring an end-of-lease maintenance adjustment payment if no maintenance reserve is collected. In the former, the regularly collected maintenance

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reserves are typically calculated based on flight hours and flight cycles. When due, lessees typically have the maintenance work done, pay the maintenance provider, and then claim a reimbursement from the lessor from a maintenance reserve account (funded by a maintenance reserve collection). In the latter, if the lessee defaults on the lease and doesn't pay an end-of-lease maintenance adjustment payment, the lessor will have to bear the potential maintenance exposure when the aircraft is returned. For AASET's portfolio, the initial aircraft leases contain provisions specifying maintenance standards and the aircraft's required condition on redelivery. Some of the initial leases require the lessee to provide monthly maintenance reserves and others do not have regular payment provisions. Specifically, of the initial 32 leases, 18 require monthly cash maintenance reserve payments.

Maintenance Cash Flow Assumptions Maintenance cash flow is an integral part of our cash flow model. We input the aircraft maintenance cash flow (month-by-month maintenance reserves and expenses) ICF International generates into our overall cash flow model and model the maintenance account activity per the maintenance account mechanism outlined in the transaction documents. For the initial fleet, the ICF International model forecasts each aircraft's utilization rates and conditions, according to the existing contractual lease terms and projected future lease terms, together with the associated maintenance-related cash flows. Specifically, the model predicts the timing and lessor-related inflows and outflows associated with airframe (heavy checks), engine (performance restorations and life-limited part replacements), and component (landing gear and auxiliary power unit overhauls) maintenance. The model does not forecast cash flows for remarketing, lease transition, repossession, etc. The ICF International analysis includes both base- and stress-case scenarios. The base-case scenario (a cash flow run without any stresses) assumes all aircraft remain subject to existing lease agreements through the initial leases' contractual expiration dates and then that each aircraft will be re-leased to consecutive new lessees until each aircraft reaches its assumed retirement age. Among other assumptions, the base-case scenario assumes that all payments are made in a timely manner and that no events of default occur. For the stress-case scenarios, ICF International provided stress scenario maintenance projections using a set of stress scenario assumptions consistent with our sector-wide stress maintenance projection assumptions as outlined in "S&P Outlines Maintenance Analysis For Aircraft/Aircraft Engine-Backed Securitizations," published June 11, 2015. The article outlines recessionary periods, default rates, default timing, RRR duration, the new lease's length, the percentage of subsequent leases paying maintenance reserve, and maintenance delay timing. Given the uncertainty as to how many new leases would require maintenance reserve payments after the initial leases mature, the stress maintenance projection assumes that the number of leases that have maintenance reserve requirements will decline by 50% after the initial leases mature in the stress-case scenario. The stress maintenance projection further assumes that aircraft subject to defaulted leases have had no major maintenance performed within the 12 months before the default so that the transaction will bear any required major maintenance costs. Utilizing these assumptions and ICF International's

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own assumptions on aircraft and engine maintenance expense and timing, ICF International ran a set of Monte Carlo simulations involving 250 trials in which specific lease defaults and the timing of such lease defaults varied and then took the average of the maintenance-related cash inflows/outflows. Under a "medium" default rate scenario, for the maintenance cash flow period up to the end of the asset's useful life, ICF International projected the total maintenance-related cash inflows to equal approximately $362 million in an 'A' rating stress, $375 million in a 'BBB' rating stress, $396 million in a 'BB' rating stress, and $442 million in a base case; the total maintenance-related outflows would equal approximately $423 million in an 'A' rating stress, $419 million in a 'BBB' rating stress, $411 million in a 'BB' rating stress, and $328 million in a base case. Therefore, the cumulative projected maintenance profit/loss equals approximately $61 million loss in an 'A' rating stress, a $46 million loss in a 'BBB' rating stress, a $14 million loss in a 'BB' rating stress, and a $114 million surplus in a base case. Chart 5 shows the cumulative maintenance profit/loss under base-case, 'A', 'BBB', and 'BB' stress scenarios. Chart 5

The transaction has a senior maintenance reserve account that is expected to have an $20.05 million balance and a junior reserve account with $3.94 million balance at closing. According to the transaction documents, any funds the maintenance reserve receives each month will be put into the collection account, and the maintenance expenses will

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be drawn first from the maintenance reserve account and if insufficient, then from the collection account. After paying senior fees, interest on the series A and B notes, and liquidity facility advances, the remaining available collection will be used to top up the senior maintenance reserve account so that the senior maintenance reserve account can maintain a required amount equal the sum of the following projected future months' maintenance expenses: • Before month 109, the sum of 100% of maintenance expense in month one, 75% of maintenance expense in month two, 62.5% of maintenance expense in month three, 50% of maintenance expense in month four, 37.5% of maintenance expense in month five, 25% of maintenance expense in month six, 12.5% of maintenance expense in month seven, and 12.5% of maintenance expense in month eight. • Starting from month 109, the sum of 100% of maintenance expense in the following 12 months. The transaction has an engine reserve account (initially funded with $0.21 million at closing) which needs to be topped up to an amount equal to: • Before month 109, the sum of 100% of engine reserve account payments (ERA payments) in month one, 75% of ERA payments in month two, 62.5% of ERA payments in month three, 50% of ERA payments in month four, 37.5% of ERA payments in month five, 25% of ERA payments in month six, 12.5% of ERA payments in month seven, and 12.5% of ERA payments in month eight. • Starting from month 109, the sum of 100% of ERA payments in the following 12 months. The transaction will top up the junior reserve account before month 109 so that the senior maintenance reserve account, the junior reserve account, and the engine reserve account can in aggregate maintain a required amount equal the sum of the following projected future months' maintenance expenses the sum of 100% of maintenance expense and ERA payments in month one, 87.5% of maintenance expense and ERA payments in month two, 75% of maintenance expense and ERA payments in month three, 62.5% of maintenance expense and ERA payments in month four, 50% of maintenance expense and ERA payments in month five, 37.5% of maintenance expense and ERA payments in month six, 25% of maintenance expense and ERA payments in month seven, 12.5% of maintenance expense and ERA payments from month eight to month 12. After month 109, the transaction will not top up junior reserve account. AAML will perform maintenance expense projection for the forward-looking 18 months in May and November of each year, the result of which will be confirmed for reasonableness and achievability in an opinion letter of ICF International. Amounts on deposit in senior maintenance reserve account and junior reserve account may be used only to fund maintenance costs (and, solely in the case of the junior reserve account, to fund ERA payments and to fund repayment or other application of security deposits in accordance with a lease to the extent amounts available in the security deposit account are insufficient). The excess maintenance reserve over the maintenance reserve account's required maintenance amount will be transferred to the collection account and distributed according to the rental waterfall.

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Cash Flow Analysis Results Our ratings approach considered cash flow primarily from the 32 assets in the portfolio. Cash is generated from lease or replacement lease payments, aircraft/engine disposition proceeds, and the liquidity facility. The leases are operating leases that were initially signed for fixed periods and have a 3.5-year remaining weighted average lease term. Under our stress scenarios commensurate with the preliminary 'A (sf)' rating, the cash flow results showed that timely interest and ultimate principal on the class A notes would be paid off by September 2029. Under our stress scenarios commensurate with the preliminary 'BBB (sf)' rating, the cash flow results showed that ultimate interest and principal on the class B notes would be paid off by July 2025. Under our stress scenarios commensurate with the preliminary 'BB (sf)' rating, the cash flow results showed that ultimate interest and principal on the class C notes would be paid off by June 2025. Chart 6 below shows the lease revenue projections in 'A' rating run, 'BBB' rating run, and 'BB' rating run, and base-case scenarios. Chart 6

Chart 7 below shows the class A, B, and C notes' scheduled amortization curves.

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Chart 7

Chart 8 below shows the class A notes' projected amortization curves under an 'A' rating run stress compared with the scheduled amortization curve.

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Chart 8

Chart 9 below shows the class B notes' projected amortization curve under a 'BBB' rating run stress compared with the scheduled amortization curve.

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Chart 9

Chart 10 below shows the class C notes' projected amortization curve under a 'BB' rating run stress compared with the scheduled amortization curve.

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Chart 10

Sensitivity Analysis Aircraft are operating assets with lease revenue highly sensitive to lease rates, their useful lives, and the servicer's capability. In sensitivity run 1, we modeled aircraft to be sold according to the servicer's expected aircraft/engine sale date. In sensitivity run 2, we analyzed how sensitive lifetime revenue is to our assumed LRFs (or lease yield). We reduced the LRF by a 2.2% break-even haircut at the 'A' level for the class A notes and a 18% break-even haircut at the 'BBB' level for the class B notes under, which the respective notes can still receive timely interest and ultimate principal. We reduced the LRF by a 20.5% break-even haircut at the 'BB' level for the class C notes under which the class C notes can still receive ultimate interest and ultimate principal. All of the other assumptions are consistent with the rating run. For each of the runs (both rating and sensitivity runs), we calculated the net present value (NPV) of the lifetime revenue and compared it in each scenario with that in a base-case scenario (i.e., a cash flow run without any stresses in an aircraft lease rental and sales proceeds analysis). See tables 18-20 for each sensitivity test's revenue NPV with a 5% discount rate as a percentage of the base-case run's revenue NPV at the 'A', 'BBB', and 'BB' rating levels, respectively.

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Table 18

Sensitivity Runs--Class A Notes Revenue NPV as a percenrage of the base-case run (5% discount) Base-case run

Cash flow test result

100

'A' rating run

73.98 Paid off on September 2029 with no interest shortfall

'A' sensitivity run 1 (useful life based off of management expection)

70.21 Paid off on March 2024 with no interest shortfall

'A' sensitivity run 2 (breakeven) (additional 2.2% haircut on lease rate factor)

73.11 Paid off on October 2029 with no interest shortfall

NPV--Net present value.

Table 19

Sensitivity Runs--Class B Notes Revenue NPV as a percenrage of the base-case run (5% discount) Base-case run

Cash flow test result

100

'BBB' rating run

79.27 Paid off on July 2025 with no interest shortfall

'BBB' sensitivity run 1 (useful life based off of management expection)

73.87 Paid off on August 2023 with no interest shortfall

'BBB' sensitivity run 2 (breakeven) (additional 18% haircut on lease rate factor)

71.9 Paid off on June 2032 with no interest shortfall

NPV--Net present value.

Table 20

Sensitivity Runs--Class C Notes Revenue NPV as a percenrage of the base-case run (5% discount) Base-case run

Cash flow test result

100

'BB' rating run

84.64 Paid off on June 2025

'BB' sensitivity run 1 (useful life based off of management expection)

77.57 Paid off on February 2024

'BB' sensitivity run 2 (breakeven) (additional 20.5% haircut on lease rate factor)

75.99 Paid off on April 2032

NPV--Net present value.

Tables 21 and 22 compare the sensitivity run results for Apollo, Castlelake, Shenton Aircraft Investment I Ltd., Diamond Head Aviation 2015 Ltd., ECAF I Ltd., AIM Aviation Finance Ltd., Eagle I Ltd., CIT Aviation Finance III Ltd. (if applicable), RISE Ltd., Emerald Aviation Finance Ltd., and AABS Ltd. Table 21

Revenue NPV As A Percentage Of The Base-Case Run (5% Discount)

Class A-1 rating

Apollo Aviation Securitization Equity Trust 2016-1

Castlelake Aircraft Securitization Trust 2015-1

Shenton Aircraft Invesment I Ltd.

Diamond Head Aviation 2015 Ltd.

ECAF I Ltd.

AIM Aviation Finance Ltd.

A (sf) (preliminary)

A- (sf) (preliminary)

A (sf)

A (sf)

A (sf)

A (sf)

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Table 21

Revenue NPV As A Percentage Of The Base-Case Run (5% Discount) (cont.) Class A-1 LTV 64 (%based on LMM of half-life values)

66

74

53

70

71

Base-case run (%) 100

100

100

100

100

100

A+'/'A'/'A-' rating run (%)

73.98

78.7

78.98

76.14

81.3

72.91

Sensitivity run 2 (%)

73.11 (with 2.2% additional break-even haircut to LRF)

78.51 (with 0.6% 76.70 (with 4.4% additional break-even additional haircut to LRF) break-even haircut to LRF)

75.24 (with 2.6% additional break-even haircut to LRF)

79.56 (with 3.9% additional break-even haircut to LRF)

70.92 (with 4.0% additional break-even haircut to LRF)

Eagle I Ltd.

CIT Aviation Finance III Ltd.

RISE Ltd.

Emerald Aviation Finance Ltd.

AABS Ltd.

A (sf)

A (sf)

A+ (sf)

A (sf)

A+ (sf)

Class A-1 LTV 54 (%based on LMM of half-life values)

69

62

70

63

Base-case run (%) 100

100

100

100

100

A+'/'A'/'A-' rating run (%)

66.21

73.02

75.48

75.99

75.11

Sensitivity run 2 (%)

66.21 (with 0.0% additional break-even haircut to LRF)

72.22 (with 1.8% 71.50 (with 7.8% additional break-even additional haircut to LRF) break-even haircut to LRF)

75.49 (with 0.7% additional break-even haircut to LRF)

71.74 (with 7.5% additional break-even haircut to LRF)

Class A-1 rating

NPV--Net present value. LTV--Loan-to-value. LMM--Lower of the mean and median. LRF--Lease rate factor. N/A--Not applicable.

Table 22

Revenue NPV As A Percentage Of The Base-Case Run (5% Discount) Apollo Aviation Securitization Equity Trust 2016-1

Castlelake Aircraft Securitization Trust 2015-1

Shenton Aircraft Invesment I Ltd.

Diamond Head Aviation 2015 Ltd.

ECAF I Ltd.

BBB (sf) (preliminary)

BBB (sf) (preliminary)

BBB (sf)

BBB (sf)

BBB (sf)

Class B-1 LTV (% 77 denominator is the LMM of the half-life aircraft values)

79

80

70

81

Base-case run (%)

100

100

100

100

100

'BBB+'/'BBB' rating run (%)

79.27

82.01

82.75

81.36

85.2

Sensitivity run 2 (%)

71.90 (with 18% additional break-even haircut to LRF)

81.76 (with 0.8% additional break-even haircut to LRF)

81.50 (with 2.3% additional break-even haircut to LRF)

80.96(with 1.1% additional break-even haircut to LRF)

82.19 (with 6.5% additional break-even haircut to LRF)

AIM Aviation Finance Ltd.

Eagle I Ltd.

RISE Ltd.

Emerald Aviation Finance Ltd.

BBB (sf)

Class B-1 rating

Class B-1 rating

BBB (sf)

BBB+ (sf)

BBB (sf)

Class B-1 LTV (% 82 denominator is the LMM of the half-life aircraft values)

67

72

81

Base-case run (%)

100

100

100

100

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Presale: Apollo Aviation Securitization Equity Trust 2016-1

Table 22

Revenue NPV As A Percentage Of The Base-Case Run (5% Discount) (cont.) 'BBB+'/'BBB' rating run (%)

77.4

71.47

79.63

81.1

Sensitivity run 2 (%)

74.93 (with 5.0% additional break-even haircut to LRF)

70.53 (with 2% additional break-even haircut to LRF)

70.45 (with 17.2% additional break-even haircut to LRF)

77.48 (with 7% additional break-even haircut to LRF)

NPV--Net present value. LTV--Loan-to-value. LMM--Lower of the mean and median. LRF--Lease rate factor. N/A--Not applicable.

Surveillance Standard & Poor's uses surveillance data to perform periodic reviews on all rated aircraft securitizations to identify potential and emerging trends. Our ratings reflect the transaction's ongoing risk profile. We will maintain surveillance on the transaction until the notes are paid off, review the servicer's monthly reports on underlying collateral performance, and maintain periodic contact with the managing agent and the servicer to ensure that the minimum servicing standards are sustained and any material changes in the servicer's operations are communicated and assessed. We will continue to develop and provide performance information, research, and analysis to increase the level of transparency, as well as information on our methodology, ratings, and rated transactions' performance.

Related Criteria And Research Related Criteria • Global Investment Criteria For Temporary Investments in Transaction Accounts, May 31, 2012 • Revised Cash Flow Assumptions And Stresses For Global Aircraft And Aircraft Engine Lease Securitization, Aug. 26, 2010 • Understanding Standard & Poor's Rating Definitions, June 3, 2009 • Aircraft Securitization Criteria: The Rating Process For Aircraft Portfolio Securitizations, Sept. 1, 2004 • Aircraft Securitization Criteria: Rating Considerations For Lease Pools, Sept. 1, 2004 • Aircraft Securitization Criteria: Maintenance And Related Issues, Sept. 1, 2004

Related Research • S&P Outlines Maintenance Analysis For Aircraft/Aircraft Engine-Backed Securitizations, June 11, 2015 • Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012;

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"Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, 2009.

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