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VX Capital Takes Advantage of Strong B737 Freighter Values

November 26, 2018

VX Capital, specializing in the leasing of B737 Classic freighters in recent years has launched an ABS – VX Cargo 2018-1 Trust – centered on 35 B737 Classic freighters.

The ABS seeks a principal amount of $190 million secured on 35 aircraft. The ABS focusses on older aircraft which have been converted or are due to be converted to freighter. The freighter market has been suffering over the last decade but most of the concern has centered more on the larger widebody aircraft rather than the narrowbody sector. The market for the B737 Classic freighters has been reasonably robust with the internet shopping serving to increase regional volumes. The nature of cargo operations makes to necessary to use low capital cost aircraft as utilization can be limited to just a few hours per day. This makes the B737 Classic particularly suited although it is noted that the greater volume offered by the B737-400 has made it the more desirable variant in recent years. the operator base of the B737 Classic freighters is limited but then this work in the favor the lessor, VX, as an operator seeking such a freighter will have few options. Of the 35 aircraft which are part of the ABS, one is off lease and three others have yet to be fully converted to freighters.

The ABS values used were base values derived from three well respected appraisers Avitas, IBA and MBA which differs from the three appraisers normally used for EETC valuations. The total value of the 35 aircraft therefore amounts to approximately $250 million. The $250 million is based on maintenance adjustments. The current market value as indicated by AVAC (www.aircraftvalues.net) using half life and generic build year assumptions amounts to only slightly less at $245 million. The values of the B737-400SF have been able to achieve a measure of stability in recent years as the market for such aircraft has improved. At some $6-7 million the aircraft is affordable for many operators with lease rentals expected to approximate $100,000 per month representing a premium over similar vintage passenger aircraft. Kroll Bond Rating has assigned an A rating for the Class A Loans.

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