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DCR Rates CL/PK Funding's $100M Trust-Secured Variable ABS Notes

20 November 1998

DCR Rates CL/PK Funding's $100 Million Trust-Secured Variable ABS Notes

    NEW YORK, Nov. 19 -- Duff & Phelps Credit Rating Co. (DCR)
issued ratings on the $100 million secured variable-rate asset-backed notes
issued by CL/PK Funding Trust.  The ratings are as follows:  the $94 million
Class A Notes are rated `AA` (Double-A), the $3 million Class B Notes are
rated `BBB` (Triple-B), the $2.5 million Class C Notes are rated `BB`
(Double-B), and the Class D Notes are unrated.
    Credit Lyonnais/PK Airfinance (CL/PK), a wholly owned subsidiary of Credit
Lyonnais, provides and arranges asset-based financing of used commercial jet
aircraft, as well as related advice and services.  CL/PK is based in
Luxembourg with a branch office in New York and a representative office in
Tokyo.
    The underlying collateral that will pay down the notes is the cash flow
stream generated from the trust's interest in installment payments on loans
and leveraged leases used to finance the purchase of 20 aircraft, the proceeds
from the liquidation of the aircraft should the corresponding loan enter an
event of default, and the credit enhancement built into the securitization
structure.
    The collateral consists of the trust's interests in 20 aircraft flown by
15 different airlines, and all of the aircraft satisfy the stage III noise
requirements.  The transaction has 54 percent exposure to Boeing 737s
(300s and 400s), with the balance made up of 27 percent MD80s, 11 percent
DC10-30s, 8 percent Boeing 757-200s, and 1 percent DC9-32HKs.  The airline
exposure is internationally based with 65 percent European, 12 percent in the
United States, and 23 percent in Latin America.
    DCR issued the ratings on the notes based on many quantitative and
qualitative factors.  Quantitatively, the loan-to-value (LTV) ratio for the
trust's interest in the underlying collateral is conservative at 53.1 percent
of current base value.  The notes pay down quickly, and the LTVs decrease
rapidly, due to the sequential priority of payments to the notes and the short
term nature of the loans with a remaining average life of 2.9 years.  Also, a
cash reserve account of $1,250,000 is available to make timely payments of
interest on the notes.
    Qualitatively, DCR gained comfort in the diversification among the
obligors in the pool, the quality of the collateral, and the legal structure
of the transaction.  Further, DCR gained significant comfort in the historical
performance of loan portfolios originated by CL/PK, as well as CL/PK`s ability
to service the portfolio and liquidate the collateral if needed.
    The transaction was jointly placed by Credit Lyonnais Securities (USA)
Inc. and Westwood Capital, LLC.