Morningstar DBRS Assigns Provisional Credit Ratings to PK ALIFT LOAN FUNDING 6 LP

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of notes to be issued by Morningstar DBRS Assigns Provisional Credit Ratings to PK ALIFT LOAN FUNDING 6 LP:

-- $94,000,000 Class A-F Senior Secured Floating Rate Loans at (P) AAA (sf)
-- $423,000,000 Class A Senior Secured Fixed Rate Notes at (P) AAA (sf)
-- $60,000,000 Class B Secured Fixed Rate Notes at (P) AA (high) (sf)

CREDIT RATING RATIONALE/DESCRIPTION

(1) The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns March 2025 Update, published on March 26, 2025. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

(2) Transaction capital structure and sufficiency of available credit enhancement to withstand stressed cash flow assumptions for the applicable credit ratings and repay investors in accordance with the transaction terms and documents under which they have invested:
(A) Credit enhancement (CE) is composed of overcollateralization (OC) as measured by two levels of LTV measurement, subordination and a temporary reserve account available at transaction close;
(B) Morningstar DBRS' credit ratings address the payment of timely interest (with respect to Classes A-F, A, and B), and ultimate principal repayment by the Stated Maturity.
(C) The transaction is backed by 41 Collateral Obligations and ultimately, on a look-through basis, by a highly diversified pool of aircraft and engines with the Issuer having senior first liens on the assets. The underlying collateral consists of 99 aircraft and 15 aircraft engines including:
-- 71 narrowbody passenger aircraft with a majority composed of young to mid-life assets, including but not limited to A320 family (18 / 24.4% of loan balance), A320/321 neo family (12 / 10.8%), and Boeing B737-800 family (19 / 21.1%).

(3) The transaction is supported by strong cash generation from the loan principal and interest and potential disposition of aircraft. The portfolio is relatively young with more than a decade of leasable life, and compared with the transaction term, exhibits a marketable pool if required to sell the assets at any point in time.
(A) The WA age of the aircraft pool is 10.7 years consisting of mostly young aircraft. A significant portion (71%) of the pool is early to mid-life aircraft, aged less than 15 years. Additionally, younger aircraft (<10 years of age) total 44%, which is a credit positive.
(B) Based on an assumed economic useful life of 25 years for the underlying passenger aircraft, the pool has approximately 14.3 years of WA remaining economic useful life.
(C) Aircraft disposition proceeds were assessed based on proposed credit rating-level stress assumptions within stated methodology ranges.

(4) Morningstar DBRS used its proprietary CLO Insight Model to derive various credit rating pool-level scenario default rates. The model accounts for lessee concentration risk based on the number of lessees, lessees' default probabilities, and collateral tenor.
(A) Based on the overall credit profiles of the lessees and tenor of the corresponding loans, Morningstar DBRS assumes approximately 80% of lessees will default under the AAA stress scenario, and approximately 78.4% under AA (high) stress scenario.
(B) Approximately 39% of the pool is supported by airlines with Morningstar DBRS-equivalent corporate default ratings in the B (low) credit rating category or higher. The large majority of the nonrated airlines in the pool were assigned CCC-category credit ratings, representing the remaining 61% of the collateral.

(5) The transaction's structural features are generally consistent with those seen in other loan transactions (i.e., collateralized loan obligation (CLO) transactions and prior issued loan ABS). Cash flow is protected via several mechanics and provisions:
(A) Performance triggers.
(B) Two waterfalls, one for interest proceeds and one for principal and disposition proceeds.
(C) Pro rata principal payment switching to sequential when outstanding Note balances reach 40% of original.
(D) Potential deferral of interest to Classes C and D (not rated (NR)) until due at Stated Maturity.
(E) Prefunding Account.
(F) Substitution of Prepaid Assets - this is new to the PK ALIFT transactions with 2025-1 being the first one to include this feature, and discussed earlier in this report.

(6) PKAir's adequate capabilities as the servicer. Morningstar DBRS conducted an operational review of PKAir/Perseus/Merx in May 2024 and considers them to be an adequate aircraft aviation loan servicer and service providers. PKAir has solid experience managing loan facilities through multiple historical economic and aviation cycles, and the Special Advisor has significant technical and repossession experience over similar periods along with managing its fleet, including aircraft securitized through aircraft ABS.

(7) The historical credit performance of PKAir's portfolio; over the past 23 years, cumulative net losses have totaled less than 25 basis points (bps) as a percentage of originations.

(8) Consideration of the two separate potential repayment sources on a Facility Collateral Obligation¿the borrower under Facility/Collateral Obligation, payments under leases on the Underlying Collateral, and, ultimately, aircraft (or metal) disposition proceeds.

(9) Morningstar DBRS assessed jurisdictional risk across the 32 countries represented in the pool. Such risk is mitigated by (1) the pool diversification with more than 41 facilities and 114 individual aviation assets; (2) the fact that PKAir has historically repossessed less than 50 aircraft over 23 years; (3) strong historical performance with minimal defaults and net losses from 2001 to 2023 (i.e., 12 loss events in 23 years and cumulative net losses of 0.23%); (4) the two layers of protection¿(A) facility borrowers and (B) the aircraft and related leases thus containing losses to the very low levels described above; and (5) PKAir's robust origination, underwriting, and servicing capabilities to manage its book (including with the assistance of Special Advisor Perseus) across global jurisdictions (being adequately able to locate, secure, and repossess assets historically including in challenging jurisdictions). Along with the inherent diversification, Morningstar DBRS views the repossession prospects for the jurisdictions reviewed as adequate in the context of the other protective mechanisms present.
(A) Notwithstanding the foregoing mitigants, Morningstar DBRS reviewed and assessed jurisdiction risk in the pool by reviewing the information and historical events mentioned above, including across jurisdictions with which Morningstar DBRS has had prior credit rating experience (including all types of aviation-secured debt transactions such as enhanced equipment trust certificates (EETCs), aircraft ABS and diversified hybrid secured aircraft loan/lease backed debt), jurisdictional questionnaires, other publicly available information (e.g., the Pillsbury World Aircraft Repossession Index (WARI)), and the aforementioned information provided by PKAir and Perseus.

(10) Consideration of the absence of a dedicated interest reserve account (which is a common feature of ABS transactions), though less common in a CLO transaction, with which this transaction could be, at a high level, compared. This is further mitigated by (A) an insulated legal structure where all cash remains within the transaction, (B) the fact that key transaction parties are bankruptcy-remote special purpose entities, (C) the inclusion of numerous legal opinions with respect to the structure and its parties, (D) during the first six months, the presence of other cash in the form of a temporary reserve account, and (E) trapped monthly equity distributions (payable, instead, on a quarterly basis).

(11) Morningstar DBRS reviewed multiple factors and features that are rarely seen together in transactions in considering a AAA (sf) credit rating for Class A: (A) the deep experience and long-term success of PKAir and its platform over multiple cycles; (B) extremely low cumulative net losses totaling less than 25 bps over the past 20+ years, including through stressed periods (e.g., COVID-19 and the financial crisis); (C) the strong franchise among PKAir and its affiliates (specifically Apollo and Perseus); (D) the significant pool diversification across borrowers, lessees, aircraft, and jurisdictions that is unmatched across recent aviation debt transactions; (E) the nature of the assets and credit enhancement on the loan portfolio as well as the Underlying Assets, resulting in a look-through LTV of near 40%; and (F) additional features included in the transaction for which no quantitative credit was given but that provide qualitative benefit.

Morningstar DBRS' credit rating on the securities referenced herein addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Investment Amount, and Current Interest and unpaid Current Interest from prior periods.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the redemption premium and interest on unpaid interest on the Class A-F Loans, Class A, and Class B Notes.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in US dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is

Rating Structured Aviation Transactions (March 10, 2025) https://dbrs.morningstar.com/research/449583.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned securities are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

CLO Insight Model v1.0.1.4
https://dbrs.morningstar.com/research/443207/global-methodology-for-rating-clos-and-corporate-cdos

Operational Risk Assessment for U.S. ABS Originators and Servicers (March 26, 2025)
https://dbrs.morningstar.com/research/450709/operational-risk-assessment-for-us-abs-originators-and-servicers

Legal Criteria for U.S. Structured Finance (December 3, 2025)
https://dbrs.morningstar.com/research/444064/legal-criteria-for-us-structured-finance

Rating U.S. Structured Finance Transactions (March 10, 2025)
https://dbrs.morningstar.com/research/449616/rating-us-structured-finance-transactions

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.