Item 1.01 Entry into a Material Definitive Agreement.
On August 22, 2018, Willis Engine Structured Trust IV (WEST IV), a direct, wholly-owned subsidiary of Willis Lease Finance Corporation
(Willis), closed its offering of $373.4 million in aggregate principal amount of fixed rate notes (the Notes). The Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of
$326.8 million and the Series B Notes in an aggregate principal amount of $46.7 million. The Notes are secured by, among other things, WEST IVs direct and indirect interests in a portfolio of 55 engines and one airframe.
The Series A Notes have a fixed coupon of 4.750%, an expected maturity of approximately eight years and a final maturity date of September 15, 2043 and
Series B Notes will have a fixed coupon of 5.438%, an expected maturity of approximately eight years and a final maturity date of September 15, 2043. The Series A Notes were issued at a price of 99.99504% of par and the Series B Notes were
issued at a price of 99.99853% of par. Principal on the Notes is payable monthly to the extent of available cash in accordance with a priority of payments included in the Indenture (as defined below). Proceeds from asset sales by WEST IV will be
used, at WEST IVs election subject to certain conditions, to reduce WEST IVs debt or to acquire other engines or airframes.
In connection
with this transaction, Willis and WEST IV entered into a number of agreements, in addition to the Note Purchase Agreement previously reported on the Willis current report on Form
8-K
filed on August 16,
2018, listed below:
1. Asset Purchase Agreement dated as of August 22, 2018 by and between Willis, as seller, and WEST IV, as
purchaser, providing for, among other things, the sale by Willis to WEST IV of the portfolio of 55 engines and one airframe during a specified delivery period, by way of the sale of the beneficial ownership interests in trusts that own the assets.
2. Trust Indenture dated as of August 22, 2018 among WEST IV, Deutsche Bank Trust Company Americas (DBTCA), as trustee
and security trustee, Willis, as administrative agent, and Bank of America, N.A., as initial liquidity facility provider, providing for the issuance by WEST IV of the Notes (the Indenture). The Indenture contains customary covenants for
offerings of this type that apply to WEST IV and its subsidiaries (but not Willis and its subsidiaries other than WEST IV), including among others, limitations on incurrence of additional debt, limitations on distributions and dividends, limitations
on asset dispositions, and a requirement to comply with certain concentration lease limits included in the Indenture. The Indenture also contains customary events of default.
Pursuant to the Indenture, cash earned by WEST IV will be collected in a pledged account, which will be used to service the Notes and any
remaining amounts, after debt service and defined expenses, will be distributed to Willis. Additionally, amounts equal to a portion of WEST IVs maintenance costs (including maintenance reserve reimbursement obligations) and lease security
deposit reimbursement obligations will be accumulated in pledged accounts and will be available to fund future maintenance events and to apply as security deposit amounts are permitted or required to be applied under the applicable lease,
respectively.
3. Security Trust Agreement dated as of August 22, 2018 among WEST IV and DBTCA, as security trustee (the
Security Trustee) and operating bank (the Security Trust Agreement). Pursuant to the Security Trust Agreement, WEST IV grants, and each of WEST IVs future subsidiaries will grant, a security interest in substantially
all of its assets to the Security Trustee for the benefit of the secured parties in the transaction, including the holders of the Notes. The assets of WEST IV are not available to satisfy Williss obligations or those of any of Williss
affiliates other than the obligations specific to WEST IV.
4. Servicing Agreement dated as of August 22, 2018 among WEST IV and
Willis, as servicer and administrative agent, providing for the appointment of Willis as the servicer of the assets of WEST IV and its subsidiaries. WEST IV will pay Willis monthly fees equal to 11.5% as servicer and 2.0% as administrative agent of
the aggregate net rents actually received by WEST IV on its engines. WEST IV will also pay Willis a fee of 3.0% of the net proceeds from the sale of any engines.
5. Administrative Agency Agreement dated as of August 22, 2018 among WEST IV, Willis, as administrative agent and DBTCA, as trustee,
providing for the appointment of Willis as the administrative agent of WEST and its subsidiaries.
6. Revolving Credit Agreement dated as
of August 22, 2018 among WEST IV, Willis, as administrative agent and Bank of America, N.A., as initial liquidity facility provider, providing for a revolving loan that may only be applied to certain of WEST IVs obligations, including
interest on the Notes for a specified period.
Each of these agreements contains customary representations, warranties, covenants and events of default
for a transaction of this type.