The two most prominent risks to our expected returns are the future value of our asset prices or “residual value” and counterparty credit default. While counterparty credit is second in the order of risk hierarchy, this risk is significantly lower than residual value risk.

Residual Values: As part of Thora’s underwriting process, we have developed proprietary residual value curves for over 25 different helicopter model types. Further, we also obtain third-party appraisal projections as part of each our pre-purchase underwriting and annual audit process. At a minimum, we assume a one-in-four probability of exiting the ownership of our aircraft into a soft market and no benefit from macroeconomic inflation, and often apply greater conservatism than that. This translates to roughly 6% projected annualized depreciation of the aircraft. In contrast, our exits have resulted in appreciation by an average of over 3% generating outperformance relative to our initial base underwriting projections.

Counterparty Credit: Based on our proprietary credit rating analysis, Thora’s portfolio maps to a BBB S&P-equivalent credit rating. On a probabilistic-basis, Thora has significant margin of safety in our counterparty credit analysis. The downside returns from stressed residual value projections is the controlling projection for all S&P equivalent- ratings except for CCC.

Because of Thora’s focus on deploying capital into the “blue light” sector of helicopters – consisting of end-users operating on behalf of first responders and utilities – not only are Thora’s cash flows less sensitive to macroeconomic fluctuations, but importantly our counterparties also have lower sensitivity to the business cycle.