KBRA Affirms Air Lease’s A- Issuer, Senior Unsecured Debt Ratings and BBB Preferred Share Rating with Stable Outlook and Assigns A- Rating to Air Lease’s Medium-Term Notes
Key Credit Considerations
The issuer and senior unsecured ratings of
The A- rating of the Sukuk trust certificates is equalized with AL’s senior unsecured debt rating based on AL’s irrevocable obligations under its purchase undertaking to provide necessary funds to ensure payments of principal and periodic distribution amounts are met following the occurrence of a Dissolution Event (which does not include a Total Loss Dissolution Event) and AL’s obligations under the purchase undertaking and servicing agency agreement ranking pari-passu with AL’s other senior unsecured obligations. The BBB rating of the Preferred Shares is two notches lower than the senior unsecured rating reflecting the deeply subordinated features of the preferred shares indicated by their ranking in the capital structure, their discretionary and non-cumulative dividend feature, and their perpetual nature. The 75% equity credit indicates that the preferred securities are highly loss-absorbing given their structural features, which protect senior creditors against credit losses to some extent.
The Stable Outlook reflects AL’s resilient performance through the pandemic-driven severe downturn and the aftermath from the Russian-Ukraine conflict. AL demonstrated robust access to capital markets at attractive rates, effective management of lessee deferrals and defaults, and successful aircraft remarketing efforts, while maintaining moderate leverage and adequate liquidity and profitability. Besides AL’s reported loss in FY22 driven by the extraordinary write-off on aircraft in
Rating Sensitivities
A ratings upgrade in the near future is not expected given the industry’s potential challenges, susceptibility to event risk in general and the company’s reliance on wholesale funding, despite the Company’s resilience demonstrated during the pandemic. The Stable Outlook could be revised to Negative or the ratings could be downgraded or reviewed for downgrade if air traffic declines and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability with significant negative impacts on profitability, capital and/or liquidity metrics. A notable increase in the company’s asset encumbrance could also trigger a review.
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Related Publication
Methodologies
- Financial Institutions: Finance Company Global Rating Methodology
- Corporates & Financial Institutions: Corporate Instrument Notching Global Methodology
- ESG Global Rating Methodology
Disclosures
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
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