CORRECTION TO HEADLINE: MOODY'S ASSIGNS Aaa TO NORTHWEST AIRINES, INC. SERIES 2002-1 CLASS G ENHANCED EQUIPMENT TRUST CERTIFICATES AND Ba1 TO THE CLASS C (SHOULD STATE AIRLINES)
New York, July 30, 2002 -- Moody's Investors Service has assigned the following ratings to Northwest Airlines, Inc. Pass Through Certificates Series 2002-1:
$637,131,000 Class G Certificates: Aaa
$112,000,000 Class C Certificates: Ba1
The rating on the Class G Certificates is based on the certificate guaranty insurance policy issued by MBIA Insurance Corporation ("MBIA") to support the timely payment of interest when due and the ultimate payment of principal on the Class G Certificates. Moody's rating of the Insurance Financial Strength of MBIA is Aaa. The rating on the Class C Certificates is based on the ability of the issuer to make timely payments of interest and ultimate payment of principal at a date no later than the legal final maturity date of the Certificates. The ratings are based on the credit quality of Northwest Airlines, Inc. ("Northwest") as obligor under the leases, the value of the aircraft pledged as security for the equipment notes, and the credit support provided by the liquidity facilities for the Class C Certificates.
Proceeds from the offering will be placed in an escrow account and used to purchase equipment notes issued in connection with separate financing transactions of 20 new aircraft to be chosen by Northwest from a total of 32. The aircraft to be financed will consist of 11 new Airbus A319-100 aircraft (chosen from a total of 15 scheduled for delivery to Northwest from October 2002 through December 2003), 6 new Boeing 757-300 aircraft (chosen from a total of 11 scheduled for delivery to Northwest from November 2002 through October 2003), and 3 new Airbus A330-300 aircraft (chosen from a total of 6 scheduled for delivery Northwest from June 2003 through December 2003).
The aircraft collateral includes both wide body and narrow body aircraft all of which should be included in Northwest's fleet for the duration of the transaction. All three aircraft types are well represented in commercial fleets worldwide and Moody's expects that secondary market demand would be present in all but the most difficult of resale markets. Moody's notes that the B757 aircraft type has been in production since 1982 and is somewhat older technology than the Airbus aircraft leaving it slightly less protected from valuation fluctuations in the latter years of the transaction.
The majority aircraft are expected to be leased to Northwest through separate leveraged lease transactions. It is anticipated that two will be owned Northwest. NWA Corp. (Senior Unsecured rating, B2), the parent of Northwest will guarantee payment of all principal and interest under owned aircraft notes and all of Northwest's lease obligations associated with the leased aircraft. The equipment notes are secured by a security interest in the aircraft and by an assignment of the leases relating thereto. It is the opinion of counsel to Northwest that the equipment notes will be entitled to the benefits under section 1110 of the U.S. Bankruptcy Code.
The Class G and C Certificates (the "Certificates") will be issued each in two classes - Class G-1, Class G-2 and Class C-1, C-2. The Class G-1 and G-2 Certificates rank equally in right of distribution and the Class C-1 and C-2 Certificates rank equal in right of distribution and rank junior to the Class G Certificates. The Class G-1 and C-1 Certificates will be floating rate and the Class G-2 and C-2 Certificates fixed rate.
The Certificates will be supported by liquidity facilities intended to pay up to 18 months of interest in the event Northwest has defaulted on its payments under the notes. The Primary Liquidity Facility is initially provided by Citibank, N.A. (rated Prime-1) and the Above-Cap Liquidity Facility is initially provided by Credit Suisse First Boston International (rated Prime-1). Moody's notes that outstandings under the liquidity facility have a lien prior to that of the Certificates on the proceeds of the liquidation of aircraft. Class D Certificates will be issued but not rated. The Class D Certificates will not benefit from a liquidity facility and are subordinated to all Class G-1, G-2, C-1, and C-2 Certificates.
Any future changes in the underlying credit quality of MBIA and its ratings could cause a change in the rating of the Class G Certificates. Any future change in the underlying rating of Northwest, the availability of the liquidity facilities, the rating of the providers of the liquidity facilities or a substantial change in the value of the underlying aircraft collateral could cause a change in the rating of the Class C certificates.
Northwest Airlines, Inc. is headquartered in Minneapolis, Minnesota.
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