New York, October 03, 2022 -- Moody's Investors Service ("Moody's") affirmed the Baa3 backed issuer rating of AerCap Holdings N.V., the Baa3 backed senior unsecured rating of AerCap Ireland Capital D.A.C., the Ba1(hyb) backed junior subordinate rating of AerCap Global Aviation Trust, and the Ba2(hyb) preferred stock rating of International Lease Finance Corporation (together "AerCap"; see the complete list of affected ratings below). Moody's also revised AerCap's outlook to positive from stable.
Affirmations:
..Issuer: AerCap Holdings N.V.
....Backed LT Issuer Rating, Affirmed Baa3
....Backed Junior Subordinated Regular Bond/Debenture, Affirmed Ba2(hyb)
..Issuer: AerCap Global Aviation Trust
....Backed Junior Subordinated Regular Bond/Debenture, Affirmed Ba1(hyb)
..Issuer: AerCap Ireland Capital D.A.C
....Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa3
....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa3
..Issuer: Delos Finance SARL
....Backed Senior Secured Bank Credit Facility, Affirmed Baa2
..Issuer: ILFC E-Capital Trust I
....Backed Pref. Stock, Affirmed Ba1(hyb)
..Issuer: ILFC E-Capital Trust II
....Backed Pref. Stock, Affirmed Ba1(hyb)
..Issuer: International Lease Finance Corporation
....Pref. Stock, Affirmed Ba2(hyb)
..Issuer: Setanta Aircraft Leasing DAC
....Backed Senior Secured Bank Credit Facility, Affirmed Baa2
Outlook Actions:
..Issuer: AerCap Holdings N.V.
....Outlook, Changed To Positive From Stable
..Issuer: AerCap Global Aviation Trust
....Outlook, Changed To Positive From Stable
..Issuer: AerCap Ireland Capital D.A.C
....Outlook, Changed To Positive From Stable
..Issuer: Delos Finance SARL
....Outlook, Changed To Positive From Stable
..Issuer: ILFC E-Capital Trust I
....Outlook, Changed To Positive From Stable
..Issuer: ILFC E-Capital Trust II
....Outlook, Changed To Positive From Stable
..Issuer: International Lease Finance Corporation
....Outlook, Changed To Positive From Stable
..Issuer: Setanta Aircraft Leasing DAC
....Outlook, Changed To Positive From Stable
RATINGS RATIONALE
Moody's affirmed AerCap's ratings based on the company's increasing competitive strength in commercial aircraft leasing, underscored by its progress integrating the operations of GE Capital Aviation Services (GECAS), which it acquired in late 2021. Moody's expects that AerCap's global scale and improved fleet and customer diversity support its prospects for stronger financial performance, as well as improved resilience to industry and macroeconomic cycles. AerCap's credit profile is also supported by its effective liquidity and capital management, including through the pandemic-induced downturn in air travel and the loss of aircraft leased to sanctioned Russian airlines.
AerCap's outlook was revised to positive from stable based on Moody's expectation that AerCap will generate stronger and less volatile profitability and cash flow compared to peers over the next 12 – 18 months, reflecting its increased competitive strength, sector leading scale and improved efficiency of operations. Moody's also anticipates that AerCap will continue to maintain strong liquidity even as its debt refinancing needs and aircraft acquisition expenditures rise in 2023 and subsequent years. Additionally, Moody's expects that AerCap's cash flow strength will drive a reduction in its debt-to-tangible net worth leverage to less than 3.0x (Moody's adjusted) by the end of 2022. AerCap's leverage rose to 3.2x after it recorded $2.7 billion of pre-tax charges in the first quarter of 2022 relating to its Russia exposure.
AerCap's credit challenges include airline industry cyclicality, larger aircraft purchase commitments after acquiring GECAS and debt-to-tangible net worth leverage (Moody's adjusted) higher than certain peers. The global airline industry is well-along in its performance recovery, which has spurred aircraft demand and lifted the profits of aircraft leasing companies. However, inflation, rising interest rates, a stronger US dollar and ongoing geopolitical strife could slow positive momentum in the industry. But Moody's expects that AerCap's global presence and well-established fleet risk management underscore its solid long-term performance prospects as it contends with these rising challenges.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade AerCap's ratings if: 1) air travel volumes and airline industry performance support continued strong demand for leased aircraft; 2) AerCap generates consistently stronger and more stable profitability and cash flow ratios compared to peers; 3) the company continues to demonstrate effective liquidity management as debt refinancing and aircraft purchase commitments rise; and 4) the company's debt-to-tangible net worth leverage ratio sustainably declines to less than 3.0x (Moody's adjusted).
Though a downgrade is unlikely given the assigned positive outlook, AerCap's ratings could be downgraded if: 1) liquidity coverage (Moody's sources-to-uses over a one-year horizon) substantially declines; 2) the recovery in air travel volumes reverses course due to adverse macroeconomic or aviation sector developments, weakening prospects for AerCap's financial performance; and 3) debt-to-tangible net worth leverage increases to more than 3.5x (Moody's adjusted).
The principal methodology used in these ratings was Finance Companies Methodology published in November 2019 and available at https://ratings.moodys.com/api/rmc-documents/65543. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
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Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
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The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.
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Mark L. Wasden
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
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New York, NY 10007
U.S.A.
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Client Service: 1 212 553 1653
Joseph Pucella
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
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