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Rating Action:

Moody's affirms ILFC's Ba3 rating, revises outlook to stable from positive

Global Credit Research - 26 Aug 2013

NOTE: On September 10, 2013, the press release was revised as follows: Corrected the first paragraph to: Moody's Investors Service affirmed all ratings of International Lease Finance Corporation (ILFC) and revised its ratings outlook to stable from positive Revised release follows.

New York, August 26, 2013 -- Moody's Investors Service affirmed all ratings of International Lease Finance Corporation (ILFC) and revised its ratings outlook to stable from positive.

RATINGS RATIONALE

The change in rating outlook reflects Moody's view that American International Group's (AIG, Baa1 stable) sale of ILFC to Jumbo Acquisition Limited is less likely to occur as originally proposed, based on a series of transaction delays, changes in the makeup of the buyer consortium, and AIG's parallel pursuit of an IPO of ILFC's shares as a potential alternative to the sale. These developments increase uncertainty regarding ILFC's longer-term strategic priorities, access to capital, and stability of ownership.

"We previously said that the sale, as originally proposed, would benefit ILFC by providing clarity regarding its ownership and strategy, and potentially expanding its access to clients and funding sources in growing Asian markets," said Moody's Vice President Mark Wasden. "However, it is less certain that the sale will close and if it does, what the implications would be for ILFC's long-term credit profile."

AIG agreed in December 2012 to sell up to a 90% stake in ILFC to Jumbo, a consortium of investors based mainly in China, for $4.7 billion. In response to Jumbo's missing payment deadlines, AIG agreed to extend the sale agreement but modified terms allowing it to prepare for a potential initial public offering of ILFC shares. Statements by certain consortium investors indicate that the composition of the consortium has itself changed, calling into question the strategic alignment between ILFC and remaining investors.

ILFC's ratings and outlook reflect Moody's expectation that a period of time will be required to observe and fully evaluate the credit considerations associated with ILFC's eventual change in ownership. Key considerations include the financial effects on ILFC's capital position and earnings, as well as new owners' longer-term strategic and financial objectives and their influence on ILFC's growth rate, portfolio concentrations, financial leverage, and access to capital.

ILFC's ratings reflect its leading global franchise positioning, aircraft and customer diversification, and resilient operating cash flow. Also supporting its ratings, ILFC has in recent years extended its debt maturity profile, strengthened liquidity management, and reduced leverage. Ratings are constrained by challenges relating to sustaining lease margin improvements and generating attractive returns on equity. Additionally, ILFC's business is exposed to the effects of economic cyclicality on air travel volumes, aircraft demand and lease rates, and airline credit quality. Additional credit challenges include the monoline and cyclical nature of ILFC's business, its exposure to aircraft residual values, and its reliance on confidence-sensitive wholesale funding.

Moody's could upgrade ILFC's ratings if the company sustainably improves profitability while maintaining solid liquidity and leverage positions; if operating conditions improve, particularly in Europe; and if new ownership is conducive to good governance and operational independence, as well as discipline regarding growth, concentration risks, leverage, and liquidity. Moody's could downgrade ratings if ILFC's margins and cash flow shrink unexpectedly or if its liquidity profile weakens, or if the company embarks on a strategy of high growth accompanied by higher than expected leverage.

First acquired by AIG in 1990, ILFC is one of the world's largest commercial aircraft leasing concerns, with approximately 1,000 owned or managed Boeing and Airbus aircraft at June 30, 2013 and commitments to purchase 281 additional aircraft for delivery through 2020.

The principal methodology used in this rating was Finance Company Global Rating Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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 ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Mark L. Wasden
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Franklyn Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms ILFC's Ba3 rating, revises outlook to stable from positive
No Related Data.

 

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