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Rating Action:

Moody's downgrades Voyager Aviation Holdings' long-term senior unsecured debt rating to Caa2 from B2, outlook remains negative

24 Sep 2020

New York, September 24, 2020 -- Moody's Investors Service, ("Moody's") has downgraded Voyager Aviation Holdings, LLC's (Voyager) corporate family rating to B3 from B1 and its long-term senior unsecured rating to Caa2 from B2.

The disruption in air travel globally is related to the coronavirus pandemic, which Moody's regards as a social risk under its environmental, social and governance (ESG) framework, given the substantial implications for public health and safety.

Downgrades:

..Issuer: Voyager Aviation Holdings, LLC

....LT Corporate Family Rating, Downgraded to B3 from B1

....Senior Unsecured Regular Bond/Debenture, Downgraded to Caa2 from B2

Outlook Actions:

..Issuer: Voyager Aviation Holdings, LLC

....Outlook, Remains Negative

RATINGS RATIONALE

Moody's has downgraded Voyager's ratings to reflect the rising refinancing risk that the company has with respect to the August 2021 maturity of its $415 million senior unsecured notes, considering the company's uncertain access to debt capital amid the aviation sector downturn and limited alternate liquidity. Voyager management has reported that it is pursuing various alternatives to enhance the company's cash position and address the upcoming maturity, including potential additional secured and unsecured financing arrangements. Most of Voyager's funding is provided by amortizing non-recourse secured debt whose debt service is supported by the cash flows generated by pledged aircraft and associated leases. However, the company's small fleet of 18 aircraft, the collateral pledge of all of its aircraft, as well as lenders' shift to more conservative loan underwriting in the current weakened operating environment likely limits Voyager's ability to extract sufficient funds from secured financing and other alternatives to repay the senior notes at maturity. Unlike higher rated aircraft leasing companies, Voyager has no committed backup line of credit from which it can borrow to cover liquidity contingencies. Additionally, it is undetermined whether Voyager's sponsor Centerbridge Partners would consider providing capital support to strengthen Voyager's liquidity position. Voyager's limited liquidity alternatives raise the risk that holders of the company's senior notes could be subject to a distressed exchange of the notes, in Moody's view.

The downturn in the airline industry has weakened the market value of commercial aircraft, eroding the current value of Voyager's residual interest in the aircraft it has pledged to secured lenders, which constitutes the primary source of asset coverage for Voyager's senior notes. As a result of the weakened asset coverage, Moody's has downgraded Voyager's senior unsecured notes by three notches while downgrading its corporate family rating by two notches.

Voyager's B3 corporate family and Caa2 long-term senior unsecured ratings reflect the company's small competitive scale compared to rated peers, higher aircraft and airline lessee concentrations, and limited alternate liquidity but also the relatively low average age and long average remaining lease term of the company's aircraft fleet and the stronger average credit quality of the company's airline customers. To date, Voyager has made proportionately fewer rent deferral accommodations to its customers than other Moody's rated aircraft leasing companies. A high percentage of Voyager's customers are "flag" carriers that have received capital support and should better endure the downturn in air travel compared to weaker competitors. However, the company continues to work with certain customers whose rental payments are in arrears regarding formal rental relief, representing a material proportion of Voyager's revenues. Secured lenders on the aircraft appear also likely to temporarily relax debt service requirements on the aircraft in question, mitigating the decline in Voyager's rent collections. These factors highlight the above average credit quality of Voyager's airline customers but also its high customer concentrations.

Voyager's $1.8 billion fleet of 18 aircraft at 30 June 2020 had an average age of 5.4 years, which compares favorably with other aircraft leasing companies, and a weighted average remaining lease term of 6.8 years, consistent with the rated peer median. The company's aircraft include recent vintage Boeing 777 and Airbus A330 passenger and Boeing 747 freighter models that are deployed in core service by the respective airline and cargo operators, but whose user base is smaller than widely operated narrow-body aircraft. Moody's believes that the current downturn has elevated the residual value and remarketing risks of even newer wide-body aircraft. Moody's expects that recovery in air travel volumes will materially strengthen toward 2019 levels in 2023, but that recovery in utilization of wide-body aircraft will lag utilization improvements of narrow body aircraft.

Voyager's outlook remains negative, based on Moody's expectation that the downturn in airline sector will weaken the company's access to debt capital to refinance its 2021 senior notes maturity and that the company's cash flow will be pressured by the weakened financial condition of its airline customers.

Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Today's rating action reflect the negative effects on Voyager of the breadth and severity of the shock, and the deterioration in credit quality, profitability, capital and liquidity it has triggered.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The negative outlook indicates that rating upgrades are unlikely over the next 12-18 months. However, the outlook can be stabilized and the ratings could be upgraded if the company: 1) demonstrates that it has sufficient liquidity to repay its August 2021 senior notes as well as meet other operating and financial liquidity requirements over the outlook horizon; 2) improves fleet and customer diversification; 3) generates consistently positive profitability; and 4) reduces its ratio of debt to tangible net worth to less than 3.5x.

Moody's could downgrade Voyager's ratings if the company: 1) is not able to refinance or accumulate sufficient funds to repay its August 2021 $415 million senior notes; 2) significantly increases its debt-to-tangible net worth ratio; or 3) experiences a deterioration operating prospects including from a disruption in air travel and weakening of airline credit quality.

The principal methodology used in these ratings was Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099. Alternatively, please see the Rating Methodologies page on www.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 at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

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 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 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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