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Rating Action:

Moody's rates ILFC's secured Notes Ba3

Global Credit Research - 09 Aug 2010

New York, August 09, 2010 -- Moody's Investors Service assigned a Ba3 rating to International Lease Finance Corporation's (ILFC) senior secured notes (Notes), issued in three series of up to $900 million due 2014, $800 million due 2016, and $800 million due 2018. ILFC's other ratings, including its B1 Corporate Family and senior unsecured debt ratings, are not affected by the new transaction. The outlook for ILFC's ratings remains negative.

The Notes will be secured by a perfected first priority lien, or the equivalent, on specific aircraft and associated equipment, leases and proceeds owned by ILFC and certain of its subsidiaries. The ILFC subsidiaries that own assets pledged in support of the Notes will guarantee the Notes on a senior secured basis. ILFC will use the proceeds of the debt issuance to repay a portion of the principal and interest of currently outstanding indebtedness owing to AIG Funding and the associated ILFC guarantee of AIG Funding's borrowing from the Federal Reserve Bank of New York. Repayment of the AIG Funding debt would result in the release of liens on a significant number of aircraft securing the AIG Funding loans, a portion of which would comprise the collateral securing the Notes. In Moody's view, ILFC's financial and operational flexibility would improve, to the extent that the AIG Funding debt is repaid.

The Ba3 rating assigned to the Notes is one notch above ILFC's B1 corporate family rating, based upon terms that meaningfully lower secured creditors' risk of loss compared to holders of ILFC's unsecured obligations. A supporting factor in the one-notch uplift is the initial collateral coverage provided by the asset pool, based upon independently appraised values and net book values. The Notes are rated one-notch lower than ILFC's Ba2-rated $750 million term loan maturing March 2015 (Term Loan 1; see press release dated February 24, 2010). Though the Notes are expected to feature similar initial collateral coverage as Term Loan 1, estimated to be 59% loan-to-value, the Notes do not require a quarterly maximum loan-to-value certification and semi-annual collateral appraisal as is the case with Term Loan 1. Rather, with respect to the Notes, compliance with a 63% maximum LTV restriction is required only upon the occurrence of specific events, including a refinancing of the Notes with secured debt and repayment of a series of Notes. In Moody's view, the more frequent collateral assessments and loan-to-value compliance requirements under Term Loan 1 better protect Term Loan 1 creditors from potential losses in a liquidation scenario.

To ensure acceptable pool diversity, the collateral securing the Notes will be subject to concentration limits relating to aircraft type (wide- or narrow-body), model, lessee, and country of operation that are identical to Term Loan 1.

The Ba3 rating anticipates ILFC's greater use of secured debt in its capital structure. To generate cash to repay its significant upcoming unsecured debt maturities, ILFC will likely seek to issue additional secured and unsecured debt and sell certain assets. The notching uplift incorporated into the Ba3 rating is consistent with Moody's estimate of ILFC's future capital structure, taking into consideration the anticipated shifts in its funding profile.

The rating of the Notes also reflects ILFC's fundamental credit characteristics including strengths such as its competitive positioning in the aircraft leasing industry, modern aircraft fleet, and history of earnings growth, as well as one notch of rating uplift associated with support from ultimate parent American International Group (AIG). While ILFC's liquidity profile remains a key rating concern, Moody's believes the Notes offering is incrementally helpful to the firm's efforts to strengthen its liquidity position and establish improved stand-alone viability. Further progress by the company in advancing its liquidity initiatives would be a credit positive.

In its last ILFC rating action dated March 30, 2010, Moody's assigned a rating of B1 to ILFC's senior unsecured notes due 2015 and 2017.

The principal methodology used in rating ILFC is Analyzing the Credit Risks of Finance Companies, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Rating Methodologies sub-directory.

International Lease Finance Corporation, headquartered in Los Angeles, California, is a major owner-lessor of commercial aircraft.

New York
Mark L. Wasden
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Young
MD - Financial Institutions
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's rates ILFC's secured Notes Ba3
No Related Data.
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