New York, June 02, 2021 -- Moody's Investors Service ("Moody's") has affirmed
the Baa3 backed long-term issuer rating of AerCap Holdings N.V.
(AerCap) and the Baa3 backed senior unsecured ratings of subsidiary AerCap
Ireland Capital D.A.C., the backed Ba1(hyb)
junior subordinate rating of AerCap Global Aviation Trust and the Baa3
senior unsecured ratings of International Lease Finance Corporation.
Moody's also revised the outlooks for each entity to stable from
negative.
A complete list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
Moody's has affirmed AerCap's ratings based on its expectation
that improving demand for leased aircraft as airline operating conditions
gradually improve will strengthen the company's operating prospects.
The ratings' affirmation also considers AerCap's pending acquisition
of GE Capital Aviation Services (GECAS) from General Electric Company
(GE. Baa1 negative), that the companies expect to close in
the fourth quarter of 2021. Moody's expects this acquisition
will enhance AerCap's's competitive positioning in commercial
aircraft leasing, benefiting its earnings and cash flow from a larger
high quality fleet and increased customer base. The ratings'
affirmation also reflects AerCap's continued commitment to strong
liquidity management, including maintaining a liquidity sources
to uses ratio of at least 150% at closing of the GECAS transaction.
A credit challenge is AerCap's need to raise longer-term debt capital
to replace the acquisition transaction's bridge financing;
AerCap's larger post-transaction scale will significantly increase
its exposure to the confidence-sensitivity of the debt capital
markets. Additionally, the transaction could increase AerCap's
debt-to-equity leverage at closing, though Moody's
expects that AerCap will emphasize a deleveraging strategy toward its
2.7x target. Like industry peers, AerCap is also exposed
to continued weak performance of certain airlines.
Moody's has revised AerCap's outlook to stable from negative
based on Moody's expectation that demand for leased aircraft will
rise as air carriers rebuild capacity to serve strengthening air travel
demand, helping to improve the company's profitability and
cash flow metrics over the next 12-18 months. The stable
outlook also reflects Moody's expectation that AerCap's combination
with GECAS will have manageable execution risks, including fund
raising, and that AerCap will prioritize leverage reduction and
maintenance of strong liquidity.
Moody's revised its outlook for the aircraft leasing sector to stable
from negative on 20 May 2021, reflecting its expectations that rising
air travel volumes will strengthen airline credit quality and improve
demand for leased aircraft, strengthening lessors' prospects
for achieving stronger profitability by 2023. The stable outlook
also reflects strong liquidity positioning as well as stable financial
leverage in the sector, as the risk of large impairment charges
recedes.
AerCap maintains strong liquidity, aided by resilient access to
market debt capital during the pandemic-related downturn and the
company's own steps to build alternate sources and reduce cash flow
demands by reducing aircraft purchase commitments. AerCap has obtained
commitments for $24 billion of bridge financing from banks to fund
its payment to GE for its acquisition of GECAS and has also increased
revolving credit commitments by $4.35 billion, for
a total of $9 billion, providing backup liquidity for the
increased funding needs of the combined entity. Moody's estimates
that AerCap had liquidity coverage of 12 month's liquidity uses
of over 160% at 31 March 2021, which is above Moody's
current 150% minimum liquidity coverage threshold for investment-grade
aircraft leasing companies. Moody's expects that AerCap's
strong liquidity, liability management, and fund raising actions
will preserve its strong liquidity runway.
The ratings' affirmation reflects anticipated improvements in the
risk characteristics of AerCap's aircraft fleet. The company's
combined fleet of over 2,000 owned and managed aircraft will have
a lower percentage of wide-body aircraft (approximately 40%
versus 47% currently), which Moody's believes will
reduce fleet remarketing and residual realization risks. Further
fleet improvements are embedded in the combined order book of nearly 500
new-technology primarily narrow-body aircraft. AerCap
has a strong record of committing its ordered aircraft to new leases well
in advance of delivery.
Moody's expects that air passenger demand will recover strongly
toward 2019 levels by 2023, but during the interim certain airlines
will continue to struggle, limiting AerCap's profitability
and cash flow, though improving air travel demand should ease conditions
over the next several quarters. Moody's expects that leasing
will remain an important source of aircraft acquisition capital for the
airline industry and that recovery will provide new leasing opportunities
that will help to revive AerCap's cash flows and earnings.
AerCap's debt-to-equity leverage could rise at the closing
of its acquisition of GECAS, given the potential fluctuations in
the company's share price that will drive the value of the shares AerCap
issues to GE as part of the transaction consideration. But AerCap
has said it remains committed to a 2.7x adjusted debt-to-equity
leverage ratio, which is consistent with Moody's investment-grade
criteria. Moody's expects that AerCap will take steps to reduce
leverage to that level should it be necessary post-closing.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
AerCap's ratings could be upgraded if: 1) the company's GECAS acquisition
execution and integration risks are well managed; 2) the strength
of recovery in air travel volumes exceeds Moody's base case; 3) the
company is expected to generate consistently stronger and more stable
profitability and cash flow ratios compared to peers; 4) the company
continues to demonstrate effective liquidity management post-acquisition;
5) fleet integration, residual value risks and exposure concentrations
are well managed; and 6) the company's debt-to-tangible
net worth leverage ratio declines to less than 3.0x (Moody's adjusted).
AerCap's ratings could be downgraded if: 1) liquidity coverage (Moody's
sources-to-uses over a one-year horizon) substantially
declines; 2) recovery in air travel volumes declines materially below
Moody's base case; 3) revenues weaken and costs increase to the extent
that the company will be unable to generate materially improved profits
and operating cash flow by the end of 2023; 4) debt-to-tangible
equity leverage increases to more than 3.8x (Moody's adjusted);
5) the company's competitive positioning otherwise weakens.
LIST OF AFFECTED RATINGS
Issuer: AerCap Holdings N.V.
..Affirmations:
....Backed long-term Issuer rating,
affirmed Baa3
....Senior Unsecured Shelf, affirmed
(P)Baa3
....Backed Junior Subordinated Regular Bond/Debenture,
affirmed Ba2(hyb)
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: AerCap Ireland Capital D.A.C
..Affirmations:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed Baa3
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: AerCap Global Aviation Trust
..Affirmation:
....Backed Junior Subordinated Regular Bond/Debenture,
affirmed Ba1(hyb)
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: International Lease Finance Corporation
..Affirmations:
....Senior Unsecured Regular Bond/Debenture,
affirmed Baa3
....Preferred Stock, affirmed Ba2(hyb)
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: Delos Finance SARL
..Affirmations:
....Backed Senior Secured Bank Credit Facility,
affirmed Baa2
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: ILFC E-Capital Trust I
..Affirmation:
....Backed Preferred Stock, affirmed
Ba1(hyb)
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: ILFC E-Capital Trust II
..Affirmation:
....Backed Preferred Stock, affirmed
Ba1(hyb)
..Outlook Action:
....Outlook changed to Stable from Negative
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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.
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.
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
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
