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Rating Action:

Moody's takes actions on the ratings of 7 aircraft lessors; changes aircraft leasing sector outlook to negative from stable due to coronavirus uncertainty

23 Mar 2020

New York, March 23, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings of the following aircraft leasing companies and revised their outlooks to negative: AerCap Holdings N.V. (Baa3 backed issuer rating), Aviation Capital Group LLC (Baa2 issuer rating), Avolon Holdings Limited (Baa3 backed issuer rating), DAE Funding LLC (Baa3 backed long-term senior unsecured), Fly Leasing Limited (Ba3 corporate family rating), and Voyager Aviation Holdings, LLC (B1 corporate family rating). Moody's has also revised the review of Aircastle Limited's Baa3 long-term senior unsecured rating to review for downgrade from review direction uncertain. The ratings of Air Transport Services Group, Inc. (Ba2 corporate family rating, stable) and Fortress Transportation and Infrastructure Investors, LLC (Ba3 corporate family rating, stable) are not affected by these actions for idiosyncratic reasons.

The rating actions reflect the likely negative effects on aircraft lessors' financial performance from the widening disruption in airline operations globally relating to the coronavirus pandemic. In connection with these actions, Moody's has revised its outlook for the aircraft leasing sector to negative from stable.

Affirmations:

..Issuer: AerCap Holdings N.V.

....Issuer Rating, Affirmed Baa3

....Backed Junior Subordinated Regular Bond/Debenture, Affirmed Ba2(hyb)

..Issuer: AerCap Ireland Capital D.A.C

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

....Backed Senior Unsecured Shelf, Affirmed (P)Baa3

..Issuer: AerCap Global Aviation Trust

....Backed Junior Subordinated Regular Bond/Debenture, Affirmed Ba1(hyb)

....Backed Senior Unsecured Shelf, Affirmed (P)Baa3

..Issuer: International Lease Finance Corporation

....Pref. Stock, Affirmed Ba2(hyb)

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

..Issuer: Delos Finance SARL

....Backed Senior Secured Bank Credit Facility, Affirmed Baa2

..Issuer: Flying Fortress Holdings, LLC

....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: Aviation Capital Group LLC

.... Issuer Rating, Affirmed Baa2

....Commercial Paper, Affirmed P-2

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

..Issuer: Avolon Holdings Limited

.... Issuer Rating, Affirmed Baa3

..Issuer: Global Aircraft Leasing Co., Ltd.

....Senior Unsecured Regular Bond/Debenture, Affirmed Ba2

..Issuer: Avolon Holdings Funding Limited

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

..Issuer: Avolon TLB Borrower 1 (US) LLC

....Senior Secured Bank Credit Facility, Affirmed Baa2

....Backed Senior Secured Bank Credit Facility, Affirmed Baa2

..Issuer: Park Aerospace Holdings Limited

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

..Issuer: AWAS Aviation Capital D.A.C.

.... Issuer Rating, Affirmed Baa3

..Issuer: DAE Funding LLC

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

..Issuer: Fly Leasing Limited

.... Corporate Family Rating, Affirmed Ba3

....Pref. Shelf, Affirmed (P)B3

....Subordinate Shelf, Affirmed (P)B2

....Senior Unsecured Shelf, Affirmed (P)B1

....Pref. Shelf Non-cumulative, Affirmed (P)Caa1

....Senior Unsecured Regular Bond/Debenture, Affirmed B1

..Issuer: Voyager Aviation Holdings, LLC

.... Corporate Family Rating, Affirmed B1

....Senior Unsecured Regular Bond/Debenture, Affirmed B2

On Review for Downgrade:

..Issuer: Aircastle Limited

....Preference Shelf, Placed on Review for Downgrade from Review Direction Uncertain, currently (P)Ba2

....Subordinate Shelf, Placed on Review for Downgrade from Review Direction Uncertain, currently (P)Ba1

....Senior Unsecured Shelf, Placed on Review for Downgrade from Review Direction Uncertain, currently (P)Baa3

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade from Review Direction Uncertain, currently Baa3

Outlook Actions:

..Issuer: AerCap Holdings N.V.

....Outlook, Changed To Negative From Stable

..Issuer: AerCap Ireland Capital D.A.C

....Outlook, Changed To Negative From Stable

..Issuer: AerCap Global Aviation Trust

....Outlook, Changed To Negative From Stable

..Issuer: International Lease Finance Corporation

....Outlook, Changed To Negative From Stable

..Issuer: Delos Finance SARL

....Outlook, Changed To Negative From Stable

..Issuer: Flying Fortress Holdings, LLC

....Outlook, Changed To Negative From Stable

..Issuer: ILFC E-Capital Trust I

....Outlook, Changed To Negative From Stable

..Issuer: ILFC E-Capital Trust II

....Outlook, Changed To Negative From Stable

..Issuer: Aviation Capital Group LLC

....Outlook, Changed To Negative From Stable

..Issuer: Avolon Holdings Limited

....Outlook, Changed To Negative From Stable

..Issuer: Global Aircraft Leasing Co., Ltd.

....Outlook, Changed To Negative From Stable

..Issuer: Avolon Holdings Funding Limited

....Outlook, Changed To Negative From Stable

..Issuer: Avolon TLB Borrower 1 (US) LLC

....Outlook, Changed To Negative From Stable

..Issuer: Park Aerospace Holdings Limited

....Outlook, Changed To Negative From Stable

..Issuer: AWAS Aviation Capital D.A.C.

....Outlook, Changed To Negative From Stable

..Issuer: DAE Funding LLC

....Outlook, Changed To Negative From Stable

..Issuer: Fly Leasing Limited

....Outlook, Changed To Negative From Positive

..Issuer: Voyager Aviation Holdings, LLC

....Outlook, Changed To Negative From Stable

RATINGS RATIONALE

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. More specifically, the coronavirus pandemic has led to more significant disruption in the aviation sector than Moody's had previously anticipated. The operating prospects of many airlines globally have weakened significantly as mandated travel bans and limitations on select airport operations have been followed by sharp curtailments of scheduled flights and increased storage of aircraft. The number of airlines petitioning leasing companies for relief from aircraft rental payment obligations has risen significantly. While lessors are considering such requests selectively, Moody's expects that the increased depth of distress in the airline sector will result in lower lease renewals, higher lease defaults and premature return of leased aircraft, and misalignment of lease aircraft demand and supply given slackened travel volumes and higher aircraft available for lease for an indeterminate period of time. In this very uncertain environment, both lease rates and aircraft utilization rates will suffer, negatively affecting aircraft lessors' cash receipts from aircraft rentals. Additionally, lessors access to critical debt capital will likely be constrained and more costly.

Moody's revised base case for aircraft lessors reflects the now wider and deeper aviation sector disruption and anticipated slower pace of subsequent recovery. A severe downside scenario that involves a more protracted period of deep disruption and still slower recovery is also a higher probability than previously anticipated. In such a scenario, airline lease defaults would mount, lessors would make further concessions on lease renewal terms and rates in an effort to keep aircraft deployed, and declining aircraft values would lead to impairment charges that, though non-cash, would weaken lessors' capital positions. Key variables that will affect the depth and duration of the disruption and the pace of recovery include the effectiveness of societal efforts to stem the spread of coronavirus, the duration of governmental restrictions on travel, the level of governmental policy support offered to airlines that permit them to meet their financial obligations, and the continuity of post-crisis business and consumer air travel demand compared with the pre-crisis trend.

Moody's-rated aircraft leasing companies generally have stronger liquidity than global airlines, which positions them well to endure base case conditions, a key factor in Moody's rating outcomes. Almost all rated leasing companies have sufficient liquidity to repay maturing debt and fund capital expenditures commitments for one year or more, based on year-end 2019 financial disclosures. As conditions continue to evolve, Moody's expects that the strongest lessors will exhibit superior ability to manage their financial obligations, which may lead to greater differentiation in credit attributes and therefore ratings. However, the possibility of positive rating actions on lessors is limited until air travel volumes demonstrate sustained recovery and lessors show an ability to remediate any deterioration in key financial metrics.

A credit and rating consideration common to aircraft leasing companies is exposure to aviation sector environmental concerns. Moody's views aircraft lessors' exposure to environmental risks as moderate, consistent with Moody's general assessment for airlines and aircraft asset backed securities. Pressure on airlines to limit emissions will likely grow over time, which will cause older, less fuel-efficient aircraft to decline in demand. Moody's expects that leasing companies will pursue aircraft investments that reflect the shifting operating priorities of airlines with respect to environmental concerns. Moody's regards the coronavirus pandemic as a social risk under its ESG framework, given the substantial implications for public health and safety.

What follows is the rating rationale supporting individual leasing company rating actions.

AerCap Holdings N.V. (AerCap)

Moody's affirmed AerCap's Baa3 backed issuer rating based on the company's strong liquidity position, improved fleet risks, and history of strong operating performance, which support the company's leading competitive positioning in commercial aircraft leasing. Moody's revised AerCap's outlook to negative from stable to reflect the weakened operating performance of airlines relating to the widening coronavirus pandemic and the anticipated negative effects on AerCap's earnings and cash flow.

Moody's estimates that AerCap has sufficient liquidity to cover over 12 months of cash requirements for debt repayments and capital expenditures, including Moody's base case stresses to cash flow relating to likely deterioration in rental receipts from the company's significantly weakened airline customers. AerCap has $2.5 billion of senior unsecured debt maturities in the second half of 2020, which Moody's views as manageable given AerCap's liquidity resources. AerCap began the year with approximately $3.5 billion of aircraft acquisition commitments in 2020 for efficient new technology aircraft, but potential delivery delays from Boeing and Airbus may reduce this figure, a positive for near-term liquidity. AerCap has arranged leases on a very high percentage of its new aircraft scheduled to be delivered over the next two years, which offsets the risks of speculative new aircraft orders, but Moody's expects that a material number of these commitments would be at risk of falling away if airline industry weakness is sustained. AerCap has strengthened its fleet composition in recent years, reducing the company's exposure to the more volatile residual risks on aging aircraft, but it has a more significant investment in wide-body aircraft than peers, which results in increased remarketing challenges compared to fleets with a higher proportion of more liquid narrow-body aircraft. AerCap reported 2019 earnings of $1,146 million, up 13% from 2018, resulting in a ratio of net income to average assets of 2.6%, which compares well with rated peers in aircraft leasing. Moody's expects that AerCap's profitability will weaken materially but remain positive under Moody's base case stresses. Moody's has no particular concern regarding AerCap's governance.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Rating upgrades are unlikely given the negative outlook. However, Moody's could upgrade AerCap's ratings if the company: 1) increases and maintains a ratio of tangible common equity to tangible managed assets above 20%, 2) further reduces fleet composition risks, 3) sustainably reduces the ratio of secured debt to gross tangible assets to less than 25%; and 4) maintains strong liquidity and pre-tax profitability above the peer median.

Moody's could downgrade AerCap's ratings if the company's: 1) operating prospects further weaken including from a prolonged disruption in air travel and weakening of airline credit quality, 2) liquidity weakens in relation to upcoming expenditures, 3) fleet residual risks rise, or 4) leverage increases materially from the current level.

Aviation Capital Group LLC (ACG)

Moody's affirmed ACG's Baa2 issuer rating based on the company's adequate liquidity and high quality fleet, as well as its strong capital position and long history of profitable operations. Moody's revised ACG's outlook to negative from stable to reflect the weakened operating performance of airlines relating to the widening coronavirus pandemic and the anticipated negative effects on ACG's earnings and cash flow.

Moody's estimates that ACG's liquidity resources are sufficient to meet the company's cash needs for debt repayment, aircraft acquisitions and operating expenses for the next year. ACG has a manageable $600 million of senior unsecured debt due in October of this year. ACG also has aircraft acquisition commitments of $1.5 billion in 2020 for fleet that is comprised of popular narrow-body aircraft. ACG has had strong access to the unsecured debt markets, resulting in low reliance on secured funding and a largely unencumbered fleet, strengthening its liquidity. ACG maintains a conservative capital position with a ratio of debt to tangible equity of 2.0x at 31 December 2019, lower than peers. In December 2019, ACG was acquired by Tokyo Century Corporation, which Moody's expects will be supportive of ACG's continuity of operating processes and financial targets. ACG reported earnings of $216 million in 2019, resulting in a ratio of net income to average assets of 1.2%. The company's profitability measure is below the peer average but its fleet risks are below average in Moody's view. Profitability declines materially but remains positive under Moody's base case. Moody's has no particular concern regarding ACG's governance.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Rating upgrades are unlikely given that negative outlook. However, Moody's could upgrade ACG's ratings if the company 1) generates consistent, stable profitability compared to peers while maintaining a conservative fleet composition; 2) maintains a conservative approach to capital management, resulting in leverage lower than peers; 3) demonstrates effective governance, including continuity of strong operational processes and financial disciplines under the consolidated ownership of Tokyo Century.

Moody's could downgrade ACG's ratings if the company 1) increases debt/tangible net worth leverage to more than 2.6x; 2) generates materially weaker or more volatile profitability including from a prolonged disruption in air travel and weakening of airline credit quality; 3) pursues rapid growth or changes fleet composition in a manner that increases residual and capital risks; and 4) reduces its liquidity cushion.

Avolon Holdings Limited (Avolon)

Moody's affirmation of Avolon's Baa3 backed issuer rating considers the company's effective liquidity management, moderate leverage and competitive strength as one of the largest aircraft leasing companies globally. Moody's revised Avolon's outlook to negative from stable to reflect the weakened operating performance of airlines relating to the widening coronavirus pandemic and the anticipated negative effects on Avolon's earnings and cash flow.

Moody's expects that Avolon's sources of liquidity, including cash, committed borrowing availability and cash flow will be sufficient to cover over 12 months of the company's cash needs to repay debt, acquire aircraft under purchase commitments and cover other operating costs. The company has manageable debt maturities, with its next maturity of senior unsecured debt occurring in March 2021 in the amount of $300 million. However, Avolon began 2020 with a higher-than-peer average $4 billion in commitments to acquire aircraft; Moody's expects that this amount may decrease due to delivery delays and pipeline management. Avolon has progressively reduced its secured debt reliance and increased its unencumbered assets, strengthening its funding structure and liquidity. Avolon has generated strong profitability historically, though this is at risk under Moody's base stress case, reflecting a decline in rental revenues from weakened airline lessees. In 2019, Avolon generated $718 million of earnings and a ratio of 2.8%, which compares well with peers. Avolon's lead indirect shareholding is by HNA Group, whose airline operations represent Avolon's largest customer exposure, and which has experienced significant liquidity challenges. But Avolon's operating stability and governance were strengthened by ORIX Corporation's (A3 stable) 30% investment in Avolon in November 2018.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Rating upgrades are unlikely given the negative outlook. However, Moody's could upgrade Avolon's ratings if the company: 1) reduces its ratio of secured debt to gross tangible assets to 25% or less; 2) extends its average debt maturity profile to further reduce refinancing risk; 3) maintains a ratio of debt to tangible net worth of 2.5x or less while also maintaining strong fleet characteristics and effectively managing the risks of its aircraft order book; and 4) maintains profitability levels that compare favorably with similarly rated peers.

Moody's could downgrade Avolon's ratings if the company: 1) increases its ratio of debt to tangible net worth to more than 3x; 2) materially weakens its liquidity considering its upcoming aircraft expenditures and debt refinancing requirements; 3) experiences weakened profitability prospects compared to similarly rated peers including from a prolonged disruption in air travel and weakening of airline credit quality; or 4) pursues aircraft investments that materially increase its lease residual risks.

Dubai Aerospace Enterprise (DAE) Ltd (DAE)

Moody's affirmed the Baa3 long-term senior unsecured rating of DAE subsidiary DAE Funding LLC based on DAE's liquidity strength, disciplined fleet and airline credit risk management, and its unique access to capital and customers in the United Arab Emirates (Aa2 stable), which differentiates the company's business proposition versus competitors. Moody's revised DAE's outlook to negative from stable to reflect the weakened operating performance of airlines relating to the widening coronavirus pandemic and the anticipated negative effects on DAE's earnings and cash flow.

Moody's estimates that DAE's liquidity provides well over a year's coverage of cash requirements, reflecting cash balances and borrowing commitments, manageable debt maturities and absence of material aircraft purchase commitments. DAE had $482 million of senior unsecured debt maturing in August 2020 and committed borrowing availability of nearly $2.2 billion as of the end of 2019; available liquidity totals $3.0 billion following repayment of DAE's receivable from its shareholder, the Investment Corporation of Dubai (ICD), earlier this year. DAE has diversified its funding to include a higher proportion of unsecured debt, reducing its reliance on secured debt and increasing unencumbered assets. DAE's aircraft fleet is well balanced by model and type and features average age and remaining lease term comparable to rated peer median. DAE's leverage has declined, reflecting strong cash flows and sale of aircraft. A credit challenge is the lower visibility regarding DAE's growth prospects given the company's lack of new aircraft purchase commitments. DAE reported earnings of $377 million in 2019, or 2.7% net income to average assets, which is in line with strong peers. Under Moody's base case the company's profitability will decline materially but remain positive. Moody's has no particular concern with respect to DAE's governance.

WHAT COULD CHANGE THE RATINGS UP/DOWN

The negative outlook indicates that rating upgrades are unlikely. However, Moody's could upgrade DAE's ratings if the company: 1) generates profitability that compares well with investment-grade peers; 2) maintains a ratio of debt to tangible net worth of less than 2.5x; 3) maintains a ratio of secured debt to tangible assets of less than 25%; 4) demonstrates the resilience of its franchise through a fleet investment and management strategy that strengthens its competitive position and fleet risk composition.

Moody's could downgrade DAE's ratings if the company: 1) generates a protracted decline in profitability including from a prolonged disruption in air travel and weakening of airline credit quality; 2) increases its use of secured debt to more than 30% of tangible assets; 3) reduces debt maturities coverage to less than 120%; and 4) increases debt to tangible net worth to greater than 3.0x.

Fly Leasing Limited (Fly)

Moody's affirmed Fly's Ba3 corporate family rating based on the company's adequate liquidity position, decrease in leverage, and improved fleet composition. Moody's revised Fly's outlook to negative from positive to reflect the weakened operating performance of airlines relating to the widening coronavirus pandemic and the anticipated negative effects on Fly's earnings and cash flow.

Fly's liquidity position is aided by manageable debt maturities including $65.3 million due May 2021, which Moody's expects the company will be able to extend, and $325 million of senior unsecured notes due October 2021. Fly maintains no committed backup line of credit facility, but Moody's currently anticipates that Fly will have sufficient unencumbered assets to either pledge to obtain secured financing or sell to meet this maturity, should the need arise. Fly's fleet risks have benefited from the company's sale of older aircraft and acquisition of newer models, resulting in reduced aircraft remarketing and residual risks and leading to more predictable future profits. FLY's ratings reflect its high, albeit improving airline lessee concentrations and high reliance on secured funding that encumbers assets. It also incorporates the company's improved debt-to-tangible net worth leverage, which measured 2.6x as of 31 December, 2019, in line with higher-rated peers. Moody's has no particular concerns regarding Fly's governance.

WHAT COULD CHANGE THE RATINGS UP/DOWN

The negative outlook indicates that rating upgrades are unlikely. However, Moody's could upgrade Fly's ratings if the company; 1) maintains leverage (debt/tangible net worth) of less than 3x; 2) reduces its ratio of secured debt to tangible managed assets to less than 50%; 3) reduces its top ten airline concentrations to 50% or less; and 4) maintains strong profitability considering its fleet risk profile.

Moody's could downgrade Fly's ratings if the company: 1) experiences a deterioration operating prospects including from a prolonged disruption in air travel and weakening of airline credit quality; 2) reduces its liquidity cushion through required capital expenditures, higher than expected capital calls under the governing credit agreement or other cash needs; or 3) experiences deterioration in other key metrics stemming from challenging economic conditions.

Voyager Aviation Holdings, LLC (Voyager)

Moody's affirmation of Voyager's B1 corporate family and B2 long-term senior unsecured ratings reflect the company's small competitive scale compared to rated peer aircraft leasing companies and limited alternate liquidity, offset by 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 compared to certain peers, which should lead to lower asset and earnings volatility. Moody's revised Voyager's outlook to negative from stable to reflect the weakened operating performance of airlines relating to the widening coronavirus pandemic and the anticipated negative effects on Voyager's earnings and cash flow.

Voyager has no senior unsecured debt maturities until 2021. Most of the company's debt is amortizing secured debt whose debt service is supported by the cash flows generated by pledged aircraft and associated leases. The company has intentions to acquire aircraft to grow and diversify its fleet, but the absence of purchase commitments provides the company flexibility to contend with current market challenges. However, Voyager has no committed revolving credit facility, which limits its liquidity strength compared to peers. Voyager's credit challenges include its exposure concentrations to widebody aircraft and certain airline lessees, owing to its small fleet of 18 aircraft. Additionally, the company's leverage is higher than peer average. Voyager is seeking to overcome weaker recent profitability reflecting impairment charges on aircraft it sold as part of its fleet repositioning efforts. Voyager's ratio of net income to average assets measured -3.92% for the three quarters ended 30 September 2019 and .04% for full year 2018. Moody's has no particular concerns regarding Voyager's governance.

WHAT COULD CHANGE THE RATINGS UP/DOWN

The negative outlook indicates that rating upgrades are unlikely. However, Moody's could upgrade Voyager's ratings if the company: 1) improves fleet risks by diversifying its aircraft investments to include new vintage narrow-body aircraft; 2) significantly reduces airline customer concentrations; 3) generates stronger financial performance that results in a sustainable ratio of net income to average assets of at least 1.0% annualized; and 4) permanently 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) increases its debt/tangible net worth ratio to more than 4.0x; 2) increases the proportion of secured debt in its funding structure to more than 60%; 3) experiences a deterioration operating prospects including from a prolonged disruption in air travel and weakening of airline credit quality; or 4) weakens its liquidity position.

Aircastle Limited (Aircastle)

Moody's revised its review of Aircastle's Baa3 long-term senior unsecured rating to review for downgrade from review with direction uncertain. Moody's initiated the review of Aircastle's ratings following announcement of the company's acquisition by Marubeni Corporation (Marubeni, Baa2 stable) and Mizuho Leasing Company, Limited on 26 November 2019. Moody's viewed the transaction as having counterbalanced positive and negative implications for Aircastle's credit profile. Stable, long-term ownership under Marubeni and Mizuho Leasing would eliminate Aircastle's exposure to equity market confidence sensitivity and could improve the company's operating flexibility and expand funding alternatives, especially in Japan. However, the increased risks to Aircastle's financial performance from the coronavirus pandemic decreases the probability of a rating upgrade, resulting in the change in the rating review to down from direction uncertain. During the review, Moody's will evaluate the effects of the transaction on Aircastle's operating strategy and financial profile, as well as the investment objectives and potential support from the company's new owners and the company's governance structure. Moody's will also review the effects of the widening coronavirus pandemic on Aircastle's financial profile and operations. The transaction received approval by Aircastle's shareholders on 6 March 2020 and is pending regulatory approval.

Aircastle's ratings are based on the company's strong liquidity profile, aided by committed borrowing availability, manageable debt maturities and modest aircraft expenditure commitments. Moody's estimates that Aircastle has sufficient liquidity to cover well over one year's cash uses. Aircastle has a strong competitive position as a lessor of mid-life and older commercial aircraft, an established operating record and strong capital cushion. A credit challenge includes residual risks of aircraft that are on average older than those of many peers. The company's historically strong access to the debt capital markets strengthens its resilience to competition from existing and newer entrants in the sector. Aircastle's profitability, measured as net income to average assets, declined in 2019 to 1.9%, below the average of about 2.2% over the last few years, whereas well-established peers' measures range from 2.5% to 3.0% over the same period; under Moody's revised base case the company's profitability measure weakens materially but remains positive.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Ratings upgrades are unlikely given the review for downgrade. Moody's could upgrade Aircastle's ratings if: 1) Moody's were to assess a high likelihood that Aircastle would receive extraordinary support from its new owners if required; 2) Aircastle maintains a ratio of tangible common equity to tangible managed assets of 25% or more; and 3) Aircastle maintains stronger than peer average liquidity coverage.

The ratings could be confirmed at the conclusion of the review if Moody's determines the transaction credit effects to be neutral to Aircastle's credit profile.

Moody's could downgrade Aircastle's ratings upon completion of the review if: 1) the company's ratio of tangible common equity to tangible managed assets declines to less than 20%; 2) profitability prospects materially weaken including from a prolonged disruption in air travel and weakening of airline credit quality; or 3) the company's liquidity coverage materially weakens.

The principal methodology used in these ratings was Finance Companies Methodology published in November 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

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.

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

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

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

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

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