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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

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Rating Action:

Moody's upgrades Avolon's corporate family and senior unsecured ratings to Baa3 with a stable outlook, concluding review

10 Apr 2019

New York, April 10, 2019 -- Moody's Investors Service (Moody's) has upgraded the corporate family rating of Avolon Holdings Limited ("Avolon") to Baa3 from Ba1, the senior unsecured ratings of Avolon Holdings Funding Limited and Park Aerospace Holdings Limited to Baa3 from Ba2, and the senior secured rating of Avolon TLB Borrower 1 (US) LLC to Baa2 from Baa3. Moody's also assigned a Baa3 rating to the proposed multi-tranche senior unsecured notes of Avolon Holdings Funding Limited announced today. This concludes Moody's review of Avolon's ratings initiated on April 8, 2019. The rating outlook for Avolon and its rated subsidiaries is stable.

Assignments:

..Issuer: Avolon Holdings Funding Limited

....Gtd Senior Unsecured Regular Bond/Debenture, Assigned Baa3

Upgrades:

..Issuer: Avolon Holdings Funding Limited

....Gtd Senior Unsecured Regular Bond/Debenture, Upgraded to Baa3 from Ba2, Rating Under Review

..Issuer: Avolon Holdings Limited

.... Corporate Family Rating, Upgraded to Baa3 from Ba1, Rating Under Review

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

....Gtd Senior Secured Bank Credit Facility, Upgraded to Baa2 from Baa3, Rating Under Review

..Issuer: Park Aerospace Holdings Limited

....Gtd Senior Unsecured Regular Bond/Debenture, Upgraded to Baa3 from Ba2, Rating Under Review

Outlook Actions:

..Issuer: Avolon Holdings Funding Limited

....Outlook, Changed To Stable From Rating Under Review

..Issuer: Avolon Holdings Limited

....Outlook, Changed To Stable From Rating Under Review

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

....Outlook, Changed To Stable From Rating Under Review

..Issuer: Park Aerospace Holdings Limited

....Outlook, Changed To Stable From Rating Under Review

RATINGS RATIONALE

Moody's upgraded Avolon's ratings based on further transformation of Avolon's funding structure resulting from the proposed issuance of $1.8 billion of senior unsecured notes and intention to use transaction proceeds to repay secured debt. Avolon has progressively reduced its secured debt reliance and increased its unencumbered assets, strengthening its financial flexibility. Avolon's ratio of secured debt to tangible assets will likely measure about 38% as of end-March 2019, down from 41% at end-December 2018 (including Moody's adjustments), reflecting the company's $1.7 billion of unsecured debt issuance in Q1 2019, a portion of the proceeds of which were used to repay secured debt. Moody's expects that Avolon's ratio of secured debt to tangible assets will decline to 30% or less as a result of the proposed issuance of senior unsecured notes and subsequent secured debt repayments, achieving a key criterion of the ratings upgrade.

The senior unsecured debt ratings of Avolon's subsidiaries were upgraded by two notches, resulting in their alignment with Avolon's upgraded Baa3 corporate family rating. The two-notch upgrade reflects the higher proportion of senior unsecured debt in the company's capital structure and the growing base of unencumbered assets that provides coverage, improving creditor protections in a default scenario. Avolon's corporate family rating will be subsequently withdrawn because Moody's assigns corporate family ratings only to non-investment grade entities.

The Baa3 rating Moody's has assigned to Avolon's proposed senior unsecured notes reflects the notes' priority in the company's capital structure. The notes rank pari passu with other senior unsecured debt issued by Avolon's subsidiaries based on their terms and parental and affiliate guarantees.

Moody's upgrade of Avolon's ratings is also based on the company's strong liquidity management and profitability, characteristics that Moody's expects will continue to compare well with similarly rated peers. Avolon has also demonstrated effective management of the financial risks of its aircraft order book by committing ordered aircraft to leases well in advance of their delivery and by providing the liquidity necessary for the aircraft expenditures. With a ratio of debt to tangible net worth of 2.4x at year-end 2018, Avolon maintains a strong capital cushion considering its fleet and airline risk characteristics. Avolon's governance risks relating to its parent Bohai Capital Corp. and its controlling shareholder HNA Group have become less prominent credit constraints since ORIX Corporation (A3 stable) acquired a 30% minority interest in Avolon in November 2018. Bohai and HNA have also made strides to reduce their leverage and short-term debt balances, which lessens their financial risks and leads to more stable governance at Avolon.

Moody's could upgrade Avolon's ratings if the company: 1) reduces its ratio of secured debt to gross tangible assets to 20% 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, and 4) pursues aircraft investments that materially increase its lease residual risks.

The principal methodology used in these ratings was Finance Companies published in December 2018. 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 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 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.

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: 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.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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