NOTE: On June 21, 2012 the press release was revised as follows: Added a hybrid (hyb) indicator to the preferred stock ratings for International Lease Finance Corporation
and ILFC E-Capital Trusts I and II. Revised release follows:
New York, June 15, 2012 -- Moody's Investors Service upgraded the corporate family and senior
unsecured ratings of International Lease Finance Corporation (ILFC) to
Ba3 from B1 and revised the rating outlook to stable. The debt
ratings of Delos Aircraft Inc., Flying Fortress Inc.,
ILFC E-Capital Trust I, and ILFC E-Capital Trust II
were similarly upgraded by one notch and the rating outlooks revised to
stable.
RATINGS RATIONALE
The upgrade of ILFC's rating is based on the progress the company
has made in recent quarters to enhance its liquidity and capital positions,
thereby improving its financial flexibility and reducing risks to its
franchise. ILFC's rating continues to be constrained by profitability
that is lower than aircraft leasing company peers, as well as by
unstable economic conditions in Europe that represent a challenge to the
firm's efforts to improve margins.
ILFC strengthened its liquidity by extending debt maturities, diversifying
its funding and lengthening its liquidity runway. ILFC issued $4.5
billion of unsecured debt in the twelve months ending March 31,
2012, demonstrating improved access to funding that doesn't
encumber the firm's assets. Longer loan terms extended the
weighted average maturity of ILFC's debt to 6.5 years at
March 31, 2012, up from 4.3 years at the end of 2008.
At the end of the first quarter, ILFC had $2.3 billion
of unrestricted cash and a $2 billion unused committed line of
credit that, combined with operating cash flow, provide strong
coverage of debt maturities over the next 24 months, in line with
company targets. In Moody's view, ILFC's liquidity
and liability management actions have materially reduced its intermediate
term liquidity risks.
"Going forward, a ramp up of aircraft deliveries under ILFC's
purchase agreements will place additional demands on the firm's
liquidity," said Moody's senior analyst Mark Wasden.
"But the firm's pipeline is largely comprised of new technology
aircraft that we believe will be more easily financed than older aircraft."
ILFC also reduced leverage, strengthening its capital cushion to
absorb potential asset quality and operating performance weaknesses.
Moody's anticipates further modest deleveraging in the near term,
though in the longer term debt-funded growth could pressure the
company's leverage measures. Moody's believes that
ILFC must demonstrate that it can maintain an improved leverage profile
while also generating a return on equity that is attractive to investors.
Moody's expects that ILFC's profitability will eventually
improve as it takes delivery of new aircraft that command premium lease
rates. Management efforts to sell or part out less profitable portfolio
aircraft and refinance higher cost debt will also benefit earnings.
However, current conditions suggest that near-term improvement
in ILFC's profitability metrics could be slow to develop,
which is a constraint on the firm's rating and outlook.
"ILFC faces challenges improving its profitability to a level that
is commensurate with its franchise strengths," said Wasden.
" A key concern relates to the effect of weaker European economic
conditions on air travel volumes, aircraft demand and lease rates,
and airline credit quality." ILFC earned 44% of its
revenues from European carriers in 2011, a relatively high percentage
for the sector. Fuel price volatility and higher new aircraft production
rates could add to pressure on lease rates in a weaker economy.
ILFC's higher trending average effective cost of borrowing is also
an earnings challenge, though lower debt levels partially offset
the effect of this on the firm's lease margin.
ILFC's rating continues to be supported by its position as an industry
leader in aircraft finance, its fleet of relatively recent vintage,
widely utilized aircraft, and its diverse global customer relationships.
Moody's could upgrade ILFC's ratings if the firm steadily improves profitability
to a level more comparable with close peers, while also maintaining
strong capital discipline.
In its last rating action on April 5, 2012, Moody's assigned
a Ba3 rating to a $550 million term loan issued by ILFC subsidiary
Delos Aircraft Inc.
International Lease Finance Corporation, headquartered in Los Angeles,
California, is a major owner-lessor of commercial aircraft.
The principal methodology used in this rating was the Finance Company
Global Rating Methodology published March 2012. Please see the
Credit Policy page on www.moodys.com for a copy of this
methodology.
Ratings affected by today's action include:
International Lease Finance Corporation:
Corporate Family: to Ba3 from B1
Senior unsecured: to Ba3 from B1
Senior secured: to Ba2 from Ba3
Preferred stock: to B2(hyb) from B3(hyb)
Delos Aircraft Inc.:
Senior secured: to Ba2 from Ba3
Flying Fortress Inc.:
Senior secured: to Ba2 from Ba3
ILFC E-Capital Trusts I and II:
Preferred Stock: to B2(hyb) from B3(hyb)
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, 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 has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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
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Information sources used to prepare the rating are the following :
parties involved in the ratings, public information, and confidential
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Moody's considers the quality of information available on the rated
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Please see the ratings disclosure page on www.moodys.com
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Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
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The date on which some ratings were first released goes back to a time
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the lead rating analyst and to the Moody's legal entity that has issued
the 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: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Franklyn Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's upgrades ILFC senior unsecured to Ba3
