Avolon Holdings Ltd. Ratings Placed On CreditWatch Positive On Potential Reduced Encumbered Assets; Notes Rated 'BBB-'

  • On April 10, 2019, Avolon Holdings Funding Ltd., a wholly-owned subsidiary of aircraft operating lessor Avolon Holdings Ltd., announced a proposed unsecured debt issuance that would, if successful, result in secured debt as a percentage of total assets declining to around 30%.
  • This level is similar to other 'BBB-' rated aircraft operating lessors.
  • We are placing our 'BB+' issuer credit rating on Avolon Holdings Ltd. and our issue-level 'BB+' unsecured debt ratings on Avolon Holdings Funding Ltd. and Park Aerospace Holdings Ltd. on CreditWatch with positive implications.
  • We are not taking a rating action on Avolon subsidiaries Avolon TLB Borrower 1 (US) LLC's and Avolon TLB Borrower 1 (Luxembourg) S.À R.L's 'BBB-' rated secured debt because we typically do not rate secured debt higher than our issuer credit rating, and accordingly expect to affirm those ratings if we upgrade Avolon.
  • At the same time, we assigned a 'BBB-' issue-level rating to Avolon Holdings Funding's proposed $1.8 billion unsecured notes (which reflects the pro forma higher rating on unsecured debt).
  • We expect to resolve the CreditWatch when the company completes the proposed unsecured notes transaction. If successful, we expect to raise the issuer credit rating to 'BBB-' from 'BB+' and assign a stable outlook. We also expect to raise ratings on the existing unsecured notes to 'BBB-' from 'BB+'.
NEW YORK (S&P Global Ratings) April 10, 2019—S&P Global Ratings today took the above listed rating actions. The CreditWatch placement follows the announcement of Avolon's proposed unsecured notes, proceeds of which would mostly be used to repay secured debt. If successful, this would reduce its secured debt as a percentage of total assets to around 30%, in line with other 'BBB-' rated aircraft lessors.

CreditWatch


We expect to resolve the CreditWatch when the company completes the proposed unsecured notes transaction. If successful, we expect to raise the issuer credit rating to 'BBB-' from 'BB+' and to assign a stable outlook. We also expect to raise the rating on the existing unsecured notes to 'BBB-' from 'BB+'. If the reduction in secured debt is materially less than anticipated, potentially caused by a less-successful-than-expected unsecured notes offering, we could affirm the ratings.
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