KBRA stabilizes Aviation Capital view

KBRA said it affirmed the A- issuer and senior unsecured debt ratings and revised the outlook to stable from negative for Aviation Capital Group LLC.

“The change in outlook to stable reflects the significant recovery in travel demand, especially in various domestic markets, seen throughout 2021, along with ACG’s continued robust access to capital markets and its ability to manage lessee deferrals and defaults and aircraft remarketing efforts (off-lease aircraft reduced to 4.5% as of Dec. 31, 2021, from 7.7% from 12 months prior) throughout the severe aviation downturn caused by Covid-19. ACG maintained exceptionally low leverage and remained profitable during the last two years,” KBRA said in a press release.

However, the agency noted, “Due to the difficulties facing lessors in the process of repossessing aircraft from Russia, the conflict could lead to impairments and reduced cash flow. However, KBRA believes the company’s significant liquidity of $2.2 billion, which was 3.1x their next 12 month uses as of Dec. 31, 2021, and equity base of $3.9 billion are adequate to absorb the cash flow interruption and impact on leverage of any potential impairments on its aircraft in Russia, which made up roughly 3% of its fleet by net book value.”

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