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TEXT-S&P upgrades AWAS Aviation Capital to 'BB+'

Overview

-- On Oct. 5, 2012, Dublin-based aircraft lessor AWAS Aviation CapitalLtd. converted $800 million of shareholder loans into equity.

-- We are raising our ratings, including raising the corporate creditrating to 'BB+' from 'BB', and removing ratings from CreditWatch.

-- The outlook is stable, reflecting our expectation that AWAS' financialprofile will remain relatively consistent into 2013.

Rating ActionOn Oct. 8, 2012, Standard & Poor's Ratings Services raised its ratings on AWASAviation Capital Ltd., including raising the corporate credit rating to 'BB+'from 'BB', and removed the ratings from CreditWatch, where we placed them withpositive implications on Oct. 5, 2012.

Rationale

The conversion of shareholder loans has reduced AWAS' debt to capital by about8% to the high-70% area from the mid-80% area. The company's debt leverage hadbeen among the highest of its rated peers, and the conversion of shareholderloans into equity narrows the gap somewhat. However, because the company willstill carry a heavy debt burden, which we expect to increase as it uses debtto fund new aircraft deliveries, we expect funds from operations (FFO) to debtto remain at about 9%.

The ratings on AWAS reflect its position as a large provider of aircraftoperating leases and its diversified fleet and airline customer base. Limitingcredit considerations include exposure to cyclical demand and lease rates foraircraft, a weaker financial profile than some of its competitors, and asubstantial percentage of encumbered assets, constraining options for raisingcapital. The ratings incorporate our expectations that these trends willcontinue over the next several quarters. Standard & Poor's characterizes AWAS'business risk profile as "satisfactory," its financial risk profile as"significant," and its liquidity as "adequate" under our criteria.

Outlook

The outlook is stable. We expect AWAS' financial profile to remain relativelyconsistent into 2013, with higher earnings and cash flow offsettingincremental debt to fund new aircraft deliveries. We could lower the ratingsif AWAS completed a large debt-financed aircraft portfolio acquisition ordebt-financed dividend to its owners, causing FFO to debt to decline to themid-single-digit percent area. We do not foresee an upgrade given thecompany's ownership structure--it is owned by funds managed by private equityfirm Terra Firma and Canada Pension Plan Investment Board (CPPIB). Wetypically do not rate transportation equipment lessors owned by private equityhigher than 'BB+' because of financial policy concerns.

Related Criteria And Research2008 Corporate Criteria: Analytical Methodology, April 15, 2008Ratings ListUpgraded; Removed From CreditWatchTo FromAWAS Aviation Capital Ltd.Corporate Credit Rating BB+/Stable/-- BB/Watch Pos/--Senior Secured BBB BBB-/Watch Pos

Complete ratings information is available to subscribers of RatingsDirect onthe Global Credit Portal at

. All ratings affectedby this rating action can be found on Standard & Poor's public Web site at. Use the Ratings search box located in the leftcolumn.(New York Ratings Team)

((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging:pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))

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