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Fitch Downgrades AerCo Limited

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has taken the following rating actions on AerCo Limited:

--Class A-3 notes downgraded to 'CCsf' from 'BBsf', Outlook Negative, RE80%.

--Class B-1 and B-2 affirmed at 'Csf', RE 0%;

--Class C-1, C-2, and D-2 affirmed at 'Dsf', RE 0%.

The downgrade of the class A-3 notes to 'CCsf' reflects Fitch's view that default is considered probable. The outstanding class A-3 note balance significantly exceeds the value of trust collateral. Furthermore, the pool of aircraft consists predominately of aged, lower tier aircraft which Fitch believes will be unable to generate sufficient cash flow to repay the notes in full. The recovery estimate of 80% reflects Fitch's expectation of principal allocation relative to the current class A-3 note balance under a base scenario.

The affirmation of class B-1 and B-2 notes at 'Csf' reflect Fitch's expectation of inevitable default. The recovery estimate is 0% as no principal is expected to be paid to any of the subordinate notes as any collections will only be applied to the senior note and large interest shortfalls continue to grow across all three subordinates.

The affirmation of class C-1, C-2, and D-2 notes at 'Dsf' RE 0% indicates that Fitch does not expect that the accumulating interest shortfalls or unpaid principal will be recouped as the notes are not expected to receive any further distributions.

The analysis of AerCo Limited is consistent with 'Global Rating Criteria for Aircraft Operating Lease ABS', dated April 17, 2012, with one exception. Fitch adjusted the assumption of useful life of aircraft upward to 30 years from the stated 25 years based on the characteristics of the current leases in place.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' dated June 6, 2012;

--'Structured Finance Recovery Estimates for Distressed Securities' dated Nov. 16, 2012;

--'Global Rating Criteria for Aircraft Operating Lease ABS,' dated April 17, 2012.

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Structured Finance Recovery Estimates for Distressed Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656557

Global Rating Criteria for Aircraft Operating Lease ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=675090

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Fitch, Inc.
Primary Analyst
Thomas Kaiser, CPA, +1-312-368-3338
Analyst
70 W Madison St.
Chicago, IL 60602
ot
Secondary Analyst
Peter Manofsky, +1-312-368-2068
Director
or
Committee Chairperson
Hylton Heard, +1-212-908-0514
Senior Director
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Source: Fitch Ratings