TEXT-S&P puts AWAS Aviation Capital 'BB' rating on watch positive
Overview -- On Oct. 5, 2012, Dublin-based aircraft lessor AWAS Aviation Capital Ltd. announced that its board of directors had approved the conversion of $800 million of shareholder loans into equity. -- We are placing our ratings on AWAS, including the 'BB' corporate credit rating, on CreditWatch with positive implications. -- We expect to raise the ratings, including the corporate credit rating to 'BB+' from 'BB', when the conversion is completed. Rating Action On Oct. 5, 2012, Standard & Poor's Ratings Services placed its ratings, including the 'BB' corporate credit rating, on AWAS Aviation Capital Ltd. on CreditWatch with positive implications. Rationale The CreditWatch listing follows AWAS' Oct. 5 announcement that its board of directors had approved the conversion of $800 million of shareholder loans into equity. The conversion of shareholder loans would reduce AWAS' debt to capital by about 8% to the high-70% area from the mid-80% area. However, because the company will still carry a heavy debt burden, which we expect to increase as it uses debt to fund new aircraft deliveries, we expect funds from operations to debt to remain at about 9%. The ratings on AWAS reflect its position as a large provider of aircraft operating leases and its diversified fleet and airline customer base. Limiting credit considerations include exposure to cyclical demand and lease rates for aircraft, a weaker financial profile than some of its competitors, and a substantial percentage of encumbered assets, constraining options for raising capital. The ratings incorporate our expectations that these trends will continue 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. CreditWatch We expect to raise the ratings on AWAS, including the corporate credit rating to 'BB+' from 'BB', when the conversion of shareholder loans into equity is completed. Related Criteria And Research 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Ratings List Ratings Placed On CreditWatch To From AWAS Aviation Capital Ltd. Corporate Credit Rating BB/Watch Pos/-- BB/Stable/-- Senior Secured BBB-/Watch Pos BBB- Recovery Rating 1 1 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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