TEXT-Fitch: evaluating aircraft EETCs: rating methodology
Nov 15 - Fitch Ratings has published a presentation entitled 'Evaluating Aircraft EETCs: Fitch's Rating Methodology'. This report details Fitch's enhanced equipment trust certificate (EETC) criteria in a slide-deck format, and complements the full criteria report 'Rating Aircraft Enhanced Equipment Trust Certificates,' dated Sept. 13, 2012. It provides a basic overview of EETCs and outlines Fitch's methodology for rating these transactions. Fitch revised its EETC rating criteria in September 2011 due to the transition of analytical coverage for EETC ratings from Structured Finance to Corporate Finance. In its overview, Fitch discusses the key differentiators between EETCs and typical corporate securities. These include the unique legal protection afforded to EETCs via Section 1110 of the U.S. Bankruptcy Code and various structural enhancements (including liquidity facilities, overcollateralization, debt tranching etc.) that significantly reduce default risk and enhance recoveries for EETCs relative to other secured bonds. The presentation also highlights the importance of aircraft as collateral, and Fitch's framework for determining aircraft value trends. The presentation then walks through Fitch's ratings process using US Airways LCC 2012-1 as an example. The slides provide a step-by-step review of Fitch's blended ratings approach which employs 'top-down' analysis for rating senior tranches, focused primarily on structure, collateral coverage and legal protection with a secondary dependence on airline IDR. On the other hand, subordinate tranche ratings are more closely linked to the airline IDR through a 'bottom-up' approach that relies on the probability of affirmation of aircraft obligations in a potential bankruptcy. This presentation, "Evaluating Aircraft EETCs: Fitch's Rating Methodology", is available at 'www.fitchratings.com'or by clicking the link below. Fitch's full criteria report, "Rating Aircraft Enhanced Equipment Trust Certificates", is available at 'www.fitchratings.com'or by clicking the link below. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and
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