TEXT - S&P rates Aviation Capital Group Corp snr notes

Tue Jan 15, 2013 11:35am EST

Jan 15 - Standard & Poor's Ratings Services said today that it has assigned
its 'BB+' rating to Aviation Capital Group Corp.'s (ACG) $300 million senior
notes. The issue is Rule 144A without registration rights. The company will use
proceeds for general corporate purposes.

Our ratings on ACG reflect its position as a major provider of aircraft 
operating leases and its ownership of new-technology aircraft with relatively 
stable asset values. Inherent risks of cyclical demand and lease rates for 
aircraft, as well as a significant, albeit declining, percentage of encumbered 
assets, limit the credit rating. The ratings on ACG do not incorporate an 
explicit parental guarantee from its parent Pacific Life Insurance Co. 
(A+/Stable/A-1), owned by Pacific LifeCorp (BBB+/Stable/--). However, we give 
one notch of credit for potential support from the higher-rated parent. 
Pacific Life Insurance injected $350 million of equity into ACG in March 2010. 
We characterize ACG's business risk profile as "satisfactory," its financial 
risk profile as "significant," and its liquidity as "adequate" under our 
criteria.

The outlook is stable. We expect ACG's financial profile to remain relatively 
consistent through 2013 despite the addition of several new aircraft over that 
period funded through incremental debt. We don't consider an upgrade likely 
until lease rates for aircraft lessors begin to demonstrate sustainable 
improvement, resulting in funds from operations (FFO) to debt approaching 10% 
on a sustained basis, or Pacific Life chooses to operate ACG at a lower level 
of leverage. Although we don't consider it likely, we could lower the ratings 
if FFO to debt declined to below 6% on a sustained basis because of global 
economic weakness, particularly in Europe, resulting in weaker demand for 
aircraft, which would likely pressure lease rates and cash flow. We could also 
lower the ratings if we believe Pacific Life is likely to reduce its support.


RELATED CRITERIA AND RESEARCH
     -- 2008 Corporate Criteria: Analytical Methodology,  April 15, 2008


RATINGS LIST

Aviation Capital Group Corp.
 Corporate credit rating                       BBB-/Stable/--

Ratings Assigned

Aviation Capital Group Corp. 
 $300 mil sr unsecured notes                   BB+