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
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and