December 10, 2012 / 7:06 PM / 5 years ago

TEXT-Fitch affirms International Lease Finance Corp's ratings

Dec 10 - Fitch Ratings has affirmed International Lease Finance
Corporation's (ILFC) Issuer Default Rating (IDR) at 'BB'. The Rating Outlook
remains Stable. A full listing of ILFC's ratings follows at the end of this

Today's rating action follows the announcement that American International Group
(AIG) has entered into an agreement to sell the majority of its ownership stake 
in ILFC to a consortium of Chinese firms. Once successfully completed, this 
transaction would conclude a lengthy sale process and resolve long-standing 
uncertainty about ILFC's long-term ownership. 

Fitch would expect ILFC's management team, fundamental strategy and market 
presence to remain largely unchanged for the foreseeable future. Over time, 
Fitch will assess the role ILFC's new owners will play in setting the strategic 
direction of the company. 

Fitch has viewed ILFC's ratings on a standalone basis, without any uplift for 
AIG's ownership, since they were downgraded to the current level in February 
2010. Inability to complete the proposed sale for regulatory or other reasons 
may have a negative impact on ILFC's ratings as a result of increased strategic 

The transaction would value ILFC at $5.28 billion, which is a material discount 
to the current book equity value of $7.87 billion. Fitch expects that the 
purchase accounting adjustments required under general acceptable accounting 
principles (GAAP) may significantly alter ILFC's balance sheet. However, the 
economic fundamentals of the business (including operating cash flows, 
liquidity, debt obligations and aircraft fleet) are expected to remain 

ILFC's ratings and Stable Outlook continue to be supported by the company's 
stable operating cash flow profile, funding diversity and sizeable market 
position. The main constraints on the ratings include lack of consistent 
profitability, uncertainty regarding aircraft residual values and a less 
attractive fleet profile than higher-rated peers. 

The resolution of the uncertainty regarding ILFC's ultimate ownership is viewed 
as generally positive. However, the potential longer-term influence of the 
ownership group on ILFC's leverage, growth strategy, lease rates, customer base,
geographic concentration and/or mix of aircraft manufacturers are all 
considerations which could impact Fitch's rating or rating outlook for ILFC in 
the future. Furthermore, the credit profiles and capital needs of ILFC's new 
ownership group will need to be considered in the context of their impact on the
financial resources and flexibility of ILFC.


Many details of the proposed transaction have yet to be finalized and Fitch will
continue to assess the potential changes to ILFC's corporate governance and 
long-term strategy. A meaningful change in ILFC's growth plans may influence 
Fitch's long-term view of the ratings. Furthermore, any adverse impact on ILFC's
current funding facilities or future availability of credit may have a negative 
impact on its ratings. 

ILFC's ratings are constrained by the company's lack of profitability over the 
past two fiscal years, which has been caused by significant impairment charges 
on older aircraft, as well as the weighted average age of its fleet, which is 
older than other Fitch-rated peers. In addition to the factors outlined above, 
negative momentum for the ratings and/or Rating Outlook could result from 
inability to access capital markets to fund debt maturities or purchase 
commitments, deterioration in operating cash flow or a permanent increase in 
balance sheet leverage. 

While positive rating momentum is not likely in the near term, over a 
longer-term time horizon, positive drivers would include consistent 
profitability, demonstrated funding flexibility, commitment to reduced leverage 
levels and a robust corporate governance structure. 

ILFC is a market leader in the leasing and remarketing of commercial jet 
aircraft to airlines around the world. As of Sept. 30, 2012, ILFC owned an 
aircraft portfolio with a net book value of approximately $35 billion, 
consisting of 918 jet aircraft.

Fitch has affirmed the following ratings:

International Lease Finance Corp.

--Long-term Issuer Default Rating at 'BB'; Outlook Stable;

--Senior secured notes at 'BBB-';

--Senior unsecured debt at 'BB';

--Preferred stock at 'B'.

Delos Aircraft Inc.

--Senior secured debt at 'BB'.

Flying Fortress Inc.

--Senior secured debt at 'BB'.

ILFC E-Capital Trust I

--Preferred stock at 'B'.

ILFC E-Capital Trust II

--Preferred stock at 'B'.

Additional information is available at ''.  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

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below