S&P Global Ratings, Moody's and Kroll took actions on FLY Leasing Ltd. after the company entered into an agreement to acquire 54 Airbus narrowbody aircraft and seven CFM engines on lease to AirAsia Berhad and its affiliates and one Airbus narrowbody aircraft on lease to a third-party airline.
S&P affirmed its BB- corporate credit rating on FLY Leasing while also affirming its existing issue-level ratings on the company.
The outlook remains stable reflecting the rating agency's expectation for a generally favorable environment for aircraft leasing based on continued passenger traffic growth and relatively stable lease rates.
S&P anticipates that the transaction will result in the percentage of FLY Leasing's aircraft that are leased to AirAsia Group to increase to the mid-20% area based on net book value, with credit metrics remaining within the range for the rating.
Additionally, Moody's affirmed the Ba3 corporate family rating of FLY Leasing and revised the outlook for the rating to negative.
The affirmation considers the expected positive effects the transaction will have on the company's franchise positioning, profitability and aircraft fleet composition.
On the other hand, the negative outlook of FLY Leasing is primarily driven by airline lessee concentrations that are higher than most rated peers, an increase in leverage that was already higher than most peers, and high reliance on secured funding that encumbers most of its aircraft fleet, Moody's said.
The rating agency anticipates that the transaction will elevate FLY Leasing's franchise positioning in the competitive commercial aircraft leasing sector.
Kroll Bond Rating Agency also affirmed FLY Leasing's issuer and senior unsecured debt ratings at BBB and BBB-, respectively.
The outlook for the ratings is stable.
Kroll said the agreement will result in significant benefits to FLY Leasing resulting in short to medium uptick in leverage. The rating agency believes the proposed portfolio purchase is in line with the company's strategic vision.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.
