S&P: Air Lease Corp.'s Senior Unsecured Notes Assigned 'BBB-' Issue-Level Rating
Our corporate credit rating on Air Lease reflects the company's position as a midtier--albeit rapidly growing--provider of aircraft operating leases, its young and diverse aircraft fleet, and its relatively low debt leverage for an aircraft lessor. The inherent cyclicality of the company's demand and aircraft lease rates, along with its airline customers' often weak credit quality, offset these positive factors. We assess Air Lease's business risk profile as satisfactory and its financial risk profile as intermediate.
The positive outlook on Air Lease Corp. reflects that, despite our expectation that the company's capital spending will total over $2 billion in 2016, we anticipate that its earnings and cash flow will benefit from the growth of its aircraft fleet, causing its EBITDA coverage to improve to at least 4x and its funds from operations (FFO)-to-debt ratio to approach 12% in 2016. We could upgrade Air Lease over the next year if we believe that the company will continue to maintain an EBITDA interest coverage metric of at least 4x and attain a FFO-to-debt ratio of at least 12% or better.
We could revise our outlook on Air Lease to stable if the company's lease rates deteriorate or if it engages in a larger-than-expected debt-financed capital spending program, causing its FFO-to-debt ratio to decline below 11% for a sustained period.