Research Update: Avolon Holdings Ltd. Outlook Revised To Stable On Expected Increase In Lease Payments; 'BBB-' Credit Rating Affirmed

Aircraft operating lessor Avolon Holdings Ltd.'s revenues and cash flow have been negatively affected by the reduction in lease payments by one of its major customers (the HNA group of airlines), some of which began even before the COVID-19 pandemic. However, we expect a new equity investment in the airlines to occur relatively soon, which should result in an increase in lease payments, albeit at lower than previous rates. The company's credit metrics have also been hurt by lease restructurings and rent deferrals from some other airline customers since the beginning of the pandemic as well as some non-recurring charges that we include in our adjusted credit metrics. As a result, we now expect Avolon's credit metrics to begin to

...- Aircraft operating lessor Avolon Holdings Ltd.'s revenues and cash flow have been negatively affected by the reduction in lease payments by one of its major customers (the HNA group of airlines), some of which began even before the COVID-19 pandemic. However, we expect a new equity investment in the airlines to occur relatively soon, which should result in an increase in lease payments, albeit at lower than previous rates. - The company's credit metrics have also been hurt by lease restructurings and rent deferrals from some other airline customers since the beginning of the pandemic as well as some non-recurring charges that we include in our adjusted credit metrics. - As a result, we now expect Avolon's credit metrics to begin to improve in 2022 based upon the increased lease payments and a full year of lower interest expense from the August 2021 exchange of $2 billion of debt for new borrowings at lower interest rates. We expect the company's EBIT interest coverage to increase to the...

Research Update