Research Update: Avolon Holdings Ltd. Ratings Affirmed On $2.2 Billion Investment By ORIX Corp., Outlook Remains Stable

ORIX Corp., through its wholly owned subsidiary ORIX Aviation Systems, has entered into an agreement to acquire a 30% stake in Avolon Holdings Ltd. for $2.2 billion. Based on the proposed acquisition and the company's revised governance structure, we now view Avolon as a de-linked subsidiary of its current owner, Bohai Capital Holding Co. Ltd., which is itself 53% owned by the HNA Group. Although this has no immediate rating impact, it means that our rating on Avolon is no longer constrained by our rating on Bohai and we could raise it if and when we judge that Avolon's credit profile has improved. Therefore, we are affirming all of our ratings on Avolon, including the 'BB+' issuer credit rating. The

...+ ORIX Corp., through its wholly owned subsidiary ORIX Aviation Systems, has entered into an agreement to acquire a 30% stake in Avolon Holdings Ltd. for $2.2 billion. + Based on the proposed acquisition and the company's revised governance structure, we now view Avolon as a de-linked subsidiary of its current owner, Bohai Capital Holding Co. Ltd., which is itself 53% owned by the HNA Group. Although this has no immediate rating impact, it means that our rating on Avolon is no longer constrained by our rating on Bohai and we could raise it if and when we judge that Avolon's credit profile has improved. + Therefore, we are affirming all of our ratings on Avolon, including the '##+' issuer credit rating. + The stable outlook reflects our expectation that Avolon's earnings and cash flow will continue to benefit from the growth of its aircraft fleet and the strong demand for aircraft due to the rising volume of global passenger traffic. We expect the company's EBIT interest coverage to be in...

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