Aviation Capital Group Comments on Standard & Poor’s Credit Rating Announcement

NEWPORT BEACH, Calif.—(BUSINESS WIRE)—R. Stephen Hannahs, Aviation Capital Group’s (ACG) group managing director and CEO, commented on today’s rating decision from Standard & Poor’s (S&P):

“We are disappointed with S&P’s decision as we feel S&P’s standardized methodology misses ACG’s more sophisticated operational and financial risk management practices. ACG has consistently maintained a strong balance sheet which has in fact strengthened over the past few years. We have been successful in self-funding our operations through diversified sources of capital and have continued to deliver consistent profits and cash flows year after year.”

In its announcement, S&P expressed concern that ACG’s credit metrics have been weaker than expected. In particular, S&P focused on ACG’s funds from operations (FFO) to debt that has averaged in the mid- to high-single-digit percent area. It should be noted that this FFO to debt ratio has been relatively stable and is in keeping with ACG’s leverage ratio of 4 to 1.

ACG’s financial position has never been stronger. Since Pacific Life’s initial investment in ACG in 1996, ACG has become a core business unit of Pacific Life, with ACG’s equity position now exceeding $1.2 billion. ACG is managed in a manner consistent with Pacific Life’s long term investment horizon in achieving appropriate risk adjusted returns and benefitting from Pacific Life’s strong asset and liability management (ALM) culture. ACG employs best-in-class ALM practices in managing lease revenue and interest expense positions. The company maintains a strong liquidity position and is an industry leader in developing and accessing the global capital markets, as demonstrated by the over $5 billion raised since the beginning of the financial crisis, including its global note program.

Finally, ACG has significant operating flexibility, benefiting from the young average age of its fleet, which is substantially unencumbered and consists of the type of aircraft most used by airlines around the world.