Fitch: Aircraft Lessors Unaffected by Potential Ex-Im Wind Down

Any US congressional vote that winds down the Export Import Bank of the United States (Ex-Im) would be manageable for aircraft lessors given the availability of other financing alternatives, according to Fitch Ratings. However, over the long term lessors would lose a key source of contingent funding for new aircraft deliveries.

Ex-Im Bank, the US’s export credit agency, is at the center of a political debate that could result in the bank’s charter not being renewed by Congress in September. Solid growth in financing avenues across capital markets has reduced the necessity of Ex-Im guarantees, particularly for more established lessors.

Loans guaranteed by export agencies were widely used by lessors during the 2008 crisis, but have since fallen out of favor. The reasons for this include increased pricing under the New Aircraft Sector Understanding (NASU) issued in 2011, wider availability of unsecured debt and the restrictive structural features in the facilities.

Aircraft lessors have utilized Ex-Im guarantees to fund deliveries of new aircraft leased to foreign airlines. The lessors with most potential risk during times of stress are ones that have large long-dated orders from Boeing. These would include AerCap Holdings N.V. (Issuer Default Rating BB+), Air Lease Corp., Aviation Capital Group (IDR BBB-) and GE Capital Aviation Services. We view export credit as an important source of contingent funding for new aircraft during times of market stress. Ex-Im played a major role aiding exports in the wake of the 2008 crisis.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.