Fitch Rates American Airline's Proposed 2013-2 Class C Certificates 'B+(EXP)'

CHICAGO—(BUSINESS WIRE)—Fitch Ratings has assigned the following rating to American Airlines Pass Through Trust Certificates, Series 2013-2

-$256 million class C certificates (C-tranche) with an expected maturity of January 2017 ‘B+(EXP)’.

Fitch currently rates the American Airlines 2013-2 class A and class B certificates ‘BBB+’ and ‘BB+’, respectively. The proposed issuance of the AA 2013-2 C tranche does not affect the existing ratings for the class A and class B certificates.

Key Rating Drivers

The C tranche ratings are notched from American’s ‘B+’ Issuer Default Rating (IDR) based on the affirmation factor of the collateral (i.e. the likelihood that the collateral pool would be affirmed in a future bankruptcy), and the recovery prospects for C tranche holders. The ‘B+’ rating is based on a high affirmation factor (+2 notches) and low recovery expectations (-2 notches).

Fitch considers the affirmation factor for this collateral pool to be high, given its size. The pool consists of 75 aircraft, making up roughly 8% of the combined American/US Airways fleet, including American Eagle. This is particularly large compared to many recent EETC pools which generally contain 2-4% of a given carrier’s fleet. The affirmation factor is limited by the average age of the aircraft which stands at more than 10 years. Many recent comparable transactions have mainly consisted of new delivery aircraft.

Weak recovery prospects reflect the subordinated position of the C tranche below both the A and B tranche in terms of priority of payment. Fitch’s recovery analysis, which incorporates a ‘BB’ level stress test, shows that the C tranche is expected to receive minimal recovery in a liquidation scenario.

TRANSACTION OVERVIEW

American issued the AA 2013-2 class A certificates in July 2013 to refinance 75 aircraft that were previously encumbered under existing secured financings. This was followed by the issuance of a $512 million B tranche in November 2013. American now intends to issue a C tranche to be sized at $256 million. The initial cumulative C tranche LTV will be 84.7% per the offering memorandum. Fitch calculates the initial LTV at 88.7% using aircraft values provided by an independent appraiser.

Collateral: The collateral pool consists of 41 737-800s, 14 757-200s, 19 777-200ERs and 1 767-300ER. The collateral pool features a weighted average age of nearly 10.6 years. These 75 aircraft equate to roughly 8% of the combined American’s total fleet, including American Eagle (by number of aircraft).

The relatively high average age of the collateral pool and the inclusion of some weaker aircraft types (757-200, 767-300ER) makes the overall collateral quality in AA 2013-2 weaker than that seen in some recent EETC transactions, which have consisted mostly of new delivery, Tier 1 aircraft. However, Fitch still considers the overall collateral quality of AA 2013-2 to be solid given that the majority of the pool consists of Tier 1 737-800s and Tier 1/2 777-200ERs.

Fitch has assigned the following rating:

American Airlines Pass Through Trust 2013-2

—Series 2013-2 class C certificates ‘B+(EXP)’.

Fitch currently rates the following:

American Airlines Pass Through Trust 2013-2

—Series 2013-2 class A certificates ‘BBB+’.

—Series 2013-2 class B certificates ‘BB+’.

Additional information is available at ‘www.fitchratings.com’

Applicable Criteria and Related Research:

—‘Rating Aircraft Enhanced Equipment Trust Certificates’ (Sept. 12, 2013);

—‘Corporate Rating Methodology’ (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Rating Aircraft Enhanced Equipment Trust Certificates

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=717763