Fitch Rates VAH's Proposed 2013-1 EEN Class D Notes 'B(EXP)'

NEW YORK—(BUSINESS WIRE)—Fitch Ratings expects to assign the following rating to Virgin Australia’s proposed enhanced equipment notes (EEN), series 2013-1 (VA 2013-1) subject to review of final documents:

—$64.6 million class D notes (D-tranche) with an expected maturity of October 2016 ‘B(EXP)’.

The ‘B’ rating for the D-Tranche is based on an estimated uplift compared with Virgin Australia Holdings Limited’s (VAH, not rated) stand-alone credit profile, largely based on a high Affirmation Factor, and expected collateral recovery prospects. While the affirmation factor for this pool is considered high, Fitch considers the collateral coverage for the D-Tranche to be weak, which combined with the absence of a liquidity facility and subordinated position to the C-Tranche (rated ‘B+’) supports the one notch rating differential from the C-Tranche. The rating is also supported by the class D note holders’ right in certain cases to purchase all of the class A notes, class B notes and class C notes at par plus accrued and unpaid interest. Additionally, the interest payments on the class D notes are senior to the principal distributions to the class A, B and C notes.

Each note will be fully cross-collateralized, and all indentures will be fully cross-defaulted from the date of the issuance of each applicable note. Fitch believes these provisions in VA 2013-1, which are standard enhancements of the modern EETC template, increase the likelihood that VAH would affirm these notes and the underlying aircraft and continue to make payments on the notes in the case of in the case of administrative proceedings. Taken together, these provisions treat all the aircraft as one pool of assets as the collateral supporting this transaction.

For more information on the VA 2013-1 series of EEN’s please see the press release ‘Fitch Rates VAH’s Proposed 2013-1 EEN Class A Notes ‘A’, Class B Notes ‘BB+’, Class C Notes ’B+’’ dated Oct. 7, 2013 and the pre-sale report available at ‘www.fitchratings.com’.

Fitch expects to assign the following rating:

Virgin Australia Enhanced Equipment Notes 2013-1:

—Class D notes ‘B(EXP)’.

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

Applicable Criteria and Related Research:

—‘Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage’ (Aug. 5, 2013);

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