BOC Aviation Ltd.#s Proposed Senior Unsecured Notes Rated #A-#

Stocks and Financial Services Press Releases Wednesday October 11, 2017 16:41
SINGAPORE--11 Oct--S&P Global Ratings

SINGAPORE (S&P Global Ratings) Oct. 11, 2017--S&P Global Ratings today said it has assigned its 'A-' long-term issue rating to a proposed issuance of senior unsecured notes by BOC Aviation Ltd. (A-/Stable/--) under the company's US$10 billion global medium-term note program.

BOC Aviation expects to use the proceeds for refinancing existing debt, capital spending, and general corporate purposes.

The rating on BOC Aviation reflects the company's good cash flow stability from long leases, sound competitive position, and support from its majority shareholder Bank of China Ltd. (A/Stable/A-1). Tempering these strengths are BOC Aviation's leverage tolerance, high capital spending over the next three years, and its exposure to the industry's cyclical demand and aircraft lease rates.

The stable outlook on BOC Aviation over the next 24 months reflects our view that the company will remain strategically important to Bank of China. We expect indirect government support to flow to BOC Aviation through the bank in the event of financial distress. We expect Bank of China to maintain a clear majority ownership in, and name sharing with, BOC Aviation over the next three years at least. In addition, BOC Aviation's leasing operations are consistent with Bank of China's strategy to diversify its earnings base into nonbanking products and outside China.

We expect BOC Aviation to maintain its market position and stable cash flow adequacy ratios through 2019. We anticipate that the company will maintain EBIT interest coverage of around 2.5x and a ratio of funds from operations to debt of close to 10% over the next 24 months. In 2016, these ratios were 3.0x and 10.5%, respectively.


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