Fitch Ratings-New York-25 April 2018: Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) and senior unsecured debt ratings of Boeing Capital Corporation (BCC) at 'A'. BCC is the captive finance subsidiary of parent, The Boeing Company (BA, rated A/Stable). A full list of rating actions follows at the end of this release.
KEY RATING DRIVERS
IDR AND SENIOR DEBT
The rating affirmation reflects Fitch's view that BCC is a core subsidiary of BA, reflecting its role arranging, structuring, and providing financing to support the sale of BA's products. The rating linkages are also based on the high level of management and operational integration between the two entities, as well as BA's track record of support for BCC, reflecting the fungibility of funding between the two entities. Consistent with Fitch's 'Non-Bank Financial Institutions Rating Criteria', the ratings of core subsidiaries are equalized with those of its parent.
In addition, BA has provided unconditional guarantees for the due and punctual payment and performance of all of BCC's outstanding publicly-issued debt. Fitch views the parent guarantees as the strongest form of parental support, which further enhances the rating linkages between the parent and subsidiary.
BCC has historically exhibited sound operating performance, stable asset quality, and a sufficient liquidity profile, although its standalone credit risk profile would likely be lower than 'A' given the cyclicality and residual value risk associated with the aircraft leasing business, the credit risk profile of BCC's lessors and its elevated leverage levels relative to standalone aircraft lessors.
BCC's operating performance is consistent with the company's operating strategy focused on minimizing the use of its balance sheet in support of BA's aircraft sales. Segment revenues and operating income has remained relatively flat driven by portfolio run-off and aircraft sales, offset by modest new origination activity. Asset quality performance has also remained relatively stable over the years, as the company has worked through a number of credit issues within its portfolio, and reduced overall risk resulting from a decrease in customer financing. Fitch believes that current loss reserves, direct BA support, and the current supportive aircraft financing environment, as well as improved airline credit fundamentals, should provide sufficient support relative to potential losses on receivables.
IDR AND SENIOR DEBT
BCC's ratings and Rating Outlook are linked to those of its parent. Positive rating actions would be limited to Fitch's view of BA's credit profile. Fitch cannot envisage a scenario where the captive would be rated higher than its parent. Conversely, negative rating actions could be driven by a change in BA's ratings or from a change in the perceived relationship between BCC and BA, including the early termination of the parent guarantee prior to the repayment of BCC's outstanding publicly issued debt.
Fitch has affirmed the following ratings:
Boeing Capital Corporation
--Long-term IDR at 'A';
--Senior unsecured debt at 'A'.
The Rating Outlook is Stable.