Fitch Ratings has assigned a rating of 'A-' to BOC Aviation Limited's (BOC Aviation, A-/Stable) USD500 million 3% senior unsecured notes due 2029.
The notes are issued under the company's USD10 billion global medium-term note programme and listed on Singapore Exchange Securities Trading Limited in September 2019. BOC Aviation plans to use the proceeds from the issuance to fund new capital expenditure, general corporate purposes and/or refinancing existing borrowings.
KEY RATING DRIVERS
The bond rating is equalised with BOC Aviation's Long-Term Issuer Default Rating (IDR) and senior unsecured debt rating of 'A-'.
BOC Aviation's ratings were last affirmed during Fitch's aircraft-leasing peer review of nine publicly rated firms on 15 July 2019. The Long-Term IDR reflects Fitch's continued expectation of a very high probability of extraordinary support from BOC Aviation's ultimate parent, Bank of China Limited (BOC, A/Stable), if required.
Fitch views BOC Aviation as a strategically important subsidiary of BOC, and rates BOC Aviation one notch lower than BOC's IDR of 'A'. This is based on BOC Aviation's strong links with BOC, which is evident from the shared branding with its parent, high degree (70%) of ownership and level of board representation, cross-selling initiatives, and contingency liquidity support. Counterbalancing these factors is BOC Aviation's relatively low contribution to the broader BOC group and the fact that the aircraft lessor operates in a different jurisdiction.
The ratings of the senior unsecured debt and medium-term notes are sensitive to changes in BOC Aviation's IDR, which will move in tandem with changes in BOC's ratings - given the one-notch differential between the IDRs of BOC Aviation and BOC.
BOC Aviation's ratings could be affected should BOC seek to dispose of - or meaningfully reduce its investment in - BOC Aviation, or if there are any other developments within BOC that are perceived by Fitch as altering BOC's willingness or ability to provide support to BOC Aviation. However, this is not Fitch's expectation.
Negative rating action could also be taken if BOC Aviation's operating performance were to deteriorate and fail to deliver the return on investment envisaged by BOC, which could affect Fitch's assessment of the propensity of BOC to provide support to BOC Aviation in case of need.
DATE OF RELEVANT COMMITTEE
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The rating affirmation reflects Fitch's continued expectation of a very high probability of extraordinary support from BOC Aviation's ultimate parent, BOC.