Kroll Bond Rating Agency (KBRA) has assigned a senior unsecured rating of A with a Stable Outlook to the senior unsecured notes to be issued by Aviation Capital Group LLC (“ACG” or “the Company”), an aircraft leasing company headquartered in Newport Beach, California. The company intends to use the proceeds for general corporate purposes, which may include the repayment of existing debt. KBRA previously assigned ACG an issuer rating and a senior unsecured debt rating of A on December 5, 2017.

The notes will be ACG’s senior unsecured general obligations and will rank equally in right of payment with its existing and future senior unsecured indebtedness. The notes will rank senior in right of payment to any future subordinated unsecured indebtedness and will be effectively subordinated to its existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. The notes will be structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries.

KBRA considers ACG’s stand-alone credit profile to be A-, which reflects the Company’s long and stable track record, strong market position, experienced management team, prudent risk management culture and relatively low leverage metrics comparable to other highly rated aircraft leasing companies. These strengths are balanced by the need for additional equity for continuous significant growth, the recent increase in impairment charges in 2016 and 2017, the cyclical nature of the industry and potential credit issues of airline customers, and event risks in general. The A issuer and senior unsecured ratings of ACG benefit from the strong credit profile of its majority shareholder, Pacific Life Insurance Company (Pacific Life) and the strategic importance of ACG to Pacific Life. In KBRA’s view, ACG provides Pacific Life a great source of uncorrelated business and earnings diversification, taxable deductions through depreciation expenses for flight equipment and relatively high return on equity. In addition, the ongoing involvement of Pacific Life in ACG’s strategic direction, the long and close relationship between the two as well as Pacific Life’s publicly stated intent to remain the majority shareholder in the event of a successful partial initial public offering (IPO) of ACG all evidence the strategic importance of ACG to Pacific Life.

The ratings are based on KBRA’s Global Finance Company Rating Methodology, published November 28, 2017. The financial strength of Pacific Life is evaluated based on KBRA’s Global Insurer and Insurance Holding Company Rating Methodology, published October 10, 2017

KBRA’s rating report for ACG is available here.