New York, April 30, 2018 -- Moody's Investors Service ("Moody's") assigned a Ba3 rating to the new $100 million Class C Enhanced Equipment Trust Certificates, Series 2012-2C(R) due June 3, 2023 that American Airlines, Inc. announced earlier today. American Airlines will use the proceeds to refinance the existing Class C Certificates of US Airways Series 2012-2 EETC, which mature on June 3, 2018. Moody's also affirmed its A3 and Ba1 ratings assigned to the Class A and Class B certificates, respectively of the US Airways Series 2012-2 EETC. The Ba3 Corporate Family Rating and stable outlook of American Airlines Group Inc. (together with American Airlines, Inc., "American") are unaffected by this rating action.
The ratings on the 2012-2 EETC reflect the credit quality of American; the typical benefits of EETCs, including the applicability of Section 1110, cross-default and cross-collateralization of the equipment notes; 18 month liquidity facilities on the Class A and Class B series of certificates; cross-subordination pursuant to the Intercreditor Agreement; and Moody's belief that the A321s and A330-200s that collateralize the certificates will remain in the company's fleet through the Class A scheduled final payment date of June 3, 2025.
The respective notching on the Class A and Class B certificates is six and two above the Ba3 Corporate Family rating. The Ba3 rating on the new Class C(R) is level with the CFR. The notching for each class reflects Moody's belief of 1) the importance of the aircraft to American's network and 2) that the aircraft in this transaction will be younger than the average age of their respective types in the fleet during the transaction's remaining term through 2025. These factors lower the expected probability of default of the Certificates under an American Airlines insolvency scenario.
Moody's estimates the respective peak loans-to value (LTV) of the Class A, Class B and Class C(R) at about 58%, 78% and 98%, respectively over the remaining life of the transaction through June 2025, (before priority claims for repossession and remarketing costs and liquidity facilities). The LTVs on the senior classes support the notching of each tranche. The Ba3 rating on the new Class C(R) is the same as the rating on the existing Class C and one notch higher than the B1 rating Moody's assigns to senior unsecured debt obligations of American Airlines Group Inc. The rating of the Class C(R) balances the security interest of the obligation against the loan to value of almost 100%, which indicates no equity cushion. Moody's expects the LTV of the Class C will improve to about 80% following the maturity of the Class B on June 3, 2021. Changes in the EETC ratings can result from any combination of changes in the underlying credit quality or ratings of American, in Moody's opinion of the importance of particular aircraft models to the airline's network, or in Moody's estimates of aircraft market values, which will affect estimates of loan-to-value and thus equity cushions.
American Airlines Group, Inc. is the holding company for American Airlines, Inc. and American Eagle Airlines. The companies operate an average of nearly 6,700 flights a day to nearly 350 airports across 50 countries. The company reported $42.2 billion of revenue in 2017.
..Issuer: American Airlines, Inc.
....Senior Secured Enhanced Equipment Trust, Jun 3, 2023, Assigned Ba3
..Issuer: US Airways, Inc. (assumed by American Airlines, Inc.)
....Senior Secured Enhanced Equipment Trust, Jun 3, 2025, Affirmed A3
....Senior Secured Enhanced Equipment Trust, Jun 3, 2021, Affirmed Ba1
The methodologies used in these ratings were Enhanced Equipment Trust and Equipment Trust Certificates published in December 2015, and Passenger Airline Industry published in April 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.