TEXT-S&P summary: BOC Aviation Pte. Ltd.

(The following statement was released by the rating agency)

Jan 21 -

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Summary analysis -- BOC Aviation Pte. Ltd. ------------------------ 21-Jan-2013

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CREDIT RATING: BBB/Stable/-- Country: Singapore

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Credit Rating History:

Local currency Foreign currency

26-Jun-2012 BBB/-- BBB/--

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Rationale

The rating on BOC Aviation Pte. Ltd. reflects the company's good cash flow

stability from long lease lives, sound competitive position, and support from

its 100%-owner Bank of China Ltd. (BOC: A/Stable/A-1; cnAA+/cnA-1). A

moderately higher leverage than that of other rated peers and the industry's

exposure to cyclical demand and aircraft lease rates partly offset these

strengths. We assess BOC Aviation's business risk profile to be "satisfactory"

and its financial risk profile to be "significant."

We assess BOC Aviation's stand-alone credit profile at 'bbb-'. Our rating

incorporates a one-notch uplift because we consider BOC Aviation to be a

subsidiary with "moderately strategic importance" to BOC.

BOC Aviation's financial performance and cash flows for the nine months ended

Sept. 30, 2012, were in line with our expectations. Revenues grew as the

company leased new aircraft to customers and EBITDA margins remained 90%-95%.

The company's EBITDA interest coverage of 5.5x-6.5x over the period was

stronger than the 3x-4x we had anticipated for 2012. This is because the

company's capital spending for the period and associated borrowing needs were

substantially lower than the US$2.9 billion we had assumed for 2012. BOC

Aviation does not publish quarterly financial statements.

The company's interest coverage ratios could decline moderately in 2013 as it

raises more debt to finance capital spending. Our capital spending assumptions

accommodate BOC Aviation's recent order of 50 new aircraft. The financial

difficulties that BOC Aviation's India-based customer Kingfisher Airlines Ltd.

is experiencing will not materially affect BOC Aviation's financial

performance in 2013, in our view. Currently, BOC Aviation still has aircraft

placed with Kingfisher, representing about 1% of the company's net book value.

Liquidity

BOC Aviation's liquidity is "adequate," as defined in our criteria. We expect

the company's liquidity sources to exceed its needs by about 1.2x or more over

the next 12 months.

Our liquidity assessment incorporates the following factors and assumptions:

-- Liquidity sources include our expectation of funds from operations

(FFO) of US$475 million-US$525 million for 2013. The company also has about

US$361 million in cash and cash equivalent as of June 30, 2012, although these

should now be significantly higher following a US$500 million senior secured

notes issuance in September 2012.

-- BOC Aviation has a committed credit line of US$2 billion from BOC and

committed credit lines of US$225 million from various other international

banks. Such credit lines provide the company with significant funding

flexibility, in our view.

-- We don't consider any prospective aircraft sales in our liquidity

assessment.

-- Liquidity needs over the next 12 months include short-term debt and

capital spending.

-- We exclude from liquidity needs bank loans that BOC Aviation would

repay with proceeds from aircraft sales over the next 12 months.

-- The company's liquidity sources will exceed its needs even if EBITDA

declines by 15%.

Outlook

The stable outlook reflects our expectation that BOC Aviation's financial risk

profile will remain broadly stable through 2014 despite a substantial

debt-funded capital spending plan. We anticipate that the company will

maintain a ratio of FFO to debt of 6%-8% and a ratio of debt to capital of

less than 82%.

We believe an upgrade is unlikely until demand and lease rates for aircraft

lessors improve sustainably. BOC Aviation's ratio of FFO to debt staying above

12% on a sustainable basis would indicate such improvement.

We could lower the ratings if: (1) BOC Aviation increases its debt-funded

capital spending beyond our expectations, such that its ratio of debt to debt

plus equity increases beyond 85%; or (2) we believe support from BOC is likely

to wane. We could also lower the rating if BOC Aviation's ratio of FFO to debt

falls below 5% on a sustainable basis. This could happen if the company's base

monthly lease rate declines below 0.65% while its average funding cost is 250

basis points over LIBOR.

Source: http://news.yahoo.com/text-p-summary-boc-aviation-pte-ltd-090513406--sector.html

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