Moody's Investors Service has raised Avolon's corporate and senior unsecured ratings following the completion of a minority investment from Orix Aviation.
The agency upped Avolon's issuer credit rating to Ba1 from Ba2 – one notch below investment-grade – as well as increased its senior unsecured rating to Ba2 from Ba3.
"Moody's believes that Orix is strongly committed to Avolon achieving an investment-grade financial profile," the agency writes in a report.
Moody's views Orix's 30% stake in Avolon as having improved the company's shareholder profile and reduced governance risks, providing a counterbalance to the influence of majority investor Bohai and its controlling shareholder HNA Group, especially when it comes to matters concerning Avolon's creditors.
"Moody's expects that Orix will have a positive influence on Avolon's strategy and operational and financial controls through its appointed board directors and will enhance Avolon's business and funding opportunities," the agency writes in a report.
The new board of directors includes two Orix appointed directors, three directors named by Bohai, Avolon's chief executive Domhnal Slattery and one independent director.
"Benefits to Avolon will likely include new leasing opportunities and enhanced access to capital, particularly in the Japanese financial markets," Moody's writes.
The agency praises Avolon's "strong profitability, ample liquidity and moderate leverage" but will watch the lessor's mix of secured debt funding which it says is "high" and the financial condition of controlling shareholder HNA Group.
Fitch Ratings and S&P Global Ratings rate Avolon "BB" and "BB+" respectively. Both affirmed their ratings on 8 August when Orix announced its intention to take a 30% stake in Avolon. At the time, Fitch revised its outlook from stable to positive.
Source: Cirium Dashboard