KBRA Assigns BBB Rating to Air Lease Corporation’s Series A Preferred Stock

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns a debt rating of BBB with a
Stable Outlook to the non-cumulative perpetual preferred stock to be
issued by Air Lease Corporation (“AL” or “the Company”), an aircraft
leasing company headquartered in Los Angeles, California. KBRA most
recently affirmed Air Lease’s issuer rating and senior unsecured debt
rating of A- on December 14, 2018. The BBB rating of the preferred
shares is two notches below the issuer and senior unsecured debt rating
of A-.

The proposed preferred shares qualify to receive 75% equity credit for
the purposes of leverage calculation. The two-notch reduction from AL’s
senior unsecured debt rating reflects the deeply subordinated features
of the preferred shares indicated by their ranking in the capital
structure, their discretionary and non-cumulative dividend feature and
their perpetual nature. If dividends on the preferred shares are in
arrears, dividends on any parity securities as well as other more
subordinated securities may not be paid. The 75% equity credit indicates
that the preferred securities are highly loss absorbing given their
structural features which will protect senior creditors for credit
losses to some extent.

It is worth noting that AL is a highly rated entity with a high
unencumbered asset base comprising of highly liquid aircraft assets as
well as relatively low leverage (2.4x as of December 31, 2018). If the
credit profile of AL deteriorates and results in a lower rating, the
notching differential may potentially be wider. On the other hand, the
Company indicated that it does not intend to issue any other form of
hybrid securities or subordinated debt in the future. Should AL issues
other forms of subordinated debt or hybrid securities, KBRA will review
the notching and equity credit given. Finally, KBRA considers the
quality of equity when assigning ratings and limits the amount of equity
credit given to hybrid securities based on the total level of capital
including common stocks of the Company.

Air Lease intends to use the proceeds of the issuance for general
corporate purposes, which may include the purchase of aircraft or the
repayment of existing indebtedness. Dividends will accrue at a fixed
rate for the first 5 years and then accrue at a floating rate
thereafter. Dividends are discretionary and non-cumulative. The
preferred stock will rank senior to AL’s common stock and junior to all
AL’s existing and future debt obligation. If dividends of the preferred
shares are in arrears, dividends on any parity securities and
subordinated securities may not be paid.

The A- issuer and senior unsecured ratings of Air Lease are supported by
strong financial fundamentals, as reflected by a low leverage strategy,
strong profitability, liquidity and cash-flow metrics, and largely
unencumbered asset base. The ratings also take into account Air Lease’s
strong management profile and the growing strength of its global
franchise, which is backed by a young and in-demand fleet, a diverse
customer base, substantial forward lease placement of orders, and a
strong order book. The ratings are further supported by the stable
outlook of the global aircraft leasing industry. These strengths are
balanced by the disciplined funding and placement planning required to
manage the significant order book, an element of key-man risk despite
good succession planning, the cyclical nature of the industry, potential
credit quality issues in the airline industry as a whole, and event
risks related to air travel in general.

The ratings are based on KBRA’s Global
Finance Company Rating Methodology
published on November 28,
2017.

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
designated as a designated rating organization by the Ontario Securities
Commission for issuers of asset-backed securities to file a short form
prospectus or shelf prospectus, is recognized by the National
Association of Insurance Commissioners as a Credit Rating Provider, and
is a certified Credit Rating Agency (CRA) by the European Securities and
Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.

Contacts

Analytical Contacts:
Danise
Chui, Senior Director
(646) 731-2406
dchui@kbra.com

Marjan
Riggi, Senior Managing Director
(646) 731-2354
mriggi@kbra.com

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