S&P Global Ratings has upgraded Avation from B- to B, and has maintained its outlook for the lessor as “stable”.
On Tuesday (November 11), the ratings agency said that Avation’s refinancing and liquidity risks have “materially improved” following the completion of its latest refinancing.
On Monday, the Singapore-based lessor used proceeds from its recent $300 million note issuance to refinance its $298 million notes that were due in October 2026.
“The $298 million notes accounted for close to half of Avation's debt, creating a large maturity wall in 2026," the ratings agency said.
“With the successful refinancing, we estimate the company's annual debt maturities will now comprise a much lower 10% to 20% of total debt through fiscal 2028 (year-end June 30). The new notes will mature in May 2031.”
Avation's credit strength is also expected to improve, driven by rising earnings and fleet growth.
The lessor is aiming to expand its fleet to more than 40 aircraft by the end of fiscal 2028, up from 33 aircraft as of June 30, 2025.
The “stable” outlook rating reflects S&P’s expectation that Avation will further add to its fleet and maintain stable lease rates over the next 12 to 18 months.
S&P expects Avation to have a ratio of funds from operations (FFO) to debt approaching 7% and EBIT interest coverage ratio of 1.1x-1.2x.
However, the agency said it could lower its rating if weak leasing demand, a stagnant fleet, or payment delays from airline customers result in lower earnings and cash flow.
EBIT interest coverage ratio falling below 1.1x, or ratio of FFO to debt approaching 6% for a sustained period, could indicate such a deterioration.
S&P may raise the rating if it expects the company's EBIT interest coverage to improve to more than 1.3x and its ratio of FFO to debt rises above 9%.