Fitch Ratings has assigned the following ratings to SMBC Aviation Capital Finance DAC: Long-Term Issuer Default Rating (IDR) 'BBB+'; Senior unsecured notes 'BBB+'.
The notes were issued by SMBC Aviation Capital Finance DAC and guaranteed by SMBC Aviation Capital Limited (SMBC AC; Long-Term IDR of 'BBB+'/Outlook Stable), whose majority parent is Sumitomo Mitsui Financial Group, Inc. (SMFG; Long-Term IDR of 'A'/Outlook Stable).
SMBC Aviation Capital Finance DAC's IDR is equalized with SMBC AC's IDR and reflects the full and unconditional guarantee of SMBC Aviation Capital Finance DAC's obligations by SMBC AC.
The senior unsecured notes rating is equalized with SMBC AC's long-term IDR, reflecting Fitch's expectation for average recovery prospects given that the majority of SMBC AC's consolidated debt-funding is unsecured. As of March 31, 2016, secured debt represented 4.5% of total debt and 3.2% of total assets. Pro forma for the notes offering, secured debt represents 4.2% of total debt and 3.1% of total assets.
Top exposures at SMBC AC is: GOL Linhas Aereas Inteligentes S.A. which represented 3.0% of net book value as of March 31, 2016.
SMBC AC's Third-party funding represented 41.2% of SMBC AC's total debt funding as of March 31, 2016 and is 45.2% pro forma for the unsecured notes offering. Leverage, defined as debt-to-tangible equity, on a consolidated basis was 4.6x at March 31, 2016 and is 5.0x pro forma for the unsecured notes offering. This pro forma level represented the highest leverage among Fitch-rated aircraft lessors. Fitch expects some reduction in SMBC AC's balance sheet leverage over the next three years, although it is likely to remain higher than most peers.