The United States, European Union, and United Kingdom have imposed new sanctions against Russian individuals and entities. In light of these recent events, Kroll Bond Rating Agency (KBRA) states that it is monitoring its Global ABS Aviation sector of over 150 lease backed securities in over 50 transactions.
The lessees in a given transaction are typically from multiple jurisdictions, and transaction concentration limits often permit aircraft lessees that may be domiciled in Russia or Ukraine.
In regard to aircraft leased to airlines located in Russia, KBRA notes that there is potential cash flow interruption that could result from recent or future economic sanctions on Russia or Russian citizens as a result of the conflict. “There are several scenarios that have the potential to impact cash flow, including, but not limited to: (a) if a lessee becomes subject to sanctions, (b) if an owner of the lessee becomes subject to sanctions, (c) if a bank which is involved in the processing of lease payments for the lessee becomes subject to sanctions, or (d) if the lessee operates a certain percentage of their routes within sanctioned regions. Currently, there are no sanctions in place within Ukraine; however, aircraft leased and located in Ukraine may be susceptible to physical damage.”
KBRA plans to continue to monitor the current situation in Russia and Ukraine and if needed effectuate Watch Placements and/or rating actions.