Rating agency Scope has proposed updates to its aviation finance rating methodology, which it says might have moderate rating implications on existing ratings.
The agency calls for comments from market participants by 19 June 2021.
The proposal contains: changes to the calculation of the day-one value of an aircraft, clarification of the various steps of the aircraft analysis, a clarification that the market environment is included as a consideration for determining aircraft remarketing time, clarification how structural features will be considered in the probability of default analysis and how the default probability analysis may impact the loss analysis, how the credit quality of risk presenters under review will be considered, as well as
editorial changes.
The main proposed change is to the application of the Day-one value. Scope proposes to incorporate an aircraft’s market value in the calculation of the day-one value to improve the rating’s sensitivity to sharp market value drops, such as in a crisis scenario. The proposed change considers drops in an aircraft’s market value resulting from a market downturn or issues that are specific to the aircraft model.
Scope invites issuers, investors and other interested parties to comment on the methodology by 19 June 2021, as part of the agency’s ongoing commitment to transparency and open dialogue with market participants.
Download the methodology here or from www.scoperatings.com.