S&P Global Ratings today published its global criteria for rating aircraft and aircraft engine asset-backed securities (ABS), "Criteria: Global Aircraft ABS: Methodology And Assumptions." We also published "Sector And Industry Variables: Global Aircraft ABS: Methodology And Assumptions," which outlines the variables we use in our analysis of specific global aircraft ABS transactions.
The new criteria follow our request for comment, "Request For Comment: Global Aircraft ABS: Methodology And Assumptions," published Oct. 4, 2022. For summaries of the changes between the request for comment and the final criteria, and the rationale behind those changes, see "RFC Process Summary: Global Aircraft ABS: Methodology And Assumptions." After incorporating market feedback, our updated criteria remain largely in line with the proposals in our request for comment.
The rating impact as a result of applying these criteria is limited to aircraft and aircraft engine lease transactions. Up to 25% of the outstanding ratings may move downward, half of which by two notches or more. 60% or more of the outstanding ratings are not expected to change. Up to 15% of the outstanding ratings could move upward by up to two notches, two-thirds of which by no more than one notch. Any rating action will be dependent on our view of the extent of continued stress in the sector. The impact is mainly due to the interplay of multiple factors, including updated lease rate factors reducing lease payments, the change in depreciation assumptions, and an updated assumption to apply a fixed lease term of four years to project obligor defaults for lease transactions. This impact analysis is intended to serve as a broad, directional guide to the possible rating impact of the criteria. Ultimately, actual rating impact may vary, depending on the specifics and performance of the asset pool and structural features of a particular transaction.
We will publish a separate press release placing all ratings that may change because of the new criteria under criteria observation (UCO). We plan to complete our review of the majority of the potentially affected ratings within the next 180 days.
This report does not constitute a rating action.
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