Thursday 26 April 2018

Avolon seeks rating agency grading

Avolon will be rated by agencies including Moodys, Fitch and S&P
Avolon will be rated by agencies including Moodys, Fitch and S&P
Sarah McCabe

Sarah McCabe

Avolon will become the next Irish company to be rated by the biggest prestigious international rating agencies - with or without a sale.

The €2.5bn-valued jet-leasing company will secure an investment grade rating from Moodys, Fitch and S&P, regardless of whether takeover bids from at least two foreign businesses succeed, chief operating officer John Higgins said.

Dublin-based Avolon has until September 14 to decide whether to walk away from a deal struck last month to sell a minority 20pc stake to Bohai Leasing, a unit of the Chinese aviation and shipping company HNA.

Bohai has also made an offer for the whole company after Avolon, which was founded just five years ago by a small group of Irish aviation leasing executives, received an informal bid from another party, understood to be Avic Capital, a subsidiary of China's Aviation Industry Corporation.

"We have had a lot of dialogue with ratings agencies," said Higgins. "Ultimately we will secure a path to investment grade rating, with or without a sale.

"One of the obstacles is obviously our private equity ownership. Avolon is about 80pc owned by private equity firms. The ratings agencies have a policy that regardless of the quality of your financials and credentials, that level of private equity ownership precludes a rating.

"But even if the current bids don't come to anything, our private equity owners will still ultimately want to monetise and reduce their stakes which will put us in a position to get a rating."

The company expects an investment grade rating, he said. Many large conservative investors, like pension funds, require this to invest.

The management intends to stay on with the company and keep it in Ireland even if it is sold to a foreign owner, Higgins said.

"The intention is to maintain the status quo. From a management perspective, we want to stay with the business. This is a business that we started and grew."

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