Moody's says Avolon held back by HNA
Moody's has warned that Avolon's credit rating is being held back by its troubled parent company, HNA Group.
In a new credit report on the Irish-founded, Irish-run aircraft lessor, Moody's said Avolon's access to capital remains sensitive to developments at its parent.
Chinese conglomerate HNA owns Avolon via a subsidiary called Bohai. Moody's deems HNA and Bohai to have weaker credit fundamentals than Avolon.
"Creditors of Avolon benefit from the protection provided by the company's governance structure as well as from the amendment of its bond covenants to clarify the extent to which Bohai can extract capital from Avolon," Moody's said.
"Nonetheless, Bohai has considerable influence over Avolon's strategy that could be disadvantageous to creditors, and Avolon's cost of market capital continues to be sensitive to negative developments at HNA."
The ratings agency flagged a $237m (€201m) loan given by Avolon to Bohai that matures in December 2018, saying this could be "renewed rather than repaid, given Bohai's strained liquidity position".
It also said Avolon had a "material exposure of about 7pc of its fleet" to HNA Group airlines, some of which had run behind on payments to lessors.
HNA has moved to sell off a number of assets recently. It spent more on interest than any non-financial company in Asia last year, a $5bn (€4.2bn) bill that represented a more than 50pc increase from the year before. With roots in a regional airline founded on China's Hainan Island, HNA carried a total of $94bn (€80bn) in debt at the end of 2017. (Additional reporting: Bloomberg)