Moody’s is understating the fundamental credit risk of AerCap Holdings N.V. (NYSE:AER) with its cross-over Ba1 credit rating. Our fundamental analysis highlights a riskier credit profile for AER since even the combination of their cash flows and cash on hand will not be able to cover their material debt maturities beginning in 2017. Valens therefore rates AER four notches lower at an HY2 credit rating (B2 using Moody’s ratings scale).
In addition, credit markets understating AER’s credit risk with a CDS of 198bps and a cash bond YTW of 3.115%, relative to our Intrinsic CDS of 281bps and our Intrinsic YTW of 3.955%.
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