Moody’s And Credit Markets Don’t Realize The Risk Associated With AerCap
Summary
- Moody’s is understating the credit risk of AerCap Holdings N.V. with their cross-over Ba1 credit rating four notches higher than our fundamental HY2 (equivalent to B2) credit rating.
- Credit markets are also understating AER’s credit risk with a CDS of 198bps and a cash bond YTW of 3.115%, relative to our 281bps iCDS and our 3.955% iYTW.
- We rate AER as a much riskier credit because of their consistent material debt maturities and weak recovery rate.
- In addition, our qualitative analysis highlights that management may be concerned about their ability to manage leverage and improve their liquidity position.
Cash Flow Profile
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%.
We produced a Credit Cash Flow Prime™ chart for AerCap Holdings N.V., as we do for every company we evaluate. The chart provides a far more comprehensive view of credit fundamentals than traditional ratio-based analyses. It shows the cash flow generation and cash obligations related to the credit of the firm, adjusted for non-cash financial statement reporting distortions from GAAP.
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