2008-07-23 23:55:02 -
- Fitch Ratings has taken the following rating actions for Lease Investment Flight Trust (LIFT) aircraft securitization as outlined below:
--Class A-1 notes downgraded to 'B' from 'BB';
--Class A-2 notes downgraded to 'B' from 'BB';
--Class A-3 notes downgraded to 'BB' from 'BBB-';
--Class B-1 notes downgraded to 'C/DR6' from 'CC/DR5';
--Class B-2 notes
downgraded to 'C/DR6' from 'CC/DR5';
--Class C-1 notes remain at 'C/DR6';
--Class C-2 notes remain at 'C/DR6';
--Class D-1 notes remain at 'C/DR6';
--Class D-2 notes remain at 'C/DR6'.
Cash flow available to service debt in the LIFT transaction has declined steadily over the past three years. Due to the combination of reductions in available collections and periodic spikes in expenses, cash liquidity for classes B, C, and D have been completely exhausted, resulting in interest shortfalls for each of those classes. Given the reductions in cash flow, it appears unlikely that class B notes will receive future interest payments. Furthermore, the class A cash liquidity was drawn upon for the first time on the January 2008 payment date in order to pay scheduled class A interest. However, class A liquidity was restored on the March 2008 payment date. Class A continues to pay partial minimum principal payments; however, as available cash flow continues to decline, the reliability of full principal payment on the class A notes also declines. Compounding these concerns is the LIFT portfolio's concentrations in older generation, less fuel efficient aircraft types such as the Boeing 737-300 and -400 (Classics) and McDonnell Douglas MD-80 series aircraft. These and other aircraft types are exposed to potential value and lease rate deterioration stemming from fuel price volatility and the resulting airline capacity reductions and bankruptcies.
Fitch's analysis incorporated expected cash flow to be available to the trust over the remaining life of the transaction. This expectation is based on several factors including aircraft age, current portfolio value, potential lease rates, and perceived liquidity of the portfolio. Lease rate and portfolio value expectations have been updated to reflect Fitch's views on certain aircraft types given recent aviation market volatility.
LIFT is a Delaware business trust formed to conduct limited activities, including the issuance of debt, and the buying, owning, leasing and selling of commercial jet aircraft. LIFT originally issued $1.4 billion of rated notes in June 2001. Primary servicing on LIFT's aircraft is being performed by GE Capital Aviation Services, wholly owned by General Electric Corporation while the administrative agent role is being performed by Phoenix American Financial Services, Inc.
Fitch will continue to monitor this, and all, aircraft securitizations and update ratings as warranted.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Bradley Sohl, 312-368-3127 (Chicago)
Peter Manofsky, 312-368-2068 (Chicago)
Media Relations:
Sandro Scenga, 212-908-0278 (New York)
