OREANDA-NEWS. Fitch Ratings has affirmed BOC Aviation Pte Ltd's (BOC Aviation) Long-Term Issuer Default Rating (IDR) at 'A-' and senior unsecured debt rating at 'A-'. The Rating Outlook is Stable.

These actions are being taken in conjunction with a broader industry review conducted today by Fitch, which includes five aircraft leasing companies. For more commentary on the broader sector review, please see 'Fitch Completes Aircraft Lessor Peer Review', available at 'www.fitchratings.com'.

KEY RATING DRIVERS

IDR AND SENIOR UNSECURED DEBT

The affirmation of BOC Aviation's IDR primarily reflects Fitch's continued expectation of a very high probability of extraordinary support from BOC Aviation's ultimate parent, Bank of China (BOC; 'A', Outlook Stable), if required. This view is based on BOC Aviation's strong links with BOC, which is evident in the parent's shared branding, high level of board representation, cross-selling initiatives, and contingency liquidity support.

Fitch considers BOC Aviation to be a strategically important subsidiary of BOC under its Global Non-Bank Financial Institutions Rating Criteria, which typically results in notching of one to two notches from the parent company's long-term IDR. In BOC Aviation's case, the IDR is one notch lower than BOC's long-term IDR, mainly reflecting the parent's 100% ownership and the aforementioned factors which support BOC Aviation's strategic importance to BOC. The rating also takes into account its small size relative to the broader organization and that it operates in a different jurisdiction.

BOC has committed a standby liquidity line amounting to \\$2 billion, which is considerable relative to BOC Aviation's assets of \\$11.4 billion at year-end 2014. The maturity of the standby facility was extended to 2022 in June 2015, and replaced two \\$1 billion credit lines which were expiring in 2017 and 2019, respectively. The committed credit line is on top of the \\$300 million common equity injection by BOC since it took over BOC Aviation in 2006, and supports Fitch's view that the parent-subsidiary linkage remains strong.

BOC Aviation is one of the few wholly-owned subsidiaries within the BOC group that reports directly to BOC's management. BOC members represent eight out of 10 members on the board of directors - with the president of BOC appointed chairman of BOC Aviation's board. Fitch believes the high level of board representation and management integration reflect the strategic importance of BOC Aviation to BOC, even though the former accounted for only about 0.4% of BOC's consolidated assets as of year-end 2014. BOC Aviation also provides cross-selling opportunities through building new and existing relationships with airlines and aircraft manufacturers.

From a standalone credit risk perspective, BOC Aviation has exhibited a reasonable track record through cycles, a consistent ability to maintain a young fleet age, solid lessee quality and an experienced management team. BOC Aviation's profitability has been consistently higher compared with rated peers, in part supported by low funding costs due to its strong parent linkages.

BOC Aviation has a moderately higher appetite for leverage (with Debt/Equity at 4.0x at end-2014) and reliance on bank borrowings (69% of total debt) compared to its peers. Changes in Fitch's view of BOC Aviation's standalone financial profile would be likely to take into account BOC Aviation's future leverage appetite, funding diversity, and/or risk appetite in terms of lessee quality and growth ambitions.

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS AND SENIOR DEBT
BOC Aviation's ratings are primarily sensitive to changes in BOC's ratings, given that the ratings of BOC Aviation are notched one notch below those of BOC.

Further, although not expected by Fitch, should BOC seek to dispose of its investment in BOC Aviation, or there be any other developments within BOC which are perceived by Fitch to alter BOC's willingness or ability to provide support to BOC Aviation, BOC Aviation's ratings could be adversely affected. Negative rating action could also be taken if BOC Aviation's own operating performance deteriorated, thereby not delivering the return on investment envisaged by BOC, to the extent that this had an impact on Fitch's assessment of the propensity of BOC to provide support to BOC Aviation in case of need.

Fitch has affirmed the following ratings:

BOC Aviation Pte Ltd:
--Long-term IDR at 'A-';
--Senior unsecured debt at 'A-'.

The Rating Outlook is Stable.