PRESS RELEASE

KBRA Places Negative Outlooks on Global Aircraft Lessor Ratings Due to Coronavirus Challenges and Uncertainties

NEW YORK (March 27, 2020) – Kroll Bond Rating Agency (KBRA) affirms the ratings of the following commercial aircraft leasing companies and revises their Outlooks to Negative from Stable.

• (A- Issuer Rating; A- Senior Unsecured Debt Rating) • Aviation Capital Group LLC (A- Issuer Rating; A- Senior Unsecured Debt Rating) • Holdings Limited (BBB+ Issuer Rating; BBB+ Senior Unsecured Debt Rating) o Park Aerospace Holdings Limited issuances (BBB+ Senior Unsecured Debt Rating) o Avolon Holdings Funding Limited issuances (BBB+ Senior Unsecured Debt Rating) • Dubai Aerospace Enterprise Ltd. (BBB+ Issuer Rating; BBB+ Senior Unsecured Debt Rating) • Fly Leasing Limited (BBB Issuer Rating; BBB- Senior Unsecured Debt Rating) • DAC (BBB+ Issuer Rating; BBB Senior Unsecured Debt Rating) • Voyager Aviation Holdings, LLC (BB- Issuer Rating; B+ Senior Unsecured Debt Rating)

This action follows KBRA’s review of the ongoing negative impacts of the new coronavirus (COVID-19) on airlines globally and potential secondary effects on lessors.

Key Credit Considerations

The Negative Outlooks reflect the widespread severe impact of the COVID-19 pandemic on global passenger air traffic which directly affects airlines as lessors’ customers with potential deterioration in lessors’ credit metrics due to rental abatements and the prospects of increased airline defaults, potential impairments and reduced financing availability. While KBRA views the announcement of global aid packages as a welcome relief for airlines, the length and extent of the crisis still remain unpredictable and we believe that the risk to airlines’ cashflow still remains high at least for 2Q20 with some recovery through the end of the year.

In recent weeks, airlines globally have seen an unprecedented drop in passenger traffic and revenue, driven by the efforts to limit contagion, including travel restrictions. A significant portion of lessors’ airline customers have asked for some sort of rental relief. While, so far, only a small percentage of requests has been granted, KBRA expects the numbers will increase as lessors provide some support to their credit worthy customers. In addition, with current travel restrictions and depressed demand, lessors would face more challenges repossessing and remarketing aircraft in the case of customer defaults, a historical strength of the business model.

The decline in demand caused by COVID-19 is unprecedented, with air passenger traffic down approximately 50% globally in March year-on-year according to The International Air Transport Association (IATA). IATA projects that airline passenger revenues could decline by $252 billion or 44% in 2020 compared to 2019. This scenario assumes that severe travel restrictions last for up to three months, followed by a gradual economic recovery later in 2020. The duration of this pandemic and economic impact is difficult to predict, but KBRA believes significant sovereign support will likely be necessary to avoid widespread airline defaults.

KBRA views its investment grade-rated aircraft lessors as generally well-capitalized and having sufficient liquidity to withstand near-term reductions in lease cash flows while managing fixed costs including debt maturities and committed capex obligations. In addition, KBRA believes these lessors are adequately capitalized to withstand minor to moderate level of impairments. However, in KBRA’s view, the widespread nature and severe impact of COVID-19 on passenger travel has the potential to stress lessors’ financial health.

KBRA recognizes that some governments have committed to supporting their national carriers. The allocation and form of this support globally is currently unknown and will likely differ across countries / regions where lessors have differing exposures. In addition, government fiscal and monetary policy action taken to mitigate the broad economic impact of COVID-19 may improve prospects of an economic recovery and rebound in passenger demand once COVID-19 cases decline and travel restrictions are lifted. However,

PRESS RELEASE

given limited visibility to recovery timing and visible severe impacts to the aviation industry, KBRA believes Negative Outlooks are warranted.

ESG Considerations

KBRA’s ratings incorporate all material credit factors including those that relate to Environmental, Social and Governance (ESG) factors. While ESG factors may influence ratings, it is important to underscore that KBRA’s ratings do not incorporate value-based judgments. Throughout our analysis, KBRA captures the impact of ESG factors in the same manner as all other credit-relevant factors. More information on ESG Considerations for the Aviation sector can be found here. There were no ESG factors that had significant impact on this rating analysis.

Air Lease Corporation

Key Credit Considerations

The affirmation of Air Lease’s ratings is driven by the company’s highly experienced management team, wide and diverse customer base, a significant portion of which either have government ownerships or are flag carriers, and strong financial fundamentals, as reflected by a low leverage strategy, strong profitability, liquidity and cash-flow metrics, and largely unencumbered asset base. In addition, Air Lease’s young and in-demand fleet is less prone to impairment risks. In KBRA’s view, Air Lease’s significant liquidity of $6 billion in undrawn committed revolving credit facility plus over $300 million in unrestricted cash is sufficient to withstand a significant reduction in rental revenue as a result of rent abatements, delinquencies or airline bankruptcies and meet debt obligations as well as its significant purchase obligations in the next 12 months. It’s worth noting that ALC has raised $1.4 billion debt in January 2020. Furthermore, Air Lease’s large unencumbered asset base can provide additional liquidity in times of stress.

Rating Sensitivities

A ratings upgrade in the near future is not expected. The Negative Outlook could be revised to Stable if declines in coronavirus cases combined with lifting of travel restrictions in the near-term leads to significant recovery in global passenger traffic towards pre-pandemic levels. The Negative Outlook could be revised to Watch Downgrade or the ratings could be downgraded if air traffic remains significantly depressed beyond 2Q20 and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability with significant negative impacts on profitability, capital and/or liquidity metrics. A notable increase in the company’s asset encumbrance could also trigger a review for downgrade.

Aviation Capital Group LLC (ACG)

Key Credit Considerations

The affirmation of ACG’s ratings is based on the company’s long and stable profitable track record, experienced management team, well-diversified customer base, focus on highly liquid in-demand aircraft, adequate liquidity and a conservative debt to tangible equity leverage at 2.0x as at December 31, 2020. ACG’s near-term maturity of $600 million due October 2020 as well as its modest purchase obligations of $1.4 billion in 2020 is well supported by its undrawn committed revolving credit facility of over $1.9 billion and unrestricted cash of $340 million even if there is a significant reduction in rental income. ACG’s largely unencumbered asset base can also provide additional liquidity if need be.

Rating Sensitivities

A ratings upgrade in the near future is not expected. The Negative Outlook could be revised to Stable if declines in coronavirus cases combined with lifting of travel restrictions in the near-term leads to a significant recovery in global passenger traffic towards pre-pandemic levels. The Negative Outlook could be revised to Watch Downgrade or the ratings could be downgraded if air traffic remains significantly depressed beyond 2Q20 and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability

PRESS RELEASE

with significant negative impacts on profitability, capital and/or liquidity metrics. A notable increase in the company’s asset encumbrance could also trigger a review for downgrade.

Avolon Holdings Limited

Key Credit Considerations

The affirmation of Avolon’s ratings reflects the company’s leading market position, seasoned management team, well-diversified lessee base, strong credit metrics including low leverage, strong profitability, and abundant liquidity. The company’s over $5 billion undrawn committed credit facilities along with $688 million of cash as of December 31, 2019 is sufficient to meet its limited debt obligations (amortizing debt) and its $4 billion purchase obligations in 2020, should there be a significant drop in operating cash flows. In addition, Avolon has made significant progress in unencumbering its balance sheet, which can provide addition funding flexibility.

Rating Sensitivities

A ratings upgrade in the near future is not expected. The Negative Outlook could be revised to Stable if declines in coronavirus cases combined with lifting of travel restrictions in the near-term leads to a significant recovery in global passenger traffic towards pre-pandemic levels. The Negative Outlook could be revised to Watch Downgrade or the ratings could be downgraded if air traffic remains significantly depressed beyond 2Q20 and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability with significant negative impacts on profitability, capital and/or liquidity metrics. A notable increase in the company’s asset encumbrance could also trigger a review for downgrade.

Dubai Aerospace Enterprise Ltd. (DAE)

Key Credit Considerations

The affirmation of DAE’s ratings is driven by the company’s experienced management team, strong capital and liquidity profiles as well as the long-term strategic ownership by Investment Corporation of Dubai (ICD). KBRA believes that ICD’s significant financial resources, funding relationships and demonstrated commitment to aviation sector investments, provide DAE with franchise benefits and funding flexibility. DAE does not have an order book and its current strong liquidity position of over $3.2 billion (including $1.0 billion of cash and $2.2 billion of unutilized credit facilities) are more than adequate to meet modest debt maturities of $440 million in 2020 and $1.0 billion in 2021. In addition, DAE has made significant progress in unencumbering its balance sheet.

Rating Sensitivities

A ratings upgrade in the near future is not expected. The Negative Outlook could be revised to Stable if declines in coronavirus cases combined with lifting of travel restrictions in the near-term leads to a significant recovery in global passenger traffic towards pre-pandemic levels. The Negative Outlook could be revised to Watch Downgrade or the ratings could be downgraded if air traffic remains significantly depressed beyond 2Q20 and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability with significant negative impacts on profitability, capital and/or liquidity metrics. A notable increase in the company’s asset encumbrance could also trigger a review for downgrade.

Fly Leasing Limited (FLY)

Key Credit Considerations

The affirmation of FLY’s ratings is based on the company’s strong and experienced management team under BBAM Limited Partnership (BBAM), improved earnings and leverage metrics in 2019 and adequate liquidity. The ratings are constrained by slightly higher lessee and geographic concentration, as compared to its peers

PRESS RELEASE

as well as limited unencumbered assets. Currently, FLY has $285 million cash on hand, which is adequate to service its debt obligations for the next 12 months even if operating cash flows are significantly reduced.

Rating Sensitivities

A ratings upgrade in the near future is not expected. The Negative Outlook could be revised to Stable if declines in coronavirus cases combined with lifting of travel restrictions in the near-term leads to a significant recovery in global passenger traffic towards pre-pandemic levels. The Negative Outlook could be revised to Watch Downgrade or the ratings could be downgraded if air traffic remains significantly depressed beyond 2Q20 and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability with significant negative impacts on profitability, capital and/or liquidity metrics.

Nordic Aviation Capital DAC (NAC)

Key Credit Considerations

The affirmation of NAC’s ratings is driven by the company’s leading market position in regional aircraft leasing with deep industry relationships with regional aircraft operators and manufacturers, seasoned management team, adequate liquidity and significant progress in unencumbering its asset base, including an over $800 million unsecured issuance in February 2020. Rating constraints include higher leverage than peers and one of its lessees, FlyBe, currently in default. Currently, NAC has $847 million in liquidity ($690 million in cash and $157 million in undrawn committed capacity), which is adequate to meet its debt obligations (debt amortization) and modest purchase obligations in the next 12 months even if cash flows from operations are severely impacted.

Rating Sensitivities

A ratings upgrade in the near future is not expected. The Negative Outlook could be revised to Stable if declines in coronavirus cases combined with lifting of travel restrictions in the near-term leads to a significant recovery in global passenger traffic towards pre-pandemic levels. The Negative Outlook could be revised to Watch Downgrade or the ratings could be downgraded if air traffic remains significantly depressed beyond 2Q20 and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability with significant negative impacts on profitability, capital and/or liquidity metrics.

Voyager Aviation Holdings, LLC

Key Credit Considerations

The affirmation of Voyager’s ratings considers the credit profile of the company’s current seven lessees, its lack of remarketing needs in the near future unless defaults occur, demonstrated resilience in the past and continued support from shareholders to-date. The ratings are constrained by lessee and asset concentrations, limited liquidity, high asset encumbrance and relatively high leverage (compared to higher- rated lessors).

Rating Sensitivities

A rating upgrade in the near future is not expected. The Negative Outlook could be revised to Stable if declines in coronavirus cases combined with lifting of travel restrictions in the near-term leads to a rebound in global passenger traffic towards pre-pandemic levels. The Negative Outlook could be revised to Watch Downgrade or the ratings could be downgraded if one of the company’s lessee defaults, or air traffic remains significantly depressed beyond 2Q20 and leads to increased delinquencies, defaults and/or impairments, or a decline in funding availability with significant negative impacts on profitability, capital and/or liquidity metrics.

The ratings are based on KBRA’s Global Finance Company Rating Methodology, published November 28, 2017.

PRESS RELEASE

Related Publications

▪ KBRA Releases Updated Comment on the Coronavirus’ (COVID-19) Impact on the Global Aviation Industry

Analytical Contacts

Marjan Riggi, Senior Managing Director, Head of Aviation, Transportation, and Commercial Finance +1 (646) 731-2354 [email protected]

Danise Chui, Managing Director +1 (646) 731-2406 [email protected]

Michael Dodge, Director +1 (646) 731-3349 [email protected]

Business Development Contact

Nish Kumar, Senior Director +1 (646) 731-3372 [email protected]

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here, here, here, here, here, here and here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.