Fitch Ratings has taken the following rating actions on Aviation Capital Group Trust I (ACG):
--Class A-1 notes downgraded to 'B' from 'BBB-'; assigned Outlook Stable;
--Class B-1 notes downgraded to 'C/RR6' from 'BB-';
--Class C-1 notes downgraded to 'C/RR6' from 'CCC/DR1';
--Class D-1 notes revised to 'C/RR6' from 'C/DR6'.
Consistent with Fitch's aircraft operating lease criteria, the analysis of ACG involved forecasting the expected lease cash flow to be available to service debt over the remaining life of the transaction. Fitch's expected cash flow takes several factors into account, including aircraft age, value, Fitch's expectations for the commercial aviation industry, remarketing expenses and downtime, and perceived liquidity of the aircraft in the portfolio to determine future lease expectations. Fitch considered varying aircraft useful life assumptions due to the age of the ACG portfolio and the lease terms currently in place.
The downgrade of the class A-1 notes reflects Fitch's expectation that lease rates will continue to be under pressure for most of the aircraft in the portfolio. The class A-1 notes were able to receive full interest and principal payments in accordance with the terms of the transaction documents under Fitch's expected base case 'B' scenarios.
The downgrades and revision of the class B-1, C-1, and D-1 notes reflect the continuing interest shortfalls which began accumulating following the depletion of the liquidity reserve available to support the subordinate notes. Under Fitch's expected base case cash flow scenarios, the class B-1 notes receive minor cash allocation while the C-1 and D-1 notes receive no further disbursements due to their subordinate position in the waterfall. As such, recovery prospects for the subordinate notes are minimal and are thus assigned a Recovery Rating of 'RR6', consistent with Fitch's 'Criteria for Structured Finance Recovery Ratings', dated Aug. 17, 2009.
Applicable criteria available on Fitch's web site at 'www.fitchratings.com' include: 'Global Criteria for Commercial Aircraft Operating Lease Securitizations', dated Aug. 29, 2007, and 'Global Structured Finance Rating Criteria', dated Sept. 30, 2009.
Additional information is available at 'www.fitchratings.com'.
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