OREANDA-NEWS. Fitch Ratings expects to assign an 'A-' rating to BOC Aviation Limited's (BOC Aviation) proposed five-year U. S. dollar senior unsecured notes. The final maturity date in 2021 and a fixed-rate of interest will be determined at the time of issuance. The notes will be issued under the company's current USD5 billion global medium-term note (GMTN) program.

The final rating is subject to the receipt of final documentation conforming to the information already received. BOC Aviation plans to use proceeds from the issuance for capital expenditure, general corporate purposes, and/or refinancing of existing borrowings.

KEY RATING DRIVERS

SENIOR DEBT

The notes are rated at the same level as BOC Aviation's Long-Term Issuer Default Rating (IDR) and existing senior unsecured debt. This is because the notes will constitute direct, unsubordinated and senior unsecured obligations of the company, and will rank equally with all its other unsecured and unsubordinated obligations.

The IDR reflects Fitch's view of a very high probability of extraordinary support to BOC Aviation from its ultimate parent, Bank of China Ltd. (BOC; rated '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. Counterbalancing these factors is BOC Aviation's small size relative to the broader organization, less than full ownership by BOC following BOC Aviation's 30% IPO in June 2016 and the fact that BOC Aviation operates in a different jurisdiction than BOC.

These factors support Fitch's view that BOC Aviation continues to remain strategically important to BOC, as defined under Fitch's 'Global Non-Bank Financial Institutions Rating Criteria'. Financial issuers deemed to be strategically important subsidiaries are typically rated one - to two-notches below the parent company's Long-Term IDR. In BOC Aviation's case, the IDR is one-notch lower than BOC's Long-Term IDR of 'A'.

RATING SENSITIVITIES

SENIOR DEBT

The ratings of the notes are sensitive to changes in BOC Aviation's IDR and the level of unencumbered balance sheet assets in a stressed scenario, relative to outstanding unsecured debt. A decline in the level of unencumbered asset coverage combined with a material increase in the use of secured debt could result in the notching between the IDR and the senior unsecured debt.

BOC Aviation's ratings are primarily sensitive to changes in BOC's ratings given the one-notch differential between the IDRs of BOC Aviation and BOC.

Further, although not expected by Fitch, BOC Aviation's ratings could be adversely affected should BOC seek to dispose of or meaningfully further reduce its investment in BOC Aviation, or if there are any other developments within BOC which are perceived by Fitch to alter BOC's willingness or ability to provide support to BOC Aviation. A negative rating action could also be taken if BOC Aviation's operating performance deteriorated, thereby not delivering the return on investment envisaged by BOC, which could impact Fitch's assessment of BOC's propensity to provide support to BOC Aviation when needed.

BOC Aviation is based in Singapore and owned by BOC. It is a leading global aircraft operating leasing company with a portfolio of 265 owned and managed aircraft, with total assets of USD13.6 billion at end-June 2016.

Fitch expects to rate the following:

BOC Aviation Limited

--Senior unsecured debt 'A-(EXP)'.

Fitch currently rates the following:

BOC Aviation Limited

--Long-Term IDR 'A-';

--Medium-term note program 'A-';

--Senior unsecured debt 'A-'.