Aviation Capital Group Corp. (PACLIF)

Capital Goods

Bonds Appear Appropriately Priced - We initiate coverage on Aviation Capital Group Corp. (ACG)’s Senior Unsecured Notes with a “Market Perform” rating. ACG operates a $7.6 billion aircraft leasing fleet that is well diversified in terms of customer and geography. The Company’s leverage metrics generally fall in the range of its aircraft lessor peers, and we estimate that they will remain relatively stable over the next two years. While spreads on ACG’s 5-year notes are currently 81bp tighter than the average for its peer group, the Company benefits from parental support given by A1/AA- rated Pacific Life due to the strategic value that ACG provides its parent in return.