Fitch rates United Airlines pass-throughs AA, A

Fitch Ratings said it assigned the following expected ratings to United Airlines, Inc.'s (BB-/positive) proposed pass-through trusts series 2016-2: (a) $636,512,000 class AA certificates due in October 2028 AA(EXP); and (b) $283,081,000 class A certificates due in October 2028 A(EXP).

The ratings on both classes of certificates are primarily driven by a top-down analysis incorporating a series of stress tests which simulate the rejection and repossession of the aircraft in a severe aviation downturn.

Fitch said the AA level rating is supported by a high level of overcollateralization (OC) and high-quality collateral supporting the agency’s expectations that senior tranche holders should receive full principal recovery prior to default even in a severe stress scenario.

Likewise, the A rating on the subordinated certificates is supported by overcollateralization sufficient for the tranche to pass Fitch's A level stress scenario.

The ratings are also supported by the inclusion of 18-month liquidity facilities, cross-collateralization/cross-default features and the legal protection afforded by Section 1110 of the U.S. Bankruptcy Code. The structural features increase the likelihood that the certificates could avoid default even if United were to file bankruptcy and subsequently reject the aircraft, Fitch explained.

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