VistaJet Malta Finance P.L.C. — Moody’s downgrades Vista Global to B3, outlook stable

VistaJet Malta Finance P.L.C. — Moody’s downgrades Vista Global to B3, outlook stable

Frankfurt am Main, July 23, 2020 — Moody’s Investors Service, (“Moody’s”) has today downgraded Vista Global Holding Ltd.’s (Vista Global) corporate family rating (CFR) to B3 from B2 and the probability of default rating (PDR) to B3-PD from B2-PD. Concurrently, Moody’s has also downgraded the ratings of the senior unsecured notes to Caa1 from B3 which are issued by VistaJet Malta Finance P.L.C. and co-issued by XO Management Holding Inc. The outlook remains stable.

“Today’s rating action reflects the weaker than previously expected operating profitability with a reported EBITDA of materially below $300 million in 2019 leading to elevated leverage of 8.1x Moody’s-adjusted debt/EBITDA and a weaker liquidity profile with a fully drawn RCF”, says Dirk Steinicke, the Moody’s lead analyst for Vista Global. “The uncertainty of the global business aviation market development following the coronavirus outbreak adds to uncertainty of the deleveraging path to below 5.5x debt/EBITDA,” added Mr. Steinicke.

Today’s rating action reflects Moody’s expectations of very high leverage at around 10.0x Moody’s adjusted Debt/EBITDA in 2020 from 8.1x in 2019 along with an expectation of deteriorating EBITDA margin at around 20{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in 2020 from 23.9{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in 2019. Looking beyond a more difficult 2020, we expect the company to deleverage, but to not bring back leverage to around 5.5x before 2022 which places the rating better at the B3 level.

In Q1 2020, Vista Global increased its flight revenue by approximately 2{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} and new FSP hours sold increased by 8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} compared to Q1 2019 with Moody’s adjusted EBITDA margin declining to 21.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} as a result of increasing contribution of operating costs and flight mix shift towards XO’s off fleet business while Moody’s adjusted Debt/EBITDA increased to 8.8x.

Moody’s expects the coronavirus to continue putting pressure on business aviation in the months and years ahead. The agency is also cognizant of the significant uncertainty with respect to the speed of economic recovery and potential for multiple “waves” of the virus leading to repeated lockdowns and further travel restrictions that might potentially affect business aviation. Hence, the pace of Vista Global strengthening its financial profile remains uncertain in the current business environment.

The B3 corporate family rating of Vista Global reflects the company’s (i) strong position in the market for corporate jet travel, (ii) significant contracted revenues from a diverse customer base, (iii) high utilization rates that enables a relatively cost-efficient business aviation solution to its customers, (iv) meaningful free cash flow (FCF) supported by modest capital investment needs.

The major constraints to Vista Global’s B3 CFR are (i) exposure to cyclical demand, (ii) very high Debt/EBITDA of 8.8x for the twelve months ended March 2020 (on a Moody’s adjusted basis) which Moody’s expects will tend to decline in the mid-term because of annual amortization of aircraft financings of about $200 million, (iii) still competitive, highly fragmented market, and (iv) a still adequate liquidity profile.

The stable outlook reflects the gradual flight activity recovery in the business aviation market combined with material cash inflow from its Flight Solution Program (FSP) leading to around break even quarterly net cash flows despite meaningful aircraft financing repayments. We also see a heightened risk that Vista Global’s credit metrics improvement takes longer than previously expected due to the high uncertainty of the longer-term recovery in business aviation flight activity. We also expect the shareholders to remain supportive of the business.

Upward pressure on the ratings could develop if Vista Global is able to (1) improve debt/EBITDA to below 5.5x on a sustained basis (2) generate more material free cash flow in excess of aircraft debt service leading to an improved liquidity profile (3) improve EBITA margin towards mid-teens in percentage terms on a sustained basis.

Likewise, downward pressure could arise if the company (1) is unable to reduce Debt /EBITDA to below 7x by year-end 2021, (2) failure to improve utilization rates would in turn result in failure to improve EBITA margins to double digit terms in percentage terms in the next 2 years, (3) is not able to sell a sufficient level of FSP hours to secured meaningful quarterly cash payments for a a prolonged period, (4) generates insufficient free cash flow to meet the scheduled amortization of its aircraft financings leading to a deterioration in liquidity, or (5) finances its growth with additional debt leading to weaker credit metrics.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS (ESG)

The rapid spread of the coronavirus outbreak, deteriorating global economic outlook, low oil prices and high asset price volatility have created an unprecedented credit shock across a range of sectors and regions. The combined credit effects of these developments are unprecedented. Business aviation sector has been one of the sectors affected by the shock given its sensitivity to travel restrictions and economic sentiment.

Moody’s regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Today’s action reflects the impact on Vista Global of deterioration in credit quality it has triggered, given its exposure to business aviation which has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions.

LIQUIDITY

Liquidity is still adequate. We expect free cash flow to cover the scheduled debt amortization through 2021. As of 31 March 2020, the company had $53 million cash on the balance sheet while having fully drawn under its $26 million revolving credit facility, which we do not expect to be repaid during 2020. Furthermore, we expect the company to need to comply with the springing financial covenants of 6.8x senior net leverage for which we expect it to remain in compliance. Alternate sources of liquidity are limited to equity values of VistaJet aircraft, since VistaJet’s owned aircraft are mostly pledged and XOJET’s fleet, while unencumbered, is older, providing some value should additional financing be needed.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

Headquartered in Dubai, Vista Global Holding Ltd. (Vista Global) is the holding company of a leading global business aviation provider that serves corporates and high net worth individuals. The company offers flights through its two subsidiaries VistaJet Malta Finance P.L.C. and XO Americas Holding Inc. (XOJET) primarily by membership programs and on-demand charter on either its own aircraft (“on-fleet division”) or on a partner’s aircraft (“off-fleet division”) and generated approximately $1 billion revenues in 2019. Vista Global operates a fleet of 115 aircraft including ultra-long range, large cabin and super-mid cabin aircraft. The company is owned by majority shareholder and founder Thomas Flohr and minority shareholders Rhône Capital, Mubadala and Clearlake.

REGULATORY DISCLOSURES

For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dirk Steinicke AVP Mgr-Rtgs - Research Sup Corporate Finance Group Moody's Deutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Christian Hendker, CFA Associate Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Deutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

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