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GE - A Tale Of Two Aircraft Lessors: Opportunity In Credit Dislocation
General Electric Company
We think investors should consider the opportunity to pair trade Aircastle (AYR)/Avolon (AVOL) credit: short WYR '24 bonds and long AVOL '24 bonds on the basis that AYR'24 bonds trade at an unjustifiable spread relative to AVOL. We believe the opportunity exists because AYR bonds have overshot too far to the upside following an erratic transition from high yield to investment grade. In contrast, AVOL has been ignored largely over concerns on its ultimate shareholder debt.
Accordingly, we believe that the AVOL trade discount to AYR is unwarranted since the former