Yep. They rated two different tranches of certificates with different ratings. With good collateral (a lot of new aircraft or support equipment for instance) you can (generally) up the rating of your certificates to (generally) allow borrowing at a lower rate. What actually determines the actual effective rate is what people are willing to pay at auction at the time of sales, and that is dependent on buyer sentiment and - especially - buyer expectation of what else they can do with that money. While collateralization somewhat protects bond and certificate buyers against the possibility of loss IF THE BONDS OR CERTIFICATES ARE HELD TO MATURITY if they need to be sold before maturity (in the secondary market) at a time of higher bond yield, the sellers can still lose money on the investment. Similarly, if buyers tie up their capital for years by buying currently priced bonds or certificates, they will forfeit the opportunity to invest that capital at higher rates shoukd inflation ouch up bond coupons. And the protection is “somewhat” because all the collateral is in aircraft related equipment and in the event of another black swan event affecting flying (pandemic, war, $300 a barrel oil, etc.) the value of these items could plummet and the certificate owners wind up actually losing money.

There is a whole financial industry that works these issues and the only guaranteed winners appear to be the underwriters and the rating agencies themselves, who take their cut of the action off the top.

The write up by the ratings agencies are particularly interesting because they give what the ratings agencies believe to be critical issues to watch for the company’s rating. Example:

And to a limited extent these rating agency statements become a self fulfilling prophecy since lower ratings affect the market to cause higher debt service costs for the lower rated companies.