Company: AYR
Filing Date: 2025-07-10
Form Type: 10-Q
Source: 0001628280-25-034715
Chunk: 36

Company: Aircastle LTD
Filing Date: 2025-07-10
Form: 10-Q
Item: Part I, Item 3
Chunk 36
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32

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates.  These risks are highly sensitive to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.  We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates.  Our primary interest rate exposures relate to our floating-rate debt obligations.  Rent payments under our aircraft lease agreements typically do not vary during the term of the lease according to changes in interest rates.  However, our borrowing agreements generally require payments based on a variable interest rate index, such as SOFR or an alternative reference rate.  Therefore, to the extent our borrowing costs are not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our securities.

Sensitivity Analysis

The following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts on our financial condition and results of operations.  Although we believe a sensitivity analysis provides the most meaningful analysis permitted by the rules and regulations of the SEC, it is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the extraordinarily complex market reactions that normally would arise from the market shifts modeled.  Although the following results of a sensitivity analysis for changes in interest rates may have some limited use as a benchmark, they should not be viewed as a forecast.  This forward-looking disclosure also is selective in nature and addresses only the potential interest expense impacts on our financial instruments.  It also does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.

As of May 31, 2025, a hypothetical 100-basis point increase/decrease in our variable interest rate on our borrowings would result in an interest expense increase/decrease of $5.1 million and $5.1 million, respectively, over the next twelve months.

ITEM 4.  CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Exchange Act Rules 13a-15(e) and 15d-15