Zacks_Analysts' Blog : Wilmington Not a CAL Lender - Analyst Blog

Wilmington Trust is not a lender to Continental Airlines

In a filing with SEC on July 1, 2009, Continental Airlines Inc (CAL) unveiled an agreement with Wells Fargo & Company (WFC) and Wilmington Trust Corporation (WL) for aircraft financing. Continental intended to issue equipment notes to finance 12 Boeing aircraft it already owns and five of the seven Boeing planes that are scheduled for delivery through September.

However, On July 3, 2009, Wilmington Trust clarified that it is not a lender to Continental and has no credit exposure to the airline company. Wilmington is serving solely in corporate trust and agency capacities for Continental’s future issuance of approximately $390 million of equipment notes.

As a result, this transaction has no impact on Wilmington Trust’s financial condition. Wilmington Trust’s role remained restricted to serving as subordination agent, pass-through trustee, and indenture trustee, for which it has received a fee.

Wilmington is a mid-cap financial holding company whose primary subsidiary, Wilmington Trust Company, is a Delaware-chartered bank and trust company.  Wilmington Trust has a very well-balanced revenue stream relative to most mid-cap peers (Webster Financial Corp [WBS], Valley National Bancorp [VLY] and Fulton Financial Corp [FULT]).

Moody’s downgraded the rating of the company in April 2009 based on concerns related to its real estate lending concentration and investments in bank trust preferred securities. Furthermore, recently, S&P lowered its outlook on Wilmington Trust to “negative" and also downgraded its ratings. As such, we maintain our Sell recommendation on the shares of Wilmington Trust.