Finance Assets, net:

At March 31, 2013, finance assets, net, of $2,385 million were comprised of investments in finance leases of $2,422 million and an other receivable of $42 million, reduced by the allowance for losses of $79 million. At December 31, 2012, finance assets, net, of $2,581 million were comprised of investments in finance leases of $2,680 million, reduced by the allowance for losses of $99 million.

PMCC assesses the adequacy of its allowance for losses relative to the credit risk of its leasing portfolio on an ongoing basis. During the first quarter of 2013, PMCC determined that its allowance for losses exceeded the amount required based on management’s assessment of the credit quality and size of PMCC’s leasing portfolio. As a result, PMCC reduced its allowance for losses by $20 million, which was recorded as income during the three months ended March 31, 2013. PMCC believes that, as of March 31, 2013, the allowance for losses of $79 million was adequate. PMCC continues to monitor economic and credit conditions, and the individual situations of its lessees and their respective industries, and may have to increase its allowance for losses if such conditions worsen.

The activity in the allowance for losses on finance assets for the three months ended March 31, 2013 and 2012 was as follows:



	For the Three Months Ended March 31,
	2013			2012
	(in millions)
Balance at beginning of the year	$	99		$	227
Decrease to allowance	(20		)	—
Amounts written-off	—			(23		)
Balance at March 31	$	79		$	204

During the first quarter of 2012, as a result of developments related to the 2011 American Airlines, Inc. (“American”) bankruptcy filing, PMCC wrote off $23 million of the related investment in finance lease balance against its allowance for losses. During the first quarter of 2013, PMCC sold its remaining interest in the American aircraft leases.

All PMCC lessees were current on their lease payment obligations as of March 31, 2013.

The credit quality of PMCC’s investments in finance assets as assigned by Standard & Poor’s Ratings Services (“Standard & Poor’s”) and Moody’s Investors Service, Inc. (“Moody’s”) at March 31, 2013 and December 31, 2012 was as follows:



	March 31, 2013		December 31, 2012
	(in millions)
Credit Rating by Standard & Poor’s/Moody’s:
“AAA/Aaa” to “A-/A3”	$	784	$	961
“BBB+/Baa1” to “BBB-/Baa3”	925		938
“BB+/Ba1” and Lower	755		781
Total	$	2,464	$	2,680