Moody’s Rankings lower Alaska Air Group Inc.’s credit score grade to junk standing after the corporate stated it plans to difficulty secured debt to refinance borrowings from its acquisition of Hawaiian Holdings Inc., in accordance with an announcement on Tuesday.
The credit score grader lowered the airline’s issuer score to Ba1, the best junk degree, from Baa3, the bottom investment-grade rating, and altered its outlook to unfavorable from secure, signaling extra downgrades could possibly be coming within the medium time period.
On the similar time, Moody’s gave Alaska Air’s deliberate secured debt obligations a score of Baa2, the second lowest investment-grade rating. The airline stated on Monday that it plans to borrow $1.5 billion, secured by the corporate’s loyalty program, to assist refinance Hawaiian Airways debt.
Late final 12 months, Alaska Air agreed to purchase rival Hawaiian Holdings for $1.9 billion, snatching up an organization that had been hit by rising competitors from Southwest Airways Co., amongst different components. Alaska Air closed its acquisition on Sept. 18. Primarily based on financials at the moment, and accounting for Hawaiian’s loyalty notes getting repaid, about 90% of Alaska Air’s debt can be secured, Moody’s estimated.
“Alaska Air is establishing a capital construction which can be made up primarily of secured debt, which is credit score unfavorable because it reduces the corporate’s monetary flexibility,” Moody’s analyst Peter Trombetta wrote within the bond grader’s assertion. “The secured debt may have a better precedence of declare than any unsecured debt, ensuing within the downgrade of the corporate’s issuer score.”
The scores agency expects deliberate capital expenditure for the mixed firm to burn greater than $500 million of money in 2025, in accordance with the assertion. Alaska Air’s standalone money was about $2.5 billion as of the tip of June, in accordance with Moody’s. The corporate additionally has entry to an $850 million revolving credit score facility that expires in September 2029, the scores agency stated.
(Updates with share of debt that’s secured in fourth paragraph)
