Moody’s Rankings minimize Alaska Air Group Inc.’s credit score grade to junk standing after the corporate mentioned it plans to subject secured debt to refinance borrowings from its acquisition of Hawaiian Holdings Inc., based on a press release on Tuesday.
The credit score grader lowered the airline’s issuer score to Ba1, the very best junk degree, from Baa3, the bottom investment-grade rating, and altered its outlook to destructive from secure, signaling extra downgrades may very well be coming within the medium time period.
On the identical time, Moody’s gave Alaska Air’s deliberate secured debt obligations a score of Baa2, the second lowest investment-grade rating. The airline mentioned 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 elements. Alaska Air closed its acquisition on Sept. 18. Based mostly on financials at the moment, and accounting for Hawaiian’s loyalty notes getting repaid, about 90% of Alaska Air’s debt will likely be secured, Moody’s estimated.
“Alaska Air is establishing a capital structure which will be made up primarily of secured debt, which is credit negative as it reduces the company’s financial flexibility,” Moody’s analyst Peter Trombetta wrote within the bond grader’s assertion. “The secured debt will have a higher priority of claim than any unsecured debt, resulting in the downgrade of the company’s issuer rating.”
The scores agency expects deliberate capital expenditure for the mixed firm to burn greater than $500 million of money in 2025, based on the assertion. Alaska Air’s standalone money was about $2.5 billion as of the tip of June, based on Moody’s. The corporate additionally has entry to an $850 million revolving credit score facility that expires in September 2029, the scores agency mentioned.
(Updates with proportion of debt that’s secured in fourth paragraph)
