APA plays down Standard & Poor’s potential credit downgrade
Media reports say that Airline Partners Australia is playing down the prospect of a likely downgrade in the airline’s credit quality if the $11.1 billion sale went ahead, with an APA spokesman saying that rating agency Standard & Poor’s threat to review Qantas’ financial standing after the takeover had been anticipated.
He added, “All of our arrangements to fund the offer are in place as well as to fund the airline beyond that,” dismissing the Standard & Poor’s report as of little interest or impact on APA.
Standard & Poor’s have said if the buyout offer was successful the airline’s credit quality would be weakened significantly, because as the buyout was debt funded a marked increase in financial leverage would result.
Standard & Poor’s also said that in reviewing the airline’s finances they had noted that the bonds and MTNs do not include sufficient cross-default protection to facilitate repayment if the syndicated bank facility becomes repayable.”
As a result, Standard & Poor’s said its existing BBB-plus longer and A-2 short-term ratings on Qantas airline would remain on creditwatch with negative implications, but warning that the airline’s rating could still change even if the buyout failed.
This reassessment would also take into account any changes to the airline’s business risk profile, the capital structure and that additional capital expenditure will be required as a result of the delay and ultimate delivery of the Airbus A380 and the new Boeing 787 fleet deliveries.
Report by The Mole
John Alwyn-Jones
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