Moody's confirms Airborne

Moody's Investors Service confirmed Airborne Inc. and its primary operating subsidiary Airborne

Express Inc., ending a review begun on March 26 following the announcement of DHL's intention to acquire the U.S. ground-based express delivery operations of Airborne, Inc. for $1.05 billion in cash. Ratings confirmed include Airborne Inc.'s $150 million 5.75% senior unsecured convertible debenture due 2007 at Ba3 and Airborne Express Inc.'s $100 million 7.35% senior secured debentures due 2005 at Ba1.

Supporting the confirmation of the ratings are the benefits to debt holders of the completion of the acquisition by Deutsche Post AG (A1, negative outlook), through its subsidiary DHL, including the substantial financial strength of the acquiring group, the potential synergies of the integration of the Airborne and DHL distribution networks, as well as the respective strengths of their brand names in the U.S. and globally, Moody's said.

The ratings are constrained by the historically weak financial performance of Airborne and expectations that the financial benefits of the acquisition will take some time to achieve. The ratings also consider the lack of explicit support from DHL or its ultimate parent.

The acquisition of Airborne was completed in August. U.S. law limits foreign ownership of U.S. airlines. As a result, Airborne's air operations were spun off to existing shareholders under the new name ABX Air, Inc. To provide support to the newly independent company, DHL entered into a service contract with ABX Air, Inc. to provide air transport capabilities and certain other services on a cost-plus basis.

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