S&P rates Air Baltic BB-

S&P said it assigned a preliminary BB- long-term issuer credit rating to Air Baltic Corp. AS.

The outlook is stable.

The rating includes two notches of uplift from its stand-alone credit profile due to the moderately high likelihood of market-based financial support by the Latvian government in case of financial distress, the agency explained.

Air Baltic is expected to complete an issuance of about €200 million of unsecured international notes in the next 90 days and use the proceeds to repay outstanding debt and strengthen its liquidity position, considering it a transformative event, S&P said.

Given Air Baltic's planned large capital investment in expanding and modernizing its aircraft fleet, the airline has limited room for debt reduction with an adjusted gross debt-to-EBITDA ratio of 7.5x to 8x through 2020, the agency said,

The ratings also reflect the company's low return on capital, high concentration on one region and exposure to the highly cyclical airline industry, which limits its stand-alone rating to B, S&P said.

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