S&P rates Avianca Group B-, notes B

S&P said it gave B- issuer ratings to Avianca Group International Ltd. and Avianca MidCo 2, its fully owned subsidiary. The agency also assigned B ratings to Avianca MidCo 2’s 9% secured exit notes for up to $1.6 billion with a planned seven-year tenor. The notes will be composed of $1.05 billion under tranche A-1 and the remaining $550 million under tranche A-2. The recovery rating on the notes is 2 reflecting an expectation for substantial recovery (70%-90%; rounded estimate: 85%) in default.

S&P also withdrew the D issuer and issue credit level ratings on Avianca Holdings SA, at the company's request and affirmed the B- rating on LifeMiles Ltd. based on its highly strategic group status to the new holding company.

Avianca Holdings plans to emerge from Chapter 11 under Avianca Group. “Upon emergence, Avianca Group will focus on increasing its point-to-point operation, while implementing a lean cost structure. This business model is proven by other industry peers to offer high profitability margins and captures higher levels of passengers when economic conditions are under pressure,” the agency said in a press release.

The outlook is stable.

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