Moody's cuts Continental Airlines to SGL-3

Moody's Investors Service said it lowered the speculative grade liquidity rating of Continental Airlines Inc. to SGL-3 from SGL-2 and affirmed Continental's long-term debt ratings.

The outlook is negative.

According to Moody's, the downgrade reflects the company's operating losses and weakened prospects for operating cash flow, as stronger revenue and cost containment measures have been offset by record level fuel costs. Continental has few remaining assets that can be readily monetized, nor does the company have lines of credit available.

Additionally, while the company should comply with its covenants over the next 12 months, failure to maintain compliance would require the company to add cash to the collateral supporting certain financing arrangements in an amount which could materially reduce the unrestricted cash balance.

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