S&P gives B- to Virgin Australia notes

Standard & Poor’s said it assigned its B+ long-term corporate credit rating to Virgin Australia Holdings Ltd. The outlook is stable.

At the same time, S&P assigned a B- rating to Virgin Australia’s proposed U.S. Rule 144A and Regulation S senior unsecured notes. The recovery rating on the senior unsecured notes is 6, reflecting an expectation of “minimal” recovery prospects (0%-10%) in the event of default.

“Our assessment of Virgin Aust’s business risk profile reflects its status as the second player in Australia’s duopoly market; small size globally; and low, albeit improving, profit margin compared to global peers,” S&P credit analyst May Zhong said in a news release. “The assessment also incorporates Virgin Aust’s competitive cost position; exposure to the cyclical and capital-intensive airline industry; and susceptibility to volatile fuel costs.”

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