S&P rates Air Canada notes B

Standard & Poor's said it assigned a B issue-level rating and a 2 recovery (70% to 90%) rating to Air Canada's proposed C$300 million senior secured notes due 2019.

Proceeds will be used to help repay Air Canada's 9¼% senior secured notes due 2015, 10 1/8% senior secured notes due 2015 and 12% senior second-lien notes due 2016, as well as to add cash to the company's balance sheet.

"The ratings and outlook on Air Canada reflect what we view as the company's highly leveraged capital structure; weak cash flow protection measures; participation in the high-risk airline industry; and modest, albeit volatile, cash flow to cover relatively high fixed costs," S&P analyst Jamie Koutsoukis said in a statement.

"Mitigating these weaknesses, in our opinion, are the company's strong market position in Canada as the largest provider of commercial airline services; broad route network, providing some ability to offset domestic weakness; and good brand recognition," Koutsoukis added.

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