S&P rates American Airlines notes, loan B+

S&P said it assigned a B+ issue-level rating and 1 recovery rating to American Airlines Inc.’s proposed $500 million term loan B due 2024 and $1.5 billion secured notes due 2025. The 1 recovery rating indicates S&P’s expectation lenders would receive very high (90%-100%; rounded estimate: 95%) recovery of their principal in a default.

“We also reassessed all existing recovery ratings and rounded estimates because of the higher level of secured debt in the capital structure, which includes the proposed transactions as well as the proposed $4.75 billion government loan secured by the company’s frequent flyer program expected to close at the end of June 2020,” S&P said in a press release.

The agency affirmed the B+ rating on the company’s first-lien term loan secured by slots, gates, and routes at London Heathrow. The recovery rating remains unchanged at 1, but S&P said it revised the recovery percentage to 90% from 95%.

S&P said it trimmed the ratings on American’s revolvers and term loans secured by slots, gates and routes in Latin America airports (the former) and slots at Ronald Reagan Washington National and New York LaGuardia airports (the latter) to B from B+. The agency revised the recovery rating on both to 2 from 1, indicating expectations lenders would receive substantial (70%-90%) recovery of principal in a default, with a rounded estimate of 80% on the former and rounded estimate of 70% on the latter.

S&P said it also lowered the rating on the company’s revolver and term loan secured by spare parts to B- from B+. The recovery rating is revised to 3 from 1, indicating the expectation lenders would receive meaningful (50%-70%; rounded estimate: 65%) recovery of principal in the event of a default.

Finally, S&P affirmed its CCC rating on American’s outstanding unsecured notes. The 6 recovery rating remains unchanged, indicating an expectation that lenders would receive negligible (0%-10%) recovery of their principal in the event of a payment default. However, S&P said it revised the rounded recovery percentage to 5% from 0%.

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