S&P cuts US Airways to D

Standard & Poor's said it lowered its ratings on US Airways Group Inc. and its US Airways Inc. subsidiary, following the Sept. 12 bankruptcy filings by both entities. The corporate credit ratings were lowered to D from CCC-.

Rated enhanced equipment trust certificates (EETCs) are still current, despite the bankruptcy filing, due to availability of dedicated liquidity facilities and/or bond insurance. Downgrades of some noninsured EETCs reflect increased risk of eventual default, based on an assessment of collateral coverage and the likelihood of US Airways reorganizing.

S&P said US Airways enters Chapter 11 with relatively limited liquidity and is approaching the slow winter travel season. Because all of its assets are already pledged as collateral, it will have to rely on existing unrestricted cash.

The company reached an agreement with the Air Transportation Stabilization Board, which guarantees a $717.6 million loan, providing access to "a portion of $750 million in cash," which forms part of the collateral backing that loan. US Airways is expected to move quickly to seek revised labor contracts to lower operating costs and limit cash outflow. Management states that it will seek to do so consensually, but is prepared to ask the bankruptcy court to impose new contracts if necessary. It is likely that least some of the airline's unions will eventually agree to revised contracts, given the alternative of imposed changes, as did unions at bankrupt United Air Lines Inc.

Other ratings lowered include US Airways Inc.'s equipment trust certificates to CCC- from CCC, and passthrough certificates series 1998-1A to BB+ from BBB-, series 1999-1A to BB+ from BBB-, series 1998-1B to CCC+ from B-, series 1999-1B to CCC+ from B-, series 2000-3C to CCC- from CCC, and series 2001-1C to CCC- from CCC.

Ratings affirmed include US Airways Inc.'s passthrough certificates series 2000-1G, 2000-2G and 2000-3G at AAA, series 2001-1G at AAA, series 1998-1C at CCC-, and series 1999-1C at CCC-.

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