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American Airlines was upgraded to B1 from B2 by Moody’s. It also upgraded senior secured ratings to Ba2 from Ba3 and senior unsecured debt to B3 from Caa1. The upgrade was a reflection of the company’s improving operating performance due to a recovery in travel demand. Moody’s expects a 300bp improvement in operating margins to 8% in 2023 and expects these margins to sustain in 2024 and 2025. Given that its credit metrics are expected to strengthen over the next year, Moody’s also believes the carrier will continue to maintain a “very good liquidity”. The upgrade also reflects Moody’s belief that American Airlines will reduce reported debt by at least $5bn between end-2022 to 2024 and by at least $3.5bn in 2025. Its debt maturities due 2025 currently stand at $7.5bn, including the company’s $1bn of 6.5% convertible notes. The upgrade of its senior secured and unsecured ratings are due to its Loss Given Default (LGD) rating methodology benefitted by its loyalty program financing.
American Airline’s bonds were trading steady with its 3.375% 2027s trading at 90.25 yielding 9.06%