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Deutsche Lufthansa, along with its senior unsecured notes were upgraded by a notch to BBB- by S&P. S&P also upgraded Lufthansa’s junior subordinated debt by two notches to BB. With the upgrade, Lufthansa has thus moved to being an IG-rated issuer from its prior HY rating, making it a rising star. The upgrade comes on the back of Lufthansa’s higher than expected earnings due to robust demand for air travel and industrywide capacity constraints. For the first nine months of 2023, Lufthansa achieved EBITDA of €3.9bn ($4.2bn) compared to €2.5bn ($2.7bn) a year earlier. S&P expects Lufthansa’s strong earnings to persist in the fourth quarter and its adjusted EBITDA for 2023 to be at ~€4.9bn ($5.2bn), higher than its earlier forecast of €4.5bn ($4.9bn). S&P forecasts that higher EBITDA will offset large capital expenditure for new aircraft and support Lufthansa’s commitment to deleverage, translating into sustained positive free cash flow and credit metrics for the company.
Lufthansa’s euro bonds traded positive with its 3% 2026s up by 0.7 points to 97.5, yielding 4%.