"Alaska Air is establishing a capital structure which will be made up primarily of secured debt, which is credit negative as it reduces the company's financial flexibility," Moody's analyst Peter Trombetta wrote in the bond grader's statement.
"The secured debt will have a higher priority of claim than any unsecured debt, resulting in the downgrade of the company's issuer rating," Trombetta added, emphasizing the implications of shifting toward mostly secured debt.
Moody's expects planned capital expenditure for the combined company to burn more than $500 million of cash in 2025, raising concerns about its financial health in the medium term.
The credit grader lowered the airline's issuer rating to Ba1, the highest junk level, from Baa3, indicating significant credit risk as the company looks to refinance its obligations.
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