SP Global and Moody's Downgrade Jetblue Airways
Creditors Unimpressed by Proposed Debt Raise
Key Points
- SP Global (S&P) and Moody's downgraded JetBlue Airways' credit rating.
- Shares fell by nearly 9% in after-hours trading.
- Rating agencies cited concerns over a proposed $3 billion debt raise.
On August 12, 2023, credit rating agencies S&P Global (S&P) and Moody's downgraded JetBlue Airways' (JBLU) credit rating from "BB" to "BB-", citing concerns over the carrier's plans to raise $3 billion in additional debt.
The downgrade comes after JetBlue announced its intention to raise funds through a combination of senior secured notes and convertible senior notes. The proceeds from the debt raise will be used to fund aircraft deliveries and other general corporate purposes.
Rating agencies expressed concerns that the additional debt will increase JetBlue's financial leverage and weaken its overall credit profile. S&P noted that the downgrade reflects "the negative impact of the proposed financing on JetBlue's credit metrics." Moody's stated that the downgrade is driven by "concerns about JetBlue's ability to manage its leverage and liquidity in a challenging operating environment."
Shares of JetBlue Airways fell by nearly 9% in after-hours trading following the announcement of the downgrade. The stock has lost more than 25% of its value so far in 2023.
Credit rating downgrades can have a significant impact on a company's ability to borrow money and its overall cost of capital. The downgrade of JetBlue's credit rating is a sign that investors are becoming increasingly concerned about the carrier's financial health.
In response to the downgrade, JetBlue issued a statement saying that it "strongly disagrees" with the rating agencies' assessment. The company said that its "balance sheet remains strong" and that it has "ample liquidity" to meet its obligations.
Only time will tell whether JetBlue Airways will be able to address the concerns of the rating agencies and stabilize its credit rating.
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