Fitch Cuts AMR To Deeply Distressed Rating
Fitch Ratings on Friday cut its ratings on American Airlines parent AMR to a deeply speculative grade, and warned the airline operator is "more likely to face a liquidity squeeze" in 2010 when it will need to refinance debt.
Fitch cut AMR two notches to "CCC," eight steps below investment grade, from "B-minus." The outlook is negative, indicating an additional downgrade is more likely over the next one-to-two years.
"The 'CCC' rating reflects Fitch's view that AMR is now more likely to face a liquidity squeeze moving into 2010 as historically tight capital market conditions continue to limit the carrier's ability to refinance very heavy upcoming debt maturities," Fitch said in a statement.
Airline revenues are being hurt from reduced travel demand, which is offsetting gains from lower fuel prices.
"In the absence of a stabilization of revenue per available seat mile trends, AMR is likely to report another year of negative free cash flow at a time when scheduled debt maturities are heavy (USD$1.8 billion in 2009 alone) and access to the capital markets remains very constrained," Fitch said.
AMR also faces heavy debt maturities in 2010 and 2011 in addition to pension funding requirements, Fitch said. The company has USD$5.3 billion debt maturing from 2009 to 2011.
