S&P keeps eye on Air NZ

By Phil Boeyen, ShareChat Business News Editor

Friday 5th October 2001

Ratings agency Standard & Poor's has not made any immediate changes to Air New Zealand's (NZSE: AIRVA) rating in light of the latest capital restructuring.

S&P says the airline's long-term rating of B- remains on CreditWatch with developing implications following Thursday's $885 million state-funded recapitalisation package.

"Although the New Zealand government's plan to recapitalise Air NZ is a positive development, the cash injection, to be made in two tranches, will take three to four months to complete," S&P says.

"Furthermore, the recapitalisation plan is subject to various approvals and conditions, including those of Air NZ's banks, other financiers, and shareholders."

The ratings agency says CreditWatch Developing indicates that the rating could go up or down.

"If Air NZ's banks and other financiers continue to support the company, and all other necessary approvals and agreements for the recapitalisation of the airline are gained, a modest rating upgrade could result once the recapitalisation is completed.

"A higher rating is possible given Air NZ's very strong position in the New Zealand aviation market, which offsets its exposure to greater competition and uncertainty in its international routes."

S&P says a final rating determination will also take into account Air NZ's proposed business plan to cut its flight schedules and achieve significant cost reductions.

"If, however, all the necessary approvals and support for the recapitalisation plan do not materialise, and the plan is not completed, a rating downgrade could result."

The airline's credit ratings have already been cut twice this year.

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