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Air Canada’s debt rating lowered by Moody’s

April 3, 2012, Toronto -  Air Canada's debt rating has been lowered by Moody's Investor Service, indicating the agency believes there's an increased possibility the airline  could default on its debt obligations.


April 3, 2012
By The Canadian Press

Under the Moody's rating scale, Air Canada's debt securities were previously rated B3 — already below what many funds would consider
investment grade.

The new Moody's rating is Caa1, is applied in situations where the company that issued the debt may have trouble meeting all its obligations to debt holders — although it's still expected to do so.

In Air Canada's case, the rating agency notes the airline's spending on new planes will increase and the cap on its pension contributions will end — putting additional demands on its financial resources.

On the positive side for Air Canada, Moody's says the airline's large size and leading market share will probably provide its with enough cash flow to meet its current obligations to debt holders.

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