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Standard & Poor’s cuts corporate credit rating on Air Canada

Jun 04, 2009, TORONTO, (CP)- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Air Canada (TSX:AC.B) on Wednesday to ``CCC+'' from ``B-'' with a negative outlook.


June 4, 2009
By Carey Fredericks

Jun 04, 2009, TORONTO, (CP)- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Air Canada (TSX:AC.B) on Wednesday to “CCC+'' from “B-'' with a negative outlook.

“The downgrade reflects our assessment that the company's liquidity to support its operations in the near term remains dependent on positive developments in a number of financing and operating initiatives, the outcomes of which remain uncertain,'' said S&P credit analyst Greg Pau said in a statement.

“In addition, the downgrade reflects our view that Air Canada's financial risk profile continued to weaken in the first quarter, reflecting continued soft market conditions for airlines.''

A lower credit rating typically increases the cost of borrowing for a company.

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The airline faces millions in debt payments, a pension shortfall that has roughly tripled in the last year and capital spending needs. These financial burdens come at a time when the recession has squeezed its business and led to mounting losses.

S&P also noted that Air Canada may also need to find additional non-operating cash resources in the coming months to maintain cash balances sufficient to satisfy the minimum required in a deal with
its credit card processor.