S&P lowers Allegiant, rates notes BB-

S&P said it lowered the corporate credit rating on Allegiant Travel Co. to BB- from BB.

The outlook is stable.

The agency also said it assigned a BB- rating and 4 recovery rating to the company's proposed senior unsecured notes. The 4 recovery rating indicates 30% to 50% expected default recovery.

Additionally, S&P said it lowered the rating on the company's existing senior unsecured notes to BB- from BB. The 4 recovery rating is unchanged, indicating 30% to 50% expected default recovery.

The downgrades reflect an expectation that Allegiant's credit measures will decline from their 2015 levels, S&P said.

Specifically, the agency said it believes that the company will maintain a debt-to-EBITDA metric of about 2x and a funds from operations-to-debt ratio in the low-30% range for 2016.

This compares to a debt-to-EBITDA metric of 1.36x and a FFO-to-debt ratio of 52.37% in 2015, S&P explained.

The company's credit measures are not expected to return to the 2015 levels over the next two years due to the combined impact of the company's elevated capital spending needs, rising operating costs, declining passenger revenue per available seat mile (PRASM) and increased capacity as new aircraft are delivered in 2017, the agency said.

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