Moody’s eyes Hawaiian Holdings

Moody's Investors Service said it placed all its ratings for Hawaiian Holdings, Inc. on review with direction uncertain following the announcement on Dec. 3 that it agreed to be bought by a subsidiary of Alaska Air Group, Inc. Previously, the outlooks were negative. The deal is expected to close by the end of June 2025.

The Caa1 corporate family rating and Caa1-PD probability of default rating assigned to Hawaiian, the B3 rating on subsidiary Hawaiian Airlines, Inc.'s series 2013-1 class A backed enhanced equipment trust certificates and the B2 rating assigned to subsidiary HawaiianMiles Loyalty, Ltd.'s $1.2 billion of backed senior notes secured by the company's HawaiianMiles loyalty program and its brand intellectual property are each on review direction uncertain. The SGL-3 speculative grade liquidity rating for Hawaiian Holdings, Inc. remains unchanged.

“Placing the ratings on review with direction uncertain captures the potential for a downgrade of Hawaiian's ratings before there is confidence that the acquisition will take place. If consummated, the acquisition would result in an upgrade of Hawaiian's ratings if Hawaiian's debts are assumed or guaranteed by Alaska.

“The sale of Hawaiian would remove the refinancing risk the company currently faces. The Notes mature on Jan. 20, 2026. However, Moody's projects the company to burn cash through 2025. Based on Hawaiian's most recent guidance from its Q3 earnings call, Moody's forecasts an operating loss of about $300 million and negative operating cash flow of about $50 million in 2023,” the agency said in a press release.

Moody’s said it will monitor Hawaiian’s performance and developments concerning the Department of Justice’s regulatory review. “There is the potential for one or more downgrades of Hawaiian's ratings during the review if it does not achieve a material positive inflection in its operating profit and cash flow in the first half of 2024.”

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