Fitch lowers Latam Airlines

Fitch Ratings said it downgraded Latam Airlines Group SA's long-term foreign currency issuer default rating to CC from B-, and unsecured notes to C/RR5 from B-/RR4.

The agency lowered Latam’s national scale long-term rating to CC(cl) from BB(cl), and its issuance was downgraded to C(cl) from BB(cl). Fitch removed the rating watch negative.

“Fitch's rating actions follow Latam's confirmation that it did not make interest or principal payments of all the three tranches on a debt obligation related to an EETC transaction (not rated) on May 15, 2020. The company has entered into a 15-day grace period, which if uncured, would trigger an event of default,” Fitch said in a press release.

It is unclear if company plans to make the payment or has started the process of entering a larger debt restructuring, Fitch said.

Cross default clauses in other financial obligations would allow those creditors to declare a default and begin enforcing remedies, the agency said.

“The revision of the recovery rating of the bonds to RR5 from RR4, and the downgrades of the bonds are due to revision of the multiple used by Fitch in its going concern analysis to reflect the weakness of the airline industry,” Fitch said.

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