S&P lowers Latam Airlines EETC 2015-1

S&P Global Ratings said it lowered Latam Airlines Group SA's EETC-2015 1 class A certificates to CCC-(sf) from CCC(sf) and class B certificates to CC(sf) from CCC-(sf). Subsequently, S&P withdrew the ratings.

After the aircraft rejection and agreement with the trustee in mid-2020, S&P said it based the certificates’ ratings exclusively on collateral values and availability of the liquidity facility, which should cover the next three interest payments until Nov. 15, 2021.

“On March 15, 2021, the majority of class A certificate holders, acting as the directing certificate holder mandated the trustee to auction the EETC aircraft. The downgrade follows the confirmation after bid deadline that the only qualified bid was the one from the stalking horse bidder, which is the directing certificate holder. We believe the bidding price could be considerably below current aircraft market values (30%-35% lower) and below outstanding debt ($646 million in class A and $102 million in class B),” the agency said in a press release.

The class A certificates downgrade reflects the view that the proceeds left from the aircraft sale, after repayment of the liquidity facility and other expenses, will not fully cover the class A certificates' outstanding debt, S&P said.

The class B certificates downgrade reflects an expectation of a total loss on the junior class. “Certificate holders could recover part of the deficiencies as unsecured claims under Latam's bankruptcy process, but our EETC ratings don't incorporate such a scenario,” S&P said.

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