Moody's downgrades SAS

Moody's Investors Service said it downgraded the corporate family rating of SAS AB to Caa3 from Caa1 and the probability of default rating to Ca-PD from Caa1-PD. Concurrently the agency lowered the SAS Denmark-Norway-Sweden backed senior unsecured MTN program rating to (P)Caa2 from (P)B3 and the backed subordinate rating to Ca from Caa2.

“The downgrade of the corporate family rating to Caa3 from Caa1, a two notch downgrade compared to the three notch downgrade of the probability of default rating reflects our expectation that the government shareholders will provide financial support through their participation in the planned capital increase, which should improve the recovery prospects of creditors, especially for the senior unsecured creditors,” Moody’s said in a press release.

The PDR’s downgrade was prompted by SAS AB's announcement of a SEK 7.5 billion cost-reduction program that includes a debt-to-equity swap for all hybrid and senior unsecured debt instruments issued by SAS and SAS Denmark-Norway-Sweden. “The debt to equity swap proposal comes alongside a broader restructuring of SAS AB' balance sheet with leasing and aircraft financing contracts to be part of the negotiation and a capital increase to build a more significant liquidity buffer,” the agency said.

The outlook on both entities remains negative.

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