Moody’s assigns Spirit Airlines B1, notes Ba3

Moody’s Investors Service said it assigned first-time ratings to Spirit Airlines, Inc., including a B1 corporate family rating, a B1-PD probability of default rating and an SGL-2 speculative grade liquidity rating.

At the same time, Moody’s assigned a Ba3 rating to the senior secured notes due 2025 that Spirit announced on Monday. The issuer of the notes, Spirit IP Cayman Ltd. and co-issuer Spirit Loyalty Cayman Ltd. are new, wholly-owned, indirect, bankruptcy-remote, special-purpose entity subsidiaries of Spirit. Spirit and the respective, newly created intermediate holding companies will own the co-issuers and will guarantee the note obligations.

The B1 rating reflects Spirit’s solid market position as a leading low-cost provider of passenger air transportation in the U.S.’ domestic market offset by the uncertainty of the timing of a recovery from the pandemic, the agency said.

“The Ba3 rating on the notes reflects the strategic importance of the Spirit brand and related intellectual property (IP) to the company and the benefits of the loyalty program to Spirit’s day-to-day operations and cash flows, balanced by an expected relatively low recovery if the collateral ever needed to be monetized to pay off the notes,” Moody’s said in a press release.

The outlook for Spirit is negative reflects the possibility of the pandemic causing even more damage to air travel, and the outlook for the notes mirrors Moody’s view the cash flows will be able to comfortably service the interest payments, the agency said.

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