Moody’s rates WestJet loan

Moody's Investors Service said it assigned Ba3 rating to WestJet Loyalty LP's planned $1 billion senior secured term loan B due in 2031 with a stable outlook.

The agency said it reviewed WestJet Airlines Ltd.'s B2 corporate family rating, B2-PD probability of default rating, B1 backed senior secured first-lien term loan B, B1 backed senior secured first-lien revolving credit facility, and stable outlook and they remain unchanged.

“The Ba3 rating on the WestJet Loyalty's proposed term loan B reflects the essentialness of WestJet's brand and related intellectual properties for it to operate the business and the importance of WestJet Rewards to the company's day-to-day operations and cash flows. This view is balanced by a relatively lower recovery of the collateral if WestJet faces a liquidation scenario, and the collateral assets are monetized to repay the proposed debt.

“The Ba3 rating is two notches above WestJet's CFR which reflects Moody's assumption of a lower probability of default relative to the company's other secured debt obligations, which are rated one notch lower at B1,” the agency said in a statement.

WestJet Loyalty plans to loan the proceeds of the loan to WestJet, via intercompany loan. WestJet plans to use the proceeds to repay a portion of the outstanding term loan B and for general corporate purposes.

WestJet Brand Holding LP, and WestJet Brand LP, will guarantee WestJet Loyalty's debt obligations under the term loan B agreement.

“WestJet Loyalty - the issuer - is a new, wholly owned, indirect, bankruptcy-remote, special purpose entity subsidiary of WestJet. WestJet and the newly created special purpose entities (SPEs) – WestJet Loyalty Holding LP, WestJet Brand Holding LP, and WestJet Brand LP – will unconditionally guarantee WestJet Loyalty's debt obligations under the term loan B agreement on a joint and several basis,” Moody’s explained.

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