Moody’s rates Virgin Australia debt B3

Moody's Investors Service said it assigned a provisional B3 rating to the senior unsecured debt issuance program of Virgin Australia Holdings Ltd.

The company has a B2 corporate family rating and B3 senior unsecured debt rating.

The outlook is stable.

The provisional B3 rating is in line with Virgin's existing B3 senior unsecured ratings.

“While Virgin's free cash flow has not improved to a level where Moody's believes it can maintain its B2 rating without further improvements in operating cash flow, reductions in capital expenditure, or reliance on shareholder support, Moody's expects debt to EBITDA for fiscal 2018 and 2019 to be between 4.9x and 5.2x, down from 5.8x in fiscal 2017,” the agency said in a news release.

“This is largely due to the equity raising in 2017 which was used to strengthen the balance sheet, as well as an improvement in EBITDA, driven in part by the company's Better Business initiative which is a three year program launched in July 2016 targeting A$350 million of annualized cash flow savings.

“This level of leverage provides Virgin with headroom versus the 6.0x downgrade threshold for the rating.”

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