S&P rates Aeromexico, notes BB-

S&P said it assigned BB- ratings to Aeromexico SAB de CV and its proposed senior unsecured bond issuance for up to $400 million, which will be sold by subsidiary Aerovias de Mexico, SA de CV. The agency also assigned a recovery rating of 4 to the notes, indicating an expected average recovery (30%-50%) in the event of a payment default.

The company will use the proceeds primarily to refinance its short-term debt, growth capex and other corporate expenses.

“We expect a recovery in the company's lower operating and financial performance for the past 12 months, benefiting from its leading position in Mexico's international air travel market and its route offering, maintaining EBITDA margins at about 20% and leverage ratios in line with the credit rating,” said S&P in a press release.

The outlook is negative. “The negative outlook reflects our view that the company's credit metrics could weaken in the next 12 months, including debt to EBITDA close to 5x, funds from operations (FFO) to debt below 12%, and EBITDA interest coverage below 2x,” the agency said.

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