Moody’s lowers Spirit Airlines

Moody's Investors Service said it downgraded Spirit Airlines, Inc.’s ratings, including the corporate family rating to Caa2 from Caa1 and the probability of default rating to Caa2-PD from Caa1-PD. The agency also lowered the backed senior secured rating assigned to Spirit IP Cayman Ltd.'s 8% senior notes, which are secured by the company's loyalty program and brand IP, to Caa2 from B2. The speculative grade liquidity rating remains unchanged at SGL-3.

“The downgrade of the corporate family rating to Caa2 reflects Moody's belief that the potential of a default has increased since Judge William Young ruled on Jan. 16 that the agreed acquisition by JetBlue Airways Corp. (JetBlue) would be anti-competitive and a violation of the Clayton Act. The downgrades of the CFR as well as of the senior notes secured by Spirit's loyalty program IP and brand IP (notes) reflect the increased potential of a default and less than a full recovery, whether in a formal reorganization or if the senior secured notes are refinanced or retired for less than face value,” the agency said in a press release.

Moody’s noted that after the ruling, the market price of the notes dropped to around 50 from the low to mid-70s since mid-November. The price has risen back up to the low 60s following the announcement that Spirit and JetBlue would appeal the court's ruling.

The outlook remains negative.

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