Moody’s assigns Hawaiian notes Ba3

Moody’s Investors Service said it gave a Ba3 rating to the senior secured notes due 2026 to be issued by HawaiianMiles Loyalty, Ltd. and Hawaiian Brand Intellectual Property, Ltd. The co-issuers are special purpose entities subsidiaries of Hawaiian Airlines, Inc. and Hawaiian Holdings, Inc. Hawaiian Airlines and intermediate holding companies will guarantee the notes.

“The Ba3 rating on the notes reflects the essentiality of the Hawaiian Airlines’ brand and related intellectual property (IP) for it to operate its business and the importance of its loyalty program to its 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 under an airlines liquidation scenario. The notes' rating, one notch above the B1 corporate family rating, reflects Moody’s assumption of a lower probability of default relative to that of the company’s other senior secured debt obligations, which are unrated,” the agency said in a press release.

Concurrently, Moody’s affirmed the B1 corporate family and B1-PD probability of default ratings of Hawaiian Holdings but downgraded subsidiary Hawaiian Airlines’ series 2013-1 enhanced equipment trust certificates class A to Ba3 from Ba2 and class B to Caa1 from B1. Hawaiian’s speculative grade liquidity rating was upgraded to SGL-1 from SGL-2. The outlook is negative.

The EETC downgrades reflect the evaporation of the equity cushion of both classes because of more bearish assumptions on the A330-200 wide-body aircraft’s value. With an estimated loan-to-value on class B of about 160%, loss on this class would be substantial if Hawaiian filed for bankruptcy and rejected the transaction, Moody’s said.

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