Delta's Credit rating just cut to Junk Status
03-24-2020, 05:54 PM
#1
Gets Weekends Off
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Joined APC: Nov 2012
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Posts: 300
Delta's Credit rating just cut to Junk Status
03-24-2020, 06:14 PM
#2
Kerbal Rocket Surgeon
Joined APC: Dec 2007
Position: DTW 717A
Posts: 1,099
Good luck paying the interest on all that debt we carry to "prevent a buyout" (that's not really why)
Management issued debt to inflate EPS through buybacks, making the stock look more attractive and juicing their own Management Incentive Program stock compensation. The shareholders didn't complain because in theory it should have continued to drive the share price higher.
Management, shareholders, and creditors deserve to lose on this one. NOT the taxpayer.
Management issued debt to inflate EPS through buybacks, making the stock look more attractive and juicing their own Management Incentive Program stock compensation. The shareholders didn't complain because in theory it should have continued to drive the share price higher.
Management, shareholders, and creditors deserve to lose on this one. NOT the taxpayer.
03-24-2020, 10:40 PM
#5
Gets Weekends Off
Joined APC: Mar 2015
Position: stake holder ir.delta.com
Posts: 10,026
It was dropped 2 levels. While this is a drop from investment to junk,that applies to the future lenders. They just drew 2.6 billion and announced a $50M CURRENT cash bleed. That’s like dropping from 650 to 550 FICO after borrowing just under half your annual income. This is to be expected and why we drew the cash when we did. Had we waited, it would have been more expensive. This really is just telling the next investor there’s been a change. Like FICO scores, you can frame your 800+ and put it on the wall for pride or you can use it to borrow and make productive use of your great to date reputation for paying your bills. If and when you need to use it there’s no point in showing off the score while you are in need of cash. That’s the usefulness of the investment grade rating, insurance effectively.
03-25-2020, 08:04 AM
#10
veut gagner à la loterie
Joined APC: Apr 2008
Position: Light Chop
Posts: 23,286
The article says S&P Ratings downgrades it properly to junk.
but...
For now, Delta’s more than $7 billion of corporate bonds still qualify as investment grade, since the airline has investment-grade ratings from Moody’s and Fitch. But Moody’s put the company on review for a downgrade last week, and Fitch has a negative outlook on its rating. The company’s stock was up almost 20% despite the downgrade Tuesday.If another credit-ratings firm downgrades Delta’s debt next week, the airline’s bonds will get booted from investment-grade bond indexes at the end of the month.
That could put stress on the high-yield bond market. While Delta already trades like it is junk—even a distressed credit—the junk-bond market has a smaller group of institutions and is more reliant on individual retail investors.
that was in the article
but...
For now, Delta’s more than $7 billion of corporate bonds still qualify as investment grade, since the airline has investment-grade ratings from Moody’s and Fitch. But Moody’s put the company on review for a downgrade last week, and Fitch has a negative outlook on its rating. The company’s stock was up almost 20% despite the downgrade Tuesday.If another credit-ratings firm downgrades Delta’s debt next week, the airline’s bonds will get booted from investment-grade bond indexes at the end of the month.
That could put stress on the high-yield bond market. While Delta already trades like it is junk—even a distressed credit—the junk-bond market has a smaller group of institutions and is more reliant on individual retail investors.
that was in the article
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