Today’s ratings agency actions include a new rating on off-balance sheet arrangement by AMR Corp. (NYSE: AMR), parent of troubled American Airlines, and other actions involving General Motors Co. (NYSE: GM), ConAgra Foods Inc. (NYSE: CAG), Level 3 Communications, Inc. (NASDAQ: LVLT), and Thomson Reuters Inc. (NYSE: TRI).
AMR Corp. (NYSE: AMR) has received a rating of ‘A-‘ on its series 2011-2 class A pass-through certificates that are expected to mature on October 15, 2021. The company plans to issue $726 million of equipment notes secured by 43 aircraft to refinance airplanes already owned by AMR.
According to S&P, the pass-through certificates are protected under US bankruptcy law and liquidity facilities through Morgan Stanley Bank. The liquidity facilities are intended to pay up to three semi-annual interest payments and re-marketed by certificate holders following any default by AMR. The liquidity facilities also maintain continuity of interest payments when/if AMR enters negotiations with certificate holders in a bankruptcy proceeding.
The certificates were registered under a shelf registration in September and will be purchased by a newly formed trust as each aircraft is purchased. The notes carry an interest rate of 8.625%.
S&P referred to yesterday’s reports of AMR’s possible bankruptcy and said that the agency believes that AMR’s current liquidity combined with the sale of the certificates was “still adequate.” However, if the company’s cash and short term investments fall below $3 billion, S&P said it “could lower our ratings.”
General Motors Co. (NYSE: GM) received an upgraded issuer default rating from ‘BB-‘ to ‘BB’ at Fitch Ratings. The company’s rating outlook was also upgraded from ‘Stable’ to ‘Positive’. The ratings also apply to GM Holdings LLC, and GM Financial Co., Inc., both subsidiaries of GM. Fitch noted, among other things contributing to the upgrade, that the new contract with the United Auto Workers “appears to provide the company with sufficient financial and operational flexibility to allow a continuation of the positive progress it has made since emerging from bankruptcy in 2009.”
Level 3 Communications Inc. (NASDAQ: LVLT) received an upgrade to its corporate family and probability of default ratings from ‘Caa1’ to ‘B3’ from Moody’s. The agency said that the now-closed transaction with Global Crossing Ltd. should allow the company to become “modestly cash flow positive on a sustained basis with two years.” The new rating was also applied to a new $650 million senior secured term loan at Level 3’s financing subsidiary and the company’s assumption of senior unsecured debt originally issued to another Level 3 subsidiary.
ConAgra Foods Inc. (NYSE: CAG) received a preliminary ‘BBB’/’BBB-‘ rating from S&P on a shelf registration of senior unsecured/subordinated debt that does not include a total offering amount or a number of debt securities. The company’s corporate rating is ‘BBB’ with a stable outlook.
Thomson Reuters Inc. (NYSE: TRI) received a ‘A-‘ rating from S&P on $350 million in senior unsecured notes due 2021. The company plans to use the proceeds to repay borrowing from it commercial paper program. Thomson Reuters carries a corporate credit rating ‘A-‘ with a ‘Stable’ outlook.
Paul Ausick
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